Developer PRDC Properties LLC plans to restore the former Frank P. Heid & Co. hat factory on 13th and Wood Streets north of Center City into a 96-unit apartment building, the latest in a resurgence of industrial-to-residential rehab efforts in central Philadelphia.
The nearly century-old, eight-story Heid Building, as it is to be known, will feature a ground-floor restaurant, a roof deck with barbecue grills and a “hammock lounge,” and a 10-to-15 person coworking space, PRDC said in a release ahead of its planned formal announcement of the project Wednesday.
PRDC’s plan to redevelop the 95,000-square-foot concrete building comes as apartment developers refocus their attention on renovating existing structures, rather than building towers from the ground up, amid soaring construction costs and stagnant rents.
“The bones of the Heid Building are very good, better than most,” PRDC chief executive David Perlman said in an interview Tuesday. “We love repurposing old buildings.”
A large contingent of central Philadelphia’s rental units are already in former industrial buildings, such as the Chocolate Works apartments in Old City and the Lofts 640 development on North Broad Street.
Toward the middle of this decade, though, developers and their financial backers grew increasingly comfortable with building residential high-rises from the ground up amid what was seen as unmet demand for posh rentals in the city center.
Among these are the Dalian on the Park apartments within the Art Museum area’s Rodin Square Complex and the 1213 Walnut St. tower now being completed by the Goldenberg Group of Blue Bell and Houston-based Hines.
But enthusiasm for such projects seems to be winding down, with Jersey City, N.J.-based Mack Cali Realty Corp. backing out of a deal to build a Center City apartment tower and developer Carl Dranoff tweaking his plan for the corner of Broad and Pine Streets to feature condos instead of apartments.
Instead, recent months have seen an explosion of proposals for smaller apartment developments involving the reuse of existing industrial buildings.
Projects coming to light over just the last few weeks have included Post Brothers’ plan for a 350-apartment building in a former warehouse at Ninth and Poplar Streets in the North Philadelphia’s Poplar neighborhood (which has encountered a zoning hurdle) and a proposal to revitalize the area around Wayne Junction train station on the Germantown-Nicetown border that includes converting factory buildings into residences.
Mark Thomson, who coheads commercial real estate firm HFF’s Philadelphia office, said the shift is at least partly due to the failure of apartment rents to keep pace with the rising construction costs across property types.
Costs to build a new “Class A” apartment tower can run between $350 and $400 a square foot, up about 30 percent from just a few years ago, Thomson estimated. Converting an existing property can cost hundreds less, he said.
“If you can get an industrial building where you don’t have to bring in all that brand new steel and you’re working within the existing structure that’s there, you can make the deal work,” Thomson said. “You’re not going to spend the same construction dollars.”
Perlman, whose company’s recent projects include the conversion of the former TransAtlantic building at 430 Fairmount Ave. into apartments and the rehabilitation of the fire-damaged former Lincoln Apartments at 1222 Locust St., acquired the Heid factory building at 325 N. 13th St. for $7.6 million in a deal that closed Tuesday, he said.
Renovation plans for the Heid, expected to cost around $13 million, involve restoring the building’s factory-style windows and cleaning its brick and masonry facade.
Zoning approvals have been secured for the project, with construction scheduled to begin in November and move-ins to start before spring of 2019. The building’s studio, one-bedroom, and two-bedroom units are expected to range between $1,100 and $2,600 a month.
“We love the neighborhood,” said Perlman, citing the success of the nearby Goldtex apartments, also in a former factory, and the newly built Hanover North Broad mid-rise residential complex just to the east, as well as plans for a new city police headquarters in the area. “We had a lot of lenders that were very interested in what we are doing.”