Developer Bart Blatstein has closed on buying 1400 Spring Garden St. in Philadelphia from the state for $21 million and has started the first phase of a mixed-use project that will cost more than $100 million to build out.
The deal took more than three years to finally complete for a range of reasons. First, Pennsylvania wanted to wait until it had a lease in place for its roughly 1,000 employees who worked out of the building. Then the deal got delayed again when the state wanted to make sure it was completely moved into its new offices at 801 Market St. When it looked as if things were finally in place, Blatstein’s Tower Investments of Philadelphia ran into financing issues and negotiated an extension with the state. Eventually those hurdles got resolved.
The 19-story building totals 300,000 square feet and has a 208-space parking garage. It was constructed in 1954 for the state and became vacant in late 2008 when the state relocated its 11 state agencies to 801 Market.
Originally called the Philadelphia State Office Building, it’s the second major office building in that immediate neighborhood to come on the block. Philadelphia Media Network, parent to the Philadelphia Inquirer and Daily News, is trying to sell its headquarters at 400 N. Broad St., an 18-story, 470,000-square-foot building and offers have been made on that property.
Minimum bids for the state building started at $15 million but closed at $21 million.
“I think most people would consider it to be a very strong number for the seller. It’s a healthy number,” said Steve Marzullo, an investment broker with CB Richard Ellis who helped arrange the transaction. “You have a large corner site with access to public transit right there from the building, parking below grade and the ability construct above that. The potential for the site is huge.”
The building sits in a neighborhood experiencing increased development and adjacent to the desirable museum district flanking the Benjamin Franklin Parkway and not far from activity along North Broad Street that has been spurred by the expanded Pennsylvania Convention Center. In recent years, the redevelopment of 1500 Spring Garden into an office property has also attracted a number of high-profile office tenants to the area and increased pedestrian traffic.
Blatstein’s project will be completed in two phases with the first entailing 204 apartments that is expected to be completed by next summer, Blatstein said. Phase two will include a 20-story tower along 15th Street with 150 apartments and 60,000 square feet of retail space on two levels facing Spring Garden. That addition will get kicked off in a “few years,” Blatstein said.
The city has started to see an uptick of proposed apartment projects. The Philadelphia Planning Commission has reviewed two development proposals in recent months for new residential units, said Gary Jastrzab, executive director of the Planning Commission in an email. Both need zoning variances. One, at 18th and Arch streets, proposed by PMC Property Group of Philadelphia, will be a mixed-used project with 236 units. It was recommended for approval by the Planning Commission in May. The second, the former AAA Building at 2040 Market St., is also being proposed by PMC and would have 282 units. EB Realty and PMC broke ground in January on a 101-unit complex at 600 N. Broad and the zoning board of adjustment just OK’d a 64-unit development at 921-31 Ellsworth St., according to the Center City District.
While some smaller apartments projects are in the works, a couple of larger ones are also in the pipeline. For example, Pearl Properties of Center City expects to begin construction this fall on a rehab of the old Granary building at 411 N. 20th St., turning it into 218 apartments and 40,000 square feet of retail space.