The owners of the Gallery don't plan to replace Kmart with another store when it closes in April.
Instead, the plan is to replace the two-story discount retailer with multiple stores, Joseph F. Coradino, chief executive at the Pennsylvania Real Estate Investment Trust (PREIT), disclosed before speaking to a group of retail real estate professionals at Villanova University on Wednesday.
PREIT, based in Center City, operates 35 malls around the nation and eight in the region, including Cherry Hill Mall, Moorestown Mall, and Plymouth Meeting Mall as well as the Gallery.
The plan for the Gallery Kmart space would put an end to what has always been an awkward retail situation, with the store's central selling space doing double duty as a mall pass-through corridor.
"The situation of walking through a store like that, you can count on two hands" throughout the nation, Coradino said.
The move to create more traditional shops along what will become a normal mall corridor will put more emphasis on the Gallery's anchors, Coradino said.
While the Gallery may appear to be one entity, several sections of it along Market Street had been owned by different companies. PREIT bought the Kmart building last year and now has control over the entire Gallery.
"We've been working on that project for 10 years," said Coradino, the main speaker at the area chapter of the International Council of Shopping Center's Next Generation CEO breakfast.
"It was the most difficult acquisition that we ever made," he said.
Coradino was careful not to be specific about any plans for the Gallery, particularly the vacant first floor of the former Strawbridge & Clothier store at Eighth and Market Streets.
But he said the demographics of the city, the growing population of young people, and the presence of 20 million commuters exiting the Market Street East train station below the Gallery provide an opportunity to "transform the retail scene in Philadelphia. We're happy to do that on Market East."
His company has already put out requests for proposals to build a hotel tower and a residential tower above portions of the Gallery.
Coradino said PREIT also has a stake in the bid to put a second casino in Philadelphia. He said PREIT is a 40 percent owner in the property at Eighth and Market.
Developers for the Market8 project, one of the five proposed casino sites, testified Wednesday morning before the Pennsylvania Gaming Commission.
"We're a big supporter of the Eighth and Market casino," Coradino said. "We think it will be an add" to the area.
Real estate development aside, Coradino made a bit of a confession.
"I'm not a gambler," Coradino told the group at Villanova. "I find [casinos] somewhat depressing."
Coradino also said that PREIT recently purchased a building on the northwest corner of 15th and Walnut Streets in Center City. He said company officials got tired of seeing the building underused when they left their offices at the Hyatt at the Bellevue. He did not say what the company's plans for the building were.