CPDC Developments Newsletter - 06.25.19

Office Sector News

Major Internet Connectivity Company Expands To Center City

NYIIX, one of the world’s largest neutral internet exchange networks, has expanded to Netrality Data Centers’ facility at 401 N. Broad Street. The new partnership will enable users in the Philadelphia area from hospitals to universities to small businesses and individuals get their content faster, officials said.

Operated by Telehouse America, NYIIX’s expansion is part of a strategy to expand into the Philadelphia market, where the company says there is strong and growing local demand. The new data center, known as NYIIX Philadelphia, also helps to close the connectivity gap between New York City and Virginia, which is a data center hub.

Center City Health Tech Company Acquires Suburban Firm

Center City health tech firm GlobalFit is acquiring a suburban Philadelphia company in a cash-and-stock deal it said will double its staff and bolster its existing suite of products with nutritional expertise. GlobalFit is buying the Broomall-based Charge Group, which offers insurance-funded health and nutrition programs to employees at their places of work. Financial terms of the deal were not disclosed.

Charge’s 34 employees will join GlobalFit’s existing staff of 32, and both organizations have plans to increase hiring in the next year. Charge will remain in its Broomall office until GlobalFit can combine all employees under one roof next May, when the company’s lease at 1880 JFK Boulevard expires.

Eds & Meds News

Arizona Company Buys South Street Office Building 

Healthcare Trust of America Inc. has paid $10.5 million for 1740 South Street, a 45,569-square-foot medical office building and the Scottsdale, Ariz.-based REIT’s first Philadelphia acquisition. The property was sold by affiliates of Chestnut Funds and Anchor Health Properties, which paid $2.35 million for it in 2007. The office building was developed in 1986 and renovated in 2010. It was 97% occupied at the time of the most recent sale. 

The property attracted the interest of public and private REITs, real estate funds and other prospective buyers. It is located between Penn Medicine’s University City location and Thomas Jefferson University and is close to Penn Medicine’s Rittenhouse Square campus, which includes a 96-bed hospital.

Jefferson College Of Population Health Names First Entrepreneur-In-Residence

The Jefferson College of Population Health has selected Don McDaniel, a longtime health care executive and current CEO of Baltimore health care and technology consulting firm Canton & Co., as its first “entrepreneur-in-residence.”

Officials from the Center City-based school said McDaniel will work to translate classroom learning into real-world applications, incubate ideas into business opportunities, and connect students and professors with external experts and investors for additional development.

Temple Health System To Extend Talks With TJU On Fox Chase Sale

Temple University Health System said its agreement to negotiate exclusively with Thomas Jefferson University on the possible sale of Fox Chase Cancer Center would likely be extended beyond the current June 30 expiration date. The negotiations include the sale of Temple’s share of the insurer Health Partners Plans.

Temple Health reported $5.6 million in net income on $1.4 billion in revenue in the nine months ended March 31. The bottom line improvement from a $44.6 million loss in the comparable period a year ago was attributed to a special state subsidy and favorable results from Health Partners, employee benefits, and insurance.

Center City Startup Debuts AI Software To Detect Skin Cancer 

Center City startup Proscia is debuting a new product that could address a growing problem – skin cancers are on the rise, but the number of pathologists capable of diagnosing them is dropping. DermAI is a new application for Proscia’s existing Concentriq platform, used by more than 2,200 pathologists and scientists to digitize and automate their workflow.

It uses artificial intelligence technology to review scans of cells from skin biopsies and suggests actions, like sending the sample to a pathologist with expertise in a certain field, which the platform can then facilitate. Proscia, which is backed by $12.5 million in venture capital, relocated to Philadelphia from Baltimore last year and has since grown from a staff of 12 to 25. The company expects its staff to double or triple over the next 12 to 18 months as it brings on new customers and expands outside of the U.S.

Group K Diagnostics Expanding Lab And Manufacturing Space

Group K Diagnostics is expanding its lab and manufacturing operations in Center City, and adding staff, to meet what the company said is the growing demands of its partnerships and product development pipeline. To triple its output capacity, the company has moved its manufacturing facilities to a 1,200-square-foot space within the same building on the 1000 block of Chestnut Street where it moved its headquarters earlier this year.

The company, founded in 2016, has hired eight new employees since the start of the year and now has a staff of 15. Among its new hires is an experienced molecular biologist to support a research collaboration with the Centers for Disease Control and Prevention.

Boston Biopharma Firm Has Growth Plans In Philadelphia 

Alnylam Pharmaceuticals, a Cambridge, Mass.-based biopharmaceutical company that specializes in developing therapeutics for genetically defined diseases, is expanding its operations into Philadelphia. CEO John Maraganore told the Philadelphia Business Journal that the company has four employees at an office in University City and he expects that number to grow to 12 to 15 by the end of the year.

Maraganore cited Philadelphia’s pharmaceutical and biotech industries and stated, “over time, we think we will see Philadelphia becoming another core center for Alnylam.”

Pennovation Works Begins Next Phase With $35M Project 

The University of Pennsylvania is preparing to begin the next phase of Pennovation Works by spending $35 million renovating an existing building into lab space.  The four-story, 73,400-square-foot structure will have 35,000 square feet of wet lab, office and flex space. It will cater to growing and next stage companies with 10 to 25 employees that need from 2,000 to 10,000 square feet. 

Rents for the lab space are being determined. Work on the building will begin this fall and its completion is expected by August 2020.

The Next Boston? Cutting-Edge Research Spurs Development Boom

An in-depth article by Bisnow Philadelphia discusses the city’s building boom resulting from the flourishing cell- and gene-therapy research community. The piece posits Philadelphia as “the next Boston” and speculates that an “unprecedented development boom” is on the near horizon.

Residential Market News

$75M Crane Tower Near Completion In Chinatown 

A plan unveiled in 2011 to expand Chinatown residential development north of the Vine Street Expressway is coming to fruition with a $75 million mixed-use, community-based project at 10th and Vine streets. Formerly dubbed Eastern Tower, the development project now called Crane Chinatown is scheduled to open in September. 

The 195,000-square-foot building will have largely market-rate apartments, community, office and retail space, as well as an early childhood learning center. Crane will enable the Philadelphia Chinatown Development Corporation to expand many of the programs it offers now in small sites scattered throughout the neighborhood. The development also includes a multipurpose gym with a basketball court, room for volleyball and flexibility to convert into a banquet space for 500 people.

Condo Plans For Nelson Building, Freeman’s Auction House

The apparent future owner of the Nelson Building in Society Hill and the Freeman’s auction house near Rittenhouse Square wants to convert the properties into condos by constructing towers atop their early 20th-century facades. Plans for the 222-230 Walnut Street building that had housed the Nelson architectural firm and for a group of buildings that includes Freeman’s at 1808 Chestnut Street will be presented Tuesday to the Philadelphia Historical Commission’s architecture committee.

Application documents filed on the commission’s website by Cecil Baker & Partners architects identify the buildings’ owners as units of Astoban Investments LLC. Baker’s firm worked with Astoban on a similar “overbuild” project involving a historic property on the 2100 block of Walnut Street.

Dranoff Starts 47-Story Residential Tower At Broad & Spruce

A 47-story residential tower is underway at the corner of Broad and Spruce streets, overlooking the Kimmel Center for the Performing Arts. The $253 million tower, dubbed Arthaus, will include 108 balconied condominiums that range from 1,600 to nearly 5,500 square feet, along with 151 parking spaces, a 75-foot pool, fitness and yoga studio, a “dining salon” and a roof garden and greenhouse.

Developer Carl Dranoff said the tower is designed to appeal particularly to empty nesters selling their suburban homes and moving into Center City. Earlier plans for a 45-story SLS International Hotel & Residences were revised to an all-residential high-rise. The Dranoff Properties tower is anticipated to have its first occupancy in fall 2021.

Center City Apartment Building Sells For $117M 

FCP, a real estate firm formerly known as Federal Capital Partners, has paid $117.9 million in an all-cash deal for the Edgewater apartment complex at 2323 Race Street. The property was sold by J.P. Morgan Asset Management, which bought it in 2014 for $113 million.

The property, which was 98% leased at the time of sale, overlooks the Schuylkill River and is at the base of the Vine Street Expressway. The acquisition includes an existing 13-story building with 270 apartments and 20 townhouses. FCP, based in Chevy Chase, Md., said it bought Edgewater because of Philadelphia’s job growth, walkability and its live-work-play environment. The firm said it is looking for additional properties to buy in the city.

Citywide House Prices Show Biggest Quarterly Drop In Nearly A Decade

The average Philadelphia home price fell by 5.7% in Q1 on a quality- and seasonally-adjusted basis, the largest quarterly drop since the recession, according to the latest data from Drexel University’s Lindy Institute. Philadelphia’s house prices are down 1.2% year-over-year. The decline comes on the heels of price deceleration over several previous quarters.

The median house price in Philadelphia in Q1 was $143,800; a 10.7% drop from $161,000 in the previous quarter1. Additionally, the city’s median house price is down 4.1% from one year ago. These are the largest quarterly and annual declines in 5 years. While home sales activity remains fairly strong, its growth has slowed considerably. The average number of days that it takes a home in Philadelphia to sell increased sharply in Q1, from 38 days to 61 days; a 61% increase.

Retail News

Sansom Street in Midtown Village Reopens A Year After Water Main Break

Following a nearly yearlong repair effort after a 48-inch water main burst, Sansom Street in Center City’s Midtown Village neighborhood has reopened. The break last July 3 caused more than 14 million gallons of water to flood the area, and left some buildings without power and running water for two weeks.

Since then, Sansom Street between 13th and Broad streets had been closed to vehicular traffic for extensive repair work. It officially reopened on Friday. The Philadelphia Water Department spent about $1.7 million on the restoration.

Instant Pop-Up Success Has Retailer Shopping For Storefront

Just a month after opening a pop-up store in Center City, men’s apparel chain State & Liberty is considering a long-term brick-and-mortar location. The pop-up became profitable within two weeks of opening, the Philadelphia Business Journal reported.

State & Liberty currently operates in about 1,500 square feet of retail space at 1702 Walnut Street. The brand is looking to stay in the Rittenhouse Square area because of its mix of retail, residential and office spaces.

Yards Brewing Co. Announces Contract Agreement With NJ Brewer

Yards Brewing Co.‚ founded in 1994 and based at 5th and Spring Garden streets since 2017, has signed its first contract brewing deal with Cape May Brewing Co. Yards said its 70,000-square-foot canning, bottling and barreling facility, distribution and visitor center offers extra space for contract brewing.

Cape May Brewing is its first contract partner. Yards will replace Cape May’s current facility in Rio Grande, Lower Township, N.J.

Transportation News

Dockless Bike Rentals Could Begin In Philadelphia This Fall

While the future of e-scooters in Philadelphia remains uncertain, the city is moving forward with a pilot program for dockless bike sharing. The pilot could begin as soon as the fall. The city’s Office of Transportation, Infrastructure, and Sustainability will oversee the program along with the Department of Streets.

The city plans to distribute only two licenses and each business will be limited to 1,200 bikes. The program will take place in a designated area of the city, which has not yet been determined.  The licenses will be valid for one year or less, with an application fee of about $2,600 and the license fee of $76,000. At the maximum of 1,200 bikes for each of the two chosen companies, that amounts to about $63 a bike.

City Government News

PICA: City Sees 3.4% Increase In May Tax Collections 

With the economy still expanding, the City collected approximately $263.1 million in General Fund tax revenue in May 2019, compared to $254.5 million in May 2018, an increase of almost $8.6 million, or 3.4%, according to recent figures from the Pennsylvania Intergovernmental Cooperation Authority (PICA).

Only November and January have fallen short of FY2018 in terms of monthly collections, with just the month of June remaining in FY2019. The series of strong months has driven an almost 7% increase in year-to-date collections. PICA noted that the business income and receipts tax (BIRT) is having a strong year, with collections totaling $536.3 million, a 22.2% increase over last year. The only tax category to decrease in year-to-date collections was the realty transfer tax, decreasing by $6.7 million, or 2.2%, after what PICA said was an exceptionally strong FY2018.

City Council Passes $5B FY20 Budget; Up $1B Since 2016

Philadelphia City Council has approved a $5 billion spending plan for fiscal year 2020, an increase of $300 million from the current budget that officials said was necessary to address spiking salary and benefits costs for city employees, and to bolster antipoverty initiatives. The city’s General Fund budget has grown by $1 billion, or 29%, since Mayor Jim Kenney took office in 2016, increasing at an annual rate of 4%, compared to a 1.4% growth in the cost of living.

Kenney and several Council members contend that many of the spending increases are restorations of cuts made during the recession. City Councilman Allan Domb expressed criticism of the plan, and said he saw no notable return – specifically in areas like crime or poverty – from the increased spending over the last four years.

Report: Clarke Halted Housing On Vacant Lot, Helping His Landlord

In an investigation of whether “politically connected developers get a do-over when they lose out on a city land sale,” PlanPhilly concluded that Philadelphia’s effort to move toward a more competitive bidding system “is still vulnerable to political interference.”

Citing emails it obtained, PlanPhilly reports that staffers for City Council President Darrell Clarke took steps to help one developer, Mudasiru Adedokun, acquire a valuable piece of city land while derailing another developer’s plan to put housing – including affordable units – on the lot. Clarke’s office acted just weeks after Adedokun agreed to lease space for a new district council office at a heavily discounted rate, PlanPhilly reports.

Upcoming Events

June 25: Priorities For Growth: Balancing Competiveness & Inclusion

Join us tomorrow, June 25 at 8 a.m.  for the next meeting of the Central Philadelphia Development Corporation for a moderated conversation at The Union League (Meade Room), 140 S. Broad Street. The discussion will focus on job growth, wages, taxes, and preparing our workforce for 21st-century jobs.

Our panelists will be Leo Addimando, Alterra Property Group & Building Industry Association; Ryan N. Boyer, Business Manager, Laborers' District Council of Metropolitan Philadelphia; Allan Domb, City Councilman At-Large, and Helen Gym, City Councilwoman At-Large. The moderator will be Chris Satullo, former editorial page editor of The Philadelphia Inquirer and former VP of news at WHYY.