$160M Whole Foods and apartment complex in Art Museum area was no-brainer to out-of-town developer

One of the key players in the development of Rodin Square, a $160 million apartment complex that will have a new Whole Foods as its main retail tenant, is an out-of-towner that is bullish on Philadelphia.

Dalian Development of Washington, D.C. is joint venturing on the project with Neal Rodin’s International Financial Co. of Philadelphia.

Dalian is a relatively new company that formed in June 2012 to make real estate investments on behalf of a “very wealthy” Washington, D.C. family, said Brady Nolan, vice president at Dalian. It focuses on ground-up, high-end apartments that ideally have a mixed-use component. It doesn’t buy existing multifamily properties.

“You take more risk but you have higher returns,” Nolan said, adding that Dalian’s strategy is to build up a portfolio over the next 10 to 20 years as a “good place to put money and a good hedge.” The company is both the developer and financier of its projects giving what Nolan said was an ability to take on unique and complicated projects such as the Rodin.

Dalian got to Philadelphia because its main, undisclosed principal as well as Nolan had done business with Rodin before and once it saw the development site at 22 nd Street, Pennsylvania Avenue and Hamilton Street, the project made immediate sense.

“It’s a great site,” Nolan said. “As an outsider, you sometimes are able to look at things with a fresh view. It’s the last undeveloped site on the parkway. We see the most expensive real estate in Washington, D.C. near the National Mall. In New York City, it’s Central Park. There’s value to being near a very large park that allows you to do things you wouldn’t otherwise do. There is a lifestyle to being near the park and along the parkway. Three acres in the fourth largest city in the United States is also pretty compelling and the Whole Foods is probably one of the best amenities an apartment complex could have. It was easy to understand and get behind.”

Under the arrangement between the two developers, Dalian will own and finance the residential component and Rodin’s International Financial will own and finance the retail portion. The apartment structure will cost about $130 million and have 293 apartments and 500 parking spaces. The retail component will total 85,000 square feet of which Whole Foods will occupy 55,000 square feet, a CVS will take up 11,000 square feet at the corner of 21 st and Hamilton streets and Thomas Jefferson University Hospital has signed a lease on 12,000 square feet.

Dalian is interested in looking at other developments in Philadelphia. The city is in the first quarter of its rebirth and Nolan predicts it will continue see additional high-end buildings constructed as higher rents support them.

“We saw this in D.C. in 2010 where apartments sold for $400,000 a unit and rented for over $3 a square foot,” he said. “Now apartments are selling for $650,000 a unit and getting $4.50 in rents.”

Source: Philadelphia Business Journal