Eastside Phase II

Although it can be hard to imagine today, back in the 90s and early 2000s it was hard to find a developer interested in East Liberty. With high crime, blight, and an overall lack of commercial opportunity, the neighborhood was far from considered prime real estate. Following Home Depot’s entrance in 2000, one of the key developments that began to change this perception of the neighborhood was Eastside, which signed on Whole Foods as an anchor tenant. The development was created through a unique partnership between ELDI and the private developer The Mosites Company, where ELDI came on as an investor to help abate some of the development risk and ensure the community had a say in the urban design of East Liberty’s commercial core.

The store’s success built upon that of Home Depot and helped stimulate market interest unseen in the area, paving the way for additional developer and retailer investment. Meanwhile, ELDI and Mosites’ relationship has continued for the past 20 years as they built on this public-private-community partnership to ultimately reposition the entire southern expanse of East Liberty’s business district.  Rethinking the vision for this 16-acre span of East Liberty’s commercial core in five different phases, the Eastside developments on Penn and Centre Avenues have brought national chains and vital amenities to the neighborhood like Target, FedEx, Starbucks, and Walgreens. Their most recent development is Eastside Bond, a high density $138 million project completed in 2016 that transformed a wasteland of concrete into a brand-new, reconstructed transit station with a direct link to the Martin Luther King Jr. Busway.

We sat down with Mosites Founder and CEO Steve Mosites along with Director of Real Estate Mark Minnerly to hear the story of how they worked with ELDI to breathe new life into the center of East Liberty. We discuss what it was like to build support in the early days, what makes ELDI’s approach as a Community Development Corporation (CDC) unique, and much more.

Mark Minnerly (left) and Steve Mosites (right) on the construction site of Eastside Bond.

Steven Mosites (left), pictured with his father and original founder of The Mosites Construction Company Steven T. Mosites Sr. and his sister and Mosites partner Susan Mosites Bicket. As Steven put it: “My sister Susan Bicket was a critical partner in every phase of the Eastside developments. She made it all work behind the scenes.”

When did Mosites’ partnership with ELDI begin?

Steve: My first introduction to Maelene Myers [ELDI’s executive director] was when we were assembling the parcels that made up the Whole Foods Market project. That was my first work in the community. Mark came on as we were starting to formulate the Whole Foods Market project.

Mark: At that time, Maelene and ELDI were doing comprehensive community planning in East Liberty. Before we even started, there had been a commitment to rethink East Liberty’s defunct public housing high rises, as well as the low-rise and mid-rise communities around there, because they were owned by absentee private property owners with the U.S. Department of Housing and Urban Development (HUD). HUD determined that there was no real accountability and had initiated foreclosure with the commitment to create a better housing solution for those residents. Whole Foods Market could see that there were already a handful of major policy commitments and that this was an area that was moving from disinvestment to investment. It was the same with key buildings in the commercial core like ELDI’s Penn-Highland Building redevelopment. It gave us something to connect Whole Foods Market to, and they got it. So, for everything we did with ELDI from then and after, we were able to advance a vision for the business district rebirth in the context of the East Liberty community vision and public investment policies that already had, what we now call, a social equity agenda behind it. Steve did something at that time that he’s not crediting himself with—he showed up at the door of ELDI and said, “Tell me what your plan is. I want to fit into the plan”, which is a rare thing for a developer to do.

Can you talk about the significance of the Eastside developments and the process of getting Whole Foods to come to the neighborhood?

Steve: Mark always refers to Eastside as the zipper development, connecting the two communities of East Liberty and Shadyside. Eastside I and II are just about 16 acres that connect the two neighborhoods. We had early meetings with Mayor Murphy where he was concerned that he didn’t want to lose the opportunity of Whole Foods because he knew what would follow Whole Foods coming into the community and the people that wanted to be around that food store.

However, Whole Foods did not want to do a one-off store with nothing else around it, so we had to assemble other parcels that were a part of that. Eastside II allowed us to double the initial amount of new commercial business space on an expanded six-acre site. It’s what first became known as Eastside. Our collective success with Eastside gave our team the credibility and confidence to assemble the remaining 10 acres of land. These developments were able to attract national anchor tenants such as  Walgreens,  Starbucks, and FedEx. And then the Target came. That was really magical—their footprint fit on the eastern edge of that site perfectly. They created that grand entrance right on the corner, and that’s where it wanted to be. It was the first half of the business district’s “Eastern Gateway.”

Mark: What’s fascinating about it is that everybody realized that Whole Foods had done everybody’s efforts right by being a successful business right out of the gates. They were also the first new business to locate there at a time when people were saying, “You’ll get shot, if you go to East Liberty.” And that was quite literally what they were hearing, even if it wasn’t necessarily true. The second thing they did is they remained a viable company. They grew and their stock became more valuable. In a world where evolving market economics can bust big companies, Whole Foods Market was thriving. They hired twice the number of employees at opening than they originally projected and that kept increasing as every year passed. It debunked the myth that East Liberty was a place for other businesses to avoid.

April 1, 1994: The East Mall high-rise apartment building on Penn Avenue at Penn Circle, built in 1970, had a host of problems by the 1990s.

The making of the various phases of Eastside.

Why was Mosites the company to take on these developments in East Liberty?

Mark: Steve brought a unique profile as a developer because his company was smaller, and as it turns, out nimble when it came to trying the unconventional. We were not a big, deeply funded company with layers of management. This work in East Liberty needed a development company where you could get to the person in charge and the person in charge had the capacity to make some risky decisions. Every phase of Eastside presented some kind of unprecedented risky decisions and Steve kept taking the leap. These were the kind of risks where the outcome lay in the hands of others, and you were trusting that they would step up.  ELDI and many collaborators allowed Steve to go out on a limb, because time after time, the risk at hand was buffered by things that ELDI was bringing to the table. And they were upfront. They were like, “How do we make this happen? How can we help share some risk?”  Everyone wanted this to be successful and pitched in.

How did ELDI share some of that development risk?

Mark: Skip [Schwab, ELDI’s deputy director] was at the Local Initiatives Support Corporation (LISC) during all of this and he helped conceive something called the East End Growth Fund. [Editor’s note: The East End Growth Fund was an effort by the local LISC office to focus planning grants and pre-development grants to a targeted area over an extended period of time.] We were using the Whole Foods project as the prototype of how this would work. So, you had the foundations stepping in and saying, what if we allowed the CDC to have equity to lower Steve’s risk. At the same time, the foundations recognized that none of the existing economic development focused loan funds were going to invest in this riskier type of “community equity” investment. Foundation commitments to The East End Growth Fund provided ELDI this as an investment tool.

What was the importance of East Liberty’s community plans in this work?

Mark: When we think about the community plans, the most important thing was that it gave us confidence that what we were working on was going to meet the needs of the community. And when people said, “How do you know this is the right thing to do?” We could say, “Don’t take our word for it.” It was the physical report, not just the process of building community support. People need to read these things and understand that community planning isn’t just a kumbaya feel-good thing. It actually is a powerful tool.

What’s more is that, at every point, ELDI was out there updating their plan—because this was a 17-year long process. After the 1999 community plan, A Vision for East Liberty, there was the 2010 East Liberty Community Plan. ELDI was going out to meetings and the community reaffirmed that the path we were on in this section of East Liberty was what the community had envisioned. Fast forward to today, and you have a different problem emerging in the community forum where there is worry about affordable housing and whether development might make people feel unwelcome—softer side things that are real and difficult products of success. If you look at growth versus decline, it’s the better problem to have, because if you can take action and really devote new resources that come from growth, you can help ensure equal access to its benefits.  It’s the current call to action looking forward.

Steve: Part of what we picked up on in East Liberty’s community plans was our mission to create as many connections back into the community as possible. The goal of East Liberty was to take away all the one-way streets and allow the community to function again. So that was part of why we worked to create a pedestrian bridge reconnecting the communities over the busway and train tracks in our first phase of Eastside. Building on that, Eastside II had around six new connections to it. We took a 60s era superblock of property and returned it to the real urban fabric around it with multiple ways to get into it from Center Avenue and Highland and Penn Avenues. It became a great way to diffuse the traffic and make it safer and more human-scaled for pedestrians and bicyclists. In Eastside Bond (Eastside Phase III and IV), we worked with the Port Authority as a partner to move the transit station connection. By doing this, the pedestrian bridge landed right at Shady Avenue at grade and created an easy connection right into the community as well.

What was unique about ELDI’s approach as a CDC?

Steve: ELDI was by far the strongest CDC I had experience with, and they had the largest network. They were able to work on multiple fronts across the community like Mark said: leading the affordable housing front, engaging HUD on repositioning this huge obsolete portfolio of housing high-rises, doing scattered-site blight removal, reknitting the neighborhood, and purchasing land from slum landlords where there was known drug-related impact. As a result, they were able to lower the crime rate while we were working our process. They also had a very progressive board; Malik Bankston and Rev. Patrice Fowler-Searcy were really anchors in the community and weren’t afraid to take risks. They were also such an important conduit in fundraising. You really need to have a lot of development tools within a CDC to complement the developer, and they were able to do that. Maelene always had talented people working with her. It’s amazing when you think about a community CDC having that bench strength.

Mark: When you look at what was unique about East Liberty’s approach, you could argue it was a public sector burden carried by an array of private sector, charitable, and community development organizations. It allowed us to control the outcome and direct it. In return, it allowed our public sector partners to be able to engage as teammates in a very powerful and focused way. No one expected to do this alone or could have.

“When you look at what was unique about East Liberty’s approach, you could argue it was a public sector burden carried by an array of private sector, charitable, and community development organizations.”

What were some of ELDI’s key requests for these developments on behalf of the community?

Steve: ELDI had us, within each lease, set up job fairs for hiring in the community. The tenants were not required to hire people from the community, but they had to give them first crack. ELDI  managed that process, and we were pretty relentless about getting our tenants to agree to work with our team on that.

What was the importance of the Streetworks market plan in the Eastside developments?

Mark: The Streetworks original market analysis, which Mosites co-invested in, identified the Target location as being the anchor that needed to be in the community. ELDI’s approach was to take advantage of the fact that they had active developers in the marketplace and essentially do a merchandising strategy that was development and market-driven for very specific businesses and places in the district. Then we all went out and tried to get those businesses to come to East Liberty. That’s an important thing, because there’s the community plan and then there’s actually a sophisticated CDC creatively fueling its execution.

Steve: Target does not share store performance numbers, but by our best guess, that store was programmed to do maybe $25 million in gross sales annually, and I believe they’re doing closer to $70 million. It’s the second-busiest store in the state. That changes the shopping patterns of people within the community. Whether you’re in a low-income community or a high-income community, you’re at a Target. That was the goal with many of the shops that we brought on—the pet store and the bookstore for example—they weren’t designed exclusively for high-end customers or exclusively for low-end customers. The goal was to find tenants that, for the most part, would serve the broader community and everyone would feel comfortable going there.

“There’s the community plan and then there’s actually a sophisticated CDC creatively fueling its execution.”

How unique is this investment model where a CDC takes on some of the risk?

Mark: CDCs often have a difficult time paying for competent staff because most of what they do doesn’t generate money, but if you have the possibility of investing in something that’s big, then the scale of its success can yield some of that success back to the community. This meant building into the proforma a return for the CDC’s risk abating investment, both human and financial. It meant sharing value created which many developers don’t account for as they work with CDCs. ELDI brought both at-risk money and staff hours, all of which leveraged higher value. It was an important principle that everybody came out better off than they went in. And it was all a result of being able to tie into projects that had the market behind it. ELDI’s development team and board understood the value of trying to be creative and not taking a one-size-fits-all approach.

Steve: Maelene has been able to surround herself with talent and really strong people that she’s able to trust to move things forward. On ELDI’s behalf, I can’t say enough about those guys. They may be winding down this 20-year period, but it’s really been amazing how many folks have been involved in making it happen—just look at Kendall Pelling and all the work he’s done retying the neighborhood. The best story of all—the one that brings tears to my eyes—is when you look at the crime rate in East Liberty and how it was closer to Larimer and Homewood 20 years ago. More recently, it’s at the level of Shadyside, and there’s a reason for that. I’ll go to the grave feeling lucky to have that 17-year stretch of such awesome people trying to do stuff that didn’t seem possible and coming out of it with something that’s transformative and humbling.

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