PHILADELPHIA | East Market | 284 & 248 FT | 24 & 20 FLOORS

[shadowbat2]

From Sunday:

008 by tehshadowbat, on Flickr

009 by tehshadowbat, on Flickr

021 by tehshadowbat, on Flickr

023 by tehshadowbat, on Flickr

[psueng7]

deleted

[iheartphilly]

Originally Posted by psueng7

Sorry! Took a few days to get my page.

The Snellenburg building did in fact have storefront entrances directly into the basement level from the subway concourse. At one time these had glass display storefronts and the entrances themselves had elaborate plaster detailing, with mosaic tile and terrazzo floors - it must have been quite a sight back in the day!

Here are a couple pictures of the old main entrance from the Subway into Snellenburgs.





I spoke with one of the demo guys yesterday and he said the center section that is still up has to be taken down basically piece by piece in a very systematic fashion due to the way it was originally built. Not sure of the details beyond that.

Maybe it is being reclaimed and there is a buyer for it. Although hard to see what is being reclaimed and the value of it. Thoughts?

[psueng7]

deleted

[1487]

Last bit of old structure facing Market Street is down. Nothing is above street level at this point.

[McBane]

Certainly not the tallest building going up in the city right now and it may not even make a dent in the skyline but, from a street-level point of view, this is the most transformative project currently under construction. Taken together with the remodeled Gallery and the Brickstone project going up on Chestnut, this part of town will be unrecognizable by the end of the decade. Throw in the new work rules at the Convention Center, and I think conventioneers who come to the city every 4-6 years will be shocked at the changes next time they return.

[Cro Burnham]

Originally Posted by McBane

this is the most transformative project currently under construction.

I agree. My hat's off to these developers. They are taking a big risk, as there really is no comparable for them to reference.

They just have to hope the tenants will want to come at sufficient rents, and basically that the Center City shopping market is ready expand not only geographically but to a whole new customer base who, up till now, simply haven't really shopped in Center City except maybe a bit around Rittenhouse Sq: tourists, conventioneers, and upper middle class suburbanite day visitors.

Now that they've started, it looks to enthusiasts like us like a guaranteed success, but that is certainly not the case - imagine if you were the developer plunking town $80 million plus in equity on that bet. It's a big risk.

I think and hope they can exceed their expectations, but success is no given. These people have really gone out on a limb.

[Larry King]

Originally Posted by Cro Burnham

I agree. My hat's off to these developers. They are taking a big risk, as there really is no comparable for them to reference.

They just have to hope the tenants will want to come at sufficient rents, and basically that the Center City shopping market is ready expand not only geographically but to a whole new customer base who, up till now, simply haven't really shopped in Center City except maybe a bit around Rittenhouse Sq: tourists, conventioneers, and upper middle class suburbanite day visitors.

Now that they've started, it looks to enthusiasts like us like a guaranteed success, but that is certainly not the case - imagine if you were the developer plunking town $80 million plus in equity on that bet. It's a big risk.

I think and hope they can exceed their expectations, but success is no given. These people have really gone out on a limb.

Pension fund $$, everyone's playing with OPM here

[1487]

Even if the retail struggles to get off the ground the apts will find takers quickly. I dont think they are taking any crazy risk here. They know the density this site will allow and realized its extremely uncommon to get a chance to develop a 4+ acre parcel in the middle of a major downtown. I think there is pent up demand amongst national retailers for LARGE retail locations downtown. While there is a ton of activity west of broad most of these stores are modestly sized, one floor stores. There really isnt anywhere Target or BB and Beyond would be able to fit west of broad. Im sure the developers of East Market know all this and have some potential tenants lined up. There are also quite a few suburban casual dining chains that have no presence in CC and I can't see them holding out much longer. Cheesecake Factory found a spot and I would bet others will follow. Its pretty ridiculous that you have to go to K of P or Cherry Hill to find some of the most popular mid grade chain restaurants.

[Cro Burnham]

Originally Posted by Larry King

Pension fund $$, everyone's playing with OPM here

That's true in most big real estate projects, though, right?

But ULLICO put down a $141MM loan on on a $260 million phase 1 - tho not sure if there is separate debt for the office building rehab. But, even without the office rehab, there's probably at least $75MM equity in the deal. 30% equity? That's a big deal.

Did some of that come from pensions? Could be, but that's the norm for big deals. Pensions and life insurance companies invest in real estate equity routinely, and get preference on cash flow as limited partners.

Is it possible the union pensioners are being duped? Maybe, I guess. Do you have special information to suggest that's the case here?

In any event, if it were so easy to get union pension money, why don't these projects happen all the time in Philly? But this is a rarity.

[Cro Burnham]

Originally Posted by 1487

I dont think they are taking any crazy risk here.

I agree, it's not a crazy risk. Just a big risk. It's a project without precedent in Philly, and takes balls.

Need we be reminded of smaller-scale flops like the original shops at Liberty Place, the ground/lower level Lit Brothers retail, the first incarnation of the Bourse retail, or New Market? No matter how optimistic one feels, there is a large speculative element to a deal like this.

But maybe it's finally the right concept at the right time in the right location.

I LOOOVE this project.

[Larry King]

Originally Posted by Cro Burnham

That's true in most big real estate projects, though, right?

But ULLICO put down a $141MM loan on on a $260 million phase 1 - tho not sure if there is separate debt for the office building rehab. But, even without the office rehab, there's probably at least $75MM equity in the deal. 30% equity? That's a big deal.

Did some of that come from pensions? Could be, but that's the norm for big deals. Pensions and life insurance companies invest in real estate equity routinely, and get preference on cash flow as limited partners.

Is it possible the union pensioners are being duped? Maybe, I guess. Do you have special information to suggest that's the case here?

In any event, if it were so easy to get union pension money, why don't these projects happen all the time in Philly? But this is a rarity.

the developer NREA is 100% owned by the electricians pension fund. They don't have the same return hurdles that most RE funds have... basically they don't really need to achieve a big return. A major part of their mission is creating union jobs.

They've been doing major projects all over the country for last couple years in safe markets like DC, NY, Dallas etc.. A big part of them taking a run at philly is Johnny Doc lobbying the higher ups directly in DC and I believe a former Goldman properties guy high up on the development side of the company

[Cro Burnham]

Originally Posted by Larry King

the developer NREA is 100% owned by the electricians pension fund. They don't have the same return hurdles that most RE funds have... basically they don't really need to achieve a big return. A major part of their mission is creating union jobs.

They've been doing major projects all over the country for last couple years in safe markets like DC, NY, Dallas etc.. A big part of them taking a run at philly is Johnny Doc lobbying the higher ups directly in DC and I believe a former Goldman properties guy high up on the development side of the company

Hmmm. I thought Post Bros were big investors. SIKE.

But I didn't realize NREA was union owned. Very interesting. So I guess maybe this wouldn't meet plain vanilla commercial investment standards.

[1487]

I think biggest gamble for this project is all the potential competition for retail tenants on the east side. There could be too many new retail spots and not enough national brands to go around. The only positive is that there is a huge lack of retail/food amenities on the east side in comparison with CC west- especially on market street itself. Of course the lack of office worker density is a factor in the lack of retail/food options currently available. Market East could use more offices, apts and another hotel.

[psueng7]

deleted

[blart]

^ wow, nice shots

[Cro Burnham]

That department store was huge! To think Philly once had at least five gigantic block-long multi-story downtown department stores (Wanamaker's, Strawbridge's, Gimbel's, Lit's, Snellenberg's), not to mention several smaller ones.

That, if anything, is proof that Philadelphia can sustain much more retail downtown - if it can only make shopping down here more appealing to middle class people from the outer residential rings. And it looks like it can.

[McBane]

I don't know about that. That time period you hark back to was absent of Internet shopping, the growth of the suburbs (at the city's expense), and the proliferation of shopping malls in those areas.

I'm not saying that Philadelphia couldn't use or sustain more retail. I just wouldn't use the retail footprint from the early 20th century as "proof" of anything. Times have changed greatly.

[Cro Burnham]

Originally Posted by McBane

I don't know about that. That time period you hark back to was absent of Internet shopping, the growth of the suburbs (at the city's expense), and the proliferation of shopping malls in those areas.

I'm not saying that Philadelphia couldn't use or sustain more retail. I just wouldn't use the retail footprint from the early 20th century as "proof" of anything. Times have changed greatly.

For sure it will never be the same as 65 years ago.

The internet has an across the the board impact on all shopping - New York, Philly, King of Prussia, wherever - particularly with respect to generic corporate chain store products. This is probably particularly true wrt generic suburban mall shopping where the mall offers virtually nothing extra over just staying home and shopping on the laptop. Suburbs stand alot more to lose from internet shopping than the city.

But places like NYC, Boston, the Magnificent Mile, SF - and, increasingly, Philly - offer alot more and draw in day trippers from the extended region and beyond. Like in the old days, those people are looking to have a unique downtown experience in addition to just buying even generic stuff. In the old days, people routinely traveled to Center City on day trips not only to shop but to take in everything the city had to offer. Beats sitting at home on your ass glued to a computer screen (for alot of people, anyway).

10 - 35 years ago, the vast majority of people buying mid- to high-end things in Center City were Center City people, because everyone else was going to the burbs for parking and greater variety. So Philly declined to a pretty weak downtown shopping scene. Suburbanites so no value in coming downtown anymore. That's definitely been changing. Center City is far more competitive with the best suburban malls in terms of variety of chain offerings, plus it offers an increasing array of unique stores and diversions that the suburbs, almost by definition, have never been and will never be able to offer. I think we are partially catching up with the Bostons and Chicagos. May never match them retail-wise, but were closing in slowly.

I think this project may seriously shift the momentum in shrinking that gap more quickly.

[1487]

Originally Posted by McBane

I don't know about that. That time period you hark back to was absent of Internet shopping, the growth of the suburbs (at the city's expense), and the proliferation of shopping malls in those areas.

I'm not saying that Philadelphia couldn't use or sustain more retail. I just wouldn't use the retail footprint from the early 20th century as "proof" of anything. Times have changed greatly.

My thoughts exactly. The dynamics were totally different. More concentrated population, higher city population, lack of mall competition, more reliance on public transit, no internet sales, etc.