Plans unveiled for E. Market
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Date: Friday, December 10, 2010, 6:00am EST .Related:
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.Two of the largest landlords along East Market Street are planning to spend hundreds of millions of dollars to breath new life into a worn-down section of Center City stretching from 12th Street to the cusp of the Historic District.
Pennsylvania Real Estate Investment Trust anticipates spending more than $100 million in a phased project transforming the Gallery into a modern, upscale urban mall with more eateries and retailers that appeal to consumers who are fashion-conscious and keep up with style trends. The building would be turned inside out with storefronts overlooking Market Street. PREIT would like to begin next year.
SSH Real Estate, Young Capital and JOSS Realty Partners, the partnership that owns 1100 E. Market St., would raze the dated, squatty building occupying the site and construct a $75 million, four-story retail building that may, depending on market forces, incorporate an estimated $300 million convention-style hotel that would stand 27 stories with 700 to 800 rooms. It would be the first of the four Girard Square buildings to get redeveloped.
While not as far along as PREIT and the partnership owning Girard Square, Goldenberg Group Inc. is working to piece together a mixed-use project on a surface parking lot at 8th and Market streets. In 2004, during the heady days of the real estate boom, it unveiled a $200 million plan for the site.
“It would be multiple levels and on a grand scale,” said Robert Freedman, senior partner and general counsel at the company, about what it continues to envision. “We look at the property as the centerpiece of Market Street East. We think because of both the size of the property — two acres — as well as the location that it really deserves something special.”
Such development activity is considered long overdue for Market East, which is, in some parts, a tired dead zone between City Hall and the historic area, and a drag on that part of the city in spite of having an enormous amount of daily foot traffic from commuters, tourists, conventioneers and downtown residents.
Both PREIT and the Girard partnership say that in order for the projects to move forward they need a new sign district formed along that part of Market Street that would allow high-tech animated billboards on their buildings. Revenue generated from the billboard advertising would help cover a portion of their development costs.
It could have other benefits, according to Freedman of Goldenberg.
“Certainly better, livelier and brighter signage can be helpful to attract new stores and restaurants to the area and make these blocks a more inviting shopping and entertainment destination,” he said. “We are dealing with several national tenants interested in this location, and more flexible signage options and a more dramatic streetscape would be considered a plus for them to locate here.”
A bill to establish the district between 7th and 13th streets was introduced by City Councilmen James Kenney and Frank DiCicco. It would only apply to buildings that are substantially redeveloped or new construction and the size of the billboards would be restricted. It is being reviewed by city planners. A hearing scheduled before the planning commission last month was postponed for further review and a new hearing set for next month.
The measure is expected to be controversial. Some observers believe this type of sign district would make Market East look gaudy and glitzy like Times Square and diminish the historical nature of buildings, potentially harming the Independence Mall area. Residential neighbors worry the bright signs will be an obnoxious intrusion to their homes.
“There’s so much misinterpretation out there,” said Paul Levy, CEO of Center City District. “It’s completely different from Times Square though it is using the technology. Times Square isn’t even close to what we are thinking about. Toronto and Boston have sign districts and this is even more restrictive.”
These sign districts have a way of enlivening an area and, though they capture foot traffic, can even create foot traffic by being interactive by streaming a live feed of a concert at the Kimmel Center or baseball or football games, Levy said, noting people visit Comcast Center just to view the animated images. The revenues the billboards will generate is a way to fill a funding hole local and state governments can’t tap to support development activity.
“If you go back 50 years there were 12 department stores on Market East,” Levy said. “The former Gimbel’s has sat vacant for 30 years.” The Gimbel’s was at 8th and Market where Goldenberg’s surface lot now sits.
The hospitality-and-tourism industry has long pressed for changes along Market East, urging retailers and retail landlords on Market East to make existing stores more “street friendly.”
For instance, they would create storefronts along portions of the Gallery where there are currently blank walls at street level. They would also like to see more convention-style hotels to meet demand for the increased size of the convention center. Center City needs an additional 800 hotel rooms.
“The Market East area is an essential connector between the Convention Center District and the Historic District,” said Jack Ferguson, incoming president of the Philadelphia Convention & Visitors Bureau. “With the highest foot traffic of any part of the city, Market East has great potential for development and prosperity and there are many partners working together to ensure that this happens in a timely and strategic fashion because the evolution of a first-class destination retail and entertainment district around the convention center benefits everyone — both visitors and residents.”
David Eisner, president and CEO of the National Constitution Center, said Independence Mall attractions would benefit from a stronger Market East corridor.
“The next big change is Market Street, from the Pennsylvania Convention Center,” said Eisner. “Instead of just an artery, you’d have something nice. The buildings along there have nice ‘bones.’”
Without the sign district, however, kicking off new construction or massive redevelopment projects will be difficult to finance, the developers said.
“It’s a piece of the solution,” said Joe Coradino, president of PREIT. “It’s certainly not the only solution because there are a lot of other things that come into play. I’ve been doing this for 30 years. This is by far the most complicated transaction I’ve been involved with.”
PREIT bought the Gallery in mid-2003 and late 2004 from Rouse Co., a Maryland retail real estate company. At a dinner celebrating the closing of the transaction, a Rouse executive told Coradino that Rouse Co. had been unable to line up financing for the Gallery because its ownership structure is so complicated lenders steered clear of it, Coradino recalled. The Redevelopment Authority owns the ground, PREIT owns a long-term lease on it and SEPTA and other stakeholders control other parts of the property.
“That was one piece to overcome,” Coradino said, noting that PREIT is trying to simplify some of the ownership arrangement to make it more attractive to lenders. “The second piece is no money has been invested into the Gallery in its history.”
The 1.1 million-square-foot urban mall opened in 1977.
PREIT had been investigating ways to help finance redevelopment of the property. In 2008, Foxwoods Casino considered locating there but that got scrapped. The company then began exploring sign districts for the last year or so, looking at similar projects in Chicago, Minneapolis, Los Angeles, Toronto and elsewhere to see what they looked like, whether they would work along Market East and whether they could be a revenue source.
“Tenants are not going to pay the rent to justify this massive investment,” Coradino said, noting current retailers don’t capture the 60,000 commuters and others who pass through the building every day.
PREIT is deep into its plans for the Gallery. It has an architectural design and it’s going over how the stores and restaurants would be laid out in the redeveloped space. It already has interest from prospective retailers.
“It’s crystallizing in our mind and getting close with the city but we still have some work to do,” he said.
Across the street, owners of 1100 E. Market envision a four-story, 280,000-square-foot glass building with two levels of underground parking that would replace the existing structure. A lease for a large retail anchor, which is rumored to be Target though couldn’t be confirmed, is under negotiation and would help kick off the building. If everything falls into place, including relocating existing tenants, the new space could open in 2014.
“This will be a prime shopping destination for Philadelphia,” said Larry Botel, managing partner at JOSS Realty of New York.
A sign overlay would be a needed boost to the project, Botel said, since the current lending environment is still tight for new construction and retail rents don’t support it either.
“It would be a challenge without the sign district,” he said. “We don’t want it to be loud and flashy, but it needs to be what it is to enliven the street.”
Read more: Plans unveiled for E. Market | Philadelphia Business Journal