The last phase of the 300-unit The Twins at Oxford Commons project in the Cecil B. Moore Home Ownership Zone in Philadelphia is scheduled to break ground during the first quarter of 2009. This project, partially funded by HUD, had been riddled by mismanagement until OKKS Development took it over as the company’s first big deal, which also set this developer on a different path from where it started in 2004.
Bensalem, Pa.–based OKKS initially intended to focus on tax-credit rental projects and assembled a powerhouse team to execute that plan: The two K’s in its name are Leonard Korman, one of Philadelphia’s largest commercial developers, and attorney Lewis Katz, who co-owns the New Jersey Nets professional basketball franchise. The O in OKKS is Jeffrey Orleans, chairman and CEO of Orleans Homebuilders, and the S is Michael Schurr, a commercial broker who is OKKS’s managing partner.
Schurr spent two decades on the commercial side until, in 2003, “I looked at my industry and could not see sustained expansion.” He met with Orleans, who was interested in establishing a philanthropic organization to help meet the area’s low-income housing needs. Orleans Homebuilders had worked previously with Habitat for Humanity, but was looking for something on a larger scale. Orleans asked Schurr what he knew about affordable housing. “At the time, I hadn’t even heard of it,” Schurr laughs. Six months later, he was presenting a business plan to Orleans’ board for approval.
OKKS launched with about $500 million in capitalization. But Schurr soon saw opportunities to put together financing for for-sale projects that would require minimal direct investment by the new company. Its first deal was a pilot program HUD had started six years earlier. The city of Philadelphia’s involvement in constructing the first 149 units of the Cecil B. Moore project ended in federal indictments for misappropriation of funds. Once OKKS entered the picture, “very little” of HUD’s $10 million grant was left, recalls Schurr.
OKKS’s bid won over six other developers’, partly because of its partners’ reputations, and partly because of its willingness to return 25 percent of its developer’s fee (9 percent of this $30-million-plus development) to the community.
It discarded the city’s scattered-lot redevelopment approach in favor of a master plan that required the Housing Authority and other landowners to relinquish real estate. OKKS took nearly three years to assemble land for the remaining 151 units it would build; and in late 2006, it started its first 64 homes, semi-detached townhouses averaging 1,700 square feet. Those homes, which sold out in less than six months, were priced at $82,500 and included a $155,000 soft second mortgage provided by the city. As long as the home remains owner-occupied, that second mortgage self-extinguishes at the end of 15 years.
Last October, OKKS broke ground on the 54 units in phase II, which sell for $110,000 and also provide buyers with a soft second mortgage. As of mid-November, OKKS had 40 buyers for phase II, says Schurr. OKKS expects to complete the final 33 units by early 2010. All phases require that 51 percent of the homes be sold to buyers earning below 80 percent of the area’s median income, and the rest sold to buyers earning under 120 percent.
OKKS is also in the final construction phase of 50 affordable homes in the Juniata Park section of Philadelphia. This mixed-use brownfield development, called the Twins of Powder Mill, is close to being sold out, says Schurr. His company hasn’t abandoned tax-credit rental, but finding viable projects is tough. Philadelphia Mayor Michael Nutter has scaled back his five-year plan for a $15 million affordable housing fund to $6 million. “I don’t know how much money will be available for affordable housing,” says Schurr, who has also found that some communities simply resist change. OKKS was interested in a 300-unit redevelopment project in Camden, N.J., that “imploded,” Schurr says, because of grassroots opposition to the neighborhood’s gentrification. “When I got into this, I thought I’d ride in like a White Knight to save communities,” says Schurr. “Some people said ‘No, you won’t.’ It was mind boggling.”
Learn more about markets featured in this article: Philadelphia, PA.