Office Sector News
New Owners For Wells Fargo Building on South Broad In $100M Deal
The ornate 123 S. Broad St. office tower that has long been home to Wells Fargo and its predecessors has a single owner for the first time in 20 years and has undergone a $100 million recapitalization.
In a series of four different transactions, a partnership involving SSH Real Estate and Young Capital LLC, and Luxembourg-based Quilvest Private Equity, now owns the building. SSH and Young own the Witherspoon building, which is connected to 123 S. Broad, in a separate deal.
The two buildings combined total 880,000 square feet with 123 S. Broad totaling 725,000 square feet and standing 30 stories and the Witherspoon totaling 155,000 square feet and standing 11 stories.
Pearl Properties Buys United Way Building For $10.9M
Pearl Properties has bought the United Way headquarters at 1709 Benjamin Franklin Parkway for $10.9 million. The eight-story, 68,000-square-foot structure, which is listed on the Philadelphia Register of Historic Places, has served as the headquarters for the United Way since it was built in 1967.
Pearl, a Philadelphia-based developer of hotels and apartments, plans to maintain it as an office building and market it to tenants. Bill Golderer, chief executive of the United Way of Greater Philadelphia and Southern New Jersey, said the charity will remain as a tenant until it finds a new space for its 100-person staff and will use the sale proceeds to focus on its core mission of fighting poverty.
Residential Market News
Dranoff Sells Apartment Portfolio To AIMCO For $445M
Developer Carl Dranoff is selling his portfolio of rental properties in and around Philadelphia, as he turns his attention to new and ongoing projects including a pair of condominium tower developments on South Broad Street.
Denver-based investment trust Apartment Investment & Management Co. (AIMCO) will pay $445 million for the package including four properties in Philadelphia: Locust on the Park, 777 South Broad St. and Southstar Lofts in Center City and the Left Bank in University City. The other properties are in Camden and Ardmore.
AIMCO already owns six properties in Philadelphia including Park Towne Place and the Sterling.
Philadelphia Housing Market Continues Its Mixed Signals In Q1
The city’s housing market continued to generate contradictory indicators in the first quarter of 2018, according to a new report from The Lindy Institute for Urban Innovation at Drexel University.
The report found that the average price of Philadelphia’s housing fell by 1.6% on a quality- and seasonally-adjusted basis in Q1 and while the average price of a Philadelphia home is now 4.3% higher than one year ago, prices in the previous quarter were up 12.7% from the same period a year ago.
The median house price in Philadelphia in Q1 remained at $150,000, the same as in the previous quarter, but the average house price fell 2.3% during the same period. In contrast to prices, home sales continue to remain very robust while housing inventory continues to remain very low.
CCD Report Examines Housing In Greater Center City
For further reading on housing development in Greater Center City, the balance between supply and demand, and potential constraints to Philadelphia’s ongoing revival, see the new Center City District (CCD) and Central Philadelphia Development Corporation (CPDC) report, Housing Development in Perspective: 2018.
The report concludes that instead of ending the 10-year tax abatement, or passing an impact tax or mandatory inclusionary zoning, the city should pledge as part of its budgeting process to help fund affordable housing programs through new revenues coming from expiring abatements.
Debate Continues On 1% Developers Privilege Tax
Discussion continues among various developer and business groups on Council Bill No.18035 introduced on April 12, 2018 by Councilmembers Squilla, Clarke, Quiñones Sánchez, Blackwell, Greenlee, Bass, Reynolds Brown and Jones which imposes a 1% “tax on the privilege of constructing any structure for human occupancy, including any residential, commercial or industrial occupancy, or making any improvements to any such structure, for which a building permit is required.”
A copy of the bill can be found here (pdf): phila.legistar.com/View.ashx?M=F&ID=6197024&GUID=339DBC88-B609-4589-8D25-8557543A1CD2
Brandywine Proceeds With Land Acquisitions For Schuylkill Yards
Brandywine Realty Trust is on track to acquire control of what is currently a two-acre parking lot behind 30th Street Station for the first phase of ground-up construction as part of its Schuylkill Yards plan. The $3.5 billion development is slated to eventually involve 8 million square feet of development over 14 acres.
In announcing its Q1 results, Brandywine said it paid $24.6 million for a 99-year lease to an acre of land at 3001-3003 John F. Kennedy Blvd., with plans to acquire another long-term lease by the end of June for an adjacent one-acre parcel at 3025 J.F.K. Blvd. for $20.5 million. Brandywine chief executive Jerry Sweeney said in a conference call with analysts that the acquisitions will allow the company to complete design work for the tract.
Second Philadelphia Navy Yard Hotel Planned In Old Barracks
Ensemble Investments LLC, the Phoenix-based owner of the Navy Yard’s existing Courtyard by Marriott hotel, is in discussions with the city to buy a trio of red brick Colonial Revival-style barracks in the former military base for about $1.5 million, with plans for a 230-room four-star hotel.
The plan, expected to cost $100.9 million, comes amid business growth at the Navy Yard that is fueling demand for lodging. The barracks complex was constructed between 1919 and 1942 to house the former base’s security detail.
Construction Underway For Center City “Micro-Hotel”
Construction has begun at the site where the city’s first tiny-roomed “micro-hotel” is to rise at 19th and Ludlow streets. The start of work for the 252-room, 11-story Pod Philly hotel began April 24 after a ceremonial groundbreaking held by city Commerce Director Harold T. Epps and the project’s partners — Modus Hotels of Washington, D.C., and Parkway Corporation of Philadelphia.
Pod Philly will be the sixth Pod-branded hotel, following locations in Washington’s Chinatown and in New York City. It is slated to open in September 2019.
Center City Hotels Hit Record Occupancy In Q1 2018
Center City hotels hit record occupancy figures for the first quarter of 2018 due to the strength of conventions and special events, including the Philadelphia Eagles' run to the Super Bowl championship.
Hotel occupancy for Q1 was 73.1%, an increase of 5.1% over the same period in 2017, the Philadelphia Convention & Visitors Bureau (PHLCVB) announced. Hotel revenue in Q1 grew to $135 million, a 17.4% increase over 2017.
Citywide conventions and meetings in Philadelphia were responsible for 66%, or $13.1 million, of the year-over-year room revenue growth in the first quarter of 2018, according to PHLCVB.
Philadelphia Hits Record Overseas Visitation In 2017
About 648,000 overseas visitors came to Philadelphia last year — a new record for the city, according to recent data from the Philadelphia Convention & Visitors Bureau. International visitors represent 15% of hotel room demand in Philadelphia.
Philadelphia saw particularly strong growth in travel from Asia, predominantly China, which compensated for modest declines in travelers from Europe.
More information on hospitality trends can be found in CCD’s new State of Center City report: centercityphila.org/socc
Eds and Meds News
Facing High Demand, Pa. Universities Expand Center City Space
Pennsylvania universities are expanding their footprint in Center City in response to increasing demand from the downtown’s high population of adult learners and degree seekers.
At the current growth rate, officials expect the state system will continue growing its Center City footprint in coming years, Karen Whitney of the State System of Higher Education said during an event celebrating the state system’s expanded space on the ground floor of the Lit Brothers building on East Market Street.
The 375 students currently attending West Chester University or Bloomsburg University classes at the location represent 848 enrollments in courses spread across multiple degree programs.
$5M Gift For Drexel’s New Raj & Kamla Gupta Governance Institute
A $5 million gift will fund the expansion of Drexel University’s Center for Corporate Governance at the LeBow College of Business into a university-wide institute and create a new center focusing on nonprofit governance. Former Rohm and Haas CEO Raj Gupta and his wife Kamla Gupta donated $2.5 million toward the creation of the Raj & Kamla Gupta Governance Institute, with the Haas family foundation matching the donation.
More than half of Greater Philadelphia’s 25 largest employers are nonprofit entities, said Patricia Connolly, executive director of the new Gupta Institute.
Independence, Comcast Partner On Patient Care Technology
Independence Heath Group and Comcast are collaborating to develop patient-centered technology aimed at improving the efficiency and experience of the medical care delivery process. The internet-based platform is being designed to provide consumers with access to content and information related to their individual health care needs.
Comcast and Independence are not disclosing the amount being invested in the project, but the two companies are 50-50 partners in the venture. Plans are to have the platform ready for testing in the local market later this year, and roll it out nationally in 2019.
Penn Cell Therapy Spinoff Raises Another $1.5M, Names CEO
A cellular therapy company, spun out of the University of Pennsylvania, raised an additional $1.5 million from a debt financing it initiated last year. CARMA Therapeutics’ amended Securities and Exchange Commission filing shows it has now raised a total of $3.85 million from the financing.
The company also named Steven Kelly as its first president and CEO. Kelly previously served as president and CEO of two Cambridge, Mass.-based biopharmaceutical companies focused on developing new therapies to treat cancer.
CHOP Expands Medical-Legal Partnership Program
Children's Hospital of Philadelphia (CHOP) is expanding its collaboration with the Interdisciplinary Child Advocacy Clinic at Penn Law, a pilot project created in 2015 to serve the legal needs of families of patients receiving care at CHOP facilities.
The expanded partnership, supported by a gift from law firm Reed Smith, will add Community Legal Services (CLS) to the team. CLS attorneys, in conjunction with law students from the clinic and Reed Smith attorneys, will provide free legal services to families receiving care at CHOP. The amount of the gift was not disclosed.
Medical Marijuana Dispensary Approved For Center City Location
The Pennsylvania Department of Health has approved what will be the first medical marijuana dispensary in Center City. Beyond/Hello announced that it expects to open for business this fall at 1206 Sansom St.
The company's majority investor is Denver-based Franklin BioScience, which in February formed a partnership with the Rothman Institute to study the use of medical marijuana to treat pain.
Pennsylvania’s law, approved in 2016, allows medical marijuana treatment for state residents who are under a practitioner’s care for 17 serious medical conditions, including ALS, cancer, epilepsy and multiple sclerosis.
PPA Chief Calls For Dramatic Increase For Contractor Parking Permits
The Philadelphia Parking Authority's new leader has suggested that City Council raise the price of six-month contractor parking permits from $150 to as much as $800, claiming it could raise an extra $4.3 million in revenue for Philadelphia and its underfunded schools.
PPA Executive Director Scott Petri’s fundraising pitch is the latest of several aimed at the construction industry. Other recent proposals include a 1% tax on all construction (see story above) and changes to the 10-year tax abatement, with a recent City Controller report arguing that select neighborhoods have seen the bulk of the benefit of that policy.
Domb: Consider Suspending Parking On Some Center City Streets
City Councilman Allan Domb has suggested that the city should consider suspending on-street parking on some streets as a way of taming congestion.
The city’s Office of Transportation and Infrastructure Systems (OTIS) is about to launch a planning effort focusing on city traffic and road safety. At a recent City Council hearing, Domb urged OTIS Managing Director Mike Carroll to include a study of suspending on-street parking on certain Center City streets in the plan.
CCD’s recent report on downtown congestion, Keep Philadelphia Moving, notes that between 2013 and 2017, car travel times on Chestnut, Walnut and Sansom streets from Broad to 23rd streets increased 10% to 20%, and bus travel times increased 25% to 40%. The report cites a number of contributing factors, including more pedestrians, increased construction blocking travel lanes, and the growing number of delivery trucks and ride-sharing vehicles.
Manufacturing, Service Industries Continue Growth in April
Manufacturing continued to grow in the region in April, according to responses to the Manufacturing Business Outlook Survey conducted by the Federal Reserve Bank of Philadelphia, with new orders up for 40.8% of firms, down for 22.4%, and remaining the same for 36.4%. The number of full-time employees increased for 31.2% of the companies, decreased for 4.1%, and was unchanged for 64.7%.
Looking ahead six months, 49.8% of the firms expected conditions to improve, 9.1% anticipated a downturn, and 35.7% predicted no change.
Business activity continued to expand in the region’s service sector in April, according to responses to the Nonmanufacturing Business Outlook Survey, with new orders up for 37.5% of firms, down for 25.0%, and remaining the same for 15.7%. The number of full-time employees increased for 25.5% of the companies, decreased for 9.7%, and was unchanged for 56.8%.
Looking ahead six months, 51.5% of the firms expected conditions to improve, 10.0% anticipated a downturn, and 33.4% predicted no change.
Manufacturing report: philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2018/bos0418
Nonmanufacturing report: philadelphiafed.org/research-and-data/regional-economy/nonmanufacturing-business-outlook-survey/2018/nbos0418
PICA: City Spends Entire OT Allocation Through Q3
Preliminary reports released by the Pennsylvania Intergovernmental Cooperation Authority (PICA) show that City of Philadelphia overtime costs through the third quarter of fiscal year 2018 totaled $135.4 million, or 99.8% of the city’s $135.6 million annual overtime allocation, with three months remaining in the fiscal year.
Additionally, PICA found that overtime costs increased by $18.9 million over the first three quarters of fiscal year 2017, after the city had achieved a reduction in overtime spending in that fiscal year.
City Planning Officials Put Zoning Outreach Bill On Hold
The Philadelphia Planning Commission has put a 45-day hold on proposed legislation intended to overhaul community notification requirements about zoning changes. Commissioners raised concerns about the bill introduced by Councilwoman Cindy Bass, calling it overly burdensome.
The bill as currently written would, among other things, require developers to send up to two rounds of certified mail to neighbors in a 250-foot radius of a property seeking a zoning change.
State of Center City 2018, Available Now
This comprehensive annual report from the Center City District (CCD) and the Central Philadelphia Development Corporation (CPDC) was presented to attendees of the April 24 CPDC meeting and is available online at centercityphila.org/socc.
This year’s State of Center City finds that while Philadelphia is enjoying the longest period of economic expansion in the last half century, the city is growing jobs far more slowly than peer cities and suffers from persistently high poverty rates. The report concludes that comprehensive tax reform is crucial to create a competitive environment that grows private-sector jobs more quickly.
Op-ed: “Sure Philly Is Growing, But Not Fast Enough”
For an accompanying op-ed in The Philadelphia Inquirer from CCD President and CEO Paul R. Levy on the report’s findings and policy recommendations, go to centercityphila.org/news/op-ed-sure-philly-is-growing-but-not-fast-enough.
Stuck In Traffic? A Discussion About Congestion In Center City
Design Advocacy Group presents a free evening on May 8 devoted to exploring how the city, transit authorities and others are approaching the challenge of congestion in Center City. CCD President and CEO Paul Levy will provide an introduction, using the occasion of CCD's recent congestion report, Keep Philadelphia Moving, to consider what has changed.
A discussion follows with panelists Christopher Puchalsky, director of Policy, Office of Transportation & Infrastructure Systems; Erik Johanson, director of Innovation, SEPTA; and former City transportation official Denise Goren.
For more, go to facebook.com/events/204789506780429/.
Center City Residents’ Association Honors Paul Levy
Center City Residents’ Association (CCRA) will hold its annual Celebration of Center City Living event on May 10 at The Ethical Society. This year's theme is "Urban Village," where the organization will honor CCD’s Paul Levy.
For more, go to centercityresidents.org/event-2859633?CalendarViewType=1&SelectedDate=5/12/2018.