A Pittsburgh-based real estate investment company has inked a tentative deal to purchase the troubled Bethesda-Homewood properties — a collection of 141 low-income housing units in Homewood, Larimer and Garfield, the company’s CEO told PublicSource.
The provisional new owner, Omicelo LLC, is chaired by 34-year-old Joshua Pollard, a native of the Pittsburgh region who grew up in poverty and went on to be named to Forbes’ prestigious “30 Under 30” list for his financial successes in real estate investing. Pollard said he learned about Bethesda-Homewood’s potential HUD problems prior to the City of Pittsburgh’s announcement that the properties were in distress.
In October, a spokesman from the mayor’s office announced that more than 100 households would be offered relocation assistance because the U.S. Department of Housing and Urban Development [HUD] was withdrawing its project-based federal subsidy due to the properties’ “deplorable condition.” The subsidy provided more than $109,000 per month to Bethesda-Homewood’s most recent owner, Homewood Residential LP, to supplement rent in the units.
The Bethesda-Homewood properties were among the lowest scoring HUD rental units in Pennsylvania. HUD inspection scores range from 0 to 100; the Bethesda-Homewood properties scored as low as 9 on the 100-point scale.
After months of unanswered questions from the community about the fate of residents and a stalled attempt by a community development nonprofit to take over the properties, an emerging new owner — however tentative — indicates a resolution could be near. Pollard said he believes Omicelo’s purchase may enable some of the 50 to 80 households still living in the units to remain there.
East Liberty Development, Inc. [ELDI] — which was in the process of securing funding from governmental organizations and foundations to purchase the properties — has said Omicelo seems to share the goals of providing tenants with supportive services, preventing displacement and preserving affordability at these units. “We’re encouraged by that,” said Kendall Pelling, ELDI director of land recycling. “We certainly wish them all the best.”
The sale — inked on Jan. 4, according to Pollard, and reported here for the first time — is not final, pending a title clearance. Pollard declined to disclose the price he’s paying for the properties. Pollard told PublicSource that Omicelo intends to invest at least $2 million into rehabilitation.
The goal, Pollard said, is to improve as many of the units as possible to a level of quality that would pass HUD inspection, as quickly as possible. “There are properties that people live in, where they don’t have anywhere else to go, but they’re also dealing with conditions that they shouldn’t have to deal with,” said Pollard, who referenced his Pittsburgh real estate holdings as well as owning a collection of HUD-subsidized units in Baltimore. Pollard would not provide further information about specific properties or quantify his property portfolio.
Pollard’s company is partially bankrolled by UPMC; public relations director Gina Pferdehirt said UPMC acts as “limited partner investors” in Omicelo. “Because social determinants are important factors of health and wellness, Omicelo providing housing is directly in line with our mission,” she said.
HUD’s most recent inspection of the Bethesda-Homewood properties in July found doors and windows that won’t close, rodent infestations, mold and mildew, and failing roofs. Pollard pointed out that some structures have crumbling walls that let cold air in and drainage systems that haven’t been updated in decades, causing basements to flood and sewage to back up.
In a letter dated Aug. 25, HUD informed Homewood Residential its project-based subsidy would be suspended; residents weren’t officially notified until late October.
In a Dec. 19 letter to HUD, Pittsburgh Mayor Bill Peduto, who’d been collaborating with a coalition of community organizations to retain the HUD subsidy, stated that a maximum of 82 units could be repaired enough to pass inspection and allow residents to remain.
Omicelo intends to “get as many of those fixed, with people in place, as possible,” Pollard said.
“For those who absolutely have to relocate,” he went on, Omicelo will “work with a wide range of partners to get them relocated, and then possibly re-relocated back to their homes” in Bethesda-Homewood units.
HUD issued special Section 8 vouchers to the Housing Authority of the City of Pittsburgh reserved for the Bethesda-Homewood households that may allow them to remain in the units or else relocate, depending upon the condition of their unit. Pollard said that, as owner, he would accept Section 8 vouchers.
Rev. Dr. Samuel Ware, acting chair of the Homewood Community Development Collaborative [HCDC], wrote in a Jan. 12 letter to Pollard that “HCDC is in support of your efforts and we have begun the process of preparing a matrix of supportive services members of HCDC can provide to the residents of those properties.”
Pollard stated that his primary partner for engaging these households with supportive services would be Community Human Services [CHS]. Jon Hoffmann, chief operating officer for CHS, said his agency is “currently talking with Omicelo and exploring partnership opportunities to provide supportive services to the residents in the units they are acquiring. We are always open to finding ways to collaborate and ensure households across the county have the housing and services they need, especially as decent, affordable housing is in such short supply in our region.”
Omicelo plans to take care of the necessary repairs regardless of whether HUD decides to re-apply a project-based federal subsidy to the Bethesda-Homewood properties.
Pollard shied away from giving a specific timeframe for rehabilitation.
“One of two things happens,” Pollard said. “HUD keeps their project-based vouchers, or we move to tenant-based” — the latter of which would mean that those hoping to live in the Bethesda-Homewood properties would need to individually apply for subsidies through HUD or else pay full rent.
“What does that mean?” Pollard asked rhetorically. “We do not get paid until these properties get fixed.”
So the incentive — both from Omicelo’s business perspective, and from the perspective of those hoping to live in the units — is toward rehabilitating properties as soon as possible.
Hopefully, Pollard said, that means “people are going to have a better quality of life.”
Pollard is no newcomer to Pittsburgh.
He was raised in Rankin and Braddock and educated on scholarship at Sewickley Academy. He left the Pittsburgh area to attend the University of Rochester in 2001, where he earned a bachelor’s degree in 2005 with a dual major in economics and statistics. Not long after graduation, he landed at Goldman Sachs in Manhattan as a real estate analyst. After Goldman, Pollard managed real estate securities at Pine River Capital Management in New York City.
Having done well for himself financially in New York, Pollard returned to Pittsburgh in 2014 and explored his dream of purchasing WAMO, the legendary pop and hip-hop station that served as a home for influential DJ “Porky” Chedwick, and acted as Pittsburgh’s lone radio station catering specifically to African Americans. The station existed on an AM station and a low-frequency spot on the FM dial, and he wanted to revitalize it. He organized a Pittsburgh music event, the DreamOn Festival, in April 2014, as a way to raise money and interest in the venture. It was a success as a community event, but a cash failure. “I lost my shirt,” Pollard said. “It was a six-figure loss.” He never purchased WAMO. Friends implored Pollard to instead stick to what he knew — real estate.
That’s how Pollard started using his Wall Street experience to build a “mission-driven” local portfolio focused on “multifamily assets, single family rentals and residential whole loans,” according to Omicelo’s website.
The company worked to find Pittsburgh properties where it could bring higher quality standards to affordable housing units, while also making money for Omicelo investors. This two-tiered approach — a philosophy of nonprofit and for-profit models intertwining — is carried out through two companies: Omicelo LLC and Omicelo Cares.
The DreamOn Festival is Omicelo Cares’ main pursuit. Though the festival lost money its first year, it lives on as an annual, two-day live music event that has featured up to two dozen artists and a Grammy award winner. Pollard said the festival is organized in large part by high school students who gain small business and event planning skills along the way.
Omicelo Cares also hosts real estate investment classes for high school students and community leaders just starting out in real estate investment.
Real estate investing — the profit-making tier of Omicelo’s operations — is done by Pollard and his staff of three employees. They’ve honed in on three Pittsburgh neighborhoods for investment “that are immediately on the cusp of change,” Pollard said. Those are Homewood, the Hill District and Hazelwood.
In the summer of last year, Pollard said, one of Omicelo’s researchers made Pollard aware of the Bethesda-Homewood properties; Pollard then began speaking with representatives of the owner, Homewood Residential LP, about a potential sale. Homewood Residential includes mostly out-of-state investors. The most prominent of them, Stephen Hersh, managed day-to-day operations at the Bethesda-Homewood properties for about five years, but stepped aside when his luggage company, Biaggi, began to take off; he eventually appeared on Shark Tank, pitching the brand to high-stakes investors on national television. When Hersh gave up his regular duties in Homewood, daily management fell to Aishel Real Estate — a company known as much for property sales as for management. Owner of of Aishel Real Estate, Chaim Davidson, said he did not wish to comment on the Bethesda-Homewood properties. When asked if he had an individual financial stake in Homewood Residential LP, Davidson said, “It’s not relevant at this point what I do or don’t have in it.”
Pollard said he was initially unsuccessful in trying to negotiate “a reasonable price, and trying to get HUD to stop the abatement process.” The abatement process continued, and Omicelo was unable to come to an agreement with Homewood Residential. “The best I can tell you … is it wasn’t our choice,” Pollard said.
Then problems at Bethesda-Homewood became public.
While tenants and other stakeholders publicly asked questions about where residents of the Bethesda-Homewood properties would end up in a city already 17,000 units shy of an optimal number of affordable housing units, Omicelo began to act behind the scenes.
Omicelo took over Homewood Residential’s mortgage on Oct. 13, purchasing debt on the Bethesda-Homewood properties after calculating that these properties held value regardless of whether HUD’s project-based subsidy remained in place or not. Pollard declined to disclose the cost of that purchase.
“When we purchased the mortgage,” Pollard said, “we knew there was some probability that we would become the owner, but it was low.” He said there were other potential buyers looking into the properties.
In fact, ELDI had already secured a purchase agreement with Homewood Residential on Sept. 28, according to Pelling. ELDI’s plan included a $500,000 loan from the URA. But the Dec. 22 closing date passed before ELDI could marshal the funding to complete the purchase.
Pelling noted that the sale was complex because it involved multiple neighborhoods and properties and balancing the needs of residents with the challenges of repairing the units. While each funding partner eventually agreed to invest, he said, “Sometimes things take longer than you think.”
When that funding did come together in early January, they’d already been informed by Omicelo and Homewood Residential of their purchase agreement — one that kept ELDI out of the transaction.
“We’re hopeful that there’ll be a good outcome for the residents, which has always been our focus,” Pelling said. “We also hope that the experience of seeing this crisis with poorly managed subsidized housing will help our city systems anticipate these crises, so that these properties can be identified before they fail.”
Not everyone is happy with this turn of events. “It is disappointing that things have played out the way that they have with ELDI losing out to a for-profit development company,” Richard Swartz, executive director for the Bloomfield-Garfield Corporation, wrote in an email. His community development organization serves neighborhoods in which some of the Bethesda-Homewood units are located. “With the amount of investment that these properties and the rest of the portfolio will require over time, it’s going to be a struggle for the owner to turn a profit with them, and still have them be affordable to anyone earning less than $35,000/year.”
Tim McNulty, a Peduto spokesman, said the administration is “hopeful that the purchase by Omicelo will result in outcomes that are in the best interests of both residents and the communities of Homewood, Larimer and Garfield.”
Both Pelling and Pollard emphasized efforts by the mayor’s office to retain HUD’s project-based subsidy, whether it remains with these properties or elsewhere within the city.
The Urban Redevelopment Authority [URA] issued a request for proposals on Dec. 21 seeking property owners with HUD experience capable of managing the monthly $109,293 project-based subsidy associated with the Bethesda-Homewood properties — to be utilized there still or else transferred to other properties within the city of Pittsburgh.
Omicelo did not submit a proposal. Pollard said that because the negotiations for the agreement with the owner coincided with the URA’s proposal process, he didn’t feel Omicelo was in a position to apply for the subsidies.
Proposals to the URA for managing the project-based subsidy were slated to be reviewed the week of Jan. 8; the URA has not released the results of their selection process.
“We continue to work with HUD and our community partners on pursuing the best options to ensure that there are ample affordable housing resources in place for the residents of Bethesda-Homewood as well as preserving the long-term affordable housing resources that were put in jeopardy by the former owner,” McNulty said.
However that affordable housing can be secured and maintained at the Bethesda-Homewood properties, Pollard’s goal is to inspire ”wholesale catalytic change in neighborhoods.” And he sees outcomes being driven by the resident themselves.
“I believe firmly that if there’s enough hope in a particular place and enough evidence that it’s a good idea for folks to work in concert towards investing in their own neighborhood, that all of this amazing stuff [can happen] because the people who are already there have just decided that’s what we want to do.”
Matt Stroud is a freelance reporter in Pittsburgh. He can be reached at email@example.com. Follow him on Twitter @mattstroud.
Mark Kramer is a freelance writer and creative writing teacher based in Pittsburgh. He can be reached at firstname.lastname@example.org.
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