Keystone Property Group is making a big bet on the east end
of Center City.
In less than a year, the Bala Cynwyd, Pa., real estate
company has invested a tad more than $210 million on buying two office
buildings in the Independence Square submarket and has plans to grow its
portfolio. The company is bullish on this part of the city.
“We think the biggest story in Philadelphia real estate — as
a theme — is Market Street East and what’s happening along Market Street East,
the number of sites being developed and the amount of money being invested,”
said Bill Glazer, chief executive officer of Keystone. “It’s the most
transformative area in the market right now.”
He’s right.
There’s the redevelopment of the block formerly referred to
as Girard Square; the planned overhaul of the Gallery; the potential of the
site at 8th and Market streets getting a casino; and the owner of the Lits
building proposing an apartment tower as well as new rooftop digital signage.
Brickstone Realty Cos., the owner of the Lits building, is
also making a huge commitment to the east end of town.
“It is the journey that has been East Market,” John Connors,
vice president of Brickstone told an audience of the Central Philadelphia
Development Corp. yesterday at the Union League.
Three years ago, Connors started taking note of what Goldman
Properties achieved in Midtown Village. There, Goldman’s office properties were
fully leased and residential properties occupied. It didn’t miss a beat during
the recession.
“People want to live in Midtown Village,” he said. “I think
it’s going to be the heart and soul of Center City.”
Convinced of the area’s potential, Brickstone quietly began
amassing a portfolio of properties along the 1100 block of Chestnut Street. It
now owns 1112-1128 Chestnut and has under construction a 192,000-square-foot
project that will have 112 apartments and 95,000 square feet of retail space
fronting Chestnut Street.
Brickstone isn’t stopping there. It is picking up other
buildings in that corner of the city and has under agreement:
1021 Chestnut, a
9,500-square-foot building it plans to explore converting into co-working
space.
1108 Chestnut, a
12,500-square-foot building that goes all the way to Sansom Street. Brickstone
is looking to turn it into loft-style apartments and creative office space.
15-21 S.11th St.,
a 30,000-square-foot building that will be turned into creative office space.
So far, Brickstone has made $105 million investment in and
around 11th and Chestnut and isn’t stopping there.
“We like East Chestnut Street and we are looking at other
buildings,” Connors said in an interview. “Everyone knows how blighted the 1100
block is. It’s the hole in the donut and has a lot of development pressure
around it.”
After acquiring the Curtis Center this week for $125
million, Keystone plans to invest another $25 million into the building. Part
of its plans entail converting 90,000 square feet of vacant space into 90 apartments
and making other improvements such as outdoor streetscaping to “create a
vibrant urban corridor,” Glazer said. “Now that streetscape is so desolate but
yet it’s a screaming opportunity. Think about the potential and opportunity to
reinvent that streetscape to make it a European promenade with shops, cafes and
restaurants.”
The apartment play is a logical one at Curtis and more units
could be on the way as office leases roll over, said Chip Walters, chief
investment officer at Keystone.
“The value to that is looking at the space in the building
and how it lays out,” he said. “The Curtis is unique in that it’s a building
within a building.”
The east side of the structure has dedicated elevators, view
corridors and window lines that work well for residential and it overlooks
Washington Square and Independence Square — two of the most historical squares
in the country. The other side works well for office, though, it’s not out of
the question that just a small portion of office space will be retained over
time.
“It’s great as an office building but unparalleled as
residential,” Walters said.
At the Dow building at 6th and Market streets, which
Keystone bought late last year, the company is investing $20 million in
improvements, including installing a beer garden that should soon open. Others
are also taking a closer look at this part of town. Earlier this year,
Rubenstein Partners bought the Penn Mutual Towers as its first investment in
Philadelphia after a long drought.
“All of this investment you see is real,” said Connors of
Brickstone. “I don’t think it’s a bubble.
Source: Philadelphia
Business Journal
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