Ave. of Arts building sells for $33M, plans call for luxury apartments

The residential portion of the Avenue of the Arts building in Center City has sold for a reported $33 million. MRP Residential, a division of MRP Realty of Washington D.C., and Principal Real Estate Investors have partnered to acquire the property.

The new owners plan to redevelop it into a high-end apartment building that will have 220 units.

The acquisition consists of floors 4 through 17 totaling 209,095 square feet of the entire 283,126-square-foot building at the corner of Broad and Chestnut streets. The space is currently used as student housing by the Art Institute of Philadelphia. The new apartments will take up about 176,000 square feet.

Jim Galbally of Jones Lang LaSalle arranged the transaction along with colleagues John Plower, Doug Rodio, Joe Garibaldi and Jim Vesey.

The retail portion and floors one through three were not part of the transaction. Capital Grille occupies 11,000 square feet fronting South Broad and is in the space until 2015. Olive Garden takes up 7,500 square feet along Chestnut Street.

The property was constructed in 1898 as an office building. A partnership between Lubert-Adler Partners and Philadelphia Management Co., both of Philadelphia, bought the building in 2000 and spent $18 million converting it into residential use for the Art Institute. In December 2004, Ashkenazy Acquisition Corp. of New York paid $45 million for the entire building and was the seller in the latest transaction.

The structure has been in a state of flux for a couple of years and is reflected in the latest sale price. The Art Institute uses the building as its primary residential hall with 176 one-, two- and three-bedroom units that can accommodate up to 660 students. The Art Institute’s lease expires in September.

The new owners plan to spend an undisclosed amount to launch a major redevelopment of the property. While the existing façade and structural systems will remain, MRP Residential will replace all its existing building systems and interior finishes. Among the other upgrades will be a new lobby, leasing office, fitness center, theater room, interior landscaped courtyard, clubroom, roof deck and renovated elevator cabs. The lower floors of the building will remain retail.

MRP Residential is targeting millennials and empty nesters as prospective renters and those who can pay for a “super luxury product.”

“The location speaks for itself,” said Charley McGrath, senior vice president at MRP Realty. “It’s across from the Ritz and Union League. You could throw a football to City Hall. The location is commiserate to building a super luxury product.”

MRP Residential wouldn’t divulge what rent range it would seek. MRP Residential and Principal expect to begin construction late this year and finish the work in 2016.

MRP Residential is a development and investment company that focuses on multifamily projects throughout the Mid-Atlantic region. While the firm has spent the last 12 months looking to buy in Philadelphia, this is its first dip into the Center City market. It plans to use the conversion of the Avenue of the Arts building as a flagship and foundation for building up a portfolio in the Philadelphia area. It will look for other conversion prospects in Center City, said Matt Robinson, who heads up MRP Residential. “We have a lot of development going on in [Washington D.C.] and we are doing a lot more value add projects,” he said. “We don’t have the same kind of product down here as you do in Philadelphia, where you have old office buildings that can be converted. That is what really attracted us to this property.”

While it will focus on Center City, it will consider office, retail and residential plays in the suburbs and the Main Line.

“We are open for business in Philadelphia,” McGrath said.

Source: Philadelphia Business Journal