Growing frustration with the City Council casts a dark cloud over a heady time for Philly CRE

Philadelphia and its citizens expect a lot from the commercial real estate industry, but developers say the city government has a growing habit of getting in the way of those desires.

Bisnow/Matthieu Rothstein

Greg Jasiota of Davis Construction, Ken Weinstein of Philly Office Retail, Michael Scannapieco of Scannapieco Development, and Bill Sproule of the Eastern Atlantic States Regional Carpenters Council

Panelists at bisnowThe Philly Construction and Development event in Center City on Tuesday once again lamented two pieces of legislation that went into effect in the last few months: the reduction of the 10-year tax abatement and mandatory inclusionary zoning in parts of council districts 3 and 7 Despite Philly’s unprecedented rental growth in multifamily, continued success in the industry and booming life sciences, the tune most panelists sang was that of a growing frustration.

“We’re making this sound like a disaster, and it obviously isn’t,” Philly Office Retail president Ken Weinstein said at the event, citing self-diagnosed inferiority complex. from the city.

Beyond the familiar refrain, developers warned that the notorious and unofficial policy of municipal prerogative is gaining momentum as an obstacle to housing policy and city-wide planning goals. the city.

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Jeremy Blatstein of Orens Brothers, Palak Shah of Open Spaces Capital, Jhanel Wilson of The Savvy REI and Lorraine Wilson-Drake of Wilson-Drake Development

“I’ve said publicly that the councilor’s prerogative is a good thing, but I’ve totally re-engineered that,” said Leo Addimando, managing partner of Alterra Property Group, whose tenure as president of the local of the Building Industry Association ended earlier this year. . “Now I think it’s toxic.”

Among the lore’s most overt problems in recent years, council members have obstructed the disposal of vacant city-owned land in their districts, hampering what appears to be a win-win policy to fight the scourge. while subsidizing affordable housing. with cheap land, several panelists said.

“Every property that comes out of the [Philadelphia] Land Bank, you can’t get your hands on it unless you have it with the council member for that district,” said Weinstein, who is also president of the Philadelphia Housing Development Corp., which oversees Land Bank. “That could be a powerful lever for newer or smaller developers, but it’s not happening.”

Even developers of color, for whom Philadelphia has made several public attempts to increase access and resources, reported years of waiting for land to be transferred to them even after being selected by PHDC. Wilson-Drake Development president Lorraine Wilson-Drake, whose company is building new homes for rent on vacant lots in some of the city’s most deprived neighborhoods, expressed frustration Tuesday. When asked to sum up her experiences working with the city, she initially offered just one word: “Yikes.”

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Chris Egan of Walker & Dunlop, Leo Addimando of Alterra Property Group and Mike Stillwell of Streamline

“It’s just very dysfunctional,” Wilson-Drake said of shaping the city’s real estate policy. “I don’t think the council understands development, and they are very reactionary. I try to build things that require as little involvement from the city as possible, because we just don’t have the administrative capacity to deal with it.

The fact that council members wield so much control over their districts compounds what the industry has long argued is the biggest challenge for commercial real estate in Philadelphia: unpredictability. From frequent changes in citywide real estate policies over time to inconsistencies in the application of zoning law, the lack of predictability for city developers has pushed many of them to choose the path of least resistance when building on property they own, which in many cases means low-density residential development with generous parking, panelists said.

Industry’s assessment of the Philadelphia City Council as out of touch means even the prospect of improving environmental sustainability could be viewed with concern or resignation by all but the best-resourced businesses, the founder and co-owner said. of Mosaic Development Partners, Greg Reaves.

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Bisnow/Matthieu Rothstein

Maryrose Myrtetus of Philadelphia Green Capital Corp., Greg Reaves of Mosaic Development Partners and Shelah Wallace of Nuveen Green Capital

“We have to be careful about implementing broad policies that could have real adverse effects on areas that cannot afford to comply with those policies,” Reaves said.

For smaller-scale owners like Wilson-Drake and Palak Shah, owner of Open Spaces Capital, sustainability efforts like floodplain resilience measures and periodic energy system tune-ups are far-fetched without heavy subsidies and easy to use, especially in the face of rampant inflation in building materials.

“The level at which I operate, especially if you’re borrowing money to acquire and renovate these properties, there just isn’t enough room to think about energy efficiency,” Shah said. “I worked for a startup that worked with PECO, so I know about energy efficiency and I believe in it. But I say the numbers just don’t work. The capital needed to fund these [initiatives]we just don’t have that.

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Bisnow/Matthieu Rothstein

Dailey Tipton, Vice President of Evolution Energy Partners, and Ernest Hanna, Senior Director of GZA GeoEnvironmental

The long-term effects of the shrinking of the newly imposed 10-year tax abatement and soon-to-be-implemented mandatory inclusive zoning law could take years to become clear, and the city’s immediate future looks historically bright. But the developers are raising a stink now, with a possible eye towards the next round of city council elections in November.

“We put this [problem] for the city council, who have chosen not to listen or believe the numbers we are offering them,” Addimando said.

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