Officials Celebrate Groundbreaking for Two ‘Flex’ Buildings at Navy Yard

Philadelphia, January 4, 2011-Two buildings totaling a little more than 100,000 square feet don’t usually constitute a blockbuster construction project.

Yet, a groundbreaking ceremony Monday at the Philadelphia Navy Yard for such a development – a first of sorts for the city – attracted the mayor, two members of Congress, and a party tent full of bigwigs in the region’s construction and economic-rejuvenation world.

They, their eight ceremonial shovels, and the table of baked goods were irrefutable evidence of just how sparse the causes for celebration have been the last two years in the building industry.

“We haven’t broken ground on an investment since May 2009 – for us, that’s a long time to be fasting,” a beaming William P. Hankowsky, chairman, president, and chief executive officer of Liberty Property Trust, said as he announced his company’s plans for the two new buildings.

An ebullient Mayor Nutter declared: “What a great way to start the year.”

The project will bring something new to Philadelphia’s commercial real estate stock – flex space, a type of development that has been available only in the suburbs, John Gattuso, Liberty Property’s regional director, said in an interview before the groundbreaking ceremony.

Flex buildings are typically one-story structures with interiors designed as flexible space – easily adaptable to suit tenant requirements.

They are especially appealing to entrepreneurial companies that often need a mix of space – for instance, offices and laboratories – and room to grow, Gattuso said. They are common in California’s high-tech Silicon Valley and, closer to home, along the Route 202 corridor in Chester County.

“For many companies who desire this kind of space, they would have had to historically go far out from the city to find it,” Gattuso said.

That, in part, has to do with the limited amount of open land in the city, said Bill Wilson, president of Synterra Partners, a minority-owned Philadelphia development company that has been partnering with Liberty Property at the Navy Yard, where Liberty has development rights to 130 of the 1,200 acres.

Flex buildings “really require land, and the closer you get to the city, the less expansive land you have,” Wilson said.

The flex buildings Liberty and Synterra have planned for the Navy Yard will offer glass and precast facades with rear loading docks. Valued at $16 million, they will be just north of the new Tasty Baking Co. facility on the western edge of the Navy Yard. About 500 acres of the riverfront site along the Delaware have been the focus of a plan, now seven years old, for 20 million square feet of development. That effort is one-quarter of the way there.

Together, Tasty and the two new flex buildings will create a “mini-campus” to be known as the Navy Yard Commerce Center, said Will Agate, a vice president at the Philadelphia Industrial Development Corp., which serves as managing agent for the Navy Yard. The city holds title to the land there. The properties also will form a second entrance to the site: where 26th Street feeds into the complex near Penrose Avenue.

Drawing the biggest applause Monday was Nutter’s pronouncement that the flex buildings would create more than 100 construction jobs and his assertion that “we need those jobs.”

About $12 million for the construction project will come from the city through federal stimulus financing known as Federal Recovery Zone Facility Bonds. Hankowsky said those bonds enable Liberty Property to borrow at “slightly below the cost we would normally borrow in the marketplace and for a period of time longer than we would normally borrow.”

Sen. Arlen Specter, whose 30 years in Washington representing Pennsylvanians will end Wednesday, used the Navy Yard event to emphasize the importance of stimulus funds to struggling communities – and to take his final shots as a member of Congress at Republicans.

He made particular reference to Rep. Darrell Issa of California, the incoming chairman of the House Oversight and Government Reform Committee, and a critic of President Obama’s economic stimulus spending.

Specter called the Liberty Property flex project “an example of what can be done” with stimulus funds and said it should “put the Republican-controlled House of Representatives on notice that there’s going to be a hell of a fight, and cities like Philadelphia are going to win.”

The new buildings’ core and shell are expected to be completed by August. Liberty Property has signed a lease for 21 percent of the space with the Fretz Corp., a provider of high-end kitchen products located for the last 39 years on Woodhaven Road in Northeast Philadelphia.

President Thomas J. Dolan, on hand for the groundbreaking, said his 78-year-old company would be able to increase the size of its headquarters and showroom, where 40 employees work, from the current 18,000 square feet on Woodhaven Road to 24,000 square feet in the Navy Yard. There, Dolan said, Fretz will make $4 million in build-out investments.

The company had been considering relocation offers in Bucks and Montgomery Counties, and in New Jersey, he said.

Liberty Property has a portfolio of 80 million square feet of office, distribution, and light-manufacturing facilities throughout the United States and the United Kingdom.

That it picked Philadelphia as the place to end its development drought, Gattuso said, “is clearly a vote of confidence in this particular regional economy.”

By Diane Mastrull, Inquirer Staff Writer

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