CPDC Developments Newsletter - 05.12.20

Office Sector News

IBX Tower Under Contract For $360M

The owner of Independence Blue Cross’ Market Street headquarters has reached an agreement to sell the building for a price that would be among the highest paid per square foot for a non-medical office building in Center City.

Piedmont Office Realty Trust, a real estate trust based in Atlanta, entered into a binding contract on March 31 to sell the 801,000-square-foot office tower at 1901 Market Street for $360 million, or about $450 a square foot, it said in a financial disclosure last week. The sale is supposed to close this summer, the company said. Other terms of the deal were not released, including the name of the prospective buyer.

Eds & Meds News

Penn Medicine's New $1.5B Tower Is Ready To Accept Patients

Philadelphia now has 120 additional state-of-the-art hospital rooms available. The beds are in Penn Medicine’s new facility across from the Hospital of the University of Pennsylvania (HUP), and are now ready for use.

The Pavilion, a $1.5 billion addition to HUP’s University City campus, was originally slated to open in 2021 but work was accelerated because of the pandemic. The Pavilion will hold low-risk, non-COVID patients to make space for COVID patients should the need arise. Half of the rooms will be designated for extended in-patient care while the other half will be used as an emergency department facility.

Agri-Tech Startup Lands $3.3M From High-Profile Investors

A Philadelphia-based agricultural biotech startup, founded by a University of Pennsylvania graduate looking to solve the global problem of food waste, has raised $3.3 million in its seed funding round. Strella Biotech has developed technology using biosensors to reduce spoilage of fruit.

The investment in Strella was led by California-based venture capital firm Yamaha Motor Ventures & Laboratory Silicon Valley and Catapult Ventures. Other investors include entrepreneur Mark Cuban, owner of the NBA's Dallas Mavericks; Red & Blue Ventures, an independent venture firm that invests in companies from the Penn ecosystem; Union Labs; and investor Art Mesher.

Passage Bio Expands Gene Therapy Partnership With Penn

Passage Bio, which went public earlier this year in a $248 million IPO, has expanded its gene therapy partnership with the University of Pennsylvania. The collaboration agreement now includes an additional five programs, and extends Passage Bio’s period to exercise new programs for an additional three years through 2025.

In addition, Philadelphia-based Passage Bio will provide $5 million annually to fund discovery research at Penn's gene therapy program and will receive exclusive rights, subject to certain limitations, to technologies resulting from the collaboration.

Biotech Firm Launches COVID-19 Antibody Test, Offers It For Free

About six weeks after announcing it was joining the effort to help develop COVID-19 vaccines and therapeutics, Philadelphia-based Integral Molecular has launched a laboratory test that it says can safely measure coronavirus antibodies in patient samples.

Integral Molecular announced it will provide scientists with its testing samples at no cost. The announcement came one week after the company received $1 million from the National Institute of Allergy and Infectious Diseases to apply its technology in the battle against COVID-19.

Temple, Jefferson Call Off Fox Chase Cancer Center Deal

Jefferson University and Temple University have called off the planned acquisition of Fox Chase Cancer Center by Jefferson because of the economic impact of COVID-19. In a joint statement, the organizations said the decision was amicable.

Temple and Jefferson had reached a definitive agreement in December covering the sale of Fox Chase, which has been part of the Temple health system since 2011. Fox Chase, a research institution and 100-bed specialty hospital with about 2,000 employees, is a National Cancer Institute-designated comprehensive cancer center.

Hospitality News

PHLCVB Head Discusses Likely Changes to Meetings Industry

Philadelphia Convention & Visitors Bureau President and CEO Julie Coker spoke to The Philadelphia Inquirer about the "baby steps" which must be taken to reopen Philadelphia, and about changes that the meetings industry will likely implement in response to the pandemic.

Coker said she is on the lookout for when other cities will start lifting stay-at-home restrictions and for when international flights will restart. Conventions may not resume until “September and beyond,” she said. Buffets will likely be replaced by plated meals, and hotels are working on diagrams to space out seats in large meeting rooms.

Visitor Outreach Shifts To Virtual Tours, Online Exploration

The tourism organization has adapted its message during the pandemic to focus on the city’s abbreviated mark of PHL, turning it into an acronym that stands for “perseverance, hope and love.” The mark is integrated into platforms such as the PHLCVB social media channels and promotions like free, downloadable Zoom backgrounds depicting city attractions.

The organization also rolled out Philadelphia From Home, a digital campaign that centralizes virtual tours of the city’s museums and cultural attractions, online learning options for children, business resources and more. The idea is to send the message that while travel is on hold, it’s possible to support and explore some of the city’s offerings.

Retail News

Philadelphia’s Smaller Businesses May Be Less Equipped For Downturn

A new analysis by The Pew Charitable Trusts finds that Philadelphia businesses with fewer than 500 employees struggled to pay their bills more than their peers in other cities during and after the Great Recession of 2007-09, a sign that has potential implications for how they may fare in the wake of COVID-19.

In addition, the city’s small and midsize businesses generally had lower on-time payment ratings than did the city's large businesses in the years after the recession. A history of late payments is an indicator that a business might not fare well or could collapse during tough times.

What Will Retail’s “New Normal” Look Like After COVID-19?

In an examination of how the current health crisis may reshape the retail economy, the International Council of Shopping Centers (ICSC) spoke to experts who predict that store owners will need to consider changes like creating one-way traffic patterns through stores, expanding the touchless shopping experience via smartphones and voice-activated technologies, and designating specific doors for entry and exit.

During the pandemic, online shopping has risen out of necessity but online retailers haven’t responded with improved digital experiences. That leaves room for brick-and-mortar to regain relevance once physical stores reopen en masse, industry experts said.

“Brick-and-mortar has a chance to capture consumer attention unlike [what] they’ve had in the past 10 years,” said Naveen Jaggi, JLL president of retail advisory services in America. But it’s all about safety for the foreseeable future, he said: “When the consumers get back to the store, it’s up to the retailer to make the experience safe, acceptable and on the journey to being seamless between the car, the curb and the store.”

Reading Terminal Market Names New GM

Reading Terminal Market has named Conor Murphy its new general manager. Murphy has a wide-ranging background in hospitality, entrepreneurship and philanthropy. He most recently founded a company that helps executives and entrepreneurs to identify and fulfill philanthropic goals. In 2017, he founded Philadelphia-based Bearings Coffee, which crafts specialty coffee blends for cocktails and promotes nonprofit causes.

Murphy spent his early professional career at Ernst & Young, where he served as a risk consultant and project manager. Murphy succeeds Anuj Gupta, who has taken on the role of U.S. Congressman Dwight Evans’ chief of staff after serving as Reading Terminal’s general manager since 2015.

Transportation News

SEPTA Transit Service Returning Next Week

SEPTA is preparing for offices, schools and businesses to reopen with a plan to resume regular transit service later this month. Starting the week of May 17, regular weekday and weekend service will resume on all bus, trolley and rail routes, along with the Market-Frankford Line, and Broad Street Line. Front-door boarding and fare payment will resume on buses and trolleys.

Rider limits of 20 per bus and 25 per trolley, implemented in early April, will continue to be enforced, and operators may pass stops if the vehicle exceeds those numbers. Seats will be marked off to maintain social distancing and riders will be required to stay six feet away from operators once they board.

Toll Revenue Drop Endangers Funding For SEPTA Upgrades

Facing a projected $300 million loss of revenue through the end of June 2021, caused in part by a dramatic ridership drop due to the pandemic, SEPTA also faces an imminent shortfall in state transit funding that could delay critical infrastructure projects like station renovations and new vehicle purchases.

The Pennsylvania Turnpike Commission provides PennDOT with a $450 million cash infusion to support transit. SEPTA receives $178 million of its $640 million capital budget through these payments, made in quarterly installments. But with turnpike toll revenues down by at least 50%, Turnpike officials said they will seek to delay a $112.5 million quarterly payment – $44.5 million of which is allocated to SEPTA – scheduled for July 1.

Construction Resumes On Chestnut Street Bridge Project

The Pennsylvania Department of Transportation (PennDOT) has restarted work on the project to repair and resurface the Chestnut Street Bridge over the Schuylkill River and seven other adjacent structures in Center City. Work is being conducted in accordance with federal and state guidance as well as project-specific COVID-19 safety protocols for social distancing, use of face coverings, personal and job site cleaning procedures, management of entries to the work site, special signage and relevant training.

Crews have resumed sidewalk construction on the north side of the river bridge, repairs to the arch bridges that carry Chestnut Street over 24th Street and the adjacent CSX railroad, and rehabilitation and deck replacement of two sections the Schuylkill Avenue viaduct over the Schuylkill Expressway. The project is expected to be completed in late 2020.

Residential Market News

Housing Market Data Holds Steady in Q1, With Caveats

The Lindy Institute for Urban Innovation at Drexel University reported that while the city’s housing market posted “reasonably stable numbers,” perhaps giving some cause for optimism, the lag time in MLS data may mean that the effects of the pandemic might not be clearly seen until the next quarter.

However, the analysis notes that “the numbers for March (when the pandemic and the countermeasures taken against it hit) did not differ significantly from the rest of the quarter. The prices and sales volume for just the month of March were broken out separately from the data, and they did not indicate any significant plunge from either January or February, or even from March of last year.”

The average price of Philadelphia homes rose in Q1 by a modest 2.1% on a quality- and seasonally-adjusted basis. House price changes in individual submarkets were also generally positive, but also modest. Home sales activity was unseasonably high this winter and housing invetory hit another new low.

CCD News

In addition to keeping our basic clean-and-safe programs operating, CCD’s goal has been to support a continuous process of improvement in the public environment in Center City to get ready for a gradual reopening, hopefully in about a month to six weeks.

Working with landscaping contractors authorized by the Commonwealth of Pennsylvania, our teams disassembled the Wintergarden at Dilworth Park, installed new sod (which requires a month before the public can walk on it), and took many of the plants previously installed in the Wintergarden and planted them at Cret Park on the Benjamin Franklin Parkway. On South Broad Street, we are installing new trees and shrubs in planters lining the sidewalk though a contract with the Avenue of the Arts Inc.

Additionally, we have installed original artwork commissioned from 11 local artists on many of the boarded up storefronts that we had previously painted black to cover graffiti. The link below features a gallery of photos from The Philadelphia Inquirer, one of several media outlets reporting on the initiative.

City Government News

Tax Hikes, Layoffs In Kenney’s Revised Budget Plan

Mayor Jim Kenney’s revised budget proposes increases in the city’s property and parking taxes, hikes in the wage tax for suburban commuters, freezing planned reductions in rates for both business and the wage tax for city residents, and the elimination of the discount for property-tax payers who pay their bills early.

The tax proposals are likely to face scrutiny from City Council, which must hold hearings and approve a budget before the start of the 2021 fiscal year on July 1. With an estimated $649 million budget hole resulting from the coronavirus pandemic, Kenney is proposing a property tax rate hike of 3.95%, a city parking tax increase from 22.5% to 27%, and a nonresident wage tax rate increase from 3.4481% to 3.5019%.

Council Member Proposes Delay Of 10-Year Abatement Phase-Down

City Council member Bobby Henon is drafting legislation that proposes an additional year delay in a planned phase-down of the 10-year tax abatement on residential construction. The reduction, passed at the end of 2019, effectively would cut the abatement in half for residential projects over a multi-year period set to begin in December of this year.

Council Member Says CRE Has Key Role In Restarting City Economy

City Council member Maria Quiñones-Sánchez said the commercial real estate market will play a key role in restarting Philadelphia’s economy and helping fill budgetary shortfalls spurred by the current health crisis.

Speaking at an online town hall hosted by the digital media outlet Bisnow, Quiñones-Sánchez noted that the pandemic has exacerbated problems such as crime and poverty that have existed in the city for decades. She said that the health of commercial real estate, and of Philadelphia as a whole, are directly related.