After Inauspicious Start, Mosaic Finds Success With Navy Yard Assignment
For one thing, like many Black entrepreneurs, Reaves and Smallwood-Lewis lacked access to capital and had to cash in their 401(k) plans to get Mosaic off the ground. They also launched the company during the Great Recession, one of the most challenging times for the commercial real estate industry in recent memory. Looking back, Reaves said founding Mosaic then provided a “great period of learning.”
“Most people who get into [CRE] are wealthy already,” Reaves said. “That wasn’t the case with Leslie and me, so we had to rely on everything that we had. That is what helped us survive for three years during the Great Recession.”
Their bet on themselves paid off.
The Philadelphia-based company announced Wednesday it was chosen by the Philadelphia Industrial Development Corp. to develop a 109-acre parcel at the Philadelphia Navy Yard along with Ensemble Real Estate Investments. The companies expect up to $2.6B in private investment will be needed to develop the project, the largest in Mosaic’s history.
“The Mosaic team is thrilled to partner with Ensemble and PIDC on the next phase of the Navy Yard,” Reaves said in a press release. “The prior work at the Navy Yard has set an extremely high bar, and we are eager to apply our development model and expertise to bring unique perspective and solutions to the development team and create opportunities for disenfranchised businesses and communities who seek to become a part of this historic location.”
The company specializes in converting industrial buildings in underserved urban communities, abandoned in some cases for decades, into mixed-use developments of commercial, retail and residential units.
Mosaic’s Golaski Labs project in Philadelphia's Germantown neighborhood is a case in point. The company is planning to transform an abandoned medical warehouse into a $7M mixed-use project including 25K SF of commercial space and 40 apartments. Mosaic was approached by the Golaski family about developing the property, according to Reaves.
The company also is in the midst of a $25M project to convert the site of the Blue Horizon boxing gym into a Marriott hotel and is transforming the former Annex of Edison High School into low-income housing for veterans in a $13M project. A few years earlier, Mosaic demolished the shuttered Edison campus that took up a full city block. The $25M project converted 500K SF into a shopping center.
Reaves and Smallwood-Lewis have dubbed their development philosophy “gentrigaton,” which they said emphasizes racial and economic integration.
“Gentrigation” is addressed in many ways. The Philadelphia company uses subsidies to make commercial properties more affordable by charging cheaper rates than other property owners do in the neighborhoods where they operate. Mosaic also provides financing for businesses starting out and offers to finance to residential homebuyers.
“It gives them the opportunity to be able to grow those businesses in those neighborhoods,” Reaves said in an interview. “Typically in gentrified neighborhoods, those communities and businesses of color aren’t even considered. They are an afterthought.”
According to University of Pennsylvania professor Dominic Vitiello, the impact that developers like Mosaic can have on gentrification is limited, especially without policies that ensure housing affordability, which Philadelphia officials have failed to pass. He notes that the city lost 6,000 public housing units to demolition during the 1990s and 2000s and hasn’t replaced them.
“The city passed an inclusionary zoning/housing bill 13 years ago, but our city council president kept it on his shelf and did not move to enact it in a meaningful way,” he wrote in an email to Bisnow. “Two years ago, City Council passed another set of bills intended to raise funds for affordable housing. It's important to recognize that these bills, like the city's Housing Trust Fund approach in general, do not require that developers build affordable housing themselves, or include it in the same buildings or neighborhoods where they are investing. Instead, the ‘inclusionary housing’ approach that Philadelphia has generally taken involves payments that other developers can use to build affordable housing, often in other neighborhoods.”
Contact Jonathan Berr at email@example.com.