Goldtex redux? Can peace stick between Post Brothers and unions?

Michael Pestronk, left, and his brother, Matthew Pestronk in front of their apartment conversion project at the Atlantic Building, at Broad and Spruce Streets. This photograph was shot in October, 2012, just as the brothers were in a rancorous dispute with Philadelphia’s busilding trades over open-shop construction at their Goldtex project at 12th and Pearl streets. (ALEJANDRO A. ALVAREZ / STAFF PHOTOGRAPHER )

When Philadelphia contractors and the building trades talked peace more than a year ago, there was a lot of good dining going on, with the players choosing gnocchi or chicken marsala at Spasso’s Italian Grill in Center City or one of those hefty hot pastrami sandwiches at the Famous 4th Street Deli on South Street.

They are not eating together now — they’re too busy holding their collective breaths to see whether a fragile labor peace eked out over meals between union leaders and the Pestronk brothers, who challenged union hegemony over city construction, will hold during the apartment conversion of the 1920s Atlantic office tower at Broad and Spruce Streets.

At the moment, the truce is looking fragile.

“We’re not trying to flick anyone in the eye,” said Michael Pestronk, chief executive of  Post Brothers, the name he and his brother Matthew gave their business.

No one has forgotten what happened the last time the brothers developed in Center City nearly five years ago, in the fall of 2012.

The Pestronks wanted to convert a former textile factory at 12th and Wood Streets, the Goldtex building, into apartments, using a mix of union and non-union contractors. Construction stopped for months as union workers — objecting to the use of non-union workers — blocked entrances to the site. The protests were organized by the Philadelphia Building Trades Council, then led by Patrick Gillespie, who is now retired.

One disturbing video showed a worker trying to get on site falling down as eight men crushed him between a chain-link fence and a stone wall. Two people were arrested and others were sought. At one point, as many as 100 protesters were on site and the Pestronks were paying the Philadelphia Sheriff’s office $2,000 a day to enforce a court-order keeping them 45 feet away from the building.

Eventually, the building got rehabbed, tenants moved in, and the Brick and Mortar bar opened on the ground floor.

Then, in November 2015, John Dougherty, the newly elected head of the Building Trades Council, grabbed lunch with the Pestronk brothers at Spasso’s. Dougherty also leads Local 98 of the International Brotherhood of Electrical Workers, a politically powerful union.

In theory, an agreement was reached: The brothers would use union contractors to rehab the Art Deco building, figuring that the reliability of building without hassle would compensate for higher union construction costs. “As we saw on Goldtex, when the unions are upset with you, they do a lot to obstruct the schedule and delay things,” Michael Pestronk said at the time.

In January, 2016, there was another meal — at the Famous deli, with Dougherty, the Post brothers and Pierce J. Keating, chairman of Daniel J. Keating Co., a large general contractor. Trade sources said the brothers asked them to promise a price of about $119 million to convert the building.

After negotiations with about 30 contractors and the unions that work with them, that number was reached. Then the brothers asked for a lower number, $105 million. Again, the unions and contractors reached that number, with “value engineering,” cutting costs and materials. But no deal was reached, and the union side wondered whether the brothers used their numbers to negotiate better deals with non-union contractors.

“We thought we had crafted an appropriate deal between the Post brothers and the unions,” Keating said. “We would still like to build the building.”

Pestronk denied shopping the deal. He said that Keating met both numbers, but that the value engineering meant unacceptable grades of materials and finishes. And, so the brothers decided to handle their own general contracts. They reached signed sub-contracts at the $105 million price, which was enough to get construction financing, Pestronk said.

He said he hopes the building, designed to include a rooftop deck, pool and fireplaces, will be fully leased by the first quarter of 2019 with the first apartments available next summer.

He said demolition work is being handled by a union subcontractor employing members of a laborers’ union local, a fact confirmed by Ryan Boyer, business manager of the Laborers’ District Council. On Wednesday, workers were at the building with entrances manned by security guards. An alley or driveway behind the building was fenced off with black cloth mostly blocking views of the site.

Whether Pestronk will use union subcontractors for the larger contracts remains to be seen. “We’re working together with all the trades,” Pestronk said, saying the building will be built “majority union.” He declined to say if he’ll use union electrical contractors.

Boyer said he heard the Post brothers were envisioning a replay of what happened at Goldtex and if they do, “we’ll do everything in our legal power” to prevent them from having non-union workers there.

“We had a tacit agreement,” Boyer said.

John Dougherty, who is facing a wide-ranging federal corruption probe, was unavailable. His spokesman, Frank Keel, said there were still a lot of “open-ended discussions. I don’t think anyone has given up or thrown in the towel.”