Reporter – Philadelphia Business Journal
The developer of 2.0 University Place has landed a tenant big enough to kick off a $30 million office building at 30 N. 41st St. in Philadelphia.
It took nearly three years.
University Place Associates will break ground in December on a five-story, 97,000-square-foot building and serve as something seldom seen in the city, even on a small scale, new office construction.
Sluggish growth in jobs and rents in Philadelphia have put a lid on the need for most new construction. The exceptions have been driven by special circumstances such as sites designated as Keystone Opportunity Zone, which give companies breaks on state and local taxes to move into the space. For example, Cira Centre sits in an opportunity zone as does the Philadelphia Navy Yard, where Liberty Property Trust is erecting a new office building for GlaxoSmithKline, along with the Science Center, which completed a 140,000-square-foot building at 3711 Market St.
2.0 University Place also sits in an opportunity zone but its new anchor tenant, a General Services Administration agency called Citizenship and Immigration Services, is tax exempt because of its government status. Other tenants will get those tax benefits until 2018.
The Citizenship and Immigration Services signed a 15-year lease on 53,000 square feet valued at $26 million. The immigration agency is housed at 1600 Callowhill St. and, as it regularly does, evaluates its space options when leases expire, said Anita Rios Moore, spokeswoman.
“They want to be a community-based processing center,” Moore said.
It will house CIS’ district office, which covers Pennsylvania, a field office for the eastern part of Pennsylvania and serves as an application support center. About 142 employees will work out of the new space.
The building couldn’t get out of the ground without an anchor tenant, which is common for an office building.
“We needed a lead tenant to at least take half of the building to kick it off,” said Jack Soloff, who along with Matthew Guerrieri of Grubb & Ellis arranged the lease on behalf of the developer.
A 15,000-square-foot lease with a private company is being negotiated and the brokers are confident the remainder of the space, from about 30,000 square feet to more than 40,000, will fill up.
Another challenge facing developers these days is securing financing for new construction, especially for office space. With the GSA as the anchor tenant, University Place Associates was able to get funding from the Reinvestment Fund to move forward with the project. The building was designed by SPG3 and Shraga Berenfeld Architects. It was pre-certifed LEED platinum.
Scott Mazo, who runs Neighborhood Restorations Inc. and Prime Property Management, is familiar with that neighborhood having constructed affordable rental housing in that community. He sees the development of 2.0 University Place as a potential catalyst for other changes in the West Powelton neighborhood. Now an empty lot, the building will bring additional foot traffic with the agency employees as well as those who visit it on a daily basis.
“It will definitely change the perception of that area and bring more economic development activity and security to that area,” Mazo said.
When he first began assembling parcels to create this site 10 years ago, he initially thought market-rate housing would work there but decided the best use was commercial development.
“We do have bigger plans,” Mazo said. “We think it’s a natural evolution and build out of the Science Center, and we are interested in other sites in that neighborhood. We expect this to be the beginning of a lot more.”
When Mazo and his partners, Thomas A. Leonard, an attorney with Obermayer Rebmann Maxwell & Hippel and chairman of the Delaware Valley Real Estate Investment Fund, a union-supported fund, and James Levin, a real estate developer, announced plans for 2.0 University Place at the beginning of 2009, they proposed a cluster of green buildings totaling 500,000 square feet along that part of the West Market Street corridor. At build out, the project would total an estimated $175 million.
Mazo expects 2.0 University Place to be completed by late next year.