When developer Michael Samschick of Core Realty stood before the city Planning Commission on Dec. 8 with his architect in tow, something that’s been unusual over the past 18 months occurred: It was revealed that the project for which the company was seeking approval – the redevelopment of a riverfront industrial site – actually had a loan on the line. From an actual bank.
Blatstein, who is still at work on projects in and around the Schmidt’s site, said he’s about to close on a “large eight-figure” loan, but would not reveal for what project – only that it is for new construction. He said that during 2009, seven of his projects have been under various stages of construction, and that the first phase of his redevelopment of the State Office building at Broad and Spring Garden streets is on course for 2010.
Blatstein’s access to capital appears only to be getting stronger. He is also working with Philly-based NAI Bluestone Real Estate Capital to form an “institutional-equity fund” of between $100 million and $150 million, according to a November article in the Philadelphia Inquirer. The fund will invest in projects in and around the city in the first part of 2010.
One potential hiccup for Samschick’s Delaware Avenue project is that the first floors of both buildings are slated for retail tenants: shops, bars and restaurants, presumably. As anyone who pays even scant attention to the economy knows, retailers have seen better days. And as a commercial real estate sector, retail is a hard sell for lenders.
“With most retail, nothing’s going to get built until we see how the market’s shaking out,” Kelsen said.
“The ground is littered with bankrupt retailers,” said D’Alessio. “It’s very hard to do underwriting of retail space at this point,”
Joe Coradino, executive vice president of Pennsylvania Real Estate Investment Trust (PREIT), is a veteran retail specialist. He said that some of PREIT’s projects in that troubled sector are getting financed, though he would not be specific, deferring details to the company’s vice president of finance.
“It’s certainly been a challenging environment, no question about that,” Coradino said. “But, A, we have done it, and B, it is getting better. I wouldn’t say it’s normalized by any stretch, but it is getting better, and I think that’s pretty much consistent with the economic environment.”
In July, Wharton School marketing professor Stephen J. Hoch told Knowledge@Wharton that things are so bad among retailers that many are threatening to close if they don’t receive concessions from landlords. “The REITs have adapted and tried to be proactive,” Hoch told K@W. “It's taken a catastrophe to wake up and smell the coffee.”
With new developments, there tends to be “generations of tenants,” Blatstein explained. So while rents for shops at the Piazza at Schmidt’s are low, he’s building a list of people who want to locate there. “It takes time,” he said. “In my kind of development, you have to be very patient and very impatient at the same time. You have to build an infrastructure – a critical mass of shops and restaurants.”
The big question mark in the sky
So what does this mean for the Philly skyline? Likely, it means the one we have now is the one we’ll have for at least several years to come, and probably the one we’ll see on New Year’s Eve 2015, too.
As for the hoped-for American Commerce Center, check back in a few years, most industry watchers say.