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Penn's Landing developer Durst talks Philadelphia appeal for first project outside of New York

https://www.bizjournals.com/philadelphia...developer-alexander-durst-investing.html

Local investment in the revitalization of the Delaware River waterfront helped lead the Durst Organization to Penn's Landing with a proposal to spend billions of its own money for its first project outside of New York.

The 100-year-old real estate firm was recently selected to develop Penn's Landing, laying out a $2.2 billion multi-year plan for a sweeping mixed-use project. Alexander Durst, chief development officer at the Durst Organization, said it was the quasi-public Delaware River Waterfront Corp. that attracted the company to the redevelopment opportunity.

DRWC’s master plan for the waterfront and public investments into projects like the Race Street Pier and Spruce Street Harbor Park helped leverage private investment in the area, he said. The Park at Penn’s Landing, a $225 million public park that will be created by capping a portion of Interstate 95 and is slated to open in 2024, also fits into how public and private organizations can complement each other, he said.

“It’s a good example of how public investment is spurring private investment,” Durst said.

The company first took notice of development opportunities in Philadelphia when responding to a request for proposals from Drexel University in 2014, Durst said. Philadelphia has the dense urban environment that Durst has been building in for decades, he said. The city's various development projects like Schuylkill Yards and a $200 million tower under development for Morgan Lewis in Center City help make Philadelphia appealing.

Durst also said twice as many New Yorkers are moving to Philadelphia than the reverse. He also noted Philadelphia's prime location along the Northeast corridor.

Durst recently spoke with Reporter Natalie Kostelni about the company's vision for the Philadelphia waterfront as part of the Business Journal’s Best Real Estate Deals awards program on Oct. 15.

The Durst Organization is spearheading three projects along the Delaware River.

The Penn’s Landing project is the centerpiece, with plans calling for 3.5 million square feet of mixed-use space, including thousands of new residential units, hundreds of hotel rooms and tens of thousands of square feet in retail space. The company is also redeveloping a group of piers near the Ben Franklin Bridge, which Durst said can be a significant development because of the potential zoning floor area at the site.

The third project is located at Vine Street on the west side of Delaware Avenue, where the company will spend another $250 million to $300 million to build a 370,000-square-foot mixed-use building on the vacant parcel, Durst said. The Vine Street project is in the permitting stages, and development will take place simultaneously with the Penn's Landing project, he said.

Philadelphia mirrors New York in that both cities have been working to transform industrial waterfront areas to residential and commercial zones, Durst said. The Durst Organization has had its hands in developing waterfront properties in Manhattan, including VIA 57 West and Historic Front Street. The trophy One Bryant Park and One World Trade Center are also in the company's portfolio.

“We feel like our experience pioneering urban revitalization in New York City gave us the experience and the wherewithal to carry a project like this out,” Durst said.

Officials hope the selection of the Durst Organization for Penn’s Landing caps a decades-long process to activate Philadelphia’s waterfront.

After a competitive bidding process, a selling point for DRWC in selecting the Durst Organization for Penn's Landing was that the company did not seek any subsidies. A plan from the Philadelphia 76ers for a new arena at Penn’s Landing took some heat for requesting use of the Neighborhood Improvement Zone program. It’s not uncommon for The Durst Organization to seek tax incentives or subsidies, Durst said, and the company is currently working on other projects supported by incentives.

The Penn’s Landing project has such a long timeline — and could be longer because of the Covid-19 pandemic — that there is a risk in negotiating for subsidies when conditions could change in government or the market during the length of the project, he said. Durst is expecting the Penn’s Landing development to take eight or nine years.

“We don’t want to promise something based on something that we would receive if the market conditions change,” Durst said. “It allows for a greater sort of freedom of what that final product will be.”

The Durst Organization also stays in projects longer than competitors, Durst said, allowing it to realize the financial benefits of projects longer. The company owns its developments, and a spokesman said last month that it takes a “generational approach” to the business.

The company is in the beginning of its negotiations with DRWC over timing and deal points of the project, Durst said. Both organizations are taking the effects of Covid-19 into account when planning, he said.

“We don’t want to put a lot of residences onto the market during a significant downturn of the economy,” Durst said. “That wouldn’t work well for DRWC, the city or for us, so we’re looking at that very closely.”