PHILADELPHIA | Broad + Spring Garden | 330 & 140 FT | 20 & 13 FLOORS

[summersm343]

Title: Broad + Spring Garden
Project: office space, luxury apartments, retail
Architect: BLTa
Developer: Nightingale Group and Parkway Corp.
Location: Broad and Spring Garden St., Philadelphia, PA
Neighborhood: Spring Garden
District: North Philadelphia
Floors: 20 & 13
Height: 330 & 140 FT







Parkway proposes nearly $500M project for North Broad

Parkway Corp., in partnership with New York-based Nightingale Group, has bold plans to develop a nearly $500 million mixed-use project on what is now a surface parking lot at the corner of Broad Street and Spring Garden Street in Philadelphia.

Preliminary plans call for constructing two structures that will have a blend of residential, retail, parking and office components on a 68,000-square-foot parcel at the northwest corner of Broad and Spring Garden. If built, the project will establish a new anchor for North Broad and affirm its place in Philadelphia's continued renaissance.

As now planned, the residential portion will total 127,000 square feet and will have 144 apartments, 87,000 square feet will be dedicated to retail space and a separate18-story structure will have 586,000 square feet of office space. A park will separate the two buildings and be activated by outdoor dining and other activities. The project is estimated to cost roughly $480 million. It was designed by BLT Architects.

Perhaps the most ambitious part of the proposal is a single building dedicated just to office space. It’s challenging to construct a multi-tenanted office building in Philadelphia let alone one that doesn’t have a Keystone Opportunity Zone or other public subsidy to financially support it. This not lost on Rob Zuritsky, president of Parkway, and his team. In spite of those challenges, there is a desire pursue it not only from a development standpoint but as part of a somewhat noble desire to provide an impactful boost in an area that could use it.

“I really wanted to do something major to help get some jobs up here,” Zuritsky said. "This is a major corner that should be something really big.”

By developing a large office building in this area also pushes the boundaries of the Philadelphia office market.

“People may not consider this as Center City but it is,” said James A. Egan, an office broker with Newmark Grubb Knight Frank, who, along with colleagues Matthew Guerrieri and Jeffrey M. Tertel, has been enlisted to secure tenants for the space. “A good example of how the Center City office market has stretched its boundaries is 1500 Spring Garden Street.”

Initially marketed as a data center, the 12-story, 1.1-million-square-foot building at 1500 Spring Garden has successfully been leased up as an office building, attracting tenants such as Day & Zimmerman, Thomson Reuters and CBS.

The developer is also banking on the building’s design with lots of glass, large floorplates, ability for exterior signage and other characteristics will lure office tenants to the site. Though there is optimism about attracting tenants to kick off the office building, there is some flexibility that allows the developer to adjust the size of the office component, even eliminate it, depending on how the market responds but that’s not the objective.

“Our goal is to have a unified project that works together,” Farruggia said.

To that end, the mix of uses are meant to support each component. For example, the retail will help attract corporate tenants who want the ability to offer on-site amenities to its employees and residents who also want the ability to dine, work out or go grocery shopping just steps away from their apartments.

With 80,000 square feet split between two levels in the office building and another 4,500 square feet in the residential structure, there’s opportunity to do a grocery store as well as restaurants and other uses, said Larry Steinberg, a retail broker with CBRE Inc. who, along with colleague Paige Jaffe, has been retained to seek out tenants for the space.

"We think it could be a real addition to North Broad," said Joe Zuritsky, CEO of Parkway. "We feel good about going North."

Renderings in link:
http://www.bizjournals.com/philadelp...for-north.html

[christof]

I think this gets built, but not on the scale currently envisioned.

[Philamigo]

From the renders I think I like this one very much, Clean crisp lines. Sophisticated.

However I have been disappointed before: the finished product doesn't live up to the illustrations. Example: that mediocre thing on the corner of Chestnut and 38th Street.

[thisisforreal]

Originally Posted by Philamigo

From the renders I think I like this one very much, Clean crisp lines. Sophisticated.

However I have been disappointed before: the finished product doesn't live up to the illustrations. Example: that mediocre thing on the corner of Chestnut and 38th Street.

You're disappointed by this particular rendering vs reality?

[RonnieStevens]

Wow this one is awesome! Hope its not a tease.

[AbortedWalrus]

Originally Posted by christof

I think this gets built, but not on the scale currently envisioned.

It's zoned CMX-4, so they can basically build it by right as I understand, especially since the lot is so huge and they can get the FAR + bonuses. It's also an extremely highly trafficked corner, close to similarly sized or larger developments, in one of the wealthiest and most desirable neighborhoods in the city.

The biggest hurdle is going to be the Spring Garden CDC as they are capable of some of the most extreme NIMBYism I've ever seen. Honestly this development fits that lot almost perfectly. I even like that it's facing Broad Street.

[christof]

Can they get the financing for this? $500 million is a pretty large chunk of change. Especially for a development that is on the northern frontier of center city.

My guess the project is whittled down to the $250M or below range.

[summersm343]

Originally Posted by christof

Can they get the financing for this? $500 million is a pretty large chunk of change. Especially for a development that is on the northern frontier of center city.

My guess the project is whittled down to the $250M or below range.

[summersm343]

Philly.com picking up on the story:
http://www.philly.com/philly/busines...-lot-site.html

[summersm343]

And Curbed Philly:
http://philly.curbed.com/2017/1/10/1...ng-parking-lot

[PhillySteaks]

Originally Posted by christof

Can they get the financing for this? $500 million is a pretty large chunk of change. Especially for a development that is on the northern frontier of center city.

My guess the project is whittled down to the $250M or below range.

Is it $500m or $300M? I also read another article that said $280M. I think their is a typo up top. The office component has the highest likelihood of getting the axe. I don't know if you can get the rents to justify new development in that location, especially because there is no KOZ - but we won't know until that time comes. Maybe there is a lot of people out there willing to pay $45+ for office space at Broad & SG. I think the apts will be an easy build, 87k SF of retail for that intersection seems like a major hurdle to jump though - although if it happens the intersection could turn into a real hotspot between all the apts, neighborhoods, current office, CCP, and the subway stop. I'm curious what kind of rents they're underwriting for the retail and office. On the $300M price 60% LTV construction loan with no Mezz means they need $120M in equity to get this going, not to mention 50% preleasing on the office and who knows for the retail. Has parkway done deals of this size in the past? If so, then they should be plenty capable.

[summersm343]

Parkway Planning a Pair of Impressive Buildings at Broad & Spring Garden

From Naked Philly:
http://www.ocfrealty.com/naked-phill...-spring-garden

[AbortedWalrus]

Originally Posted by PhillySteaks

Is it $500m or $300M? I also read another article that said $280M. I think their is a typo up top. The office component has the highest likelihood of getting the axe. I don't know if you can get the rents to justify new development in that location, especially because there is no KOZ - but we won't know until that time comes. Maybe there is a lot of people out there willing to pay $45+ for office space at Broad & SG. I think the apts will be an easy build, 87k SF of retail for that intersection seems like a major hurdle to jump though - although if it happens the intersection could turn into a real hotspot between all the apts, neighborhoods, current office, CCP, and the subway stop. I'm curious what kind of rents they're underwriting for the retail and office. On the $300M price 60% LTV construction loan with no Mezz means they need $120M in equity to get this going, not to mention 50% preleasing on the office and who knows for the retail. Has parkway done deals of this size in the past? If so, then they should be plenty capable.

Dunno. I forget what all projects Parkway has done. I know they are just finishing 17,000 SQFT of retail and 330 apartment units only a few blocks away with the Hanover North Broad project.

I think this space is close enough to CC (two Subway stops), and it's right off of the Vine Street Expressway, so it has super easy commuter access, that it could draw interest in office space. 1500 Spring Garden is entirely office space as I understand (1 million sqft?), is 90% occupied, and that building sold for $180M recently. I don't really think there are as many significant challenges to the office space as people would think.

[Mr Saturn64]

I'm going to be perfectly honest; this is possibly the ugliest building proposed in Philly right now. I know I'm in the minority on this, but I think the multicolored glass on one floor and the steel looking like massive bricks in that pattern is something I personal find hideous and unappealing.

[PhillySteaks]

Originally Posted by AbortedWalrus

Dunno. I forget what all projects Parkway has done. I know they are just finishing 17,000 SQFT of retail and 330 apartment units only a few blocks away with the Hanover North Broad project.

I think this space is close enough to CC (two Subway stops), and it's right off of the Vine Street Expressway, so it has super easy commuter access, that it could draw interest in office space. 1500 Spring Garden is entirely office space as I understand (1 million sqft?), is 90% occupied, and that building sold for $180M recently. I don't really think there are as many significant challenges to the office space as people would think.

I agree that the location is decent for commuters, and even walkers from nearby neighborhoods. Between the subway stops and proximity to 676 it has a lot going for it.

I can confirm that 1500 Spring Garden is 100% office because I have the OM from when it sold. It was 88% occupied as of 2013. Since then 20% of the building has rolled over so I don't know if they vacated or renewed. 16.8% of that roll is Blue Cross, and they expire this Jun for 186.6k SF. No idea if they renewed or have plans on relocating or vacating. Stabilized occupancy for class A space (which is really limited in that submarket) is probably 80-85% so that price tag on the 1500 Sale is what someone would pay for a fully stabilized property. At $180M ($162 psf) price tag is an 8.25% cap rate on in place NOI (2013) - which makes sense because most class A building in better locations go for closer to a 7 cap, and 1500 is a tired building as well. They were underwriting $21+E rents at the time, which means they were probably taking $19-20

Unfortunately I don't know what the allocation of that $300M is to the pure office portion for parkway, so I can't evaluate the PSF accurately / although again this would be somewhat of a different product than 1500. If I had to make a guess, they'd need something substantial to justify fair market returns. $35-40 psf is my guess - which could even be light? Just seems like a lot to pay when I can pay that same amount and have a Market Street address.

[3rd&Brown]

Originally Posted by Mr Saturn64

I'm going to be perfectly honest; this is possibly the ugliest building proposed in Philly right now. I know I'm in the minority on this, but I think the multicolored glass on one floor and the steel looking like massive bricks in that pattern is something I personal find hideous and unappealing.

Yes, you are.

[hammersklavier]

What I find interesting right now is that Zuritsky proposal is basically for a spec office building. With the huge quantities of office space in the uCS/SY pipelines, I am somewhat surprised that the market's heated up strongly enough for developers to attempt anything quite so chancy.

Originally Posted by 3rd&Brown

Yes, you are.

De gustibus non disputandum. À chacun son goût. There is no accounting for taste.

[PhilliesPhan]

I'm a huge fan of this project, but especially of the illuminated "SPRING BOARD" letters on top of the proposed structure! Having North Broad lit up by signage at night is a good thing, in my opinion. From the "T" on top of Morgan Hall, to the Divine Lorraine, to this project, all the illuminated signage gives the North Broad corridor a sense of life after dark (and do a MUCH better job than those "artful" light posts in the median!).

[1487]

Originally Posted by PhillySteaks

Is it $500m or $300M? I also read another article that said $280M. I think their is a typo up top. The office component has the highest likelihood of getting the axe. I don't know if you can get the rents to justify new development in that location, especially because there is no KOZ - but we won't know until that time comes. Maybe there is a lot of people out there willing to pay $45+ for office space at Broad & SG. I think the apts will be an easy build, 87k SF of retail for that intersection seems like a major hurdle to jump though - although if it happens the intersection could turn into a real hotspot between all the apts, neighborhoods, current office, CCP, and the subway stop. I'm curious what kind of rents they're underwriting for the retail and office. On the $300M price 60% LTV construction loan with no Mezz means they need $120M in equity to get this going, not to mention 50% preleasing on the office and who knows for the retail. Has parkway done deals of this size in the past? If so, then they should be plenty capable.

The PBJ article said $480M but that doesn't sound right to me at all. I think the philly.com figure is more accurate.

[Larry King]

Originally Posted by PhillySteaks

Is it $500m or $300M? I also read another article that said $280M. I think their is a typo up top. The office component has the highest likelihood of getting the axe. I don't know if you can get the rents to justify new development in that location, especially because there is no KOZ - but we won't know until that time comes. Maybe there is a lot of people out there willing to pay $45+ for office space at Broad & SG. I think the apts will be an easy build, 87k SF of retail for that intersection seems like a major hurdle to jump though - although if it happens the intersection could turn into a real hotspot between all the apts, neighborhoods, current office, CCP, and the subway stop. I'm curious what kind of rents they're underwriting for the retail and office. On the $300M price 60% LTV construction loan with no Mezz means they need $120M in equity to get this going, not to mention 50% preleasing on the office and who knows for the retail. Has parkway done deals of this size in the past? If so, then they should be plenty capable.

^ I don't get it either, feel like office rents could get to the mid 20s at the high end in that location, 990 spring is at low 20's I think