Philadelphia Project Seeks Diverse Array of Investors

Jared Brey reports on a mixed-use project in Northwest Philadelphia called Golaski Labs. Mosaic Development Partners did not pursue a more conventional investor-funding approach to raise the $7.2 million it needs for the project, says Brey:

Instead, the firm has developed a complex financing structure that will take advantage of New Markets Tax Credits, a small portion of equity offered through the crowdfunding service Small Change, and capital raised through the new Opportunity Zones tax incentive created as part of the Tax Cuts and Jobs Act passed at the end of 2017.

The project’s Opportunity Zone fund lets investors who meet minimum net worth or income thresholds invest capital gains income. “Opportunity Zones allow investors to avoid some taxes on capital gains income by investing them in projects or businesses located in low-income areas designated by states earlier this year, although it’s a federal tax incentive,” says Brey.

The equity crowdfunding is targeting a different investor demographic. In the past, Mosaic found bringing in investors from the communities where the firm’s projects are located to be a challenge, particularly because these tended to be less experienced investors.

“[Gregory] Reaves says the firm turned to crowdfunding as a way to create opportunities for small-time investors, hopefully including some from the neighborhood, to buy into the project,” reports Brey. He notes that the Small Change crowdfunding effort differs from Kickstarter or Indiegogo because the funding is actual investments with the potential for financial returns as well as losses.