By Joseph N. DiStefano, Inquirer Staff Writer
Posted: March 20, 2014
In a sweeping $500 million-plus project aimed at finally upgrading Philadelphia’s worn downtown retail district and spreading Center City’s apartment revival east of Broad Street, a development group says it plans to demolish a modest block of stores on Market Street between 11th and 12th – and eventually level or renovate the rest of the block down to Chestnut Street – in favor of a new retail/residential complex.
Developers of the complex, to be called East Market, are two Philadelphia concerns, backed by Washington and New York firms.
“We’re going to have grocers, we’re going to have restaurants, entertainment, fashion,” said Jeff Kanne, chief executive of National Real Estate Advisors (NREA), a $2.2 billion-asset, Washington-based firm that counts the International Brotherhood of Electrical Workers and other unions as investors.
“All the tenants have been terminated, and we expect to knock that building down in July,” Kanne said Tuesday of the 1100 block of Market Street, former site of the N. Snellenburg & Co. department store and currently home to a dollar store and electronics, clothing, and jewelry shops.
Planned are two new store buildings facing Market Street, lit by Times Square-style signs, that will be topped by 325 apartments (at perhaps $2,200 a month for a one-bedroom unit), with parking underground.
Builders also will strip and replace the outside walls of the eight-story former Snellenburg warehouse facing 11th Street, now used by the city’s Family Court. The developers are talking to office tenants, but could end up putting more apartments there, said Pete Soens of Philadelphia developer and landlord SSH Real Estate, an East Market investor.
Retail stores are planned for the first floor of the nearby 12-story Girard office building, with the upper floors upgraded for office, hotel, or apartments, depending on “market demand,” said Daniel Killinger, director at NREA Development Services. “We’re going to make Market Street cool again.”
If the initial space sells well, the group plans to replace buildings in the 1100 block of Chestnut Street with new stores and apartments – bringing the residential count for the entire project to as many as 1,000 units, Killinger said.
McDevitt Co., a retail real estate agency whose clients include the chains owned by South Philadelphia-based Urban Outfitters Inc., is in charge of signing new stores. The architect for the project is BLT, whose recent efforts include two University City high-rises.
Service alleys on Ludlow and Clover Streets will be opened to through traffic, the developers said Tuesday, and a walkway stretched from opposite the Convention Center’s Reading Terminal entrance on Market Street to Chestnut, linking historic neighborhoods south and east.
No variances are required for the project, the developers said, with the anticipated uses either covered by current zoning or permitted for previous plans for the properties.
Joining NREA in financing the $230 million first stage of the project are developer Soens; Michael F. Young, owner of Classic Management Inc., which updated and operates apartments in Fairmount and northwest Philadelphia; and Larry Botel’s New York-based JOSS Realty Partners L.L.C.
Together, the four equity partners will invest more than $80 million. NREA plans to borrow the rest from banks. JPMorgan Chase & Co. financed NREA’s previous Philadelphia investment, 2116 Chestnut St.
The Commonwealth of Pennsylvania is expected to kick in $7.5 million in Redevelopment Assistance Capital Program matching funds already approved for the site.
Why is taxpayers’ money needed? “It’s expensive to build in Philly,” said NREA’s Kanne.
Soens, Young, and Botel bought 75-year renewable rights to the 4.3-acre property – also known as the Girard Block – from a would-be office developer in 2008.
Several times previously, they have announced their intention to demolish and rebuild pieces of it – just as mall landlord Pennsylvania Real Estate Investment Trust has several times announced redevelopment at the partially vacant Gallery complex nearby – but have found it tough to raise funds for more sweeping plans.
With NREA’s backing, “we’re in a very strong position to bring to Market Street what it has needed for a very long time,” Young said. “This will fill the hole in the doughnut between City Hall and the Liberty Bell,” while also drawing tourists from the Convention Center and hotels.
Kanne credited John Dougherty, president of International Brotherhood of Electrical Workers (IBEW) Local 98 and a power in city Democratic politics, with helping to sell him on East Market.
‘A force for good’
Dougherty, he said, “is the biggest cheerleader for Philadelphia, and he’s introduced us to some other projects that are very interesting,” as well as to Mayor Nutter and restaurants on Passyunk Avenue.
“John Dougherty wants to be a force for good in that town,” Kanne said.
Dougherty said he traveled to Washington “four or five times” to lobby NREA and IBEW leaders for East Market. He said he was glad to be able to note that union crews delivered the NREA-backed tower at 2116 Chestnut St. ahead of schedule.
NREA worked with Soens redeveloping apartments at 1201 Chestnut St., which faces East Market.
“I was amazed at what [young professionals] are willing to pay here, even in a building with no amenities and no parking,” Kanne said.
The city has many renovated rentals, but new units with amenities are scarce, he added: At 2116 Chestnut, “the rents are higher than we expected. There aren’t enough new buildings in Philadelphia.”