On the House: Gamble on luxury condos proved wise
Developer Tom Scannapieco is not one to gloat, but it looks as if he's defied both the real estate downturn and those who said the idea of selling a luxury high-rise in Philadelphia with one condo per floor was mad, even in good times.
Five years after starting his 31-story 1706 Rittenhouse Square Street project, and about 21/2 years since the first unit went to settlement, Scannapieco has five units (one is the model) to go.
What's more, the construction lender for the $140 million project, Ullico, the labor-owned insurance company, was repaid its $85 million in September 2011. The mezzanine lender, Marsh Hawk Capital Management of Plymouth Meeting, was repaid its $11 million then, too.
Scannapieco remains too much the gentleman to say he told us so, but he and his partners, Joseph and Robert Zuritsky of Parkway Corp., which owned the lot on which 1706 was built, did just that.
He's an unabashed Philly booster and has been since those uncertain times, back in the mid-1970s, when the engineer-turned-developer cobbled together $2,000 from his savings account and a $20,000 credit-union loan to buy two rowhouse shells in Spring Garden for $11,000 each.
"This," he said, standing in the lobby on a drizzly late October day, "is really a barometer of the attractiveness of Center City and the critical mass of people who identify with it."
That critical mass is not limited to the folks worth $10 million or more who bought their single-floor units for $4 million-plus, then poured thousands more into personalizing their spaces. It includes the hundreds of suburban-dwelling buyers of low- and mid-rise condos in Center City neighborhoods who spend $300,000 for places to spend weekends - pieds a terre, if you prefer.
"It's obvious there are enough hotel rooms in Center City available for weekend visits, but buying a small place in the city obviously makes them feel more of a part of the scene," Scannapieco said.
There's more to 1706 than just his defying the economy. It's been successful even though it's not actually on Rittenhouse Square - long the premier destination for well-heeled suburbanites looking for a city nest once the kids have flown the coop.
"Sure, it would have been nice to be on the square," he said, "but this was the only site available, so one big task was to see how we could use this location to our advantage."
Thanks to Cope Linder's design, 1706 is able to take full advantage of the greater light and space available off the Square. And "residential streets run along both sides of the building, so you can double park if you need to, without someone behind you honking the horn" - which seems to sit well with buyers.
So much so that if another parcel off the square were available, he'd consider it.
With 1706, Philadelphia joins an exclusive club: Six other U.S. locales (five cities and Florida) have residential towers of one unit per floor.
Scannapieco said his marketing research - 2,000 potential buyers in metropolitan Philadelphia worth $10 million or more - convinced him that single-floor condos would work, but he still was willing to divide them in two.
He never had to. His research, using data from the city Recorder of Deeds, shows that, from April 2010 through mid-October, settled sales for 1706 accounted for more than 85 percent of all high-rise Center City condos priced at $4 million and above. Included was the $12.5 million penthouse, the most expensive private residence here to date.
Scannapieco thinks he'll be sold out in about a year. "The building was a departure for Philadelphia, but it shows, without a doubt, that these things can be done here."
Contact Alan J. Heavens at 215-854-2472 or email@example.com, or follow on Twitter @alheavens.