Left Bank pays off for Dranoff

The Left Bank - at $58 million, developer Carl Dranoff's most expensive project to date when it opened in late January 2001 - was considered a dangerous move at the time.

"It was West Philadelphia," Dranoff said of the experts' observations. "They thought I was nuts."

Of course, Dranoff's gamble - an "educated leap of faith," he called it at the time - paid off.

The 282-unit luxury rental project - carved from a 700,000-square-foot, concrete-and-steel University of Pennsylvania-owned building at 32d and Walnut Streets that had last been home to General Electric's missile and spacecraft division - has been 100 percent rented almost since the day it opened.

First-floor retail, a tougher nut to crack given the location "at the edge of the Danish," has thrived since, as well, with some businesses, such as first tenant Picnic, still there.

With Penn and Drexel University committed back then to $800 million for development of University City and plans for the expansion of Children's Hospital of Philadelphia and the Hospital of the University of Pennsylvania, Dranoff said, "you didn't need to be an Einstein to look around and see how the whole region would be transformed."

"We are now the middle of the Danish, where all the good stuff is, surrounded on both sides by enormous development," he said.

The value of the Left Bank has nearly doubled, to about $120 million, and Dranoff has just secured $88 million in financing - commercial real estate's version of a home-equity loan - to continue efforts to "renew" the property that began quietly two years ago.

"A bank giving you a 10-year loan to do such work wants to be assured that the building will be as fresh then as it is now," Dranoff said.

Multifamily rental buildings - especially those that, like Dranoff Properties', remain in the developers' portfolios - need to be kept fresh to compete with the new products falling like autumn leaves on the market.

"The rental market has changed dramatically," said David Della Porta, president of Cornerstone Communities Inc. in Villanova, who builds both rental and for-sale housing.

"Everyone is a renter today, all age groups, income levels, and household types," he said.

"They are all looking for something a little different, but in general they want more of everything: more space, more services, more amenities," Della Porta said. "I have decided it makes good business sense to give it to them."

Spencer Yablon, senior vice president with the Capital Markets/Multifamily Group at CBRE's Wayne office, says he remains "bullish" on the multifamily rental market, saying some areas continue to be "underserved by a high-quality product."

There are some developers who have taken the process through entitlement and approvals who fear a return of 2007 "and are trying to decide whether they should proceed or sell it," Yablon said.

Multifamily rentals tend to be "submarket specific," he said, and "some areas don't have enough product while others have too much."

"But the absorption rate remains healthy, national rents are up 41/2 percent, and the homeownership rate is a 30-year low," Yablon said - all favoring multifamily development.

"We 'future-proofed' the Left Bank when we built it," Dranoff said, calling the interior courtyard cored out of the center of building "unique."

As with his more recent multifamily rentals and for-sale products, Dranoff is meeting demand for more outdoor space and interior gathering spaces.

For example, "study nooks" for individual use are being carved out of larger common areas that Dranoff believed were being underused.

Each of the Left Bank's 282 units is being rehabbed, with 55 percent - about 60 a year - of the total completed so far, he said.

"We are in it for the long haul," he said, "and that gives us a chance to set the trends."

aheavens@phillynews.com

215-854-2472@alheavens