On July 19, 2007, the University officially took possession of the postal lands, a 24-acre parcel on the west bank of the Schuylkill River. Less than six weeks later, Penn officials announced plans for a mixed-use development that would dramatically alter the West Philadelphia skyline.
“The long term vision of the trustees to grow eastward has finally come to fruition,” said University executive vice president Craig Carnaroli W’85 in September. “This is a project that is 24 years in the making.”
Penn has entered a partnership with Brandywine Realty Trust, a nationally known developer, to replace the current post office annex building on 30th Street with two glass-and-steel towers that will frame a 2,400-car parking garage. Current plans envision a 25- to 30-story residential tower facing Chestnut Street, and a 40- to 50-story skyscraper abutting the Walnut Street Bridge that will combine commercial, residential, and retail uses along with a potential hotel component.
Under the terms of the deal, Brandywine will finance the project in exchange for being granted a 90-year ground lease by Penn. The company will pay the University an unspecified annual rent, as well as a portion of the income generated by building activities, according to Carnaroli. When the lease expires, Penn will reassume control of the property.
Partnerships with third-party developers have played a key role in several recent campus projects, including three new apartment complexes (see next story). “This kind of strategic thinking has been the hallmark of Penn’s real estate expansion and acquisition program,” says Harris Steinberg C’78 GAr’82, executive director of Penn Praxis, the consulting arm of the School of Design. “I think we’ve moved quite deftly to both expand the campus and limit our liability in terms of development, and enhance the quality of life in University City.”
This will be Brandywine’s first collaboration with any university, but the locally based firm knows the neighborhood well. In 2005, Brandywine completed the 28-story Cira Centre, designed by acclaimed Argentine architect Cesar Pelli, just a few blocks to the north. Pelli’s firm has been retained for the new development, which is currently being called Cira Centre South. The project will also involve the renovation of the historic main post office building, which will be converted into office space that will house 5,000 employees of the Internal Revenue Service.
Penn has agreed to lease 100,000 square feet in the Walnut Street office tower, which will likely account for between a quarter and a fifth of the building’s total space. Experts on Philadelphia’s commercial real estate market seem optimistic about the city’s ability to fill the rest.
The original Cira Centre development concerned some analysts because it hit the market at a time when office vacancy percentages had reached the high teens, according to Andrew Liverman, a research associate with Cushman & Wakefield. “But over the past two years,” Liverman said, “we’ve seen vacancies in the downtown market decline, especially in the traditional office core.” The vacancy rate west of Broad Street, he noted, recently fell into the single digits for the first time in five years.
Even if the overall market softens, however, the location of this development within a Keystone Opportunity Improvement Zone (KOIZ) may be enough to assure its success. KOIZ status confers abatements on city and state taxes for 15 years, which can be worth millions of dollars. Kevin Gillen GrW’05, a research fellow at Wharton, observes, “With the benefits of KOIZ designation, even in a slumping market the project still works, because it confers massive tax benefits. They’ll have no problem leasing it out, just like Cira had no problem leasing [their space] out for prime rent.”
To rent Class A office space in Center City, Gillen added, “you’d pay about $25 a square foot. Cira is charging around $34 or $35. Which tells you how large those tax benefits are to those tenants.”
Carnaroli emphasized the project’s potential benefits on a part of University City currently dominated by loading and processing facilities. Attracting more office workers—and retail businesses to serve them—may help revitalize what many pedestrians now experience as a dead zone on their way over the bridge from Center City. “Our goals were to accelerate the redevelopment of the post office as well as to bring new life to this area,” Carnaroli said. “We want to get people engaged in these sites.”
The post office renovation and parking garage are slated for completion by 2010, with the towers rising in 2012. By that time, Carnaroli said, new athletic fields will have been installed south of Walnut Street and the Franklin Field Pavilion will be taking shape [“New Campus Dawning,” Sept|Oct 2006].
The Walnut Street Bridge has long been considered a vital gateway between Center City and the Penn campus. Steinberg hopes that with Cira Centre South, the University will push the west side of the Schuylkill River toward a kind of urban-renewal tipping point.
“If this kind of development can begin to spur not only private investment but public investment in quality infrastructure, bridge design, sidewalk design, and lighting,” he says, “I think the investment that Penn and Brandywine will be making will create the kind of elegant urban connective tissue that you’re looking for—that we see in Paris and Chicago and other cities, where bridge crossings are truly celebrated events in the urban landscape, and not just prosaic ways to get from one side to the other.”