Update: see my column in today's Philadelphia Inquirer here. Promo code q36w gets you in free this week.
Earlier: Crews have been hammering away restoring the wood-and-bronze-accented central hall of the old Strawbridge and Clothier store downstairs at 801 Market St. from our Inquirer offices.
Rumors that Bloomingdale’s or another high-end department store will take the long-vacant space have been circulating; earlier plans and speculation had centered on a casino, a Target, high-end restaurants. Bloomingdale’s owner, Macy’s Inc., hasn’t announced a new Philly store, and a spokeswoman for Pennsylvania Real Estate Investment Trust (PREIT) told me there’s nothing to announce.
But retail-watchers say PREIT, which didn’t upgrade the Gallery complex when it improved its malls in Cherry Hill, Plymouth Meeting and other suburbs in the late 2000s, finally looks ready to make its Philly move.
“I can tell you PREIT didn’t spend $50 million just so it can keep Kmart in that space,” says a securities analyst who has followed PREIT for years. The $50 million is a reference to PREIT’s purchase of that part of the neighboring Gallery it didn’t already own from Vornado Realty recently.
In fact, landing a Bloomingdale’s-type high-end department store for the complex is one of two “alternative” plans that Joe Coradino, who has run PREIT since Ron Rubin retired a year ago floated last month when he addressed the National Association of Real Estate Investment Trusts (NAREIT) and said a Gallery upgrade is finally in the works.
PREIT dominates Philly-area malls just as another local REIT, Jerry Sweeney’s Brandywine Property Trust, dominates high-end Center City office space. Highlights from Coradino’s talk:
“We’re the dominant landlord in the Philadelphia market. We own eight of the 20 malls, 45 percent of the malls [gross leasable area in the region]. So the retailers looking to expand in the Philadelphia region need to talk to us.”
Under Coradino, PREIT has paid down debt, sold new stock and is sitting on $400 million in relatively low-interest credit available for expansion. He is planning new initiatives at Moorestown, Plymouth Meeting, Exton, “and, of course, the Gallery … ,
“It’s in the heart of downtown Philadelphia," which has "the third-largest residential population" among U.S. downtowns "and the first fastest-growing....The property that we’ve now completed the assemblage of sits on top of one of the city’s major commuter hubs, which serves 20 million consumers annually. The Gallery is located between the Convention Center and the historic district” near Center City’s largest private employer, Thomas Jefferson University.
So what's the plan? “The possible strategies are really two, that we are moving forward with simultaneously.
“One is a high-fashion anchor center utilizing one of the four high-fashion department stores, one or two of those, as a key anchor to be very transformative and more consistent with what you see on Michigan Avenue [Chicago's high-end shopping district], if you will.
“Another possible alternative is what we call fast fashion and food, if you will, and that is to redevelop it more consistent with some of the more trendy suburban mall tenants — like the Forever 21, the H&M, the Uniqlo<NO1>cq<NO>, as well as restaurants and other food choices.
“Both of those potential visions are really driven to attract a customer that exists in Downtown Philadelphia right now that’s been terribly underserved,” he added.
While Kmart’s lease runs out next summer, and any new arrangement depends on new leases, “it’s our anticipation that, sometime prior to year-end, we will have identified and have enough tenant interest to select a course of action.”