Sunday, April 26, 2015

Coming next fall: The big chill

Gallery: Coming next fall: The big chill

The location in Southwest Philadelphia is hardly glamorous: a former junkyard bordered by an oil refinery tank farm. But something extraordinary is happening there in these punishing recessionary times.

Something is being built.

The Philadelphia Regional Produce Market, a $218.5 million public-private project born of controversy - including a threat to move to New Jersey - is projected to employ 1,500 and ring up $1.6 billion in sales annually when it opens in fall 2010.

Twenty-seven vendors will move there from the 50-year-old Food Distribution Center, a cramped 300,000-square-foot facility near Citizens Bank Park.

The new 686,000-square-foot bulk-produce market on Essington Avenue will comprise 20 acres of vendor spaces, loading platforms, and offices, with a skylight running the length of the quarter-mile-long building.

Its refrigeration sophistication is believed unmatched in the world of produce markets. Think of it as one big refrigerator with 400 separate crispers. Even the loading docks will be cooled to 55 degrees, to ensure an unbroken cold chain from harvest to distribution.

Its financing - a cornucopia of federal, state, and private dollars, as well as payback provisions, rental agreements, and future land-use arrangements - makes this "one of the most complex deals out there," said Gregory Iannarelli, chief counsel for the Philadelphia Regional Port Authority, owner of the 48-acre site and the market's landlord for at least 40 years.

After that, the entity representing the vendors, Regional Produce Cooperative Corp., will have the option to buy the market and the site for $1, assuming it is not in default.

As he led a tour of the construction zone recently, the developer, Brian O'Neill, was as much proud parent as taxpayer emissary. With Pennsylvania more than six weeks past due adopting a budget, O'Neill is aware that taxpayers might not be ecstatic that Gov. Rendell and the legislature appropriated $152.5 million last year for his project.

O'Neill assures that the state will get "every dime" of its investment back, with a return of as much as 4 percent.

"At a time when there's a tremendous amount of stimulus, handouts, and bailouts," O'Neill said, "the Philadelphia Regional Produce Market is paying its own way."

That $152.5 million was a capital-budget appropriation. Also vital to the project is a grant of $771,353 a year for 10 years from Pennsylvania's Infrastructure and Facilities Improvement Program, said Yolanda Rodriguez, an attorney for O'Neill Properties Group L.P., of King of Prussia.

The grant, she said, is equal to the increased sales and personal taxes the state expects to receive from the larger, more modern produce center. A review will occur in the fourth year of the grant, to assess whether the state is receiving what it anticipated, Rodriquez said. If it isn't, the grant's size will be reduced.

Without the grant, she added, "the vendors would have had a near-impossible time" paying the required rent for the first 10 years, as the new market is taking root and growing. Total rent payment over 40 years will amount to $178.2 million, the port authority's Iannarelli said.

Mark Shade, a spokesman for the state Department of Community and Economic Development, called the produce market "an important community-development project that this administration has been big on from the beginning."

"It has a huge upside," Shade said.

The market's journey to Essington Avenue, a busy road to the airport lined with gentlemen's clubs, auto dealerships, gas stations, and airport-parking lots, is nearly a decade in the making.

Triggering it was the 2000 decision by state and city political leaders to build the Phillies' new ballpark at the sports complex instead of in Center City. Citizens Bank Park required taking 85 acres from the Food Distribution Center, which is owned by an arm of the private, nonprofit Philadelphia Industrial Development Corp.

The produce market wanted to expand, but it could not readily find sites big enough and with the kind of highway access its South Philadelphia location afforded. A move to the Navy Yard was deemed too cost-prohibitive.

More than a year ago, New Jersey offered $90 million in incentives for the terminal to cross the Delaware, touching off a tug-of-war.

Enter O'Neill Properties. One of its affiliates, Essington Avenue Partners II L.P., had bought the former junkyard about six years ago. It was close to reaching a deal to put a Walmart there when the discount chain started scaling back expansion plans.

O'Neill offered the ground for the produce market's consideration.

Negotiations started in earnest in February 2008. Closing would come seven months later - on Sept. 16, one day after another key lender, American General Life Insurance Co., which has provided a $50 million loan, filed for bankruptcy protection.

For O'Neill, the produce market is a project like none other he has done. There are no fireplaces and swimming pools; no master suites and chandeliered entrance halls.

"The overriding feature of this building is not its architectural prowess; it's functionality," he said, standing amid the steel framing of the new market, being built by Merion Construction.

Unlike the center it will replace, O'Neill said, the new market will be open not just to commercial buyers but to individual consumers, with one condition:

"You have to buy by the case. You can't buy a strawberry."

 


 

Read about Nick Brosko, the auto salvager who said "no" on Essington Avenue, at http://go.philly.com/brosko


Contact staff writer Diane Mastrull at 215-854-2466 or dmastrull@phillynews.com.

 

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