Pete Soens (SSH Real Estate), Michael F. Young (Classic Management Inc.) and Larry Botel (JOSS Realty) have been trolling for investment partners for the old Girard Block for six years -- since they took over development rights from the defaulting Trinity group, which had the bad luck to pay the Board of CIty Trust's Girard Estate $90 million for 75 years (renewable) in 2006, just before the market crash. (Too bad those proceeds, as managed and partly spent down by the Board in the late recession, wasn't enough to let beneficiary Girard College keep its boarding program open.)
For two years the investor-developers have been talking to what's now National Real Estate Advisors, the Electricians' (IBEW)-backed union-friendly investment firm whose predecessor (Indure) backed John Buck Co.'s 2116 Chestnut St. high-rise (as I wrote here) (that was a deal sweetened, like this one, by state matching grants; and which still lacks its promised medical center, last we checked). Two years ago the group was still looking for tenants.
NREA has now pulled the trigger (apparently grocery and other store tenants have arrived, or are that close), and has joined the three developers in ordering demolitions and supplying (between the group) around $80 million in equity to bring in $150+ million in bank financing for what may be a supermarket, stores, an initial 325 apartments, and maybe more apartments, stores, offices, even a hotel refililng the block -- 11th to 12th, Market to Chestnut. They call the project East Market. Read my story in today's Philadelphia Inquirer.
(Is the Gallery at Market East next? Mall landlord PREIT's boss, Joe Coradino has told investors he's looking for his own big financial partner to finally move the aging (and increasingly vacant) mall forward. Not clear if East Market helps that deal, or competes.)
What did it take to pull the trigger? IBEW's top elected official here, Local 98 President and Democratic Party potentate "John Dougherty is the biggest cheerleader for Philadelphia," NREA's Jeff Kanne told me.He did everything he could to attract us there. He's introduced us to some other projects that are very interesting. Mayor Nutter (and Deputy Mayor) Alan Greenberger, have made it clear they welcome investment and they will do whatever they reasonably can to help us find our way. Everyone in Phily has been welcoming and helpful. (Though he hasn't met anyone from City Council, it turns out. Back to Doc:) He's a dedicated trade unionist. And he wants to be a force for good in that town."
What other projects is NREA considering? "With PIDC, we're looking at stuff down in the Navy Yard," Kanne said.
I asked John Dougherty what he'd done to tilt the balance toward Philadelphia. “We didn’t give up," he told me. "We went back to Washington four or five times." He met with NREA and with IBEW International president Ed Hill, another Pennsylvanian. "I’ve been back and forth lobbying. I won’t stop. I love Philly."
He digressed to brag about union jobs he said have come in safe, on time and under budget: 2116 Chestnut, the Sunoco refinery reconstruction, the Convention Center expansion. Makes Philly an easier sell to builders, he said. (As do the state matching RACP grants, which Kanne and Buck each told me makes Philly construction affordable.)
Back to East Market: "I've got a couple of projects I'm especially interested in. I want to get the mortgages on the lower end of Chestnut St. bought up (and the buildings developed.) I get tired of the mattress-store-on-the-first-floor, nail-salon-on-the-second floor mentality. I want to see the whole building leased. (Which is what he says NREA and partners are doing at East Market. "And I want to get a subway to the Navy Yard."