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The Sky’s the Limit

by Stuart Michaelson

Philadelphia-area building-and-construction leaders use terms like bullish and exciting—coupled with caution about schools and taxes—to describe the local market in a series of recent interviews.

Such assessments have graced a once-beleaguered Philly for some time now. Optimism flows from Carl Dranoff, president and founder, Dranoff Properties. “Our biggest advantage,” says Dranoff, “is our reputation. It gives lenders assurance that their projects will be completed on budget, on time, and will rent or sell. My strategy is to invest in areas and in projects that are ahead of the curve. I scrutinize consumer demand and supply and look for the gaps.”

CURRENTLY ON DRANOFF’S RADAR:
• One Riverside is currently under construction, with luxury space and half of the 82 planned units committed. Located in Fitler Square at the Schuylkill River Trail entrance and designed by Cecil Baker + Partners, the 22-story skyscraper features large living spaces and private gardens; first occupancy, spring 2017.

• Dranoff breaks ground this year on the SLS Lux Philadelphia Hotel & Residences, a partnership with SBE Entertainment Group. Designed by Kohn Pedersen Fox Associates, the 44-story glass tower at Broad and Spruce Streets will have 90 luxury condominiums, 152 hotel rooms, 4,600 square feet of ground-floor retail and meeting facilities.

The Hyde at Broad and Pine Streets is Dranoff’s second project with SBE, with mixed-use residential and hospitality along the Avenue of the Arts, 83 apartments, 76 high-end hotel rooms and a roof-top restaurant.

• One Ardmore Place is a transit-oriented mixed-use development in Ardmore. • Ardmore Station, which is currently the subject of an appeal to the state Supreme Court by a citizens group; a ruling is expected this year. • The $1 billion Camden Waterfront redevelopment project by Liberty Property Trust and partners includes retail, office space and residential (155 apartments) with an anticipated 2017 ground-breaking. Dranoff calls the Liberty’s initiative “gratifying” in light of his company’s investment in 341 apartments in the former RCA Victor headquarters on Camden’s Waterfront, the Victor, which opened in 2004 and gave investors “confidence about Camden.”

“This is an exciting time in Philadelphia,” says Dranoff, while acknowledging the need to improve city public schools. “Our economy is on a roll. Our image has changed from a quaint historic town to a thriving international metropolis with an exciting vibe.”

Bart Blatstein, CEO, Tower Investments, says, “[Philadelphia is] a tremendously hot market, all the rage with young singles, newly married and empty-nesters. It’s a dynamic market, being discovered by outside developers. New York has slowed down, Miami has slowed down, Philadelphia is on the rise.”

He expects visitors to be impressed in July during the Democratic National Convention. “Our transit system is great, you don’t need a car downtown, and look at how walkable the city is. I have never been more bullish on Philadelphia.”

While Blatstein recently made a splash in Atlantic City—buying the former Pier Shops at Caesars and redeveloping the site into the Playground, with such features as a bowling alley and live entertainment—he has plenty to keep him busy in Philly.

FOR INSTANCE:
• A project at Broad Street and Washington Avenue, near the High School for the Creative and Performing Arts will feature a single, 32-story apartment building atop a 50-foot-high podium, to accommodate three retailers, 650 cars and 1,000 apartments. Due for a zoning hearing in April, with changes made during a process of meetings with the Design Advocacy Group, it is set for 70,000 square feet of retail on the first-floor level and another 70,000 square feet of retail and cafes on the village (50 feet) level. Blatstein says, “We feel we have put together a great project, the best one I have ever done.” • The former Inquirer building at 400 North Broad St. is slated for an existing 520,000-square-foot building with a proposed use of a 140-room hotel and tech office space, with zoning in process. • A waterfront parcel on Columbus Boulevard between Reed and Tasker streets is planned for mixed-use with 60,000 square feet for retail use, plus 400 residences, with a zoning process this spring.

Richard S. Gottlieb, senior vice president of operations and development at Philadelphia’s Keystone Property Group, sees a bullish construction market, which he calls especially welcoming for a mixed-use environment and new construction.

“The economy,” he says, “is still growing and has room to grow.” He adds that “[The DNC] will show we have a lot to offer; when people come here, they like it.”

Gottlieb notes several Keystone properties, like The Curtis at 601 Walnut St., mixing offices and restaurants. Work started about two months ago, with plans for 63 luxury apartments and 800,000 square feet of office space.

OTHER NOTEWORTHY PROJECTS:
• Upgrades to 100 Independence Hall West’s entrance, plus lobby renovations, a new front door and porch-lighting plans. • Mixed-use plans for the former GSB building in Bala Cynwyd, with the GSB sign remaining and 206 apartment units. • Fayette and Elm in Conshohocken, with office space, parking and a hotel; and a nine-story office building at One Plymouth Meeting, near Route 476 and the Pennsylvania Turnpike.

Also voicing confidence, along with a word on taxation, is Parkway Corporation President Robert Zuritsky.

He points to Hanover North Broad, a multi-use development on North Broad and Callowhill streets, which broke ground this year. He says the project with the Hanover Co. is “a very exciting project for that area of town, which has struggled to find an identity.”

With plans for 340 units, 17,000 square feet of retail space and about 300 parking spaces, the project also benefits from a nearby Whole Foods. “That whole area,” says Zuritsky, “is really exciting.”

Parkway will sell or develop a property at 20th and Arch streets, which previously housed a car-rental office. “We are more active at this point on a sale,” he says. “Residential is a slam-dunk, or a hotel. We will see who is interested.”

It is also active in the retail use of the former Dow building at 6th and Market streets, which is 100-percent leased for three years.

Still, while Zuritsky looks with optimism at the city, he sees parking-industry challenges.

“It is incredibly expensive to build parking in Philadelphia,” he says, noting the city’s 22.5-percent tax on gross receipts from parking transactions, while New York City’s is slightly over 18 percent. “This makes things brutally difficult.”

Post Brothers Apartments, founded by brothers Michael and Matthew Pestronk, are targeting what Matthew Pestronk calls a gap in the market for college graduates who aren’t ready for mortgages.

“Historically,” Pestronk says, “people have not stayed in University City, or Philadelphia in general, after graduation simply because the appropriate housing options have not been available to them. For developers and investors like us that are opportunistic, there are many advantages. Not many cities are as walkable and commuter-friendly as Philly. When this is compounded with the fact that there’s a major dearth of high-end, accessible options in several of the city's evolving neighborhoods, there is a great opportunity for savvy and forward-thinking investors.”

High on Post’s list is Presidential City, with construction expected to be complete in about a year. The four-building, 1,000-unit complex on City Avenue was severely deteriorated when Post acquired it in 2013. “We’re performing full-gut renovations to the buildings, completely revamping both the buildings’ interiors and exteriors to reintroduce a product that is truly world-class,” he says.

In April, Post opens Presidential City’s centerpiece, Club Sora, a four-acre amenity center with Olympic-length pool and fitness center.

In University City, Pestronk adds, “We saw an opportunity to invest substantially in creating housing for an educated, upwardly mobile population” with Garden Court Plaza, a 146-unit apartment complex at 4701 Pine St.

Brandywine Realty Trust made a huge local splash earlier this year with word of Philadelphia’s Schuylkill Yards innovation development, a 14-acre master planned community consisting of five million gross square feet of mixed-use real estate on a 10-acre site next to Drexel University’s main campus.

But that 20-year development plan is far from the only current major Brandywine development. High on its agenda: A partnership with AKA by Korman Communities, featuring the FMC Tower at Cira Centre South. Designed by Pelli Clarke Pelli, the tower is a 49-story, 730-foot tall mixed-use skyscraper with luxury residences.

Slated for an early fall opening, Paul J. Commito, vice president of development at Brandywine, touts the lobby wall, marble floors and wood ceiling of the development and says a recent site tour convinced him how “incredible” the project is.

Bradley Korman, AKA’s co-founder (along with brother, Larry) notes that Philadelphia wasn’t always a city suited for luxury long-stay properties. “Ten years ago,” Korman says, “Philadelphia wasn’t like it is now. Now, people, from young to empty-nesters, want to work here, live here and rent in the city.”

Such short- and long-term luxury accommodations especially appeal to those on temporary work duties as well as, for instance, divorced people.

Commito says another Brandywine-AKA project, Cira Green, an elevated park in University City, has already taken a special place in Philadelphia’s public open spaces since opening in November.

“Already,” Commito says, “wedding photos are being taken there.”

There it is again … optimism! And with projects like these transforming the way residents work and live, there is good reason for it.

Published (and copyrighted) in Philly Biz, Volume 1, Issue 5 (April, 2016).
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