Invest: Philadelphia 2020

Philadelphia 2020 An in-depth review of the key issues facing the Bucks, Chester, Delaware, Montgomery and Philadelphia counties’ economies featuring the exclusive insights of prominent industry leaders

$159.00 ISBN 978-0-9988966-1-8

59999

9 780998 896618

Contents: 45 Real Estate: 46 Real Estate in numbers CBRE 48 Seller’s market: Bidding wars and an ample supply of renters are characteristics of a market that continues to be one of the hottest in the country 50 Roundtable: Hot market; Lauren Gilchrist, Senior Vice President and Senior Director of Research, JLL; Adam Mullen, Market Leader, Greater Philadelphia Region, CBRE; Sean Beuche, Regional Manager, Marcus & Millichap; Mike McCurdy, Managing Principal, Cushman & Wakefield

53 Interview: Tim Pulte, Senior Executive Vice President, Colliers International

54 Market voices: Under construction

9 Economy:

10 Diverse benefits: Diversity is the power propelling one of the country’s most vibrant local economies to global market status

13 Interview: Tom Wolf, Governor, Commonwealth of Pennsylvania

14 Interview: Harold Epps, Director of Commerce, City of Philadelphia

17 Interview: Bret Perkins, Vice President, External and Government Affairs, Comcast Corporation

18 Interview: Matt Cabrey, Executive Director, Select Greater Philadelphia

22 Roundtable: Planning ahead; Patty Elkis, Director of Planning, Delaware Valley Regional Planning Commission; Brian Zidek, Councilman, Delaware County; Michelle Kichline, Commissioner, Chester County

25 Legal footprint: Against the backdrop of a rich legal history, Philadelphia’s law firms are on a strong footing, with a positive growth outlook

26 Interview: Matthew Taylor, Chairman & CEO, Duane Morris LLP

29 Interview: Curtis Toll, Managing Shareholder, Greenberg Traurig, LLP 30 Roundtable: Good practice; Alan Hoffman, Chairman, Blank Rome LLP; Patricia Santelle, Managing Partner and Chair, Executive Committee, White and Williams LLP; Joe Kernen, Managing Partner, Philadelphia, DLA Piper; Marc Tepper, Managing Shareholder, Philadelphia Office, Buchanan Ingersoll & Rooney

33 Tax & Accounting: 34 Reform challenge: Federal tax changes and new BIRT rules help reshape the tax landscape, but more is needed and tax reform will be a policy pillar in 2020 36 Interview: Paul Dougherty, Philadelphia Partner-in-Charge – EisnerAmper, LLP

58 Roundtable: Market trends; David Binswanger, President & CEO, Binswanger Management Corp; Allan Domb, Broker and Owner, Allan Domb Real Estate; Jerry Holtz, President, Provco Real Estate

61 Construction: 62 Slower growth?: A growing population is helping prop up the construction sector, but growth remains unbalanced across the city 63 Interview: Shawn Carlin, Vice President, Gilbane Building Company 64 Interview: Dan Gring, CEO, D&B Construction 66 Interview: Robert Cottone, President & CEO, IMC Construction 68 Interview: Scott Zuckerman, Principal, Domus Construction 69 Interview: Angelo Perryman, CEO, Perryman Building and Construction

39 Market voices: Growth opportunity

71 Transportation:

40 Roundtable: Private equity; Jeff Rhines, Tax Quality Assurance Director, CBIZ & Mayer Hoffman McCann P.C.; Jeffery Zudeck, Regional Managing Partner, Mid-Atlantic, Marcum LLP; Christopher Hegarty, Principal, CliftonLarsonAllen LLP

74 Connected: State and local initiatives hope to ensure transportation infrastructure not only improves but gets safer and more sustainable

72 Transportation in numbers Philadelphia International Airport (PHL)

www.capitalanalyticsassociates.com

|5

CONTENTS

Contents:

75 Interview: Chellie Cameron, CEO, Philadelphia International Airport

77 Interview: Andrew Woolf, Regional Director - Pennslyvania, New Jersey, Delaware, Lyft

78 Interview: Jim Moses, Vice President, PHL Hub Operations, American Airlines

80 Interview: Chad Dobbs, General Manager for Pennsylvania, Uber

110 Roundtable: Tech trends; Charles Cowles, Market Executive, Wells Fargo Commercial Banking Pennsylvania/Delaware; Joseph Meterchick, Regional President for Philadelphia, Delaware and Southern New Jersey, PNC Bank; Travis Rhodes, Regional President Greater Delaware Valley/Lehigh Valley Region, BB&T

140 Roundtable: Regional education; Chris Domes, President, Neumann University; Peter Donohue, President, Villanova University; Damian Fernandez, Chancellor, Penn State Abington; Aaron Walton, President, Cheyney University of Pennsylvania

147 Montgomery County:

83 Interview: Jeff Theobald, CEO, PhilaPort

114 Roundtable: Wealth management; Ted Durkin, Managing Director, Pennsylvania Market Head, UBS Financial Services Inc.; Harris Fishman, President & CEO, MassMutual Greater Philadelphia; Joseph Culley, Head of Capital Markets Group, Janney Montgomery Scott LLC; Joseph McLaughlin, Chairman & CEO, Haverford Trust Company

87 Interview: Mark Nikolich, CEO, Braskem America

118 Interview: Rodger Levenson, CEO, WSFS Bank

88 Interview: Matt Cleary, Territory Manager, Sage Glass/Saint Gobain

90 Interview: Linda Mysliwy Conlin, President, World Trade Center of Greater Philadelphia

81 Manufacturing, Trade & Logistics:

82 Balanced trade: Philadelphia is upgrading infrastructure and welcoming new segments as it solidifies its position as a trade powerhouse

91 Infrastructure & Utilities:

92 Cleanup time: An old dog learns new tricks as Philadelphia embraces clean energy and emerging tech to become a smart city

93 I nterview: Mike Innocenzo, President & CEO, PECO

98 Roundtable: Energy landscape; Mike Starck, Vice President and General Manager, NRG Retail East Division; Joel Crouse, Director, Stanwich Energy Advisors; John Walsh, CEO, UGI Corporation; Chuck Hurchalla, President, Evolution Energy Partners

101 Interview: Craig White, CEO, Philadelphia Gas Works

105 Banking & Finance: 106 Great rebound: Since hitting a low during the 2008 recession, Philadelphia’s bankers are back, creating jobs and facing a digital future 109 Interview: Frank Leto, President & CEO, Bryn Mawr Trust

6 | Invest: Philadelphia 2020 | CONTENTS

121 Interview: Mike Carbone, Regional President, Metro PA/NJ, TD Bank 122 Market voices: Small business support 123 Interview: Robert Kane, Market President, KeyBank 125 Interview: Susanne Svizeny, President of the Greater Philadelphia Region, OceanFirst Bank

127 Education: 128 Beyond theory: Educators are innovating with new technologies and partnering with businesses to deliver the skills the private sector demands 129 Interview: Stephen Klasko, MD, President of Thomas Jefferson University, CEO of Jefferson Health 133 Interview: Wendell Pritchett, Provost, University of Pennsylvania 134 Interview: Christopher Fiorentino, President, West Chester University 136 Roundtable: Curriculum updates; Guy Generals, President, Community College of Philadelphia; Julie Wollman, President, Widener University; Michael Mittelman, President, Salus University 138 Interview: Daniel Schidlow, Former Dean, Drexel University College of Medicine

142 Market voices: Business schools

148 Fast forward: Montgomery County has the fastest-growing economy in the greater Philadelphia area, and it is preparing for more 150 Roundtable: Opportunity blueprint; Valerie A. Arkoosh MD, MPH, Chair, Montgomery County Board of Commissioners; Kenneth E. Lawrence Jr., Vice Chair, Montgomery County Board of Commissioners; Joseph C. Gale, Commissioner, Montgomery County Board of Commissioners 153 Interview: David Zellers, Director, Montgomery County Commerce Department 154 Market voices: Great offer 158 Roundtable: Testing fresh waters; Brock Blomberg, President, Ursinus College; Deanne D’Emilio, President, Gwynedd Mercy University; Ajay Nair, President, Arcadia University

161 Healthcare: 162 Positive attraction: The local health sector faces challenges but the industry is booming, reinforcing the city’s reputation as a major health center 164 Interview: Clint Matthews, President and Chief Executive Officer, Tower Health 165 Interview: Daniel Hilferty, CEO, Independence Health Group 166 Interview: Kevin Mahoney, CEO, University of Pennsylvania Health System 167 Interview: Larry Kaiser, Former President & CEO, Temple University Health System 170 Interview: Remy Richman, Vice President, Chief Growth Officer, Keystone Market (PA, DE, WV), Aetna

Philadelphia 2020 ISBN 978-0-9988966-1-8

173 Interview: Sam Menaged, Founder & President, The Renfrew Center

197 Interview:Larry Korman, President, AKA Hotel Residences

174 Interview: Jack Lynch, President & CEO, Main Line Health

198 Roundtable: Destination city; Jay Dellavecchia, General Manager, The Westin Philadelphia ; Jim McSwigan, General Manager, The Notary Hotel; Jerry Rice, General Manager, Cambria Hotel Philadelphia Downtown; Michael Roberts, Area General Manager, The Windsor Suites Philadelphia

Chief Financial Officer: Albert Lindenberg

200 Roundtable: Sports in the city; Ron Jaworski, Co-Owner, Philadelphia Soul; Joe Marsh, CBO, Philadelphia Fusion; Mike Shane, CBO, Philadelphia Flyers and Wells Fargo Center; John Weber, Sr. Vice President, Ticket Operations & Projects, The Philadelphia Phillies

Editor: Tomas Sarmiento

176 Interview: Barry Freedman, President & CEO, Einstein Healthcare Network 177 Interview: Dan Bradley, President, Select Medical Outpatient Division, NovaCare Rehabilitation

181 Life Sciences: 182 Life time: The life sciences sector is attracting talent, money and Big Pharma to make Philadelphia a flourishing hub 183 Interview: Felix Hsu, SVP, Global Head, WuXi Advanced Therapies 186 Interview: John Crowley, Chairman & CEO, Amicus Therapeutics

202 Interview: Scott O’Neil, CEO, Philadelphia 76ers/Harris Blitzer Sports & Entertainment

189 Tourism, Arts & Leisure: 190 In a Philly mood: Tourism industry demonstrates rapid growth that shows no signs of slowing down 191 Interview: Timothy Rub, CEO, Philadelphia Museum of Art 193 Interview: Jeff Guaracino, President & CEO, Visit Philadelphia 194 Interview: Julie Coker Graham, President & CEO, Philadelphia Convention & Visitors Bureau

President: Abby Melone

Regional Director: Jack Miller Senior Editor: Mario Di Simine Art Director: Nuno Caldeira Executive Director: Josh Greenberg Content Manager: Yolanda Rivas Writers: Sean O’Toole; Sara Warden Contributing Writers: Yolanda Rivas, Felipe Rivas

Intern: Sabrina Bocaranda Invest: Philadelphia is published once a year by Capital Analytics Associates, LLC. For all editorial and advertising questions, please e-mail: contact@capitalaa.com To order a copy of Invest: Philadelphia 2020, please e-mail: contact@capitalaa.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the express written consent of the publisher, Capital Analytics Associates, LLC. Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, financial or otherwise, sustained by any person using this publication.

Capital Analytics Associates, LLC accepts no responsibility for the return of unsolicited manuscripts and/or photographs, and assumes no liability for products and services advertised herein.

Capital Analytics Associates, LLC reserves the right to edit, rewrite, or refuse material.

195 Interview: David Devan, General Director & President, Opera Philadelphia

Photo Credits: Contents: pg. 5, 7 – JLL Economy: pg. 9 large – Comcast pg. 9 small – JLL pg. 10, 15 – JLL pg. 18, 21 – Comcast pg. 22 – Bucks County Tax & Accounting: pg 33 large – JLL pg 33 small – WithumSmith+Brown, PC pg 34 – Neumann University pg 37, 38, 40 – JLL pg 43 – Ciright Systems Inc. Real Estate: pg 45, – Colliers International pg 45 – Keller Williams pg 48 – Post Brothers pg 52, 55 – Colliers International pg 58 – MSC Retail Construction: pg 61, large – General Building Contractors Association pg 61, small – IMC Construction pg 62 – IMC Construction

pg 67 – Perryman Construction pg 69 – Skanska USA Building, Inc. Transportation: pg 71, large, small – Visit Philadelphia pg 74 – JLL pg 76 – Lyft Manufacturing, Trade & Logistics: Pg 81, large – PhilaPort pg 81, small– Photo by R. Kennedy for GPTMC pg 82, 85, 86 – PhilaPort Infrastructure & Utilities: pg 91, large, small – IMC Construction pg 92 – IMC Construction pg 94, 96 – UGI Corporation Banking & Finance: pg 105, large – Independence Hall3-G.Widman.tif pg 105, small – Ciright Systems Inc. pg 106 – Bryn Mawr Trust pg 108 – Ciright Systems Inc.

pg 110 – 2nd Bank B. Krist.jpg pg 112 – Ciright Systems Inc. pg 117 – Univest Bank and Trust Co. pg 119 – Ciright Systems Inc. pg 124 – Ciright Systems Inc. Education: pg 127, large – Campus Philly pg 127, small – Neumann University pg 128 – Campus Philly pg 130 – Delaware County Community College pg 136 – University of Pennsylvania pg 139 – Drexel University College of Medicine pg 143 – University of the Sciences pg 145 – City Year Philadelphia Montgomery County: pg 147, large, small – Valley Forge Tourism & Convention Board pg 148 – Montgomery County pg 150, 152, 156, – Valley Forge Tourism & Convention Board pg 158 – Montgomery County

pg 160 – Valley Forge Tourism & Convention Board Healthcare: pg 161, large – Temple Health pg 161, small – The Renfrew Center pg 162, 168, 171, 172 – Temple University Health System pg 175 – The Renfrew Center pg 176 – Einstein Healthcare Network pg 179 – Einstein Healthcare Network Life Sciences: pg 181 – Salus University pg 181 – GlaxoSmithKline (GSK) pg 182 – LPB Life _ Science Tourism, Arts & Leisure: pg 189 – Live Nation pg 189, small – Photo by P. Loftland for IVCC pg 190 – Visit Philadelphia pg 193 – Live Nation pg 196 – Reading Terminal Market pg 204 – The Philadelphia Phillies

www.capitalanalyticsassociates.com

|7

Economy: There is no shortage of investment or talent pouring into the city of Philadelphia as the local economy adapts to a diversifying demographic with an equally diverse economy focused on health sciences, finance, shipping and logistics. Slow but steady job creation has improved the city’s unemployment rate to the lowest since 2000, but there is still work to do to bring it under the national average.

www.capitalanalyticsassociates.com

|9

Diverse benefits: Diversity is the power propelling one of the country’s most vibrant local economies to global market status Philadelphia has capitalized on its strategic location, rich history and diverse population to fuel one of the most vibrant economies of any of the country’s large metro areas. Traditionally a manufacturing powerhouse, the city struggled to overcome the loss of much of its heavy industry to become a leading health sciences, financial, shipping and logistics, and telecommunications hub that is not only a formidable local force but a major player in the global market, as well. Today, the city is doing so well that it is operating with a budget surplus and was able to put money in its rainy day fund for the first time since it was established.

As its economy continues to expand and shatter records that had been in place for decades, it is gradually gaining steam in terms of job creation and attracting more qualified workers which, coupled with a positive birth rate, is leading to a growing population.

Overall, the bottom line in Philadelphia right now is growth.

History Philadelphia’s location primed it for success as a center of trading and commerce. Situated at the confluence of two rivers, the Delaware and the Schuylkill, and near 10 | Invest: Philadelphia 2020 | ECONOMY

to the Atlantic Coast, the city quickly became a hub for shipping. Today, the Ports of Philadelphia, which consist of Philadelphia’s port along with the ports of southern New Jersey and Delaware, are one of the largest freshwater shipping hubs in the world, as well as one of the busiest. The city is also in close proximity to New York City, Washington, D.C., and essentially the entirety of New Jersey and Delaware, leading to a good deal of business with – and shipping to – parties in these locations, and elsewhere along the eastern seaboard.

In addition to its status as a shipping center, Philadelphia was also traditionally known as “the Workshop of the World” thanks to its reputation for massive industrial manufacturing output. Toward the end of the 20th century, however, Philadelphia’s manufacturing economy contracted considerably as firms relocated or closed, and the city instead began to shift its focus to a more information and servicebased economy. Tourism is a massive component of the local economy, thanks to Philadelphia’s status as the birthplace of the nation’s government, where its founding documents were drafted, and as the location of the country’s original capital. Millions

ECONOMY OVERVIEW

of tourists pour into the city every year to sample its history and its modern attractions. Finance, law, telecommunications, and printing and publishing all do very well in Philadelphia, with large and successful firms dedicated to these services located within Center City or the surrounding suburbs. The biomedical and life sciences industries are also flourishing in the area, from the Navy Yard to Penn and Drexel universities and to the many sprawling campuses in the suburbs.

It is precisely this diversity that makes Philadelphia attractive, said Nicole Tranchitella, senior managing director and Philadelphia office lead at Accenture.

“The diversity of what Philadelphia offers is a big attraction for companies and individuals.

Philadelphia is in constant change and that is a great opportunity for consulting, because as companies go through change and disruption, they need help in the adapting process. That is a wonderful opportunity for organizations like Accenture to help companies go through that thought process. We have the unique ability to bring our experience to an individual client, help them understand what they should anticipate, and then work side-by-side with them to solve their most pressing challenges. The opportunities for consulting companies will continue to grow in the Philadelphia market because of the degree of change that’s going on in the area.”

As the city’s economy continues to diversify and expand, a similarly expanding and diverse group of workers will be attracted to it, thereby further enriching a community that is already known for attracting some of the best and brightest from around the world to study in its renowned research institutions and work at its prestigious companies.

Global factors As a vibrant economy that does a good deal of domestic and international business, Philadelphia feels a real impact from all manner of global economic and political developments. One salient example is the effect that the ever-growing number of immigrants in Philadelphia has on the economy and the culture of the area. The number of immigrants living and working in Philadelphia has grown dramatically over the last couple of decades, from less than 7% of Philadelphians being foreign born in 1990 to roughly double that in 2018. These foreign-born Philadelphians hail from many different regions, but immigrants from the Americas and Asia are the most prevalent. When these people move to the area, they bring with them a variety of skills, education, and culture, which serve to augment Philadelphia’s economic viability.

Another global economic development affecting Philadelphia is the ongoing trade war with China.

The United States and China have imposed billions of dollars worth of tariffs on one another, targeting a wide variety of goods over the past several months, leading to an increased cost of doing business and higher prices for consumers. One example is Philadelphiabased handbag and backpack maker, MinkeeBlue, which manufactures its products in China for shipment to the United States for sale. MinkeeBlue previously operated under a 17.6% import duty on its products prior to the trade war, but now languishes under a 42.6% duty. Absorbing this more than double expense so abruptly required the company to seek additional financing in the form of loans, as well as increase the prices on its products. ( ) www.capitalanalyticsassociates.com

| 11

ECONOMY INTERVIEW

Strong goals Attracting businesses means building strong workforce, investing in education, leveraging existing assets

Tom Wolf Governor – Commonwealth of Pennsylvania What is your administration doing to attract new industries and businesses?

Businesses relocate to where they can find workers. I am focused on making Pennsylvania’s workforce the strongest in the nation by investing in education at all levels and ensuring Pennsylvanians have the opportunity to learn STEM and computer science skills needed in today’s economy. I am also continuing to find ways to leverage our existing assets and make investments into our infrastructure. That includes everything from increasing broadband access, which is a necessary utility in today’s business world, to investing more than $300 million in expanding PhilaPort to make Philadelphia home to the best shipping terminal on the East Coast.

What initiatives will guarantee Pennsylvanians have the right access to healthcare?

In July, I signed legislation to create a state-based healthcare exchange that will increase access to health insurance while lowering costs. Paying the federal government to host our marketplace on healthcare. gov is costlier than operating our own exchange. The funds we save will be invested in a reinsurance program, which will lower the premiums of Pennsylvanians who purchase their insurance through the marketplace by directly paying some of the healthcare costs of high-cost individuals. By lowering premiums, we will also reduce the approximately $2 billion cost for healthcare premium subsidies for low-income individuals. We will then re-invest these savings into the reinsurance program, creating a cycle that continues to lower costs. The statebased exchange is expected to be operational in 2021.

This year, you signed legislation that would have Pennsylvania participate in the nine-state Regional Greenhouse Gas Initiative. Why is this legislation important for Pennsylvania at this time?

Increasingly severe weather patterns are having a devastating effect on Pennsylvanians across our commonwealth. In 2018, extreme storms caused an estimated $144 million in damage in residents’ property and $125 million in damage to state-maintained roads and bridges. If we want a Pennsylvania that is habitable for our kids, we need to get serious right now about stopping the climate crisis. RGGI has shown to be good for businesses, consumers, and the environment. For example, the nine states that have been participating in the program for the past decade have seen their GDP grow 31 percent faster than the rest of the country, their electricity prices have fallen by 5.7 percent while the rest of the United States has experienced price increases of 8.6 percent, and they have experienced a drop in carbon dioxide emissions at a pace 90 percent faster than the rest of the United States. www.capitalanalyticsassociates.com

| 13

ECONOMY OVERVIEW

Harold Epps Director of Commerce City of Philadelphia

Name Surname Job title Company

Lessitia commolo ribus, venimos ipsum, comnimu sdaerum et haruptam que dit ipicturit quis re mo id molum, ut ulluptatquas simusam, ommosa eossimus reperro rehendis as aperitis rectempore pratur sectors rerci blandus exerrovit molenda Which or industries are seeing the dem most faceptatia veliquae volest vendanis pa volluptas growth in Philadelphia today? sit reperep education, taquunt exceper ionsequasse Healthcare, life sciences, retailsitas and sintio. Oditias isseria sa qui ommo min hospitality have perumen been the key drivers of Philadelphia’s cusaectatur omnienienem job growth inmagnis recentmaios years.ipsapit, The region’s growing conecea dolupictem nonsedtherapy ut et dolore eos ecosystem around gene and pro precision dest, quas omnihic to imenduciunt adis quis medicine is et beginning take shapevolent and differentiate dolestius minvelentia Itatqui iderumquis Philadelphia from many doluptio. of its peers.

Those industries— as rem et fugia and venisquiati des uthigh-paying estiame possit like life sciences tech—create jobs, quiaten totate vellab abo. Itas our utem et and that challenges us iducipiet to keep improving public omnis sum quas dolore earupti at education system so thatvolor our as citizens arebeatur prepared erumquis estibus for the jobsdolupta of todayquae andnes theconserf future. eruntur Philadelphia also nihilic tem aut hitatem placcus has thousands of vacant or res unused plotsni of nimpeli land and, tatem. of the city’s location, that presents a major because Beaquatest, qui rawarehouse sequiat uribea sunt quam, opportunity to recruit and logistics centers. numindustries hit abor molupta epudam, consequi Incumquia turn, those will create living-wage jobs dolut quis Philadelphians quidell atemporis that canaut employ who ea arenonsequam, not equipped cuptate nossit et estia ditat fugiassimus with the skills or mod education needed to work in theaudi gene dolorpohealthcare recerumque ommoluptatum comnis therapy, or technology fields. corepudi nem qui nem que sundaer atemporrumet alibus,impact num has duscitis quatem facestiis ea What the international business voluptaquam, ut had es im eos inum dis atiusapiti support program locally? sit, sustput, vendendam quam quam dolut esere lit Simply the international business program vid expelit debit earum quod magnis creates new quos jobs in Philadelphia.

In modis 2018 alone, the dolessi magniamus, ut et entis esti re companies et as eat city’s international team worked withre23 a inullestis que modi nisjobs, ut tohariatur open new offices erum in ournum city,sicreating new amus ra nis amus dolorup ciamendae and bringing in new capitaltatur, and consedi global opportunities odPhiladelphians. magnis andi nobis vendisi sum facius et et et for We si must reach out to the world autPhiladelphia as voles adites a verroris et ex es untur. for to reach its full potential andTatis drive suntiatio the largestvoluptibus economicmoluptat. impact. To reach that global Ectem fugiae quasped unt veligent voluptate audience, we must communicate theeacity’s assets, molenducidis duciet alitwithin es exceptatur most notably: theautem strategic location the densest reperum aceptation volenest, sinus, and wealthiest part of theexcest, United States; the attractive vendell itatus reriosand maxim volo endeni value proposition; the liquidignit deep talent pool from comnimpor dolupta tecest, seque our incrediblearit number of universities.

Wevoluptas host, on volorporest platur, optate natem.

Nonsedit average, companies from 45 countries eachreprovid year and expersp nis mosa doluptatur aut facipiene more thanelitas 65 unique foreign delegations, generating voloritis alitati100 busaperro tes andunt, ommodis approximately new international business aut leads remoluptas sam faccull estendit, solut que ma est annually.

14 | Invest: Philadelphia 2020 | ECONOMY

45 million people live within 200 miles of Philadelphia.

( ) A similar story can be told by other Philadelphiaarea companies and consumers, such as Philadelphia Distilling, which ships 200 cases of its gin to a distributor in Shanghai each year. A 25% tariff on gin imported in China could mean that the distributor will find Fishtown-based Philadelphia Distilling’s product too expensive, and will cancel its order, costing distillery workers shifts and, thereby, money that they need to pay their bills.

Demographic shifts As Philadelphia attracts a diverse and growing immigrant population, a gradual demographic shift is taking place throughout the city. As of 2019, the ethnic breakdown of Philadelphia’s 1,526,006 residents stands at 661,839 African American (43%); 626,221 Caucasian (41%); 187,611 Hispanic or Latino (12%); 96,405 Asian (6%); 90,731 “Other Race” (5%); and 43,070 “Two or More Races” (2%). There are also populations of American Indians, “three or more races,” and native Hawaiian/Pacific Islander that all account for less than 1% each. Some observers believe that this increasingly diverse population is fairly representative of the ethnic makeup of the country as a whole, making Philadelphia an interesting case study on ethnic relations. In addition to its broadening diversity, the city also enjoyed a net population

ECONOMY OVERVIEW

increase of 3,900 people between 2017 and 2018, which was just the latest net gain in more than 10 consecutive years of modest growth, with a 3.65% increase since 2010 making the Philadlephia-Camden-Wilmington Metro Area the ninth-most populous in the country.

In addition to the influx of immigrants, Philadelphia is also enjoying a growing population thanks to a development closer to home: a natural increase in population brought about by more births in the city than deaths. This growth in Philly coincides with the decrease in population among 54% of Pennsylvania’s other counties from 2017 to 2018, showing just what a magnet Philadelphia really is.

International business Thanks to its strategic location and history as a manufacturing and shipping hub, Philadelphia has long been a player in international business.

Indeed, Pennsylvania as a whole has one of the most extensive networks of overseas offices out of any state in the United States, with more than 6,300 foreign companies operating local offices or affiliates in the state that employ more than 300,000 people.

To maintain and grow these kinds of international

ECONOMY OVERVIEW

Philadelphia healthcare providers serve patients from nearly 100 countries. connections, state and local business development organizations work tirelessly to attract and network with foreign firms and business people in order to convince them that the state is a great place to do business. One example is the World Trade Center of Greater Philadelphia’s (WTCGP) annual “Bringing the World to Philadelphia (BTW2PA)” event. BTW2PA helps to expand the opportunities of local firms to sell their goods and services internationally by arranging meetings between companies in Southeastern Pennsylvania that are ready to export and Authorized Trade Representatives during which opportunities in more than 50 global markets are discussed. Some of the specific opportunities that can be discussed during BTW2PA include foreign market intelligence, potential foreign agents and distributors, industry and government contacts, and local assistance in the foreign market when the Southeastern Pennsylvanian businesses go to visit. The event is held every year in

September, and makes its way across Pennsylvania, stopping at select venues for two days at a time.

These kinds of meetings are not only advantageous for companies looking to the global stage. Small businesses in the Philadelphia region say that similar discussions between the local government and the private sector are vital. “Our one-on-one meetings and workshops for business owners are about connecting government resources with private industry. We want the government to understand the needs of small businesses, and we want the small businesses to understand what resources are available to them,” said John Chin, executive director of the Philadelphia Chinatown Development Corporation.

Another form of international business that greatly benefits Philadelphia is international medicine.

Healthcare providers in Philadelphia serve patients from nearly 100 countries. For example, Children’s Hospital of Pennsylvania (CHOP) attracts a large volume of international patients because it is a quaternary care hospital, which treats patients with rare disorders or those in need of uncommon, specialized surgeries. As a result, prestigious children’s hospitals from around the world refer patients to CHOP, such as Princess Margaret Hospital for Children in Australia. Philly also serves a decent proportion of the average of 600,000 Chinese citizens who receive medical care abroad every year. In addition to the reputation of CHOP and other city-area hospitals, some of this international renown is thanks to Philadelphia International Medicine (PIM), which gives patients and physicians from all over the world access to care from doctors at Temple, Jefferson, Fox Chase Cancer Center, Wills Eye Hospital, and other healthcare providers. The ( )

ECONOMY INTERVIEW

Success support New technology center targets next-generation products, keeping world-class talent in the Philadephia area

Bret Perkins Vice President, External and Government Affairs – Comcast Corporation What impact will the Comcast Technology Center have on Philadelphia’s economy over the long term?

Comcast has had an unwavering commitment to the City of Philadelphia for over 55 years, and the addition of the Comcast Technology Center to our campus is the latest example. We have about 4,000 engineers, software developers, and technologists developing next-gen products in the Comcast Technology Center, and we are recruiting and trying to retain world-class technology talent here in Philadelphia.

The Comcast Technology Center is also the new home of NBC10 and Telemundo62, providing them a state-of-the-art studio to deliver the best news to the Philadelphia community. The top floors are occupied

by Four Seasons Hotel Philadelphia, which will offer five-star accommodations with magnificent views, fantastic restaurants, and will deliver an unparalleled experience…all contributing to and supporting the success of Philadelphia.

How does Comcast support local startups in the community?

LIFT Labs and our team that does entrepreneurial engagement is our front door to the startup community around the country. LIFT Labs in Philadelphia is particularly unique because we have a space that is really intended to be a convening spot for the startup and entrepreneurial community. It’s about us working with the startup community and entrepreneurs to help them build their businesses, but also for us to learn from them. We also have the Comcast NBCUniversal LIFT Labs Accelerator, powered by Techstars, which is designed to support connectivity, media and entertainment startups.

What impact will the 3,500-seat esports arena have on the city?

Comcast Spectacor and The Cordish Companies recently announced they will build the first purposebuilt facility of its kind in the country dedicated to esports. It will also be the home of the Philadelphia Fusion, our Overwatch League esports team. This is a great development for the city. It will bring additional energy and become a hub for esports. There are a number of businesses that have built up around esports, such as N3rd Street Gamers, an amateur and semi-pro esports network. Our dedicated esports arena is part of a huge investment we are making in the Philadelphia Sports Complex, which includes the $250 million renovation of the Wells Fargo Center; the creation of Pattison Place, an $80 million, Class-A office tower; and Fusion Arena, which is a $50 million investment. www.capitalanalyticsassociates.com

| 17

ECONOMY OVERVIEW

Matt Cabrey Executive Director Select Greater Philadelphia

Our ability to attract life sciences expertise is the biggest asset that we at Select Greater Philadelphia have and will continue to nurture. We keep building on the talent that we have in the life sciences, research and development, precision medicine, cell and gene therapy, connected health and overall healthcare space. And we have a history of working with collaborative partners in this space, something that we’re communicating to a national and international audience in order to attract more companies, jobs and talent to the Greater Philadelphia region. Our work with Amicus Therapeutics, which is establishing a new Global Research and Gene Therapy Center of Excellence in uCity Square, is an excellent example of how Select Greater Philadelphia supports companies looking to establish themselves in the area.

The other categories we are focusing on are financial services, energy and manufacturing. We’re helping energy firms and manufacturers in the region establish ties with policymakers, business leaders and citizens by educating the community on the economic benefits of developing the energy and manufacturing sectors, and marketing the region as an energy hub. For example, we’re talking to organizations that rely on energy assets to fuel their operations, such as big manufacturers of food products and other items that require a steady, consistent, reliable, safe and affordable source of energy to fuel their facilities.

We have the ability now to be more proactive in our approach, specifically in the life sciences, financial services, manufacturing and energy sectors. The primary asset we have in Greater Philadelphia is talent, which is our differentiator and why companies would want to establish themselves and grow here. We also have other great assets such as the cost of doing business, our quality of life, location, the cost of living and reliable and affordable access to infrastructure — especially IT and energy infrastructure. We’re on an upward trajectory as a region and there are many exciting innovations happening in the City of Philadelphia and across the region. That’s just going to continue.

18 | Invest: Philadelphia 2020 | ECONOMY

Philadelphia has the third-most populous Downtown in the United States.

( ) WTCGP has helped PIM to establish some of its fruitful relationships, like a partnership with the Sociedad Mexicana de Oncología in Mexico. Beyond the direct medical costs, these visiting patients often bring relatives with them, and together they contribute to the local economy by spending money on hotels and, possibly, tourism.

Government From the city government’s perspective, Philadelphia is doing well enough economically to justify a budget increase despite whispers of an impending recession.

The $5 billion 2020 budget, approved in the summer of 2019, represented a $300 million increase over 2019’s budget. This increase was justified by a growing tax base, thanks in part to the growing population, and the lucrative sweetened beverage tax, which eliminated the need to increase property taxes. Some notable items in the budget include a $130 million increase in funding for the School District of Philadelphia, a $34 million contribution to Philly’s rainy day fund, $7.6 million for programs to fight the opioid epidemic, $6

ECONOMY OVERVIEW

Pam Henshall President – Greater Northeast Philadelphia Chamber of Commerce

Our vision is to support the Greater Northeast Philadelphia business community, offering opportunities to network. We have developed content-driven events and programming centering on ROI value for members and participants. Annual events like the Women in Business Conference and the Nonprofit Summit offered a chance to meet and hear from experts in their related fields. New for fall 2019, we hosted the Emerging Leaders Forum, which focused on fostering growth and leadership for young professionals throughout Greater Philadelphia.

million to curb gun violence, and $3 million for job training programs. The rainy day fund contribution is particularly interesting as it is the first such contribution since the fund was established in 2011 and is thanks to the city having $298 million unspent after finalizing this year’s budget despite annual spending growing by $1 billion since 2016. This appears to be evidence of the city government’s fiscal responsibility, though some experts remind that this success may not continue indefinitely and will likely be undercut by a recession in the near future. Still, the city is expected to continue maintaining a positive balance for at least the next five years.

Tax reform The 2017 Tax Cuts and Jobs Act was one of the country’s biggest tax overhauls in decades, and it

required businesses to conduct comprehensive reevaluations of their tax pass-through structures. The new changes became applicable in the 2018 tax year, filed in spring 2019. Complicated and complex, many companies turned to their lawyers and accountants to get it right.

“As the federal tax reform changed, there is a lot of questioning about the effects on the state level,” said Lee A. Zoeller, Partner & Executive Committee Member at Reed Smith LLP. “Many people are now realizing, with the losing of the state income tax deduction and the property tax deduction at the federal level, that their affected tax rate will go up a little bit. That has been an element of surprise for some of our clients.

Our corporate clients are still trying to sort through how the states are going to react to the federal tax reform.”

www.capitalanalyticsassociates.com

| 19

ECONOMY OVERVIEW

Ellen Hwang Director/Philadelphia – Knight Foundation

Knight Foundation hosted its inaugural Knight Public Spaces Forum in Philadelphia in summer 2019, convening a diverse group of public space practitioners and community leaders. We had nearly 300 attendees who shared ideas and talked about what it means to drive engagement, design and creation when developing public spaces. We discussed ways in which culture, arts and technology come together in public spaces and the essential role of these spaces in fostering informed and engaged communities. Through the forum, we were able to share local stories of how Philadelphia residents are part of the fabric and dialogue of public spaces development, with people who are looking at public spaces in the United States and abroad.

From 2010-2019, Philadelphia saw its first jobs gain over a decade since the 1960s.

Economic performance Like its population, Philadelphia’s economy has been experiencing a pattern of growth for the past several years that has landed it among the fastest-growing large metros in the country. In fact, with 20.2% GDP growth between 2012 and 2017 to a staggering total of almost $445 billion, Philadelphia ranked sixth among the 10 largest metros in terms of the rate of GDP growth, beating out New York City, Chicago, D.C., and Houston.

Despite talk of a recession, there is cause for guarded optimism in Philadelphia that the upward trend will continue, with 2018 seeing a recordbreaking $1.4 billion surge of venture capital investment.

In addition to this historic total investment, more of the deals in the city this year fell into the $25 million or higher category than in more than 10 20 | Invest: Philadelphia 2020 | ECONOMY

years, including Harmony Biosciences’ raising of more than $295 million. The total number of deals remained steady, in the ballpark of 190 — there were 194 in 2018, just below 2016’s peak of 195). Angel and seed deal volume actually dropped to 70 in 2018 from 86 the previous year; however, the $100 million raised in 2018 was the second-highest dollar amount raised in 10 years. What does all this mean? Philly is seeing more money from higher dollar-value deals.

Although exit activity was low in 2018, the numbers look better in 2019.

In addition to venture capital investment, real estate investment is also hot in the city right now, with major renovations and developments taking place in Center City (Market East and Independence Mall West have both seen a surge of commercial development, and the massive, long-term Schuylkill Yards project has gotten underway) and in the suburbs (King of Prussia continues to be an investor’s darling). The so-called “Green Rush” — the burgeoning medicinal marijuana industry — is also gaining steam in Philadelphia, though it has yet to actually turn a profit. Eight new dispensaries opened in the region in 2019, and it even welcomed its first local grower. The commonwealth is also set to select marijuana growers to partner with eight medical schools across Pennsylvania, and five are in Philadelphia.

Although the statewide medical marijuana program grossed more than $132 million in total sales and generated $2 million in tax revenue, it failed to create a profit for stakeholders thanks to hiccups with the program’s official computer system and the continued

ECONOMY OVERVIEW

misalignment of regulations around medicinal marijuana sales and the reality of consumer and business needs, such as a ban on the sale of dry flowers that has since been lifted, but which curtailed profits.

There are 18 Fortune 500 companies within an hour’s drive of Philadelphia.

Employment As the population and economy enjoy modest gains, employment in the city exploded: there was a whopping 6.3% job growth in the Philadelphia metro area in 2018, according to Glassdoor’s Job Market Report, marking it as the fastest-growing metro in terms of year-over-year job growth and giving it an ample supply of 107,288 open jobs.

Coinciding with that momentous job growth is historically low unemployment across Pennsylvania in 2019. According to a press release by the Pennsylvania Department of Labor and Industry, the commonwealth’s unemployment rate dropped to 4% in March. The year 2000 was the only other time Pennsylvania achieved an unemployment level this low since it began keeping records of unemployment in 1976.

Local officials are optimistic that the trend will continue. “We’re surrounded by a lot of pharma and financial services companies. As those firms and their need for qualified employees continue growing, they’ll want to be part of a rich community, which is where Phoenixville comes in. We provide the opportunity to live, work and play in a great place. We’re very accessible to a lot of the large major corporate campuses, and we have a big nonprofit community that gives these employees and entrepreneurs an opportunity to give back to the community,” said Mayor of the Borough of Phoenixville Peter Urscheler. ( )

®

oundtable:

Planning ahead County leaders are looking at the opportunities to create healthier environments for residents and businesses with an emphasis on open spaces and better public heath that will deliver the goal of having a great place to live, work and play.

Patty Elkis

Director of Planning Delaware Valley Regional Planning Commission

What are DVRPC’s main areas of focus?

As the regional planning organization for Greater Philadelphia, we cover a large, diverse area, and our planning work is varied too, ranging from programming billions in federal transportation funding for priority projects, to helping municipalities better prepare for increased flooding and sea level rise and promoting strategies for community revitalization. A common thread through all our work is bringing stakeholders together to solve problems. The other common denominator is always looking toward the future. In fact, every four years we update the region’s long-range plan that has a horizon of at least 20 years. Currently, we’re working on the plan for 2050, and particularly looking at technological, climate and equity issues.

What new challenges is DVRPC facing?

One newer focus in our work is looking at the built environment through the lens of public health.

Research shows that chronic disease is the leading cause of death and disability in the United States and it is often related to the built environment. We know that peoples’ ability to be outside in a park or on a trail to exercise, to access healthy food, to be safe from crime and traffic accidents, and to breathe clean air are all directly dependent on the environments in which they live and work. A person’s income and race are often related to their address, and we are seeing vast disparities in life expectancy between zip codes.

We created a task force that brings together planners and those working in public health to work jointly on projects resulting in better health outcomes.

22 | Invest: Philadelphia 2020 | ECONOMY

ECONOMY ROUNDTABLE

Brian Zidek

Councilman Delaware County

Michelle Kichline Commissioner Chester County

What is Delaware County doing to create a healthier living environment?

We have been dedicating significant time and resources into preserving and enhancing open spaces in Delaware County, from making new trails to renovating county parks to putting in new playgrounds. We’re also studying the ways in which public health services are delivered in Delaware County to make sure it’s the healthiest county it can be. Our focus is to enhance the lives of the residents of the county, emphasizing public health and open spaces while working with partners and organizations such as Invest: Philadelphia to spread the word about what a great place Delaware County is to live and work.

What are the key focus areas for Chester County?

Chester County is the fastest-growing county in southeast Pennsylvania and we are projected to grow by 30 percent over 30 years. A key focus by the County Commissioners is on how to manage that growth and still maintain a great quality of life for those who live and work here. Chester County’s Comprehensive Plan, Landscapes3, and VISTA 2025, the economic development program borne out of our Comprehensive Plan, both focus on balancing growth with preservation. Chester County is a nationwide leader in open space preservation, with nearly 30 percent of the county preserved. As County Commissioners, we have invested nearly $70 million in infrastructure and streetscape improvements in these areas.

How is the county ensuring suport for businesses?

The Delaware County Edge Accelerator program is part of our effort to make sure that companies that are thinking of locating or starting up here understand all that we have to offer. We inform startups about tax benefits, real estate opportunities and means of financing, and we help them connect with folks that can help their companies grow and succeed. We try to make sure that we have a business-friendly environment where private and public sectors can work together.

The outlook is bright for Delaware County. We continue to enjoy a pretty positive macroeconomic environment. We see our unemployment rate staying at low levels, with plenty of job opportunities for our well-prepared talent pool, which is great for employers that are looking to start up or enhance their business growth.

What are you doing to maintain growth?

Chester County’s economy is strong and diverse. To maintain and grow that economy we are focused on keeping as much of the current economy as we can, while bringing in new elements and growing new companies. VISTA 2025, Chester County’s 10-year economic development program, focuses on attracting and retaining businesses of all sizes, and redeveloping existing infrastructure to create attractive spaces for companies. One of VISTA 2025’s strengths is the publicprivate partnership that is the program’s foundation. This partnership was created to help the program succeed, with valuable contributions coming from industry and business representatives, educational institutions including West Chester University and other further education and secondary education representatives, leading non-profit organizations and county government. www.capitalanalyticsassociates.com

| 23

ECONOMY OVERVIEW

Philadelphia ranks sixth among the 10 largest metros for GDP growth. ( ) Despite its achievements on the jobs front, Pennsylvania still has a lot of work to do: it is tied for the 15th-highest unemployment rate in the country and is north of the nationwide average of 3.8%. Philadelphia in particular has an even more complicated situation when it comes to job growth and unemployment than Pennsylvania as a whole. The city gained about 66,000 jobs between 2010 and 2019, its first positive gain over a decade since the 1960s, which is definitely a big step. And yet, the city still has one of the lowest rates of private-sector job creation among America’s

largest cities (third from last place, with 1.5% privatesector job growth since 2009, well below the large city average of 2.3%). Philadelphia actually had considerably more jobs in 1970 (roughly 900,000) than it has today (approximately 724,000) as a result of the decline of Philly’s traditional manufacturing sector and its long struggle to recover from this loss.

Looking ahead One of Philadelphia’s biggest challenges is maintaining and improving its slow but steady job creation and addressing its problems with unemployment. There is no shortage of investment and talent flowing into the city, but a focus on improving the situation for many of the disadvantaged already here must remain a top priority.

In addition, continuing programs to foster international business relationships and ensure the resilience of the local economy is essential in an ever-changing and ever-globalizing market, particularly when economists remain convinced that a downturn is imminent despite cautiously optimistic signs from the Philadelphia Federal Reserve, which expects the U.S. economy to register around 2% growth in 2019 and 2020.

ECONOMY OVERVIEW

Legal footprint: Against the backdrop of a rich legal history, Philadelphia’s law firms are on a strong footing, with a positive growth outlook Philadelphia is no stranger to the law. It’s legal history reaches back to colonial America and its practitioners have included Thomas Jefferson and John Adams.

The current landscape remains a bastion of top firms that are broadening their footprint, although revenue growth has slowed.

The city’s well-established, diverse legal market is buoyed by the 20 Fortune 500 companies that call the city home and the more than 100 Fortune 1000 companies that operate in the area. Among the leading firms headquartered in the City of Brotherly Love are Rawle & Henderson LLP, the oldest law firm in America; Ballard Spahr LLP; Cozen O’Connor; Dechert LLP; Duane Morris LLP; Fox Rothschild LLP; Morgan, Lewis & Bockius LLP; and Pepper Hamilton LLP. Many of these Philly-based law firms are members of the distinguished Am Law 100, and posted respectable revenue growth in 2018. Ballard Spahr and Cozen O’Connor, for instance, both posted revenue gains in excess of 10% while Fox Rothschild’s earnings grew by just slightly below that figure. Morgan Lewis, while it did not enjoy substantial revenue gains in 2018, did earn in excess of $2.5 billion.

Along with revenue growth, the city’s law firms are also expanding their presence. But while M&A activity is an important segment for lawyers, these firms have been relatively quiet when it comes to similar transactions among themselves, with little activity in the first half of 2019. In fact, none of Philly’s Am Law 100 firms engaged in any mergers as of June 2019, reflecting a nationwide trend that is also seeing a lower volume of law firm mergers. Instead, firms are growing their footprint through lateral hires.

A little history Philadelphia’s legal legacy predates the founding of the United States as an independent country. When America was still a British colony, Philadelphia needed lawyers to serve in colonial governments, settle disputes between citizens, and generally uphold the rule of law – not unlike the roles of lawyers today. By the time the Revolution broke out, lawyers in Philadelphia had become sophisticated practitioners of commercial and finance law, thanks to the opportunity to practice in a city that had become an established business and shipping hub.

Furthermore, Philadelphia lawyers played a key ( ) www.capitalanalyticsassociates.com

| 25

LEGAL SERVICES INTERVIEW

Galvanized Year of strategic planning sets path to higher growth, higher performance

Matthew Taylor Chairman & CEO – Duane Morris LLP

What are some recent highlights or significant accomplishments for Duane Morris?

We went through a full year of a strategic planning process, which was intensive. It’s also been galvanizing in terms of realizing how well-aligned our partners are in terms of who we are and what we want to be in the future. We rolled out our strategic plan in the first quarter of 2019, and it has been met with great excitement. The plan is focused on what we want in terms of growth, higher performance and how we are going to accomplish those goals. We were also able to strengthen the firm by growing in key regions, such as Texas, New York, Philadelphia and on the West Coast with key additions in Northern California.

26 | Invest: Philadelphia 2020 | LEGAL SERVICES

Where are you seeing the most growth in terms of your practice areas in Philadelphia?

Our trial litigation group, generally, is very busy. Our private equity and emerging company practice is very strong, too. Our employment and labor practice is particularly busy and, along with our intellectual property group, is a preeminent practice for us globally.

We’re doing well across all sectors. Things have been a bit flat over the last few years for our bankruptcy and reorg group, but this year there has been an increased amount of activity in that area. We have seen a nice broad base and good performance in all our practice groups so far this year.

As part of our strategic plan, we want to focus on our Top 5 sectors in terms of revenue. About 85% of our revenue is in the following industries: financial institutions, health and life sciences, technology and telecommunications, infrastructure (including construction and energy) and finally retail and consumer products. Those areas are our focus across the firm and in Philadelphia, which is our largest office with over 200 lawyers. Clients are focused on what you know about their industry and how you can help them, instead of where you are located. Philadelphia has done a good job in attracting great industries and keeping great corporations in the area, which benefits our law firm.

What is your outlook for Duane Morris and Philly’s legal sector in 2020?

My outlook for Duane Morris is bullish. We have high expectations for ourselves as a firm. I am just as bullish about Philadelphia. This is a gem of a city, of a region.

We have great educational institutions and industries.

The infrastructure in this city and its great healthcare, restaurants, sports and cultural sectors are the main drivers of new residents and visitors to the city.

Philadelphia is a great place to live and do business.

LEGAL SERVICES ANALYSIS

( ) role in the daring experiment of seceding from Great Britain and establishing a new nation. Indeed, lawyers were instrumental in the drafting of the Declaration of Independence, the original Articles of Confederation and, somewhat later, the Constitution, including Thomas Jefferson and John Adams, two lawyers who also both served as president, and the first Associate Justice of the Supreme Court, James Wilson, a signee on both the Declaration of Independence and the Constitution.

After playing host to the Continental Congresses and the Constitutional convention, Philadelphia enjoyed a brief stint as the nation’s capital and second-largest city, and remained a hotspot for business, manufacturing, shipping, and finance. Lawyers thrived in this capitaland transaction-rich environment, but primarily operated as solo practitioners. Most of the firms that were present in Philadelphia in those days were family businesses, with the law firm as we know it today not taking form until the end of the 19th century. Like most lawyers in early America, practitioners in Philadelphia began their careers with a long apprenticeship. The modern legal education and licensing requirements were much later innovations.

Thanks to its early establishment, the Philadelphia legal community has many distinguished “firsts” to its credit. For instance, the Law Library Company of the city of Philadelphia, founded in 1802 and known today as the Jenkins Law Library, was one of the first institutions in the country to lend legal books and later served as the Library of Congress for a period, and the Law Association of Philadelphia, now the Philadelphia Bar Association, was the first bar association in the nation when it was founded in 1821. Philadelphia

is also home to the country’s first law firm, Rawle & Henderson, which opened for business in 1783. So rich is Philadelphia’s tradition of groundbreaking lawyers, that it spawned an epithet, “Philadelphia Lawyer,” which describes a lawyer who is well-versed in the most esoteric nuances of the law. In the mid20th century, when lawyers were held in particularly low esteem by the general public, the term was used to disparage lawyers who were viewed as corrupt and profiting off the legal woes of others.

Philadelphia’s legal market today is still guided in part by its storied past. The city remains a respected commercial and shipping center that is only a short drive from New York City and Washington, D.C. The city is also home to multiple law schools, all of them highly reputable and one a member of the Ivy League, which ensures a ready supply of new lawyers to the city’s venerable institutions.

Current landscape The present legal landscape in Philadelphia is marked by large firms from other cities expanding their footprint. One of the firms to move into Philadelphia in 2019 is Hartford, Connecticut-based Robinson & Cole, which added a five-lawyer bankruptcy team consisting of assets poached from Montgomery McCracken Walker & Rhoads. “We are seeing mergers and acquisitions mostly from law firms outside of the region trying to gain a footprint in Philadelphia.

Zarwin Baum is a regional law firm and our growth is in Pennsylvania and New Jersey.” said Mitchell Kaplan, managing shareholder at Zarwin Baum DeVito Kaplan Schaer Toddy, P.C. “We believe that the talent level of our employees is as good as those at big firms. To keep

www.capitalanalyticsassociates.com

| 27

LEGAL SERVICES ANALYSIS

Stephanie Resnick Philadelphia Office Managing Partner – Fox Rothschild

Philadelphia is growing, and one strong indicator of that is the growth we have seen in the legal market. We’re seeing some new players, including several national and regional firms that never had a presence in Philadelphia before. This has made it a more competitive market. As for the general business landscape, I think Philadelphia is increasingly seen as a place where you can attract good talent. This is one of the country’s greatest cities, culturally, but it’s more affordable and livable than say, New York or San Francisco or Los Angeles. And those are factors that matter a lot to businesses when they’re deciding where to plant roots.

ourselves competitive, we try to hire talented attorneys and create efficiencies for our clients. We also employ technology to better serve our clients and allow us to keep our rates extremely competitive. As businesses merge and the cost of legal services increase, law firms need to keep abreast of the competition and tailor their business to the current market if they want to survive.”

The Los Angeles-based, 1,200-lawyer firm of Lewis Brisbois Bisgaard & Smith also expanded its presence in Philadelphia in 2019 by nearly double. Of the 10 lawyers added by Lewis Brisbois, eight are from Chicago-based Segal McCambridge Singer & Mahoney, which is now down to four attorneys in its Philadelphia office.

Philadelphia isn’t simply being taken over by firms from other cities, its firms are also planting flags in other markets. Blank Rome has entered the Chicago market with a four-partner team helmed by Kenneth J. Ottaviano, a former member of the board of directors of Katten Muchin Rosenman, where the other three members of the team were also partners. The team will handle a wide range of issues, including bankruptcy, commercial finance cases, real estate disputes, and contested merger and acquisition transactions.

This group will also be included in Blank Rome’s interdisciplinary financial services group, which consists of more than 100 lawyers. Blank Rome follows fellow Philly-based heavy hitters like Cozen O’Connor, Dechert, Duane Morris, Fox Rothschild, and Morgan Lewis and Bockius into the Chicago legal market.

Finally, Pond Lehocky Stern Giordano, Philadelphia’s largest workers’ compensation firm, has clinched statewide coverage with the announcement of a new Harrisburg office to join the firm’s existing offices in Philadelphia, Pittsburgh, and Scranton. This is the 28 | Invest: Philadelphia 2020 | LEGAL SERVICES

latest move in Pond Lehocky’s pattern of meteoric growth since it was formed in 2010 from a team that departed Martin Banks Pond Lehocky & Wilson.

Pond Lehocky’s original 7,000-square-foot office was quickly expanded to 30,000 square feet roughly four years later, and the firm has since moved to occupy a 52,000-square-foot space at One Commerce Square where it now employs 40 lawyers and 200 support staff.

Mergers and acquisitions One way that law firms can grow within a region and beyond is by merging with or acquiring other firms.

However, law firm mergers have declined significantly over the last year. Nationwide, only 47 law firm M&A deals have been announced at the midyear mark, which is behind the record-setting pace of 2018 that saw 106 mergers or acquisitions among law firms by the end of the year. The Philadelphia region is particularly inactive, with none of the year’s 47 deals involving a buyer from Philly; the only local seller was the Cherry Hill, New Jersey-based Berezofsky Law Group, a plaintiff’s litigation boutique consisting of three lawyers. Even more telling, the city’s biggest firms, including those with spots on the Am Law 100 list, have been quiet for some time – the only one to make an acquisition in 2018 was Fox Rothschild.

Diversity, inclusion Diversity is a key factor for the practical success of a law firm and the personal enrichment of its attorneys and staff. There are several reasons for this, including the fact that diversity is simply a reality. Law firms provide legal services to clients of every color and creed, and

CONSTRUCTION LEGAL OVERVIEW

as such it can be of immense benefit to have a diverse firm. “Armstrong Teasdale has a significant number of minority individuals in leadership positions. We have many opportunities for women, such as our Women’s Inclusion Network (WIN). We also have different support groups for young partners, midlevel associates and diverse attorneys to help them explore business opportunities, develop their careers and achieve leadership positions,” said Richard Scheff, partner and leader – Eastern U.S. at Armstrong Teasdale LLP. One firm in the Philadelphia region that exemplifies this philosophy is Archer & Greiner, P.C. Archer, which is based in New Jersey but has offices in Philadelphia and Harrisburg, as well as New York and Wilmington, has been a diversity trendsetter among law firms for more than 20 years. The firm has a Diversity and Inclusion Committee, which is tasked with ensuring that diversity is integrated into all aspects of the firm, from its hiring practices, retention promotions, and staffing decisions. “We have worked to expand our diversity platform for years. For many years, we’ve had a program with Rutgers-Camden Law School where we provide specific minority scholarships which bring students in as summer clerks, pay for a portion of their tuition with scholarships and hope to hire them as full-time attorneys upon graduation. We’ve had good success hiring excellent minority attorneys through that effort. We’ve had other programs with Temple Law, as well. The bottom line is that we believe diversity is important because we want to effect change in both the legal community and the community at large,” says Jeffrey Kolansky, shareholder and chair, White Collar Group, at Archer & Greiner.

Looking ahead Against the backdrop of a rich legal history, Philadelphia’s law firms have maintained positive revenue growth and a strong presence on the Am Law 100 in 2018 and 2019. Thanks to this robust market, large firms from other markets continue to expand their footprints in the city through lateral hires, while Philly-based firms continue to expand into other regions. Philadelphia’s legal strengths should allow it to remain a contender amid global economic uncertainty and a new tax structure. “We have had the best performance in the firms’ history thus far in 2019. We have been very busy and expect to continue seeing high demand for our services in 2020. We have a wide diversification of practice areas, which gives us an advantage if there is ever a slowdown in a particular segment of business,” said Joel Frank, chairman and managing partner at Lamb McErlane PC.

Curtis Toll Managing Shareholder Greenberg Traurig, LLP

How has Greenberg Traurig’s business evolved in the past year?

The Philadelphia office had a record year of growth in 2018. We added 12 attorneys and tripled the size of our real estate group. We also continued to enhance our strong environmental practice and grew our labor and class action practices at the same or greater levels. The biggest change in the last 12 months, however, was the relocation of our office to Three Logan Square, where we transformed the modern law firm space in ways that most law firms haven’t done. Not only is it technologically superior, but it is also unique in how we use our space. Our spaces are more collaborative, our offices are all the same size and our conference space is flexible and can be used as event space. Our transition from the traditional space model is indicative of how law firms have changed their thinking about physical space in light of the technology we now have at our disposal.

What are some unique characteristics of Philadelphia’s legal sector?

The real estate sector in Philadelphia has a strong advantage. As the New York and San Francisco type markets become somewhat constrained and overpriced, markets like Philadelphia have become more vibrant.

We are seeing steady growth across our residential and commercial markets, and we are now working with larger, mixed-use projects. From governmental to real estate, environmental and insurance affairs, we are able to leverage the global platform at Greenberg Traurig to the best advantage of our clients.

Philadelphia’s legal market is also undergoing some consolidation, which has presented an opportunity for us. We are recruiting from traditional firms that have undergone a contraction. Many candidates are looking for a larger, multidisciplinary entrepreneurial platform, and we have the opportunity to selectively target people that fit well within our culture. www.capitalanalyticsassociates.com

| 29

®

oundtable:

Good practice Philadelphia’s law firms are enjoying growth in their various practices. Invest: asked leading area lawyers to discuss their most prominent services and to address a wide range of issues, from diversity and inclusion to what attracts legal professionals to the city and its surrounding areas.

Alan Hoffman Chairman Blank Rome LLP

Patricia Santelle

Managing Partner and Chair, Executive Committee White and Williams LLP

What services and practice groups is Blank Rome emphasizing?

We continue to focus on our core practice areas in Philadelphia and nationally. Our corporate M&A practice is extremely strong and we have grown significantly in our representation of companies and deals. We represent major middle market clients as well as familyowned businesses. Blank Rome’s Real Estate and Financial Services practices are very strong, particularly in Philadelphia. Both continue to be core areas of our law firm with a strong national presence.

Our litigation practice is also one of our strengths.

With appearances in state and federal courts at both the trial and appellate levels, as well as in arbitrations and mediations, we routinely represent major U.S. and international corporations and industry-leading companies. We are proud that our Government Contracts and Insurance Recovery (representing policyholders) groups were both named National Practice Groups of the Year in 2018 by Law360.

What were the main highlights for White and Williams over the last year?

I am particularly proud of the diversity and breadth of services reflected in our cases and deals, client advisories, publications, speaking engagements and website content. We are halfway through a five-year strategic plan with goals of providing best-in-class service to clients and expanding our representation of existing clients into multiple practice areas. We’ve had great successes in both areas. We have identified numerous opportunities for further success with our long-standing clients and identifying new clients in Philadelphia and the other markets which we serve. We have also expanded our practice with the addition of new attorneys. In Philadelphia, in particular, we added employee benefits and healthcare regulatory attorneys within the last few months. We also promoted 10 lawyers within the firm, six to partner and four to counsel. We have a lot of our colleagues serving in leadership positions in the Pennsylvania, Philadelphia and American Bar Associations.

What are some of the firm’s efforts around diversity and inclusion?

Blank Rome was founded in 1946 by two lawyers who were barred from joining many established law firms because of their religion. Historically, we have always been at the forefront of diversity and inclusion. We were one of the charter signatories of the Diversity Lab’s Mansfield Rule, which is designed to promote diversity in law firm leadership across a variety of activities. And we have been a member of the Leadership Council on Legal Diversity since its inception.

In which practice groups is White and Williams placing a particular emphasis?

At any given time, we’re focusing on business and transactional practices because there’s a lot of demand.

Corporate mergers and acquisitions, finance, cyber security and data privacy are essential services, and we’re very fortunate to have great talent in those areas. Any practice group or service related to life sciences, technology, healthcare, education and intellectual property are a focus area for us, particularly in the Philadelphia region - that would include both transactional work and litigation.

30 | Invest: Philadelphia 2020 | LEGAL SERVICES

LEGAL SERVICES ROUNDTABLE

Joe Kernen

Managing Partner, Philadelphia DLA Piper

What practice groups is DLA Piper emphasizing in Philadelphia?

We have always had large litigation and intellectual property practices in Philadelphia, but we now have a dozen corporate transactional lawyers and small but growing tax and real estate practices. White collar, appellate, government investigations and cyber security are areas that are also seeing strong growth in our office. We are actively looking to grow our corporate group, and are always looking for high-quality lawyers or groups that want to be connected with a global firm and not sit in a silo. We became the first truly global business law firm in 2005 with the Piper Rudnick/DLA merger. For anybody who is oriented beyond this city and state, the network of lawyers we have around the country and around the world is magnificent and can help people take their practices to new heights.

What unique opportunities does Philadelphia offer the legal sector?

The explosion of the healthcare and life sciences sectors in Philadelphia in recent years has helped offset the decline of some other sectors, like banking and manufacturing. We have seen our life sciences, pharmaceutical and healthcare practices take off.

Philadelphia has also become a great place for startups.

We are launching a startup company accelerator called DLA Innovation, providing select startup company clients with beautiful space here at the top of One Liberty for up to a year at a very low cost. We expect a lot of competition for a handful of slots, and we hope to have our first class of companies on the ground early in the New Year.

Marc Tepper

Managing Shareholder, Philadelphia Office Buchanan Ingersoll & Rooney

In what areas is the firm focused?

Our firm is focused on four key areas: energy, finance, healthcare and life science. These four core areas are also central to our three-year strategic plan called Buchanan 21. Buchanan 21 is the thoughtful outcome for a planning process aimed at our core long-standing strengths while simultaneously being forward thinking. By being focused on energy, finance, healthcare and life science, we gain broader external visibility and have seen a significant boost to our influx of new work. In Philadelphia, for example, we have experienced organic growth and simultaneously grew our office through lateral acquisitions. Our healthcare litigation practice has a powerful presence in Philadelphia as does our insurance regulatory group.

What can be done to boost the perception of Philadelphia as a business-friendly city?

The city of Philadelphia has become more businessfriendly over the last few years. We have learned from doing pitches to attract companies such as Amazon.

When we pulled our resources together and worked as a collective community, we realized we were even more attractive to multinational corporations than we realized. Having local government and business leaders working together made us see firsthand we have even more to offer than other cities. Our graduates now stay in Philadelphia rather than moving elsewhere because our city now boasts high-paying positions, competitive housing prices and most of all, the best chefs, bars, cafĂŠs, and overall nightlife. All this and the pride that goes along with being a historic destination lures businesses, families and graduates to move or remain in Philadelphia. www.capitalanalyticsassociates.com

| 31

LEGAL SERVICES ANALYSIS

32 | Invest: Philadelphia 2020 | LEGAL SERVICES

Tax & Accounting: Local authorities understand the need to tackle tax reform to make Philadelphia more attractive for businesses. The federal tax reform is already having an impact and new BIRT regulations are sure to entice more companies to the city, but other complex issues such as highincome taxes and changes in the Realty Transfer Tax could cause headaches for businesses.

www.capitalanalyticsassociates.com

| 33

Reform challenge: Federal tax changes and new BIRT rules help reshape the tax landscape, but more is needed and tax reform will be a policy pillar in 2020 Philadelphia is the biggest income taxing city in the country, so it is no surprise that the local and state authorities have prioritized tax reform as a pillar of public policy in 2020. Currently, the tax rate is 3.88% for Philadelphia residents and the city relies on taxes for about 44% of annual revenues. This year, individuals and businesses also had to contend with the changes ushered in by the federal Tax Cuts and Jobs Act of 2017. The 2018 tax year, filed in spring this year, was the first time the changes applied. In addition, businesses are contending with the U.S. Supreme Court’s ruling on the Business Income and Receipts Tax (BIRT) regulations.

The landscape has created some uncertainty, while also opening opportunities for accounts and law firms specialized in the complex tax of untangling of the code. Many firms are seeing an uptick in business related to their tax practice. Opportunity Zones, which emerged from the 2017 tax act, are also attracting attention, and driving business.

On the downside, experts say that the city places too heavy a reliance on businesses, and should move the needle toward property taxes. This was illustrated

by Center City District CEO Paul Levy during a panel 34 | Invest: Philadelphia 2020 | TAX & ACCOUNTING

discussion in August who suggested that by lowering wages and business taxes, office tenants would be prepared to pay more rent, leading to higher building assessments and ultimately, more property taxes.

The local government is well aware of the tax issues facing it, and Philadelphia’s authorities are looking into completely revamping the tax system. But for now, individuals and businesses must deal with the challenges from the current landscape.

Taxes One of the main questions facing Philadelphia authorities this year was adapting its Business Income and Receipts Tax (BIRT) regulations to the U.S. Supreme Court’s ruling in South Dakota v. Wayfair Inc. Previously, companies had to have a physical presence in the city to pay taxes, but with this ruling, any company that generates at least $100,000 in Philadelphia during a 12-month period must pay taxes to the city, regardless of whether or not they have an office there.

After the ruling was made final, Philadelphia was one of the first jurisdictions that applied this economic nexus standard. As the city reduces the

TAX & ACCOUNTING OVERVIEW

income tax burden for its residents, this new standard could become a way to substitute some of that lost tax revenue and to make companies set up offices in the city, which would directly benefit the economy through new jobs and spending.

Another grey area for companies this year has been adoption of the federal Tax Cuts and Jobs Act. This tax year will be the first that companies and individuals need to incorporate the changes into their tax returns, and there are plenty of changes. Notably, the tiered corporate tax brackets have disappeared to leave just one corporate tax rate of 21%, making total statutory corporate taxes 26.5% – just above the EU’s weighted average of 25.9%. “We have seen increased demand from clients looking for our advice about the effects of the federal tax reform, especially because of the substantial changes in the privately-held business area. Clients are concerned that their accountants and tax advisers fully understand the new tax law and how it impacts them. There are significant changes to the way small businesses are taxed under this new law,” said James Bartolomei, principal at HBK CPAs & Consultants.

Landscape Much of the tax uncertainty in the city has opened up a huge source of growth for those firms that are able to untangle the complex regulations. “There is a lot of competition in Philadelphia’s financial services sector.

Most of the national firms are here along with many regional firms that are establishing themselves in the market and acquiring smaller practices,” William Burns, tax office managing partner at BDO, told Invest:.

For EisnerAmper, LLP, the most in-demand service over the past year has been tax, due to the changes introduced by the tax reform – so much so that it set up a specialized team for federal, international and state tax. “Across the board, everything has been changing in tax, and that’s been a hot topic,” said Philadelphia Partner-in-Charge Paul Dougherty. “Clients want to understand the impact of the tax reform on their businesses and some are looking to change their type of entity.”

One of the major talking points that emerged from the federal Tax Cuts and Jobs Act was Opportunity Zones, and firms like BDO and CliftonLarsonAllen LLP have wasted no time in helping their clients negotiate these new mechanisms. “We expect to see an( )

TAX & ACCOUNTING INTERVIEW

Beneficial move Moving office from the suburbs to the city of Philadelphia has significant positive impact on revenue

Paul Dougherty Philadelphia Partner-in-Charge – EisnerAmper, LLP

What have been EisnerAmper’s highlights in Philadelphia over the last year?

This year, we enjoyed a significant increase in yearover-year revenue of about 20-25%. We moved from a suburb in November 2015 and being in the city of Philadelphia has significantly helped our growth. Now that we are settled, we can see all the benefits of our location. For example, it is easier to recruit since there are numerous young professionals who live in the city and there are also great academic institutions in the area. With access to law firms, banks and talent, it is just easy to do business in Philadelphia. I attribute a lot of our growth to being in the city of Philadelphia.

Within the last 12 to 18 months, we have also opened offices in Singapore and London, since many of our clients are global.

36 | Invest: Philadelphia 2020 | TAX & ACCOUNTING

What services and industries are seeing the most demand in Philadelphia today?

The most in-demand service over the past year has been tax, due to the changes introduced by the tax reform.

We have a team that specializes in federal, international and state tax. Across the board, everything has been changing in tax, and that’s been a hot topic.

Another service that has been seeing high demand is cybersecurity. We’ve had several clients that have experienced significant breeches, which ends up being very expensive. We support them with everything from the upfront assessment to monitoring and remediation. Our Process, Risk and Technology Solutions department has been very busy as well. This department automates manually-driven processes and aims to bridge the gap between a company’s operational, financial and technological departments.

In terms of industries, cannabis has been a pretty interesting area. While we can’t do the audit of cannabis companies because it’s still illegal at the federal level, we can do advisory and tax work in the industry. We have also seen significant demand from Philadelphia’s real estate industry. Part of that demand has to do with the interest around the Opportunity Zones created under the tax reform. We are also seeing a great deal of activity in the life sciences and technology areas.

What impact is technology having on your business?

Technology is changing the way we interact with our clients and it’s also changing the way we work with our employees. We partnered with IBM Watson, and now we are using its AI system on our audits and to get recommendations around revenue recognition issues.

In our healthcare space, we use EA Collect, which is a software to analyze accounts receivable in healthcare systems. We also have a lot of tools that enable our employees to work remotely.

TAX & ACCOUNTING OVERVIEW

Due to the Tax Cuts and Jobs Act, there is a significant increase in demand for advisory services.

( ) increased demand for advisory services related to tax reform, especially surrounding Opportunity Zones,” said BDO’s Burns.

Christopher Hegarty, principal at CliftonLarsonAllen LLP, added that this kind of advisory service requires the long-term commitment of advisory firms.

“Opportunity Zones are hot in and around Greater Philadelphia now. With the changes in the tax rules, many firms are identifying which clients are going to be able to take advantage of different opportunities like the OZ and providing tax planning advice. This process takes a lot of time because people need to understand the type of opportunity, capital investment and timeline of these projects,” he said.

Tiered corporate tax brackets have disappeared, leaving one rate of 21%.

Next generation Given all the changes, uncertainty is big business for many companies, not only in terms of legislation, but also on a more personal level. According to Christopher Meshginpoosh, managing director of Kreischer Miller, changing demographics mean a lot of business owners will be coming up to retirement age, and they increasingly want advice on how to smoothly transition out of their companies. “Over the past few years, we’ve seen significant growth in the need for succession and exit planning services due to the concentration of businesses that are owned by

baby boomers who are retiring on a daily basis. Many of the owners of our clients are trying to fill their bench of future leaders or determine which exit options make sense for them in light of their long-term goals,” he said.

An unwillingness of children to enter the family business is driving entrepreneurs to look for new options to hand over their business when they are ready for retirement. “We’ve seen a tremendous amount of interest in the formation of employee stock ownership plans (ESOPs) and have developed deep expertise in that area. In the right situations, ESOPs provide a tax efficient method for owners to gradually transition www.capitalanalyticsassociates.com

| 37

TAX & ACCOUNTING OVERVIEW

ownership to their employees, allowing the business Zudeck, the firm’s regional managing partner. This to continue to thrive as an independent organization,” division oversees buy-side and sell-side due diligence, transaction and tax structuring, as well as operational Meshginpoosh added.

For those who do not have willing successors, this support for private equity firms and their portfolio companies. is where private equity comes And private equity does not in, explains Kelly Fisher, chief look like it will slow down practice partner at Wipfli CPAs anytime soon, says Christopher and Consultants. “About 40% Bruner, managing partner at of family businesses expect the EY. “I’m very optimistic about leadership of their companies to this market. The fundamentals change hands by 2021. As a part that our clients are showing us of their succession planning, a are great. Earnings are good, the lot of these business owners are businesses are solid and they’re looking at third-party exits such growing organically as well as as sale to private equity,” she told through acquisitions. Overall, Invest:. the Philadelphia economy is Some firms are seeing so much expanding and we’ll continue to opportunity in private equity Kelly Fisher Wipfli CPA and Consultants see a lot of private equity pumped that they have entire teams into the Philly market.” dedicated to the sector. One of those is Marcum LLP. “Philadelphia has a very robust middle-market private equity focus. In mid-2017 we Building on a niche realized we needed to have a team dedicated to private Alongside private equity and advisory, nontraditional equity full-time. Now we have four partners, several types of services are also seeing tremendous growth managers and directors, and a number of staff focused as industries evolve to integrate more technology, exclusively on private equity. It is a niche within our says Eric Strauss, partner at WithumSmith+Brown.

Transaction Advisory Services division,” said Jeffrey “Anything tech-related, like IT or cybersecurity, is ( )

About 40% of family businesses expect the leadership of their companies to change hands by 2021.

The local government is well aware of the tax issues facing it, and Philadelphia’s authorities are looking into completely revamping the tax system.

38 | Invest: Philadelphia 2020 | TAX & ACCOUNTING

Market voices: Growth opportunity

Christopher Bruner Managing Partner EY

We’ve seen significant growth in a couple of areas: our advisory practice and our financial services practice. We’ve continued to grow and invest in our practice, and we now have more than 1,400 people in Philly. The local market is incredibly strong and I’m not seeing a recession coming anytime soon, at least in 2019.

Advisory is seeing the highest demand, and cybersecurity and talent are the two areas within advisory that are the hottest right now. We’re doing significant work with clients around cybersecurity, helping them navigate any cyber vulnerabilities that they may have. And we’re seeing numerous opportunities around our client’s talent issues in terms of people challenges and ways to compensate and retain employees.

One of the areas where we are seeing growth is on the professional services side. As companies grow and adapt to the changes in technology, there’s an increased interest in outsourcing activities such as payroll, financial accounting and technology managed services. A lot of middle market clients often feel that they are spending too much time fussing over back-office issues that don’t serve their customers well, generate revenue, or further growth opportunities.

On the services side cybersecurity continues to be a top priority for clients and we are offering increasingly specialized services in cyber defense such as business continuity/ IT audit services. As international companies come into Philadelphia, we help them understand what they need to comply with from a cybersecurity perspective.

Christopher Meshginpoosh Managing Director Kreischer Miller

Kelly Fisher

Chief Practice Partner Wipfli CPAs and Consultants

The Philadelphia market is much more stable than many of the other markets in the United States and has a tremendous amount of industry diversity. This has allowed us an opportunity to generate steady, predictable, organic growth, as well as develop deep expertise in a wide range of industries.

Additionally, because of the many schools located in the area, we have access to highly qualified talent. Plus, the geographic region is very large, presenting opportunities not only in Center City, but throughout the suburbs. Finally, in light of the merger and acquisition volume in our industry in the region, we believe we will continue to thrive by focusing on meeting the needs of owners of closely held businesses, who value the opportunity to work closely with advisors who have the time and skills to address their unique needs.

www.capitalanalyticsassociates.com

| 39

®

oundtable:

Private Equity Private equity and wealth managment are the new bastions of growth for many law firms in the Philadelphia area, and many firms are adjusting their practices, or adding practice areas, to focus on this trend.

Jeff Rhines

Tax Quality Assurance Director CBIZ & Mayer Hoffman McCann P.C.

How do recent acquisitions by CBIZ strengthen the services the firm offers?

Those acquisitions are focused on building our brand.

These are areas that our clients want us to have more expertise and resources available. Many acquisitions have been tuck in or complementary services to CBIZ’s core competency of accounting, tax, benefits and insurance or retirement plan services. Recently, CBIZ has brought in a private equity platform that focuses on Financial and Operational consulting as well as pre and post-transaction advisory services. Our clients need expertise and these acquisitions bolster our profile.

How does Philadelphia’s tax structure impact business opportunities?

The local income tax certainly hurts the marketplace, but in Philadelphia business has continued to grow. You can go into the city and see the explosion of new buildings and investment, and it seems like everything is really running smoothly. I constantly see that the Philadelphia business community helps each other out, and local businesses are very supportive of each other in many different areas.

How do you help new businesses navigate the tax structure?

First, we get to know our clients, to understand their business and where they want to go. After learning and understanding their business, we will sit down with them and explain options so that their operations are organized better, and transactions are structured as efficiently as possible. That is how you add value.

40 | Invest: Philadelphia 2020 | TAX & ACCOUNTING

TAX & ACCOUNTING ROUNDTABLE

Jeffrey Zudeck

Regional Managing Partner, Mid-Atlantic Marcum LLP

How do your services differentiate the firm?

The private equity market is a major focus of our Philadelphia office. I came to Marcum from the PE industry. Philadelphia has a very robust middle-market private equity focus. In mid-2017 we realized we needed to have a team dedicated to private equity full-time. Now we have four partners, several managers and directors, and a number of staff focused exclusively on private equity. It is a niche within our Transaction Advisory Services division.

We do buy-side and sell-side due diligence, transaction and tax structuring, as well as operational support for private equity firms and their portfolio companies. I’m the national leader of this group for Marcum LLP, and we will keep growing it. It’s about relationships and putting the right people at the right levels on the engagements. We are very good at bringing an entrepreneurial approach to our engagements because we’ve lived it ourselves.

Marcum is postitioned in Center City. What are the benefits of being in that area?

We moved into Center City a couple of years ago to make sure we were in the hub of the business community, where we can be active and highly visible. The move paid high dividends almost immediately, making us one of the fastest-growing firms in the city. Being here enables us to continue to attract and recruit millennials, who are focused on living in the city, as well as empty-nesters who have come back to live in the city. Our more recent move was a significant commitment to Philadelphia, almost doubling our footprint to 40,000 sq. ft. in state-of-the-art facilities to accommodate our vision of a long-term future here.

Christopher Hegarty

Principal CliftonLarsonAllen LLP

Which is your strategy to grow your client base?

CLA started out as a traditional audit and tax firm sixty years ago and that business remains our core offering.

However, most of our growth over the last year has been in the business operations (BizOps) and wealth advisory areas. Many of our clients have recognized that in addition to being a traditional CPA firm, we also offer many other services that they need. Our strategy is to extend seamless service to our clients. If we are already doing some accounting or tax work for a client, we want to expand that into BizOps and wealth advisory.

We are not just accountants for our clients, we are part of their business operations. Our local BizOps Group posted year-over-year growth of 36% through September and our Philadelphia office has experienced 13% growth overall over the same period. We have numerous new team members who help maintain our quality, as we experience growth.

What is a key trend you are seeing in Philadelphia?

We used to see a lot of family businesses transferred to the next generation. A trend we are seeing in the Philadelphia market and across the country is that the next generation of families isn’t necessarily interested in carrying on the family business. This trend is driving many clients to turn to private equity, which becomes the succession plan for the business owners. We want to ensure our clients are ready for the stringent due diligence that comes with those transactions so the owners realize the value of their life’s work. www.capitalanalyticsassociates.com

| 41

TAX & ACCOUNTING OVERVIEW

( ) steadily growing. Our healthcare, technology and financial services niches are our biggest areas of growth.

We have great talent and recognized leaders in those niche areas, and that is a main driver for clients,” he said. Shaji Varghese, a partner at Friedman LLP, adds that the life sciences segment is on a particular roll.

“Life Sciences is a booming field in the United States and Philadelphia as well. Philadelphia is among the Top 10 life science hubs in the country. There are over 100 colleges and universities in the Philadelphia area, with schools like UPenn, Drexel University and Villanova University in our backyard that are a great resource for the local talent pool and the economy.

Some of the graduates out of these big schools are related to unicorn companies, which are private companies that are worth a billion dollars or more.”

As companies grow and adapt to the changes in technology, there is an increased interest in outsourcing activities such as payroll, financial accounting and technology-managed services. “A lot of middle market clients often feel that they are spending too much time fussing over back-office issues that don’t serve their customers well, generate revenue, or further growth opportunities,” says Wipfli’s Fisher.

The need for dependable cyber security in the accounting world has grown exponentially as technology plays a larger role than ever before.

TAX & ACCOUNTING OVERVIEW

Grant Thornton is making a bet on these new new businesses. The federal tax reform and new niches, with a push toward Big Data and data science BIRT regulations are sure to attract more companies to make its offering more efficient. “We’ve spent a to the city, but other complex issues such as hightremendous amount of time building our analytics income taxes and changes in the Realty Transfer Tax tools, which we believe will help with the audits of are destined to cause headaches for businesses in the the future. They’ll help us audit more information city. Recent amendments to the Transfer Tax mean that if a company experiences a quickly and efficiently. We’re 75% change in ownership over also leveraging data analytics a six-year period, transfer tax in the tax area, where the use is due. Previously, this tax only of artificial intelligence is applied when there was a 90% incredibly important. On the or more change in ownership. advisory side, our efforts revolve Regardless of messy tax around Big Data, and we’ve landscape, the local authorities hired more data scientists to have been keen to address make all our service offerings the tax issues that may make more efficient,” the firm’s Philadelphia less businessRegional Managing Partner for friendly than other states and the Atlantic Coast Sean Denham Sean Denham cities. “We’ve seen during told Invest:. “Grant Thornton is Grant Thornton the recession that if we’re too working to leverage technology in a way that can be mutually beneficial. That’s the dependent on a highly volatile tax it also causes some wave of the future globally, nationally, and here in instability,” said the city’s Budget Director Anna Adams in a council meeting in May. “So I think trying Philadelphia.” to get that balance between more stable taxes like property tax and a more volatile tax like business and Looking ahead Due to some recent legislative changes, the city of wage tax is something that we need to probably strike Philadelphia is becoming much more attractive to a better balance than we have.”

We’ve hired more data scientists to make all our service offerings more efficient.

www.capitalanalyticsassociates.com

| 43

TAX & ACCOUNTING OVERVIEW

Despite this, there are certain aspects of Philadelphia diversify its expertise, offering greater added value. that mean it will remain an attractive place to do “The Philadelphia market is much more stable than business in spite of, or perhaps even because of many of the other markets in the United States, and it complex taxes. “There’s an ecosystem in Philadelphia has a tremendous amount of industry diversity. This has allowed us an opportunity that contributes to the creation to generate steady, predictable, of new businesses, from startups organic growth, as well as develop to unicorn companies,” said deep expertise in a wide range of Friedman’s Varghese. “There industries.” are smart people who come out And for those companies that of the local universities and are not so sure, advisory firms are colleges that develop companies waiting to step in and help them in innovative fields such as negotiate the tricky landscape. cell therapy, gene therapy and “Tax reform brought a lot of new technology. The schools promote regulations that companies have this environment as well with to deal with. They’re starting institutions like UPenn, for to digest those regulations and example, that invest a large figuring out what they mean amount of capital to promote the Christopher Meshginpoosh to their businesses,” says EY’s state as a great area to do business Kreischer Miller Bruner. “Over the next 12 months, and to attract professionals and we’re going to continue working new companies to the area.”

Kreischer Miller’s Meshginpoosh says the range of very closely with our clients to digest what’s come out businesses the city attracts means his company can of all the changes.”

The Philadelphia market is much more stable than many of the other markets in the United States.

Real Estate: One word characterizes the Philadelphia real estate market: hot.

From residential to commercial to industrial, it’s a seller’s market.

Signs of a potential slowdown are emerging and housing affordability is a cloud over the sector, but for now, the market remains a strong component of the regional economy.

www.capitalanalyticsassociates.com

| 45

Real Estate in numbers: CBRE Stats

Philadelphia Retail: Neighborhood

Corridors

Average Asking Rent 2005 ($)

Average Asking Rent 2015 ($)

Average Asking Rent 2016 ($)

Average Asking Rent 2017 ($)

Average Asking Rent 2018 ($)

20052018 % Change

%3 years Change

% 1 year Change 11%

Rittenhouse Row

Walnut St | Broad to 19th Sts

80

135

135

135

150

88%

11%

Rittenhouse Row

Chestnut St | Broad to 20th Sts

35

62

70

83

90

157%

45%

8%

Midtown Village & Washington Square

Walnut St | 7th to Broad Sts

35

45

50

60

60

71%

33%

0% 10%

Midtown Village & Washington Square

Chestnut St | 7th to Broad Sts

25

35

45

50

55

120%

57%

Society Hill, Washington Square & Bella Vista

South St | 2nd to 10th Sts

37

40

40

40

40

8%

0%

0%

Rittenhouse Square & Graduate Hospital

South St | Broad to 23rd Sts

15

40

40

40

50

233%

25%

25%

Rittenhouse Square

18th St | Market to Walnut Sts

35

110

110

110

110

214%

0%

0%

Rittenhouse Square

20th St | Chestnut to Spruce Sts

30

70

75

75

75

150%

7%

0%

Market Street Office District

Market St | 15th to 22nd Sts

65

75

80

85

90

38%

20%

6%

Rittenhouse Square

Sansom St | 15th to 21st Sts

37

52

65

70

75

103%

44%

7%

Midtown Village

13th St | Chestnut to Locust Sts

25

57

70

60

70

180%

23%

17%

Old City

Market St | 2nd to 5th Sts

40

33

33

40

40

0%

21%

0%

Art Museum

Callowhill St | 19th to 21st Sts

25

47

47

55

57

128%

21%

4%

Northern Liberties

2nd St | Girard Ave to Spring Garden St

12

32

35

35

35

192%

9%

0%

Fishtown

Frankford Ave | Oxford St to Girard Ave

15

35

35

38

40

167%

14%

5%

University City

Chestnut St | Schuylkill Ave to 38th St

25

38

50

60

60

140%

58%

0%

Callowhill St | 19th to 21st Sts

2nd St | Frankford Chestnut Girard Ave Ave | St | to Spring Oxford St Schuylkill Garden St to Girard Ave Ave to 38th St

($) 160 2005

2015

2016

2017

2018

140 120 100 80 60 40 20 0

Walnut St | Broad to 19th Sts

Chestnut St | Broad to 20th Sts

Walnut St | 7th to Broad Sts

Chestnut St | 7th to Broad Sts

South St | 2nd to 10th Sts

South St | Broad to 23rd Sts

18th St | Market to Walnut Sts

20th St | Chestnut to Spruce Sts

City of Philadelphia Employment:

Market St | 15th to 22nd Sts

Sansom St | 15th to 21st Sts

13th St | Chestnut to Locust Sts

Market St | 2nd to 5th Sts

The New Philadelphia Story: 4.50

(000s) 760 740 720

Eds & Meds

4.00

eisure & L Hospitality

3.50

Office-using Gov’t & Other

3.00

Goodsproducing

700 2.50 680

Industry employment levels indexed to 1.00 in 1970

2.00

660

Source: CBRE

1.50

May 19

May 17

May 18

May 15

May 16

May 13

May 14

May 11

May 12

May 10

May 09

May 07

May 08

May 05

May 06

May 03

0.50 May 04

600 May 01

1.00

May 02

620

Source: US BLS

46 | Invest: Philadelphia 2020 | REAL ESTATE

0.0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

640

Source: US BLS, CBRE Research

Philadelphia Metro Apartment Inventory: (Units) 310,000 305,000 300,000 295,000 290,000 285,000 280,000 275,000 270,000 265,000

2006

2007

2008

2009

2011

Year

Total Employment (Jobs x 1000)

1994

2,156.40

,961.20

217.10

1995

2,177.30

4,973.70

222.00

1996

2,220.20

4,980.00

227.10

268,495

1997

2,285.70

4,992.40

237.10

270,086

1998

2,325.30

5,011.10

247.80

272,045

1999

2,371.60

5,030.00

252.30

273,540

2000

2,405.40

5,047.30

263.60

274,729

Population (x 1000)

Real Personal Income ($ billions)

2010

Rentable Stock (Units)

2012

2013

2014

2015 Vacancy Rate (Avg %)

2016

2017

Same-Store Rent Index (Avg $/Unit)

2018

Rentable Completions (Units)

Net Absorption (Units)

Rent Inflation (Avg %)

266,535

224

12,758

9.40

772.51

1.70

266,997

462

1,562

8.90

764.42

-1.00

1,498

7,216

5.00

805.94

5.40

1,591

-2,851

5.70

891.46

10.60

1,959

9,526

2.90

928.75

4.20

1,495

-3,938

3.20

975.90

5.10

1,189

6,173

3.30

927.65

-4.90

2001

2,395.70

5,066.50

263.60

275,275

546

-1,993

3.20

953.96

2.80

2002

2,396.30

5,090.50

264.10

276,511

1,236

10

3.80

958.38

0.50

2003

2,386.20

5,114.60

273.60

278,151

1,640

29

4.90

984.65

2.70

2004

2,411.50

5,135.60

282.00

279,474

1,323

1,127

4.70

1,001.21

1.70

2005

2,431.00

5,153.60

282.80

281,113

1,639

2,740

4.60

1,039.37

3.80

2006

2,447.10

5,175.00

294.60

282,106

993

3,145

3.60

1,075.64

3.50

2007

2,461.60

5,195.80

298.50

282,851

745

-5,195

4.40

1,108.16

3.00

2008

2,437.50

5,221.50

296.40

283,793

942

926

5.30

1,121.78

1.20

2009

2,361.40

5,252.20

290.90

284,505

712

-2,541

6.30

1,090.67

-2.80

2010

2,371.70

5,275.20

301.70

284,758

253

5,694

5.40

1,127.56

3.40

2011

2,373.60

5,294.30

306.30

285,184

426

-308

4.90

1,170.62

3.80

2012

2,393.90

5,306.60

321.20

285,966

782

390

5.00

1,192.86

1.90

2013

2,404.50

5,316.70

315.70

288,885

2,919

1,460

5.30

1,195.63

0.20

2014

2,443.60

5,327.40

328.50

290,761

1,876

5,207

4.80

1,233.81

3.20

2015

2,478.40

5,333.90

340.70

293,229

2,468

2,144

4.50

1,264.70

2.50

2016

2,524.60

5,343.00

346.30

297,632

4,403

3,612

4.40

1,296.73

2.50

2017

2,560.10

5,357.40

352.30

301,305

3,673

4,485

4.40

1,323.82

2.10

2018

2,591.10

5,368.80

359.20

306,456

5,151

5,673

4.20

1,360.17

2.70 2.00

2019

2,614.90

5,359.70

366.80

313,265

6,809

5,030

4.40

1,386.91

2020

2,615.80

5,358.00

370.40

316,572

3,307

4,506

4.30

1,427.04

2.90

2021

2,593.20

5,303.90

373.10

320,376

3,803

1,293

4.80

1,436.13

0.60

2022

2,595.80

5,280.10

385.70

323,967

3,591

3,560

5.00

1,458.62

1.60

2023

2,622.70

5,314.60

399.10

327,481

3,514

4,375

4.70

1,495.19

2.50

2024

2,652.40

5,357.10

410.20

331,051

3,570

3,924

4.40

1,535.55

2.70

*Sum of Markets data excludes Colorado Springs, Dayton, Lexington and Omaha Source: CBRE

www.capitalanalyticsassociates.com

| 47

Seller’s market: Bidding wars and an ample supply of renters are characteristics of a market that continues to be one of the hottest in the country Philadelhia’s real estate market continues to exhibit some troubling early signs of a downturn amid continued fears of recession, a housing affordability crisis, and an ongoing lack of inventory. All of these factors conspire to drag down the pace and number of home sales in Philadelphia: with 5,462 arms-length home sales in Q2 2019 compared to 6,460 sales in the same period in 2018, Philadelphia experienced its biggest YoY decline in Q2 home sales since the market began to recover from the Great Recession in 2012.

When homes do sell, it is taking longer for them to do so, with an average time to sell in Philly clocking in at 53 days, a figure that stood at 38 days just a year ago. As high demand and limited supply continue to conspire to lift prices, the confusing situation of a region where lots of people want to buy but few can may be further exacerbated.

For now, though, buyers continue to compete in bidding wars over property in several up-and-coming neighborhoods, and landlords enjoy the benefits of an ample pool of well-paid renters. On the commercial and industrial side of things, a diverse economy continues to drive demand up and supply down, leading to a tight and profitable market. International buyers 48 | Invest: Philadelphia 2020 | REAL ESTATE

are also helping prop up the segment, viewing the market as a means to higher returns than they would see in other popular gateway cities, said Ken Wellar, managing partner at Rittenhouse Realty Advisors.

“Philadelphia has seen a significant amount of growth in international capital. There have been more deals with international buyers than we have ever seen in the past. For example, we’ve done deals with Asian, Israeli and German investors. This shows Philadelphia is becoming more attractive for international investments. The returns in some gateway cities such as New York, Los Angeles and Chicago are slowing. As a result, investors are looking at secondary markets to get a higher return.”

Besides the possibility of recession, one of the biggest clouds looming over Philadelphia’s housing market is the lack of a supply of affordable houses. The median home price exceeds the median household income multiple times over, and the construction of new, affordable homes falls far below what is necessary to meet demand. This problem can only be addressed by proactive policies that help people obtain housing, such as raising the citywide minimum wage or providing assistance to first-time homebuyers,

REAL ESTATE OVERVIEW

the latter of which is already in place, while the former continues to be hotly debated.

Fundamentals It is an interesting time for Philadelphia’s real estate market. The city is already the sixth-largest metropolitan area in the United States, and Philadelphia County is the second-fastest-growing county in the region. This population boom has resulted in a housing supply shortage, with more buyers than there are homes for sale in Philadelphia.

That makes Philly a strong seller’s market, with bidding wars between hungry buyers increasingly common.

Because houses receive so much attention in such a tight market, they are also selling quickly. On average, homes remain on the market for 90 days, compared with more amply supplied markets that can take 125-250 days. In Philadelphia, homes remain on the market for an average of 53 days as of the end of Q2 2019 – better than average but slowing considerably from 38 days one year prior.

As the speed of sales slows, the value of sales is increasing, with numerous properties in and around Philadelphia going for prices in excess of $1 million, including in areas that were historically not associated with such large price tags like Mount Airy, East Kensington, and Graduate Hospital. Roxborough even saw its first $2 million home sale in 2019.

As 2018 came to a close and as 2019 progresses, there has been some evidence that all of these factors are pointing to a market slowdown. For instance, although there is no denying the strength of the market overall, there were only 22 $1 million-plus home sales in Q4 2018 compared to 49 in the same period in 2017, and $1 million-plus sales are a classic barometer for the market. Furthermore, as mentioned above, overall home sales fell sharply in Q2 2019 to 5,462 sales though this is still higher than the historical average of approximately 3,900 sales per quarter in the city.

Also, despite the fact that Philadelphia has been such a strong buyer’s market, with low supply and high demand, across-the-board housing prices have grown modestly - by a mere 1.4% in Q2 2019 - instead of being characterized by the kind of rapid upward price trajectory expected in the presence of such market forces. Real estate expert and Senior Research Fellow at Drexel University, Kevin Gillen, stated in an interview with Philadelphia Magazine that this has to do with buyer psychology, because there is only so much a buyer can be expected to pay for the types of houses on the market in Philadelphia. Gillen illustrated this point with the following analogy: “If you have a Cadillac

budget but there are no Cadillacs for sale, you won’t pay a Cadillac price for a Honda.” Most analysts seem to believe that these factors indicate a market that is near a peak, and that it will continue to cool off until it nears a return to a balance between buyers and sellers.

Commercial Commercial real estate, which encompasses retail and office space, has had a good 2019 thus far, but not without certain challenges and warning signs. Despite an ongoing trade war with China that has the potential to jeopardize U.S. commerce, several high-profile brands expanded their footprint in the Philadelphia region by renting additional retail space, including Sprouts Farmers Market, Aldi, Lidl, and Wegmans in the grocery store market, and Panera Bread and Factory Donuts in the restaurant segment. “Philadelphia is more affordable to purchase commercial real estate on a price per square-foot basis than gateway cities such as New York City, Washington, D.C., or San Francisco.

We are seeing an increased amount of foreign and institutional capital coming to the Philadelphia market. In previous years it was more of a struggle to get institutional groups to invest in Philadelphia real estate, but people are finally starting to buy into the value proposition here,” said Gregory Muller, COO and partner at SSH Real Estate. Although Q2 2019 saw no retail construction deliveries, the massive and newly-opened 800,000-square-foot Fashion District Philadelphia remains a focal point. Luxury is another area that is doing well, added Rittenhouse Realty Advisors’ Wellar. “We’re seeing a lot of pop-up retail and luxury pop-up shops in Philadelphia. We’ve been seeing this trend specifically on South Street, with big properties opening large retail spaces. There are also major construction developments in University City. We project it will be one of the best markets in Philadelphia due to the growth of startup companies in the area.”

Overall, regional retail availability rose to 8.6%, and leasing activity has remained flat, with availability hovering between 8.5% and 9% since Q1 2017. Given availability rates, asking rents for inline retail space fell to $20.82 per square foot, but anchor rents increased for the first time in three quarters to $14.91 per square foot. Still, both figures are down year-over-year.

The office real estate market performed well in Q2 2019, buoyed by a 21.9% increase in co-working space, one of the largest year-over-year jumps for that industry in the last four years. “Five years ago, there were very limited co-working spaces, but I believe that the co-working trend is here to stay. Philadelphia www.capitalanalyticsassociates.com

| 49

®

oundtable:

Hot market From retail to commercial to residential, real estate is booming across the region. Invest: looks at the areas that are demonstrating the strongest growth, and what factors are driving demand.

Sean Beuche

Regional Manager Marcus & Millichap

Marcus & Millichap relocated its Wynnewood location to King of Prussia. What makes that community attractive?

This relocation highlights our commitment to the area and our optimism about the local economy. The construction and new development activity going on in the King of Prussia market is very attractive. Numerous businesses and baby boomers are moving to the area, where there is more land available, beautiful housing stock, good school districts and less traffic congestion.

King of Prussia is a nexus of a variety of different interstates and that strategic location amid emerging growth and development is much more desirable for us. In addition, we are expanding in a nicer Class A office space that provides our clients and agents with a much brighter and enjoyable place to do business.

Which areas are the fastest-growing for commercial real estate in Philadelphia?

We’re seeing fast appreciation in the Point Breeze market, while Fishtown and Kensington have been hot for some time. We are also seeing numerous investments in areas further along the Main Line region. Lehigh Valley and Central PA markets are both driving a lot of new investors into Pennsylvania. As the yields continue to deliver in some of these secondary and tertiary markets, investors want to move outside of areas where they’re getting squeezed by some popularity. There is a bit of a ripple effect being created by the economy being strong for a long time, and many of the investments that have been made or taken in these core markets are pushing investors further out.

50 | Invest: Philadelphia 2020 | REAL ESTATE

Lauren Gilchrist

Senior Vice President and Senior Director of Research JLL

How is Philadelphia’s retail sector growing and what business areas are seeing the most demand?

We have about 1 million square feet in the city under construction, which we’ll finish delivering in 2019. East Market is doing phenomenally well in terms of lease-up and consumer demand, and we expect Fashion District Philadelphia to also do well. Although there is uncertainty in the retail market nationally due to disruption from e-commerce, the future looks great for experienceoriented concepts, such as fast-casual eateries and fitness clubs. Experiential retailers comprise another strong segment from a tenant-demand perspective.

Philadelphia also has the opportunity to become a food concept hub because of its rental affordability. We expect that sector will continue to flourish, too.

What do you hope to accomplish as the new president of the Greater Philadelphia Chapter of NAIOP, the commercial real estate developers association?

I took over the organization as president in January, becoming its youngest-ever and first female president. I think that says a lot about what the Philadelphia real estate community is becoming, and the values that we espouse as a community. We will focus on our advocacy platform and the current tax-abatement issue and its impact on the industry. We will also strengthen our efforts around diversity and inclusion. For example, in 2018, we launched a program for high-performing minority students that exposes them to careers in commercial real estate prior to their entrance into college. We will do a version of this program in the summer as part of our commitment to Philadelphia’s underrepresented individuals.

REAL ESTATE ROUNDTABLE

Mike McCurdy

Managing Principal, Cushman & Wakefield

How strong has the commercial real estate sector been over the last year in the Philadelphia area?

The market has been very healthy for all asset classes, with particular strength in the industrial segment, driven a lot by e-commerce. But as e-commerce has driven the industrial sector, the retail sector has experienced headwinds. People are making purchasing decisions online, which results in more warehouses and distribution centers, and less in-store buying. However, not all retail has been equally affected. If you look at urban Philadelphia, the restaurant business is booming. In general, food and beverage as well as destination-oriented retail are very strong. In the office sector, customers want amenities and higher quality buildings, which attract millennials, who will ultimately make up around 50% of the workforce by 2020. Companies are looking to attract that talent and many millennials want to be in urban environments, where they won’t have long commutes. This also means that suburban locations that are connected to regional rail options will prove to be the more popular areas for millennials. Therefore, remote, suburban locations with no transit options or amenities to attract this talent could see a drag in performance.

Have you seen an increase in demand for alternative options such as flex-space buildings?

We have not seen as large an increase in demand for flex space as we have for major, big box distribution assets.

Although, I would say that with the whole last-mile effort initially led by Amazon and now by other players, the smaller warehouse space segment is ramping up in Philadelphia.

Adam Mullen

Market Leader, Greater Philadelphia Region CBRE

What lines of business are seeing the most growth or demand in Philadelphia today?

It is hard to understate the momentum we are witnessing in the industrial and logistics space. The shift to e-commerce and modernized supply chains have not only created one of the largest warehouse distribution markets in the world in our backyard, the Pennsylvania I-78/I-81 Corridor, but demand continues to be robust for Philadelphia industrial properties. A variety of users, including retailers and third-party logistics companies, are driving demand so they deliver goods to consumers more efficiently than ever before. At the same time, the local retail market is as vibrant as it has been in years. Philadelphia is at the top of everyone’s list as a major gateway market in the retail space. We also can’t overlook the dynamism in Philadelphia’s office market, and we continue to watch the rise of the multifamily market in the region. Due to low interest rates and a plentitude of available debt capital, the demand for multifamily assets in greater Philadelphia has exploded over the past few years.

What are the major drivers of growth for Philadelphia’s real estate sector?

The local economy is very strong and is being driven notably by the “eds and meds” segment, which has a unique presence in the Philadelphia region. Not only do the local educational and health services institutions have a huge effect on the economy and are growing rapidly, but they also represent the largest share of our employment base. Consequently, this concentration of talent has created a boom in the local life sciences industry. www.capitalanalyticsassociates.com

| 51

REAL ESTATE OVERVIEW

The conversion of existing warehouses into spaces with other uses is gaining steam in Philadelphia.

continues to see companies moving into office environments with less paper, more flexibility and open collaboration areas,” said Jerry Kranzel, senior vice president of CBRE. The rent for Class A space rose 5.3% over asking rents from the same time last year. In Market West, where the largest concentration of Class A space in Philadelphia can be found, rents reached as high as $7 per square foot annually. Rents also grew in the suburbs by a modest amount. Vacancy in the central business district tightened considerably thanks to a burst of leasing activity, whereas it rose in the suburbs generally, save for the Main Line where frenzied leasing activity closed the vacancy gap. The crush of leases in Center City can be attributed to the fact that nearly 33% of all job openings in Philadelphia are for positions located here, and employers need ever-increasing space to house all their personnel.

The EPA signed a 173,000-square-foot lease at Four Penn Center downtown, and WeWork and Industrious leased space at 1100 Ludlow St. and Two Liberty Place, respectively, contributing to the large expansion of the co-working footprint in the region. The Children’s Hospital of Pennsylvania signed a lease for 50,000 square feet at the Wanamaker Building, as well.

Industrial Like the commercial market, industrial real estate experienced exceedingly low vacancy in Q2 2019 thanks to a growing demand for logistics and warehouse space throughout the region. In fact, the plummeting vacancy rate year-on-year ended at 4.3% vacancy at the close of Q2 2019 for the Philly Metro 52 | Invest: Philadelphia 2020 | REAL ESTATE

area – an all-time low for that market – and even lower in Northern Delaware at 3.7%; Southern New Jersey finished strong at 4.5%. Logistics and e-commerce companies absorbed 1.8 million square feet in Q2 2019 by themselves, including such big names as SDR Distribution Services and IKEA-backed Distributech.

Although considered to be generally within the Philadelphia market, some 1.5 million square feet of this absorption occurred in Southern New Jersey. As vacancies shrank, high demand caused asking rents to increase. In Northern Delaware and Southeastern Pennsylvania, lease rates increased by 8% and 7.5% over the same period in 2018, respectively, while Southern New Jersey experienced a huge jump of 17%.

In response to this environment of high demand and low supply, real estate developers are scrambling to accommodate needs with new industrial space.

The Philadelphia metropolitan area boasts a total of 5.5 million square feet of space actively under construction, 4.1 million of which was concentrated in Southern New Jersey. Southeastern Pennsylvania delivered about 270,500 square feet in Q2, 63,000 of which was pre-leased before construction was complete. As the region continues to develop as a logistics hub, construction activity is expected to remain frantic as that industry demands an increasing amount of warehouse space.

Residential 2018 The Philadelphia residential real estate market is hot. Characterized as a seller’s market with frequent bidding wars, the high demand and low supply has resulted in a shortage of affordable housing that the local government has struggled to adequately address.

Despite technically suffering a decline in $1 millionplus home sales in Q4 2018, Philadelphia actually broke a record for total homes sold overall in that same quarter, and before they sold they only spent an average of 25 days on the market. In addition, the values of homes sold from October through December of 2018 increased by 4.2% at the same time they were falling in cities like Las Vegas and Seattle. These trends were somewhat blunted by the massive 15.4% decrease in sales for Q2 2019, a figure that is additionally troubling when viewed beside the spike in days-on-market for homes in the area to 53 days, but overall market health appears to still be strong for the year, despite the shaky quarter. But that is not to say it isn’t challenging.

The number and speed of sales, along with the climbing price, are clear indications of just how tight the market is. Indeed, whereas a healthy housing market would have a solid five to seven months of available ( )

REAL ESTATE INTERVIEW

Global reach Philadelphia’s proximity to other large markets and access to the international stage among key attractions

Tim Pulte Senior Executive Vice President – Colliers International As a global company, what are the benefits of being located in Philadelphia?

As a global company, we have offices all over North America and abroad. Because of this, we’re able to service our clients no matter where their requirements are, both inbound and outbound. For example, if a company is coming in from Mexico, we can help them. Conversely, we can send a deal to Mexico and know it’s going to be taken care of. Philadelphia is a great location for us. We’re close to other large markets and have access to our international markets as well. We have a very strong industrial base in our clientele. We have long-standing relationships with multiple manufacturing companies throughout the Colliers network. For example, we’ve worked with Philadelphia-based company Cardone to secure locations throughout the United States. We also helped NFI secure locations in Canada and the UK. What type of investment is the Philadelphia market seeing?

We’ve started seeing an increase in foreign investment come into the Greater Philadelphia market. It has mostly been asset-driven as opposed to geographicallydriven, so it’s really dependent on what, in particular, the investors are looking for. We’ve seen a lot of investment in the industrial space recently; markets such as Philadelphia have become more appealing to investors, both foreign and domestic, because of the higher rate of return. For this reason, we’re seeing a lot of buyers from New York. We’ve also seen a lot of international investors buying companies here in the Philadelphia market. We’ve represented quite a few in the industrial space.

How does Colliers International plan to grow in the Philadelphia region?

We currently have six offices in the region: Harrisburg, Allentown, Conshohocken, Center City, Philadelphia; Mount Laurel, New Jersey; and Wilmington, Delaware.

In all our offices we handle office, industrial, retail, property management and landlord representation.

We’re trying to grow those areas across all of our offices in the region. We’re looking to capitalize on currently established relationships while building new ones, especially in strategic areas where we can grow — and from an international standpoint as well. The new federal opportunity zones will be interesting, and we hope to see some growth in the market from those.

There are some very strategic areas in Philadelphia, like the corridor leading up Broad Street toward Temple. It’ll be exciting to see what happens in those areas. www.capitalanalyticsassociates.com

| 53

Market voices: Under construction

Leo Addimando

Managing Partner Alterra Property Group, LLC

We recently opened up Lincoln Square, a mixed-use project with 322 apartments and more than 100,000 square feet of retail, including a Target, PetSmart, Starbucks and other retailers. We’re in the middle of finishing a project in University City that is the tallest modular construction project in the history of Pennsylvania. And we’re about to embark on our next big project on Broad Street, One City Plaza, which in about 15 months will be an upscale apartment building with a roof deck, commercial space, workspaces, numerous other amenities and over 300 apartments. Residential and retail are the types of projects seeing the most demand in the city. There are also numerous warehouse and distribution projects being built within the city limits. Millions of square feet are under construction right now.

The outer parcels around the core of Center City have been regentrified.

Northern Liberties, Fishtown and Kensington have been core areas for Opportunity Zone investment. These zones are already having a great impact on the region and some markets that haven’t seen much activity in a while are being redeveloped. Numerous Opportunity Zone investors are buying land in those areas and that is a good sign. In South Philadelphia, the energy from the stadiums and all the development going on there is underpinning the strength of the real estate market. The market in West Philadelphia, with the University of Pennsylvania and healthcare organizations, is also solid.

Eds and Meds are the foundation of Philly’s real estate activity and many college graduates are staying in the region, so it is becoming more of an international marketplace.

Adrian Ponsen Director of Market Analytics CoStar Group

Shaun Lyons

President & CEO Precision Realty Group

Philadelphia is one of only six or seven major cities in the United States that offer residents a mix of a large, walkable Downtown, a robust public transit network and a world-class restaurant scene. One of Philadelphia’s greatest strengths is that it has the lowest rent and property prices of all the U.S. cities that meet these criteria. If Philadelphia’s economy continues the renaissance it has experienced over the past 10 years, there is a lot more potential for real estate investors here than in places like Midtown Manhattan, and Downtown Washington, D.C., where cost burdens are becoming a huge hurdle for households and businesses. Philadelphia competes very well against some of our neighboring major cities in the Northeast.

54 | Invest: Philadelphia 2020 | REAL ESTATE

REAL ESTATE OVERVIEW

( ) inventory (the national average was seven months in October 2018), Philadelphia and its surrounding suburbs only have about 3.4 months of inventory. This kind of a seller’s market has exacerbated problems with housing availability and affordability in a city that has long struggled with these issues.

The city is, however, taking some proactive steps to combat housing affordability through a variety of legislation and incentive programs. For example, the Philadelphia Division of Housing and Community Development (DHCD) recently expanded a program that helps first-time homebuyers come up with a down payment, which can often help people bridge the financial gap separating them from home ownership.

The program will give the lower of either $10,000 or 6 percent of a home’s purchase price to first-time homebuyers who have lived in the city for at least three years, have a household income at or below 120% of the Area Median Income, and undergo housing counseling with the DHCD. The plan specifically aims to benefit lower-income households that have been especially priced out of the Philadelphia housing market by an influx of wealthier millennials and individuals fleeing the expense of nearby New York City. The mean price of a home in the city is $200,000, while the average household income is $40,000 per year, which equates to the 59th most expensive housing market in the United States. The private sector is also trying to do its part. “Our charity division, HOW Charities, supports underserved families with home ownership and financial literacy. We want to get people to financial freedom and this year, we are donating two houses. We are working with the Building Industry Association of Philadelphia (BIA) to figure out ways to duplicate this effort on a broader scale. Along with the BIA, we are looking at solutions with the private sector toward affordable housing and job placement within the industry. There is a lot of momentum because of how great the sector and the city are performing,” said President and Principal of The HOW Group Gary Jonas.

Another approach to ameliorating housing supply and affordability issues in Philadelphia is to simply build more housing. As mentioned, the total number of homes sold in Q4 2018 broke the previous record.

The number of new housing units constructed set a new record, as well, with 2,810 new homes completed in the Center City area in 2018, a number that has helped the city to begin to address its runaway housing supply shortage, if not solve it entirely.

However, the construction in this area was driven in large part by the influx of millennials into Center City

The city is consistently listed as one of the most walkable cities in the United States.

to work at high-paying jobs, and that’s exactly who is buying the units. They are searching for opportunities to have everything conveniently located around them.

“The collection of people wanting to live, work and play in one area is a trend we see growing in the area.

The Philadelphia central business district has showed us that mixed-use projects that include retail, office and residential, or two of those three components, is a very strong market. There are multiple buildings that are being converted in this way and we anticipate the trend continuing for the foreseeable future,” said Thomas Londres, CEO of Metro Commercial Real Estate.

This, however, does not equate to general population or income growth to support new construction in other areas of the city, and the general housing affordability crisis persisted throughout many other submarkets in the region despite Center City’s record-shattering construction year. One of the major factors keeping growth in other parts of the city so slow is the allure of the suburbs – despite all of the millennials moving to Center City for good jobs there, the city actually loses 7,000 residents per year to the surrounding suburbs, where housing is cheaper and the jobs are even more plentiful. Experts recommend increasing the city’s minimum wage and focusing on programs to promote the employment of existing residents and minorities as ways to combat the housing affordability crisis. www.capitalanalyticsassociates.com

| 55

REAL ESTATE OVERVIEW

Steven Cousart Executive Vice President – Newmark Knight Frank

We continue to be one of the dominant office brokerage groups in the region and we’re very active in northern Delaware, the western and northern suburbs of Philadelphia, downtown Philadelphia and southern New Jersey markets. Our biggest strength is office brokerage, and 2018 was another great year for our talented brokers. Demand for office space has been consistently strong for an unprecedented length of time but nothing is telling us the end of the current run is near. Our brokers are able to make very good deals in this environment because tenants have discovered what a great place Philadelphia is to live and work and demand for all categories of space has increased.

April 2019 were Fairmount-Spring Garden, WhartonResidential rentals When the market for buying a home is as tight as it is in Hawthorne-Bella Vista, Center City West, Cobbs Creek, Philadelphia, many people choose to rent instead. As Poplar-Ludlow-Yorktown, Center City East, Hartranft, more people turn to renting, demand can often start North Central, Chestnut Hill, and Pennsportto outweigh supply, leading to higher rental prices. Whitman-Queen. The 10 cheapest neighborhoods That’s the case in Philadelphia. The average rent for an to rent were Fox Chase, Tioga-Nicetown, Morris apartment in Philadelphia as of April 2019 was $1,790, Park, Cedar Brook, Rhawnhurst, Somerton, Oak Lane, which amounts to a 9.89% increase over the average of Bustleton, Mount Airy, and Torresdale. In general, the continually dwindling supply in $1,613 from the same time in 2018, the city is driving prices up and and up 0.45% from the month sending more people out to the before. Breaking that down more comparatively more affordable by the size of the rental unit: a suburbs. one bedroom apartment went for a median rent of $1,325, an increase of 5.66% year-overResidential investment year; a two bedroom apartment There are a number of factors that has a median rental price of make Philadelphia attractive for $1,500, a 4.77% increase; and a those interested in investing in three bedroom apartment had a real estate. The city has graduated median rent of $1,600, or 4.38% from its industrial past into a higher than last year. “There are mature information and service a few trends that we are seeing in economy with strong performance Matt Pestronk residential real estate right now in industries like higher education, Post Brothers in Philadelphia. We are seeing healthcare and biotechnology, greater demand, especially for apartments with lower telecommunications, financial services and tourism. absolute price points than ever before. We look at rent This strong and diverse economy has inspired numerous at an absolute basis as a driving metric. There is a Fortune 500 companies to locate their headquarters in market of apartments in the $2,000 range for people Philadelphia, including Comcast, Cigna, Colonial Penn, who make $40,000. We are focusing on that segment Lincoln Financial Group, GlaxoSmithKline, Wyeth, because we believe it to be underserved,” said Matt Boeing, Lockheed Martin, and Pep Boys. All of these Pestronk, president and co-founder of Post Brothers. companies require office space, and some need lab or In terms of the cheapest and most expensive places warehouse space, as well, meaning that there are many to rent in Philadelphia, the Top 10 most expensive as of opportunities to invest in property of those kinds.

There is an underserved market of apartments in the $2,000 range for people who make $40,000.

56 | Invest: Philadelphia 2020 | REAL ESTATE

REAL ESTATE OVERVIEW

The city is also home to 80 colleges, universities, and the “fix and flip” approach is viable in Philadelphia: trade schools, including such prestigious institutions purchase properties that need a bit of work or are in as the University of Pennsylvania, Drexel, Temple, up-and-coming neighborhoods, refurbish them, and and LaSalle. Graduates from these schools tend to then sell them in their newly-updated condition for enter the relatively strong job market supported by a tidy profit. However, the rental market in Philly is these businesses, and thereby become renters and also extremely tight and rents are increasing steadily, homeowners in the area, which in turn contributes to meaning that there is money to be made from taking a the presently contentious seller’s market. Philadelphia buy and hold approach and collecting rent. This also is already experiencing a housing shortage, and most entails managing the properties and there too, trends houses that hit the market are genuinely snapped are changing. “One of the notable changes in the property management sector is up after spending far below the that there are more associations average number of days for sale, being created across cities and and also enjoy high sale prices suburbs. These are a benefit as a result of bidding wars, because homeowner associations making it a very good place to are constructed on the basis of invest in and sell real estate, not having uniformity and control just for local investors but also inside the communities. Over those from across the country the last three to four years, many and internationally. “During the communities have started to last couple of years, we’ve seen reinvest in their infrastructure numerous people coming to and amenities,” said Christopher Philadelphia to invest. We have Maus, managing partner several clients from New York, and Christopher Maus and President of property they’re coming to us to seek not CAMCO management firm CAMCO. only financing, but also insights into the market and potential recommendations and connections. Professional investors are coming to Growing neighborhoods Philadelphia to find more lucrative opportunities than Philadelphia is a large metro area consisting of 55 those that are available in their own markets,” said distinct neighborhoods, and like all cities, many of its Harris Heller, managing director of Hunt Real Estate neighborhoods perform and thrive at different levels Capital. over time. Some neighborhoods, like Center City, The above touches on the “why” of investing in perform consistently well thanks to the presence of Philadelphia real estate, but what about the “how”? many businesses, well-maintained public spaces, and As is the case in virtually any tight, seller’s market, educational institutions. The latter in particular ( )

Over the last three to four years, many communities have started to reinvest in their infrastructure.

Christopher Somers Partner / Realtor – The Somers Team/ Keller Williams

Philadelpia’s development and real estate market offers tremendous opportunity. With amazing tech and biotech companies, the University of Pennsylvania and numerous innovative organizations located in Philly or coming to Philly, there are many high-paying jobs in the city. We have some of the best hospitals and are well-known for our “eds” [higher learning] and “meds” [medical] facilities, and all of these job platforms are contributing to our population increase. We have a tremendous foundation of future jobs and great companies coming to Philadelphia.

www.capitalanalyticsassociates.com

| 57

®

oundtable:

Market trends Real estate is never static, change is a constant. The market ebbs and flows as economic and demographic landscapes shift. Here, industry leaders discuss trends in the market over the last year and the factors influencing those trends.

David Binswanger

President & CEO Binswanger Management Corp

How would you describe Philadelphia’s real estate market?

Philadelphia is a strong market and we are seeing growth in all sectors. More people are acquiring than they are disposing, and they are looking for strategic help. It’s such a tight market that it’s getting more difficult to identify new places for companies to move or develop.

How are the growing life sciences and pharma sectors influencing industrial real estate in Philly?

University City, which has become Philadelphia’s hub for many life sciences companies, has become the hottest and most expensive marketplace in the city. Philadelphia has many advantages for the life sciences sector, with more academic and medical centers that any other city in the country. The activity going on in pharmaceutical and biopharma could very well be the major driver for growth throughout the region.

What is the outlook for the real estate sector in 2020?

The market will continue to boom. There doesn’t seem to be any sign of a slowdown. It is a tight market and our biggest challenge is that we are sort of out of space. There’s a lot of “musical chairs” going on…where companies rely on other companies moving to make more space available.

As a result, we’re seeing companies take a hard look at their options much earlier than they normally would, two+ years out, especially for larger square foot tenants.

But that’s not a sustainable model nor an approach that tenants want to be subject to, so we have to figure out where this next generation of product is going.

58 | Invest: Philadelphia 2020 | REAL ESTATE

REAL ESTATE ROUNDTABLE

Allan Domb

Broker and Owner Allan Domb Real Estate

How has Philadelphia’s real estate sector changed over the last year?

This past year saw an adjustment in the real estate market—in the beginning of the year we saw time on market increase while prices slightly softened. As we hit the spring market of 2019, we started to see an increase in prices from the prior year, but the overall sales volume was down over 15% in Q2, as compared to the same time period in 2018.We’ve been in a strong recovery since 2011, and we are now seeing some signs of a minor correction. In the condo world, centrality of location remains the key driver of both condo prices and price appreciation. Condos located in or very near to Center City now only have the highest prices, but have also experienced the greatest appreciation. The most vulnerable segment of the condo market has been studio and one bedrooms, mainly because of the addition of so much of this new product on the market. I predict that we are going to look back and see that sometime in 2016 or 2017 will have been the peak of the market, and in 2018 and 2019 we will have seen a bit of a healthy correction.

How are millennials and baby boomers influencing the market?

Many millennials are buying three-bedroom row homes in neighborhoods outside the core of Center City, taking advantage of the 10-year tax abatement and urban lifestyle. Baby boomers, on the other hand, want to be in the core of the city. Sixty years ago, the dream was to own one home; today many people have two homes and sometimes three homes.

Jerry Holtz

President Provco Real Estate

What trends are you noticing in the city’s real estate market?

Real estate has changed significantly over the last few years, mostly due to the advancements in technology. We were traditional retail developers, but as a result of the internet and online sales platforms, such as Amazon, we have transitioned to developing real estate projects that attract users/tenants that are basically internet proof. For example, Wawa convenience stores and TopGolf Entertainment facilities are insulated from internet competition and virtual stores. There are huge opportunities in the recreational segment now.”

Philadelphia’s central business district is thriving with the expansion of Comcast, restaurants and new apartment complexes. It is the healthiest I have ever seen it. In the suburbs, there are many infill projects.

We are seeing more density and overall more thoughtful development. Many suburbs around the city are healthy options for real estate.

Where are some challenges in the market?

One of the biggest challenges in the office segment is the fact that the old buildings are very vulnerable.

As a result, people are starting to figure out ways to redevelop them and make them more attractive with greater amenities and restaurants. In retail, we see fewer people starting small businesses, which will be challenging for a lot of small-shop space owners.

There is a lack of synergy in the small-retail area to create vibrant and sustainable small retail centers. www.capitalanalyticsassociates.com

| 59

REAL ESTATE OVERVIEW

Charley McGrath Managing Director – MRP Realty – Philadelphia & NY

The residential market has been relatively flat, which is due to our massive population and the high amount of supply that has come on the market in Center City over the last two or three years. Within the next couple years, residential rents will probably go up by 3 percent and office rents will also continue to rise. But as compared to markets such as New York and Washington, D.C., Philly is much cheaper and offers affordability and a good quality of life. The amount of Class A real estate in Philadelphia is massive; and in the future, I think you’ll see a new trend toward subdividing this category into Class A and Class A+, a trophy category.

The average apartment rent in Philadelphia was 9.89% higher in April 2019 versus a year earlier. ( ) are expanding as the economy demands. “MSC Retail is very involved in higher education, which is the core of our economy and a natural resource here in Philadelphia. A decade ago, we started our MSC University division, a national platform for university retail brokerage and master planning. It was started locally with the University of Pennsylvania, and today it’s on 25 college campuses across the country.

One of our most recent and exciting projects was Franklin’s Table Food Hall at UPenn, which entailed the redevelopment of an old, dated, traditional food court. We curated seven or eight local operators and turned it into a first-class, one-of-a-kind food hall, a true blueprint for collegiate food halls nationally,” said Douglas Green, managing principal of MSC Retail.

Other neighborhoods, such as Point Breeze, Gray’s Ferry, and Fairmount/Spring Garden, have endured sustained economic, infrastructural, and other challenges, but are undergoing a bit of a renaissance thanks to the forces of gentrification stirred to life 60 | Invest: Philadelphia 2020 | REAL ESTATE

by an influx of millennials buying and renovating the area’s affordable homes. Finally, there are some neighborhoods that are still behind, or falling even more so, including Wynnefield and Frankford. According to a study by the city improvement-focused nonprofit Next City, 20 neighborhoods outperformed the city as a whole in terms of crime, household income, house sales, population, and poverty rate as recorded by the U.S. Census Bureau’s American Community Survey (20092014), while 19 lagged far behind it and 16 were roughly on pace with the city’s overall average performance.

Looking ahead The real estate market remained stronger than the national market through the end of 2018, setting a local record for overall housing sales in the fourth quarter even while other hot markets began to fizzle out.

However, there were signs of an impending slowdown here, too, such as a marked decrease in high-value home sales. Still, Philly remains a seller’s market for the time being when it comes to residential property, with buyers fighting over properties that stay on the market for a fraction of the national average time, which leads to a strong rental market supported by individuals who choose that relatively cheaper alternative. Similarly, commercial and industrial properties remain a smart investment in a region that is constantly increasing its importance as a logistics hub and attractive base for Fortune 500 companies. Perhaps the biggest challenge for Philadelphia is addressing its ongoing and worsening housing affordability crisis, which, though not as severe as in other large metropolitan markets, is still serious and requires increased governmental intervention to correct.

Construction: New rental units and the fast-paced momentum in retail and office spaces are keeping Philadelphia’s construction industry on a positive footing, although much of the action is focused on Center City.

Infrastructure development is also lending a hand and the city’s growing reputation as a center of innovation is another axis propping up the sector.

www.capitalanalyticsassociates.com

| 61

Slower growth?: A growing population is helping prop up the construction sector, but growth remains unbalanced across the city Boosted by a host of millennials moving in to take advantage of a slow but steadily growing supply of good jobs, residential construction in Philadelphia enjoyed a record-breaking 2018. However, although residential construction was active last year, mostly by riding the tidal wave of new apartment starts at the end of 2017, things appeared to slow down going into 2019, hampered by higher construction costs and a lack of skilled labor. Moreover, the city continues to grapple with housing affordability, as income growth, while steady, remains too slow for many households.

In the retail market, high-budget projects like Fashion District Philadelphia continue to grab headlines with promises to revitalize shopping on Market Street east of Broad Street, and similar projects of comparatively smaller scale are also underway or recently opened in the surrounding area.

In the suburbs, to where some of the city’s highest earners are relocating, life sciences space is among the hottest trends in construction, thanks in part to innovation efforts at nearby Penn, Drexel, and Temple.

62 | Invest: Philadelphia 2020 | CONSTRUCTION

Sector performance Philadelphia’s construction market had a banner year in 2018, thanks in great part to the 2,810 housing units completed in the Greater Center City area alone – the highest number since 2002. Indeed, the city has lately enjoyed its biggest construction boom since World War II thanks to a tide of millennials aged 23-38 moving to the city to claim one of the 71,900 desirable jobs available and to enjoy its big city feel without big city cost of living. “Philadelphia is one of the hottest cities in the country. Part of that is due to our real estate prices, which are far below the pricing we’re seeing in New York City and Washington, D.C. Philadelphia is drawing young people from all over the mid-Atlantic region and it has become a mecca for millennials,” said Blane Stoddart, president and CEO of BFW Construction Project Management. The population of the Northern Liberties neighborhood, for example, increased by 62% between the years 2000 and 2017.

There has also been a great deal of construction and improvement throughout Philadelphia geared toward revitalizing the city’s aging infrastructure, and this has created immense value for the

CONSTRUCTION OVERVIEW

Shawn Carlin Vice President Gilbane Building Company

construction sector. Construction of bridges along Interstate 95 has contributed $8 billion, work on and around Philadelphia’s 30th Street Station generated $6.5 billion, development in the Drexel Innovation Neighborhood was worth $3.5 billion. SEPTA is also hard at work. The SEPTA Norristown High Speed Line generated $1.2 billion and the expansion of the Philadelphia Airport Light Rail was worth $900 million. Another important SEPTA project that warrants mention is the dedication of $34.2 million to the construction of a new train station in Ardmore that could be operational as soon as 2022 according to SEPTA leadership. The completely wheelchair accessible station will replace the existing platform at Lancaster Avenue, and will feature shelters and canopies along the tracks, raised platforms, and a new 500-vehicle parking garage. Construction will begin in fall 2019. Other projects include the construction of the Live! Hotel and Casino, which came in at $600 million, mixed-use development Liberty on the River generated $440 million, mixeduse development on South Broad Street brought in $420 million, and construction throughout Northern Liberties Development was valued at $350 million.

“As the economic cycle has continued longer than we anticipated, we have seen more projects and investment in our region. Development around ‘meds and eds’ is growing at a rapid pace. We are seeing additional growth in the hospitality sector, with a number of new hotels coming to the market. There are some projects, such as Fashion District Philadelphia, that will help the retail sector and will be important to the future development of Center City. The residential

What are Gilbane Building’s recent milestones in Philadelphia?

One of our most recent notable projects is the Live!

Hotel and Casino Philadelphia. We also created a special projects group, which is a breeding ground for young talent that gives us the ability to place people in between large projects. We are also doing the first public private partnership (P3) with the Philadelphia School District, which is an $80 million project.

One of Gilbane’s advantages is that we have our own development company, so whether it’s design build or in this P3 marketplace, that is beneficial for our clients.

Another big project is the completion of a vehicle processing center at PhilaPort, which is expected to have a great economic impact by increasing the number of cars coming across our shipyard for distribution up and down the East Coast.

What kinds of projects are seeing the most demand?

The most demand is typically in the eds and meds area.

The big talk that we hear from everybody is industrial, driven by e-commerce. Philly and the surrounding areas are good for industrial projects because there is a labor pool for them. An area we are looking to get into is the gene therapy space, which is taking off, especially in West Philadelphia. That growth is driven by the many higher education and medical institutions in the area.

High-rise residential is still in demand, although I see that market slowing. Student housing is also a strong market and is a core for Gilbane not only in Philly but across the United States.

The big trend now is to live in that higher-end shortterm lease space. Hospitality is also strong with several hotels coming up. Whether it’s conferences, leisure tourism or schools driving visitors, there is a demand for hotel rooms. We are now starting to see a higherend hotel room concept wanting to come into the Philly market as well. www.capitalanalyticsassociates.com

| 63

CONSTRUCTION OVERVIEW

Todd Lofgren Executive Vice President – General Manager Skanska USA Building, Inc. The Greater Philadelphia region has seen a high level of revenue for us over the last year. We have multiple anchor projects that have contributed to our growth, such as the transformation of the Gallery Mall into the Fashion District of Philadelphia, Inspira Health’s new hospital and Leading Edge Cancer Center in Mullica Hill, NJ; Christiana Care Health System’s Women’s and Children’s Tower in Newark, DE; and Swarthmore College Biology, Engineering, and Psychology building. Skanska focuses on the healthcare, higher education, life sciences, and corporate commercial markets. All of those markets are active and busy.

market keeps growing, both in high-rise and midrise industry. Finally, despite the droves of incoming buildings as well as development in neighborhoods. millennials, the Center City area suffers a net loss of Philly’s construction and development sector has 7,000 people each year to the surrounding suburbs, experienced stable growth over the last three years,” where even more jobs seem to be located and where Ben Connors, president of the General Building they are out of reach of the city’s 4% wage tax.

Contractors Association, told Invest:.

However, the hot construction market of 2018 Financing trends is not without its caveats, and a slowdown may Although the construction sector in Philadelphia be imminent. For instance, there were 2,100 new is experiencing a bit of flux at the moment and apartment units under construction at the end appears to potentially be cooling off, the market is of 2018, down significantly still healthy and several major from the 3,900 units under construction loans were awarded construction at the close of for large-scale developments 2017. One factor contributing to throughout the region. For this slowdown is the intractable example, Pembrook provided shortage of skilled construction $9.15 million in financing labor that has persisted since the for a 70-unit multifamily outbreak of the Great Recession development in Kensington in 2008. Although the number that would span 53,575 square of construction workers in the feet. The developer promises Ben Connors region climbed slowly from 2012 units that will be slightly General Building Contractors Association through 2017, it began to decline smaller and more affordable again in 2018. As educators and than apartments recently built employers continue to struggle with this issue, it will in nearby Northern Liberties and Fishtown. An continue to negatively impact the productivity of the even bigger construction loan of $53.5 million was construction sector. awarded by Meridian to Modus Hotels and Parkway Further exacerbating the apparent cooling of the Corp. in the spring of 2018 for the construction of Pod Philadelphia housing market after 2018’s peak is the Philadelphia, an 11-story hotel with 252 rooms. The increased cost of building materials, particularly micro-hotel will offer tech-centric rooms in the heart lumber, which experienced a huge price increase of Center City. Pod Philadelphia is among a growing following the Trump administration’s imposition of number of micro-hotels whose smaller and more a 20% tariff on Canadian lumber, one of the major efficiently designed rooms appeal to developers sources of the material for the U.S. construction because they maximize returns by minimizing the

Development around ‘meds and eds’ is growing at a rapid pace.

64 | Invest: Philadelphia 2020 | CONSTRUCTION

CONSTRUCTION OVERVIEW

impact of ever-growing construction costs. Finally, in June 2019, Southern Land Co. closed on a $295 million loan through Mack Real Estate Credit Strategies to finance the construction of a $400 million residential tower on Rittenhouse Square. The 48-story building will house 60 condominiums, 184 apartments, 208 parking stalls, and 44,000 square feet of retail space.

The starting price for a condo in the building will be $2.5 million.

Residential construction Much of the record residential development in Philadelphia last year centered on Greater Center City. In fact, 46% of all new units being built in Philadelphia are concentrated in Greater Center City, and 80% are in Center City or one of its five surrounding zip codes, which is a concentrated region amounting to only 17% of the city’s total geography.

The type of construction also tells a tale: between 2010 and 2018, 10,660 new rental units were added to the market, or 72% of all new housing units, while only 4,143 condos or single-family homes were delivered. This trend is driven by an issue central to many big cities: housing affordability. Many Philadelphia residents are unable to afford the cost of purchasing a home, and therefore demand for rental units remains high throughout the Greater Philadelphia Area. The areas where single-family homes are still hot include the Francisville, Point Breeze, and Northern Liberties neighborhoods.

Regardless of what types of housing are being built and where, the city faces an additional issue in the form of affordable housing. Of the 7,000 more individuals who move out of Philadelphia to the suburbs than move in each year, many are households without children or who have a household income in excess of $100,000. Meanwhile, there are well over 200,000 households within Philadelphia earning less than $50,000 per year and only 33,339 affordable subsidized units available. This creates a curious situation in which housing prices in Philadelphia remain comparatively low – 78% of sales were at $250,000 or below in 2018 – and yet many people residing in the city struggle to afford housing. It is therefore up to the city to follow the model of cities like San Francisco, New York City, and Seattle, which have combated their housing affordability issues by promoting strong annual income growth.

Conversely, Philadelphia currently ranks 23rd slowest out of the 25 largest cities in America in terms of income growth at 1.5% annually. ( )

Dan Gring CEO D&B Construction

Philadelphia is a robust market and the economics here are a little bit different. We opened a new office in the Philadelphia region in October 2018, and by the end of July 2019 we already exceeded our goals for the whole year. The activity and the relationships we have created have been on the forefront of that growth. We have been doing a large amount of work for the health and office sectors, especially around the King of Prussia area. We are seeing significant growth in Bucks County and Blue Bell.

We see the big boom in the medical industry, but there is also high demand in the business sector, where companies are growing and expanding or moving into new office space. We have been able to capitalize on that area. There is also a lot of industrial movement in the area, especially with the demand from big box stores that need to move merchandise.

The King of Prussia market is keeping us very busy. The outskirts of Philadelphia, which have many transportation alternatives that make it easy to get to the city, also are experiencing significant growth. That is a result of the business activity that is going on in Philadelphia and the need for expansion outside the city to support that activity.

The recent trends in the construction sector are tech-driven. We are using technologies like cloudbased systems and programs for scheduling and purchasing orders to help efficiencies and allow our clients to be more involved with projects. The cost of construction is relatively high at the moment and we are combating it with technology. We are creating more efficiencies to help us drive down our costs internally by using innovative systems and solutions so we can offset some of those increased material costs related to the U.S. trade tariffs.

One of the biggest challenges is manpower. We are in a boom and it has been difficult to find good team members. I think it goes back to the stigma of all the high-school kids having to go to college instead of getting into the trade early. That needs to be addressed. We need to make people understand that this is a wide open market with many opportunities to be successful in our industry. www.capitalanalyticsassociates.com

| 65

CONSTRUCTION INTERVIEW

Access is key For a mid-Atlantic player, Philadelphia’s location is beneficial for projects from Connecticut to Northern Virginia

Robert Cottone President & CEO – IMC Construction What are the areas seeing the most demand in Philadelphia’s construction sector?

The education and healthcare markets have always been strong. Healthcare and education facilities are creating ways to better serve their patients and students with more modern approaches. Multi-family residential construction has seen heightened demand over the last couple of years.

Recently, Philly was ranked one of the fastestgrowing millennial cities in the United States. This young vibe and push into the urban environment has helped lift several sectors.

What are the benefits of being located in Philadelphia?

IMC Construction is a mid-Atlantic player. Philadelphia being positioned in the middle of this market is beneficial for our projects from Connecticut to Northern Virginia. It affords companies like IMC Construction accessibility to the entire Mid-Atlantic corridor. The Philly area offers a more reasonable cost-of-living and good quality of life. This helps recruitment of talent.

Philadelphia presently offers competitive price points in comparison to New York City and Washington, D.C. Although viewed by some as a second-tier marketplace, it has increasingly appeared on many National Developers’ radars. Philadelphia’s primary employment business cluster is healthcare and higher education. These institutions are typically consistent with their capital construction improvement needs.

66 | Invest: Philadelphia 2020 | CONSTRUCTION

What are some notable changes in Philly’s construction industry over the last three to five years?

IMC has seen tremendous growth in our large project portfolio. IMC has a number of $150 million plus projects in and around the Philadelphia area. The construction/real estate market across the country has been moving at a frenzied-pace for the last couple of years and Philadelphia has fully participated in this economic rebound. Currently the vendor/ subcontractor market has slightly more capacity, but true equilibrium has not been met. We are anticipating a softening of the market starting around the end of 2020 and 2021. While work is moving at a steady clip, the frenzied pace appears to be peaking. Significant nonunion work has surfaced in the city. If we look at other cities’ trends, it’s reasonable to assume it’s here to stay.

Moreover, prefabricated modular buildings has been seeing more demand in our industry. IMC is engaged in a number of applications for prefabricated hospital rooms, bathrooms and panelized construction. This type of construction has significantly increased compared to years past. Modular construction can be efficient; often quality control is improved, and deliverables are expedited.

CONSTRUCTION OVERVIEW

Fashion District Philadelphia is one of the city’s largest developments in retail construction.

( ) Commercial Commercial construction in Philadelphia has remained steady. For the first half of 2019, Philadelphia ranked 10th nationwide in dollar amount for new office construction starts, according to Dodge Data & Analytics, driven by job growth, particularly in the life sciences sector. According to labor analytics firm EMSI, the Philadelphia region added 354,000 unique job openings between October 2018 and January 2019 alone, with Philadelphia County itself boasting 33% of these openings. This inner city job growth has led to the strong performance of the office construction market, with office rental rates increasing steadily over the past five years, particularly in Class B and new office construction, and occupancy expansion is expected to continue.

There are also some noteworthy developments in retail construction, particularly Fashion District Philadelphia, the 838,000-square-foot shopping mecca being built on Market Street between 8th and 11th Streets on the site of the Gallery at Market East mall. The district already has a list of tenants on board that features both national brands, like Chickfil-A, Levi Strauss & Co., and Burlington, as well as local flavor like South Fellini, Dolly’s Boutique, and Chickie’s & Pete’s. There will also be an AMC movie

theater. The latest projection has the entire project opening in September 2019, but this is already a delay from the original projected opening of yearend 2018.

In addition to the Fashion District, other recent retail developments east of Broad Street in Center City include The Collins at 11th and Chestnut, The Curtis at 610 Walnut Street, The Bourse food court, and the Independence Beer Garden and La Colombe café, both in the old Dow building.

Outside the city, the expanding life sciences sector is spurring demand for sophisticated lab space, pharmaceutical production facilities, and office space for the workers that support this bustling industry.

Among the reasons for the sector’s growth in the suburbs surrounding Philadelphia is the proximity to the city’s world-class research institutions, including Penn, Temple, and Drexel.

Among the life-science-based construction in the region, MLP Ventures announced plans for a massive life sciences coworking campus called the Discovery Labs in King of Prussia, a suburb just outside the city.

In all, the development will cost up to $500 million and consist of 12 buildings from 50,000 to 125,000 square feet each, making it the largest such space in the country. www.capitalanalyticsassociates.com

| 67

Scott Zuckerman Principal Domus Construction

What are some highlights for Domus Construction in the past year?

One of our most recent projects is the Dwell at 2nd Street, which is expected to be completed by December 2019. The project will include 198 apartments with a variety of amenities including onsite parking, a swimming pool and a dog park. One hundred and twenty of the units will be modular, which is a concept that seems to be getting more of a push in Philadelphia because of increasing construction costs.

What key trends have you observed in the sector?

Modular construction and smaller, efficiency-style apartments are trends we’ll continue to see in Philly.

Domus introduced live streaming construction in 2019, beginning with our Dwell at 2nd Street project.

It’s a good marketing tool because 120 units out of 198 are modular and a lot of people are very interested in seeing the process of installing them in real time. The modular process is also friendly to the environment since it provides more ways to control waste.

What actions are you taking to ensure diversity in the workplace?

Domus has a strong and long history of diversity.

We actively participate in community outreach and advertising to increase minority participation for all our projects regardless if its a requirement. Minorities participation comprise between 30 and 40 percent of the workforce on our jobs.

What is your outlook for 2020?

The outlook for Philadelphia’s construction sector seems very positive. We’re booked up until the end of 2020. There are new hotels that are rising around the city of Philadelphia, which seems to be a big trend.

Most professionals and companies in the sector seem to be busy, which is a great indicator.

68 | Invest: Philadelphia 2020 | CONSTRUCTION

Despite the challenges in the market, Philadelphia’s construction industry had a great year in 2018.

The Discovery Labs will not only be 20 times larger than a typical coworking space, it will also be uniquely tailored to the life sciences thanks to its pharmaceutical heritage, with parts of the campus being redeveloped out of the former GlaxoSmithKline Upper Merion West and Innovation at Renaissance facilities.

The campus will also feature IQ Connect, a 100,000-square-foot startup incubator operated by the Pennsylvania Biotechnology Center, as well as a host of cafes, restaurants, conference space, meeting rooms, and a fitness center. The Discovery Labs joins other major life science construction projects in and around Philadelphia, such as Spark Therapeutics’ anchor space at Schuylkill Yards and Iovance Biotherapeutics’ facility at the Philadelphia Navy Yard.

Looking ahead The outlook for construction in Philadelphia remains positive, but not without qualification.

Despite record residential construction numbers last year, condominium and single-family home starts are low throughout the city, with the bulk of new

CONSTRUCTION OVERVIEW

Angelo Perryman CEO Perryman Building and Construction

construction being in multifamily residential space concentrated in particular areas of the city. Whatever the type of housing, city residents continue to be plagued by affordability issues, with far more needy families than subsidized affordable units and this hampers real estate construction in those poorer neighborhoods.

Retail and office space development, however, continues apace with several high-budget and high-profile projects underway. The construction of space to accommodate life sciences companies is particularly booming as the city entrenches its reputation as a fast-growing biotech hub. Provided the supply of educated millennials in the city continues to grow, expectations are for Philadelphia’s construction sector to continue driving forward, although at a slower clip.

“According to the latest real estate reports forecasting the financial year 2019-2020, Philadelphia is among the Top 6 markets in the United States.

Consequently, this makes me believe the region is growing in every sector. There are 29 new highrise towers under construction. There is further planning to improve the infrastructure along the

How are some of your recent projects transforming Philadelphia and the surrounding area?

We are working on the conversion of the former Gallery into the Fashion District Philadelphia. We are delivering the AMC Theater, which will be in the heart of Center City and the first movie theater of its kind in 30 years right in Philadelphia. We are very excited about that project. It will be a luxury theater within proximity to public transportation — a major step in transforming the ease of access to entertainment, dining and shopping for those who live and work Downtown. That project is a good example of how Center City east of Broad is growing and changing.

We also just finished up the new Subaru regional headquarters in Camden, right across the Delaware River. Subaru has been in Cherry Hill, New Jersey, for decades, so this is a big move for them. The building is a state-of-the-art addition to the renaissance of the Camden community. The building is one of several that will make up the Subaru campus. This project is very important to the future of Camden.

How is the labor shortage impacting Perryman and the construction sector in Philadelphia?

We always look for exceptional talent. We are drawn to people who demonstrate a passion for management and the construction industry. We have been far less vocal about the lack of mature labor as we have been about developing the next generation of talent.

Construction is very tough physically, and the advent from working with tools to using more brain power has been a shift. There is a high-tech component to the industry that wasn’t there 20 years ago, and we are seeing some of our mature labor force struggle with that. We on the other hand are trying to utilize their fullest potential while leveraging technology to make sure they are faster and more efficient. From this vantage point, we are a key component to the 21st century of contracting. www.capitalanalyticsassociates.com

| 69

CONSTRUCTION OVERVIEW

river’s main navigation channel. And then there’s all we have proven the concept and that is fueling the the new residential and mixed-use development. And market,” he said.

Buckley adds that demand is so strong, Volumetric on the government side of things, we have never been busier,” said Dexter Lanigan, president and founder of Building Companies has enough business to keep it going for years to come. “The backlog in this industry New Age Development Group, LLC. typically is between 11 and 20 One trend that warrants considweeks. For a typical modular eration is modular construction. multifamily constructor like us, Not only is it faster than traditionmost factories have somewhere ally construction, it is also more between three and six months. efficient. Building segments are Right now, we have a multiyear designed and constructed off-site backlog and we have enough then put together in place like business in the pipeline for eight legos. One of Philadelphia’s leadyears. The modular construction ing modular construction firms industry has a major capacity is Volumetric Building Compaproblem: we just don’t have nies. President Vaughan Buckley enough factories to build the says his company has seen steady Vaughan Buckley product that we need. A big part growth as market perceptions Volumetric Building Companies of why we are in a better position have changed. “We are aligned than other companies is that we with what’s happening in the Philadelphia market. Five years ago, we were doing $5 have vertically integrated all the pieces, the design, million worth of projects, then it was $10 million, then manufacturing, logistics, and construction into one $25 million. Now some of our projects are $35 million company, which is something that is both convenient for just one building. This market has shifted because for the client, and also mitigates risk.”

This market has shifted because we have proven the concept and that is fueling the market.

Transportation: Philadelphia is on the move. Its population and economy are growing, and with that comes the need to ensure a viable transportation solution that helps the city, its people and businesses run smoothly between points. Joining with the private sector, Philadelphia is taking a proactive approach to ensure transportation infrastructure delivers.

www.capitalanalyticsassociates.com

| 71

Transportation in numbers: Philadelphia International Airport (PHL) Stats Total passengers by flight destination, 12 months ending August 2019:

Total passenger traffic

Domestic passenger traffic

International passenger traffic

12 month total (ending August 2019)

12 month total (ending August 2019)

12 month total (ending August 2019)

32.5M

28.1M

4.4M

% increase over previous 12 months

% increase over previous 12 months

% increase over previous 12 months

4.6%

4.2%

7.1% Source: Philadelphia International Airport

Total passengers by carrier, 12 months ending August 2019:

2,806,769 Other

1,268,600 United

1,784,452

22,459,711

Frontier

American Airlines

1,996,812 Delta

TOTAL

32,506,103 2,189,759 Southwest

Source: Philadelphia International Airport

72 | Invest: Philadelphia 2020 | TRANSPORTATION

Cargo and Tonnage, 2009 – 2018: 480,000

Totals:

400,000

2018 Cargo Tons

555,327

320,000

%Change

240,000

+20%

160,000

Highest tonnage since 2008

80,000

Double-digit % increase

0

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018 Source: Philadelphia International Airport

Total passengers by flight route, by region, 12 months ending August 2019:

1.3%

409,410

1.2%

1,585,855

Canada

10.7%

915,698 Caribbean

Europe

21.7%

126,114 Middle East

Source: Philadelphia International Airport

www.capitalanalyticsassociates.com

| 73

Connected: State and local initiatives hope to ensure transportation infrastructure not only improves but gets safer and more sustainable Philadelphia is experiencing a time of growth.

Millennials are moving to the city in greater numbers, and many residents from more expensive cities like New York are flocking to Philly in pursuit of less expensive lodging without having to lose the big city feel. However, with the population influx comes an increased burden on transportation infrastructure. A series of proactive approaches provide hope that Philadelphia will be able to keep up with the pace of its growth.

A host of state and local initiatives aim to make physical upgrades to the region’s transportation infrastructure itself, such as road repaving, bridge replacement, and new construction, while policy improvements like educational programs are designed to reduce traffic fatalities, provide better access to public transportation, and make transportation in the city more sustainable. The government and the private sector are working together to drive these transportation solutions, with a number of publicprivate partnerships to address transportation issues throughout the city. At the local level, too, governments like that in Bensalem Township are working to improve trasnportation flow. “We are located right between Philadelphia, Trenton, New York City, 74 | Invest: Philadelphia 2020 | TRANSPORTATION

right in the middle. We are serviced by two railways and major highways, such as I-95, the Pennsylvania Turnpike and U.S. Route 1. As the gateway to Bucks County, traffic is something we work on diligently. We have reconstructed a major highway, building many intersections ourselves to ensure they are safe,” says Mayor Joseph DiGirolamo.

Initiatives and investments “Connect: Philadelphia’s Strategic Transportation Plan,” was launched on Oct. 10, 2018 with the mission to provide “a transportation system that is safe, affordable, accessible, and reliable at moving Philadelphians, visitors, and commerce so neighborhoods thrive, people are healthy, and the economy grows.” Underpinning this is the concept of transportation equity, which can be accomplished by investing in transportation infrastructure and access that connects people to opportunities for education, employment, and full participation in their communities. In addition to equitability, Connect envisions a transportation system that is safe, sustainable and healthy.

The plan is divided into five practical goals (0-4),( )

TRANSPORTATION INTERVIEW

Set for takeoff Growth in all areas, from total passengers to cargo and number of takeoffs and landings

Chellie Cameron CEO – Philadelphia International Airport

What have been Philadelphia International Airport’s major highlights over the past 18 months?

We have had significant growth in terms of number of passengers coming through the airport. We were up to almost 31.7 million total passengers last year, which was more than a 7 percent year-over-year increase and the second-highest number that we’ve ever had.

For the first time in more than 10 years, we have also seen growth in the number of takeoffs and landings at the airport.

We experienced an all-time high in terms of cargo that we carry, too. We are the trans-Atlantic hub of opertaions for American Airlines, and we have more flights to Europe than any of their other hubs. We have service to boutique destinations such as Budapest and Prague, Dubrovnik, Berlin and Bologna. These are places you can’t fly to nonstop from other airports in the United States.

Our other airlines are growing as well, and that shows that the airport is thriving and is a great place for airlines to add flights.

As Philadelphia grows as a trade hub, what plans does Philadelphia International Airport have to increase its cargo business?

With the explosion of e-commerce and the increase in cargo, we have found it important to explore cargo opportunities. Our cargo project is a long-term commitment in terms of economic development; we have to relocate a road and are working on our wetland mitigation plan.

All of these efforts must be done before we start developing a cargo site, but we’re doing the necessary things to make it possible.

We’ve acquired three parcels of real estate in the last year, and one of them is a 135-acre cargo site.

There are very few airports that have this kind of plan on their books right now.

What is your outlook for the airport over the next 12 to 18 months?

We’re continuing to focus on air service development, so we will keep making sure that we’re adding new nonstop flights to the airport. We look forward to seeing the results of our efforts in securing services to Latin American and Asian business centers.

Advancing the cargo development project is a big deal for us, and we will continue focusing on that area as well.

As we finish and release our new economic study, we expect to increase our annual economic impact and continue building those relationships. www.capitalanalyticsassociates.com

| 75

TRANSPORTATION OVERVIEW

( ) defined as follows: Goal 0 – Vision Zero sets the goal of zero traffic deaths per year by 2030. Several steps have already been taken toward this goal, including the launch of a Zero Pilot Project to improve the safety on the Market Street and JFK Boulevard corridors, installation of safer bus plazas, announcement of 16 grants to expand citywide commitment to Vision Zero worth a total $17 million, and passage of State Senate Bill No. 172 that gives the city clearance to provide automated speed enforcement along Roosevelt Boulevard. Here are the goals as outlined in the plan: Goal 1 – Transit First is the portion of Connect focused on transportation equity through transforming bus service, developing a city transit plan, modernizing the trolley fleet, expanding the Indego Bike Share program, and stabilizing and growing regional transit funding.

Goal 2 – Great Streets looks to pour investment into well-maintained streets that can serve all people and modes of transportation by bringing all city streets into a state of good repair, increasing walkability, establishing slow zones, and expanding the city’s bike network.

Goal 3 – A Competitive City is the portion of Connect that will seek to support communities and commerce with reliable transportation that will include managing congestion, managing curbsides and parking, updating the truck network, which consists of Philadelphia streets that are especially designed to accommodate freight transport and delivery by large trucks without inconveniencing smaller vehi-

There is a growing emphasis to encourage alternative forms of transportation, like ridesharing.

cles and pedestrians, and pursuing sustainability for competitiveness.

Goal 4 – Efficient Government places the responsibility for delivering transportation services and projects efficiently and transparently on the local government through community engagement and coalition building, project delivery and prioritization, asset management modernization, technological innovation, and the introduction of a clean fleet.

TRANSPORTATION OVERVIEW

Andrew Woolf Regional Director Pennslyvania, New Jersey, Delaware Lyft

Another local initiative, Complete Streets, is managed by the Philadelphia Office of Transportation, Infrastructure, and Sustainability (“oTIS”) and requires a review of all construction projects’ impacts on roads, sidewalks, and bicycle and transit networks to ensure that all affected streets remain in compliance with city policy. There are dozens of projects in progress all over the city that fall under the auspices of oTIS. There is also the Roosevelt Boulevard “Route for Change” Program, which seeks to continuously upgrade the corridor to make it more inviting by 2040. The key elements of the plan are improved bus service and connections, better pedestrian crossings and public transit access, consistent and dependable travel times, integrated bicycle facilities, and a broader goal of economic development opportunities and job creation. There have been numerous public forums and workshops to refine the project’s goals and vision going back to 2016 and continuing into 2019. The program is funded by the city of Philadelphia, PennDOT, SEPTA, and USDOT TIGER (Transportation Investment Generating Economic Recovery) grants.

A massive rebuilding and improvement project on Interstate 95 also promises to enhance transportation in and around Philadelphia. Five distinct, major projects are underway between I-676 and Cottman Avenue interchanges as part of this broader initiative, and each is at a different stage of construction or early design. They include projects at the Girard Avenue, Allegheny Avenue, and Betsy Ross/Bridge Street

How does Lyft give back to the Philadelphia community?

Over the last year, our main priority has been to strengthen our community of drivers, riders, and cities and ramp up our community involvement to achieve maximum positive impact with the goal of improving transportation access and equity. It’s our civic responsibility to address the key transportation problems our communities are facing, with the goal of improving life in all areas of Philadelphia. One of our nationwide initiatives is City Works, which is a commitment to invest the greater of $50M or 1% of profits every year in our cities and address important issues like transportation access and equity. For example, in Philadelphia, our Grocery Access Program, in partnership with Uplift Solutions and the Philadelphia Housing Authority, helps people in food deserts get access to supermarkets through discounted rides.

This program provides local families living in areas surrounding Philadelphia Housing Authority sites throughout North Philadelphia with a $2.50 flat-rate fare on eight rides per month - or one round trip per week - to and from nearby grocery stores.

What is driving growth for Lyft in Philadelphia?

We are excited to continue doing business in our great city, build our community of drivers and riders, develop strong community partnerships, and invest in the local community. For example, we have some new, exciting partnerships with SEPTA and Design Philadelphia, and we are also constantly looking for ways to make our drivers’ lives better. We recently launched Lyft Rewards in select cities, and Philadelphia is one of the earliest participants. The program allows drivers to earn points with every ride, which can be redeemed for cash or credit. We are also proud of the Driver Advisory Councils we have in Philly and nationwide. Through these councils, we bring together groups of drivers to advise us and provide their feedback. www.capitalanalyticsassociates.com

| 77

Jim Moses Vice President, PHL Hub Operations American Airlines

How is American Airlines improving its services out of its PHL hub?

As American Airlines’ trans-Atlantic gateway, our more than 9,500 team members have worked hard to deliver the level of service our customers expect when traveling abroad. And over the last several years, the airline has consistently expanded service from Philadelphia to new destinations across Europe. With more than 420 daily departures, a key differentiator for American’s PHL hub is the ability to connect customers traveling from other points across the U.S. to our growing transAtlantic network. In 2018, we added nonstop service to Budapest and Prague, and earlier this year, we expanded into four additional markets—helping American connect our customers to 20 destinations across Europe. Thanks to PHL’s location and lack of slot controls, American has had tremendous success testing and growing service to development markets like Dubrovnik, Croatia and Berlin, Germany.

How is American Airlines investing in technology integration?

American Airlines continues to enhance the technologies used to support our customers, our team members and our operations. Whether they are on the ground or in the air, we provide our team members with innovative tools that improve our interactions with customers.

We have equipped our flight attendants with handheld tablets that allow them to access valuable customer information. In January 2020, we will introduce the Boeing 787 to Philadelphia—equipped with customer friendly amenities and our all-new Premium Economy cabin. American also announced plans recently to acquire 50 Airbus A321XLR aircraft, the new longerrange version of Airbus’ hugely successful A321neo. The new aircraft is well-suited for a hub like Philadelphia and underpins our efforts to build a market-leading transAtlantic network, helping us reach even more un- and under-served international markets.

78 | Invest: Philadelphia 2020 | TRANSPORTATION

interchanges, as well as construction that is in progress on the Adams Avenue Connector.

Philadelphia International Airport In 2017, Philadelphia International Airport (PHL) secured a $900 million investment to upgrade its facilities, which the airlines with leases at the airport, led by American Airlines, approved when renewing their leases. One of the first salient impacts of the investment is a $32.8 million terminal redesign, which will include the addition of eight new restaurants and retail offerings inside the terminal’s security perimeter, as well as the installation of 1,100 iPads that can be used to order from three of those restaurants near the gate areas of Terminal B. The airlines specifically earmarked $395.9 million for infrastructure improvements, such as replacing roofs, elevators, escalators, HVAC units, and upgrading security technology. Another $96.5 million will go toward relocating a concessions warehouse and loading dock to make room for a central entrance for all American Airlines flights between Terminal A-East and Terminal B. The majority of the expense for these improvements is being shouldered by the airlines – American’s rates and debt service on bonds provide much of the investment funds, and passengers also contribute a $4.50 “passenger facility” fee to airport capital improvement projects with every ticket purchase, although this fee was already in place and will not be increased.

Another improvement at PHL in recent years is the continual addition of air service by carriers. American Airlines, Frontier Airlines, Spirit Airlines, Southwest Airlines, and Delta Airlines collectively launched nonstop flights to 27 new destinations from PHL in 2018, and also added Irish airline Aer Lingus. This growing menu of flights has been hailed as a major contributor to the 7.1% increase in passengers traveling through PHL in 2018 over the previous year.

In total, 31.7 million travelers passed through the airport last year, the highest since 31.8 million passengers in 2008, and approaching the all-time peak of 32.2 million in 2007. 2018 was also a banner year for international passengers, with a 6% increase over 2017 – the highest rise since a massive 17.1% jump in 2004. Total passenger traffic for this year to June suggests another strong year in the making, with 15.8 million passengers coming through the airport, up 3.6% over the same period last year. Cargo tonnage also jumped in 2018, rising 20% to 555,327 tons, breaking the 500,000-ton threshold for the first time since 2008.

TRANSPORTATION OVERVIEW

State contributions In 2018, $7.3 million of PennDOT money went to six different transportation-focused projects around the city. This money is part of PennDOT’s Multimodal Transportation Fund, out of which some $41.5 million was paid out for projects across the state. Of the 222 projects that applied for the money, the six in Philadelphia that were awarded funding are: $1.1 million to improve the intersection geometry of the southwestern corner of Adams and Summerdale Avenues and Roosevelt Boulevard to make it more pedestrian- and vehicle-friendly; $1.5 million to add a new street on the former University City High School site, which will now be the mixed-use innovation district called uCity Square; $1 million to improve the Logan Point Roadway at Logan Triangle in North Philadelphia as part of a redevelopment that will totally rebuild 9th Street and Wyoming Avenue; $3 million to the Philadelphia Museum of Art for improvements to Anne d’Harnoncourt Drive, including new multimodal connections to Kelly Drive, a new school bus entrance, improved mass transit stops, permanent ADA ramps, and reengineering of vehicle and pedestrian connections to improve traffic flow; $183,750 for improvements to the new Bartram’s Trail, including a new irrigation system and improved landscaping; and $567,774 to add more Indego bike share stations around the city.

In addition to multimodal transportation projects, PennDOT has been repairing and resurfacing more than 200 miles of 15 different state highways in and around Philadelphia in 2019. Other Philadelphia County PennDOT projects include the rehabilitation of the I-76 Viaduct, U.S. 1 Wayne Junction Viaduct,

Chestnut Street bridges and Grays Ferry Bridge; replacing Allens Lane Bridge; and improving Henry Avenue.

Another major transportation initiative is the Statewide Transportation Improvement Program, which consists of 24 regional Transportation Improvement Programs (TIPs) developed by planning partners across the state. These TIPs constitute the first four years of a comprehensive 12-year plan for transportation improvement in Pennsylvania. Planning partners come together at this stage for public meetings to gather community input about transportation needs and solutions in their region. Philadelphia falls into the Delaware Valley Regional Planning Commission’s TIP, which has already invested $18.47 million through 272 separate awards. It has awarded $1.8 million to 23 projects in 2019 alone.

SEPTA SEPTA, Philly’s regional transit authority contributes roughly $3 billion in annual economic impact for the region, while helping drive up property values around its stops and stations in the suburbs. SEPTA does all this without having added any additional track length or cars in more than 20 years, despite serving 53% more riders than it did in the 1990s. Still, SEPTA knows that it can’t rest on its laurels, and is ready to improve. To this end, SEPTA kicked off the next phase of its massive, $71 million rail improvement project on July 20, which will focus on improving tracks along its Airport, Wilmington/Newark, and Media/Elwyn lines, a project that commenced in 2019 and will take three years.

Another big improvement from SEPTA is the introduction of its new transit map. The system map,

www.capitalanalyticsassociates.com

| 79

Chad Dobbs General Manager for Pennsylvania Uber

What were some highlights that Uber saw in the region during the past 12-18 months?

We rolled out Express POOL, which is a new version of Uber POOL. This new shared ride option allows passengers to get more affordable rides by taking a short walk to a spot along the route to meet their Uber, and joining other users with similar routes — which makes ridesharing more efficient. We also made significant progress on our wheelchair accessibility, through a partnership with MV Transportation, to get more wheelchair accessible vehicles on the road.

What are your main growth drivers in Phily?

In Philadelphia and other similar-sized cities, our fastest growth areas are typically outside of the core. We’re excited to bring portable options to places that are not traditionally served by public transportation. Outside of our ride program, we’re expanding the Uber concept as a platform and joining other transportation modes.

For example, we recently launched a transit planning pilot program in Denver with the local transit system.

The biggest opportunity for growth is around this concept that Uber is a platform and a way to get from point A to point B, but not necessarily in the back of a car. That part of the business has grown substantially over 2018 and is continuing to grow.

What are you doing to grow and improve the driver side and experience in the city?

We’re sitting in our Greenlight Hub facility, which is a physical location where drivers can come to receive in-person support with the on-boarding process. It’s very important for us to make sure the drivers have the support they need. We have also launched a number of different tools over the last 18 months to improve the drivers’ experience. For example, we had our 180 Days of Change campaign to make substantial improvements to our product based on the feedback of our local and national drivers.

80 | Invest: Philadelphia 2020 | TRANSPORTATION

Regional rail extension project to cost $1.2 billion. introduced in July 2019, featured the transit authority’s more than 100 bus routes, and uses a color- and line thickness-coded system to indicate how often a bus line runs. Thicker red means a bus that runs every 15 minutes, whereas gray lines run every 60 minutes. The map also features greater detail, and depicts express service stops and Broad-Ridge Spur origin stations.

SEPTA also engaged a P3 to extend regional rail service to King of Prussia. The transit authority granted the preliminary design contract for the ambitious project to infrastructure solutions firm HNTB in January of 2019. The $7.2 million design contract would be the first step in advancing toward the completion of the $1.2 billion rail extension project.

P3 opportunities In addition to its own independent infrastructure improvement projects, PennDOT also operates an extensive public-private partnership (P3) program.

Among the highlighted projects in the P3 program are the Rapid Bridge Replacement Project, the largest bundled bridge project in the history of the state; and the District 4 Bridges Project, which will replace 15 interstate bridges in PennDOT District 4.

Looking ahead Philadelphia is facing its transportation challenges head-on by taking affirmative steps to do better.

Much needed road repairs, improvements, and other infrastructural upgrades are receiving millions of dollars in funding from state and local sources and are being carried out by ambitious public-private partnerships that bring together the brightest minds in government and industry. Technology is also being brought to bear to provide solutions to the thorniest transportation issues, although sometimes unprecedented tech yields problems of its own. The question the city will continue to address is how to accommodate a growing population without exacerbating already-vexing traffic congestion or increasing the number of traffic-related fatalities.

The answer is a work in progress.

Manufacturing, Trade & Logistics: Manufacturing and logistics are key factors in Philadelphia’s economy, with two major trade gateways in PhilaPort and PHL, easy access to I-95 and I-76, and a strong and growing labor pipeline. While trade issues threaten to cloud the industry, the city’s position as a majority importer is an advantage to help maintain the sector’s momentum.

www.capitalanalyticsassociates.com

| 81

Balanced trade: Philadelphia is upgrading infrastructure and welcoming new segments as it solidifies its position as a trade powerhouse Philadelphia is an established player in manufacturing and logistics, and the e-commerce and life sciences boom in the region is making the city and its surrounding area even more relevant. Philadelphia’s two biggest ports, the Port of Philadelphia (PhilaPort) and Philadelphia International Airport (PHL) already do big business when it comes to international trade, and both are upgrading their facilities and capacities to allow for even more.

Obviously, it’s not just infrastructure that makes Philadelphia a contender. What really matters is its people. The region is fed by a host of prestigious colleges and universities that produce highly-qualified talent, and its affordability attracts millennials from more expensive markets like D.C. and New York. All these factors come together to produce a manufacturing sector that has grown compared to the same time a year ago and which is far outpacing long-term average growth predictions. “The biggest advantage Philadelphia has is its strategic location.

We are at the epicenter of a region that can reach 40% of the U.S. population in a day without the traffic and congestion you have north of us. In addition, the 82 | Invest: Philadelphia 2020 | MANUFACTURING, TRADE & LOGISTICS

port has an excellent infrastructure when it comes to service providers, terminal operators and carrier services,” said Larry Antonucci, president of the World Trade Center Association.

There are still warning signs to keep an eye on, though. A trade war with one of the world’s fastestgrowing economies and a stock market that is bracing for recession have started to reverberate throughout various industries, including manufacturing and logistics, while commencement of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) without the United States poses the potential for a stronger China and a higher cost of doing business in Asia, both of which are a concern for manufacturing firms.

Global trade Philadelphia is a major hub of global trade thanks to the PhilaPort and PHL. The port conducted a massive $29.38 billion in total trade in 2018, and had already done another $16.13 billion in trade through June 2019, a 12.51% increase over the same period last year. It is ranked 30th out of the nation’s 450 airports, seaports,( )

MANUFACTURING, TRADE & LOGISTICS INTERVIEW

Strong waters PhilaPort is riding a growth wave, strengthening its berth to accommodate the world’s largest vessels and unveiling a new $110 million terminal

Jeff Theobald CEO – PhilaPort What are some recent major accomplishments for PhilaPort?

Last year, we demonstrated remarkable growth of almost 10% on the container volume coming through the port. Over the past decade, our container growth has been 166%. We finished construction of one half of the Packer Avenue Marine Terminal, where we strengthened 1,500 feet of the berth. A continuation of an additional 1,500 feet of berth is underway and by the end of this year we will have a full 3,000 feet of new berth, capable of handle the world’s largest ships. We have completed a brand new $110 million state-of-the-art Auto Terminal- The SouthPort Auto Terminal. We then took delivery of two super-postPanamax cranes, which help to keep Philadelphia competitive in the market, giving a total of five new cranes. We are now starting the design work for a new 2,000-foot-long berth at the auto facility. This berth will be capable of handling two vessels at one time and will support the new terminal operations at Southport. Finally, we will start construction on additional warehousing space for our container business.

What is the status of the Port Development Plan?

We have already committed about $200 million of the $300 million funds we received from the government.

Most of the major projects in our development plans are already in process. We are conducting demo work on the container terminal to remove the older warehouses and design new warehousing capabilities.

We are designing state-of-the-art warehouses for both dry and refrigerated cargo to handle the increased volumes. The 110,000-square-foot vehicle processing center was completed in Summer 2019. This will allow us to be the major Hyundai and Kia distributor for all the Northeast and give us the capacity to go after

other original equipment manufacturers. This is the only auto facility above the100 year flood plain. This gives us a tremendous advantage over our competing ports especially as this relates to insurance.

What is the impact of the Delaware River Deepening Project on the port?

The project allows us to bring in bigger, deeper ships and many customers on the container side have already started to bring in deeper ships. That allows more cargo to be on the ship as it comes up the river and more cargo departing Philadelphia. It increases our capabilities, making it more attractive for shippers to come through Philadelphia because they can now maximize the asset that they’re bringing up or down the river. www.capitalanalyticsassociates.com

| 83

MANUFACTURING, TRADE & LOGISTICS OVERVIEW

Exports from PhilaPort totaled $4.6 billion in 2018

( ) and border crossings. Some of the port’s biggest trading partners in 2019 based on trade values in excess of $1 billion are South Korea ($1.5 billion), Australia ($1.37 billion), Saudi Arabia ($1.19 billion), and Germany ($1.09 billion). Brazil, New Zealand, Russia, Chile, Italy, and the U.K. are also major trading partners of the Port of Philadelphia, each with total trade exceeding $500 million. Among the fastest-growing trading partners to keep an eye on are Morocco (1,339% growth over 2018), Togo (276.28% growth), Ghana (260.95% growth) and Norway (171.68% growth).

In terms of product, PhliaPort’s top exports include petroleum gas; gasoline and other fuels; plasma, vaccines, and blood; scrap iron and steel; motor vehicles; plastic; medical instruments; copper waste; and fresh, frozen, or chilled pork. Overall, exports totaled $4.6 billion in 2018.

Top imports include motor vehicles; oil; medicine; frozen beef; gasoline; cocoa beans; grapes; fresh, chilled, or frozen sheep or goat meat; semi-finished iron products; and radioactive chemical elements. Imports totaled $24.8 billion last year.

Conspicuously absent from the list of the port’s top trading partners is China. The quick-rising economic powerhouse and erstwhile major U.S. trading partner has become the adversary in an ongoing trade war that shows no clear signs of ending. The Trump administration fired the first volley in the trade war by announcing a probe into Chinese intellectual property theft, from which followed several successive rounds of reciprocal tariff hikes by each side that have had a chilling effect on trade between the two nations and have impacted industries in both countries.

One salient example of how the battle has impacted the city is the story of Philadelphia Distilling, outlined recently in The Philadelphia Inquirer. The company typically ships 200 cases of its Bluecoat Gin per year to its distributor in Shanghai. The latest round of retaliatory tariffs from China includes a 25% tariff on gin. If this makes Philadelphia Distilling’s gin too expensive for the distributor, it may stop ordering.

84 | Invest: Philadelphia 2020 | MANUFACTURING, TRADE & LOGISTICS

In the last 10 years, PhilaPort has seen a 166% increase in container traffic.

That outcome would equate to the bottling crew’s loss of an entire day’s work.

That is just one story and there are likely others, but the silver lining for Philadelphia is its balance of trade: it is a much bigger importer than exporter. As a result, many economic experts contend that the trade war will not have too extreme an effect on global trade in Philadelphia.

State, local initiatives Promoting manufacturing in Pennsylvania is among Gov. Tom Wolf’s top priorities, as evidenced by the Manufacturing PA initiative. Manufacturing PA helps to connect Pennsylvania’s top graduate and undergraduate students with local manufacturers, thereby promoting the advancement of manufacturing and, in turn, spurring economic growth. In June 2019, the governor’s office granted $1.7 million in grants to 26 projects across the state that will foster the development of new technologies and processes it hopes will revolutionize the manufacturing industry.

These projects focus on innovation in advanced medical, energy, and consumer goods manufacturing, and include students from Philadelphia area research institutions such as the University of Pennsylvania, Temple University, Villanova University, Lehigh University, and Drexel University.

MANUFACTURING, TRADE & LOGISTICS OVERVIEW

Another push to boost the Pennsylvania economy and expand the manufacturing and logistics sectors involves bringing the entire Commonwealth into the future through universal broadband access. Highspeed internet has become a prerequisite for success in an increasingly information-based global economy, yet more than 650,000 Pennsylvanians still lack access to this vital tool. This critical need got the attention of the governor’s office, and led to the 2018 launch of Gov. Wolf’s Pennsylvania Broadband Investment Incentive Program, the first phase of which brought broadband access to 9,236 rural homes. The initiative allocates $35 million to ensure that access is expanded to cover all unserved Pennsylvanians.

Manufacturing Thanks to state and local efforts to promote manufacturing in Philadelphia, the region is now home to one of the largest concentrations of manufacturers in the country. More than 185,000 people are employed in manufacturing roles in Greater Philadelphia, and there are more than 5,500 distinct manufacturing establishments in the area, including operations of Merck & Company, Inc.; Johnson & Johnson; Lockheed

MANUFACTURING, TRADE & LOGISTICS OVERVIEW

Martin Corporation; Siemens Medical Solutions USA, Inc.; Bristol-Myers Squibb; GlaxoSmithKline; Pfizer; and Boeing.

Various aspects of the performance of the manufacturing sector in Philadelphia are tracked up to the current month by the Philly Fed Manufacturing Activity Index, which measures growth and contraction among manufacturing businesses in Philadelphia, New Jersey, and Delaware. This index is special in that it has historically proven to be an accurate measure of conditions nationwide and is closely watched by many experts outside the Philadelphia region. In August 2019, the Index measured 16.80, a five-point, 22.94% decrease from July’s strong performance of 21.80.

Breaking this figure down, the new orders index increased seven points, while the order shipments index decreased six points; the unfilled orders and delivery time indices both remained positive, reflecting higher unfilled orders and slower delivery times. There was an overall reported increase in manufacturing employment in August, but the current employment index decreased 26 points to 3.6 – the lowest since November 2016.

Although the figures may seem to indicate an industry in flux, the overall reading of 16.80 is still 3.80 points higher than August 2018 and significantly higher than the long-term average of 9.13.

PhilaPort Thanks in great part to its strong export-import traffic, PhilaPort is growing fast. For starters, the Port has seen a 166% increase in container traffic in the past 10 years, handling a record-breaking 600,000 20-foot-equivalent units (TEU) in 2018. In response to this constantly improving traffic, the port’s Packer Avenue Marine Terminal has received $300 million in public-private investment to modernize and expand its capacity. To this end, the port received seven super post-Panamax cranes, which enable the terminal to run entirely on electricity and produce no diesel emissions.

Other upgrades include strengthening and realigning a berth, removing warehousing to install the super post-Panamax cranes, and dredging the Delaware river to enable the entrance of larger ships into the port. With the upgrades already completed, the Packer Avenue Terminal is operating below capacity and boasts ship productivity of 140 gross moves per hour and turn-times of under 40 minutes, figures which are promised to improve with additional upgrades.

Yet another critical improvement is nearing completion: the deepening of a 103-mile stretch of 86 | Invest: Philadelphia 2020 | MANUFACTURING, TRADE & LOGISTICS

PhilaPort’s strategic location facilitates its reach of major retail distribution centers, manufacturers and automotive dealerships from New England to Virginia to Chicago.

the Delaware River navigation channel. The massive undertaking will deepen the navigation channel from 40 feet to 45 feet, which will allow it to accommodate larger ships up to 14,500 TEUs and enhance PhilaPort’s viability for international trade. The $400 million project was reportedly 99% done in December of 2018, providing more and larger ships with access to the port.

Other signs of the success and continued growth of PhilaPort include the resumption of Argentine beef imports kicking off at the port in 2019. PhilaPort is the largest importer of beef in the United States by volume, and PhilaPort worked closely alongside Holt Logistics to assist the Argentine Agricultural Ministry in getting the necessary approvals from the USDA to ship beef to the United States for the first time since 2001. Argentina expects beef imports to total 20,000 tons, the equivalent of 160 million quarter-pound hamburger patties. PhilaPort’s Tioga Marine Terminal was also selected by Shell as the import terminal for 10,996 pipes intended for use in the Shell Falcon Ethane Pipeline in Western Pennsylvania.

Yet, more can still be done, in particular with regard to Asia, said World Trade Association’s Antonucci in an interview with Invest: Philadelphia. “The Port of Philadelphia has traditionally been a true commoditycentric port and that’s our strength in trade and logistics. We are still focused around commodities but we must start working soon on getting a direct service from Asia. That would allow us to compete for more traditional consumer products like apparel,

MANUFACTURING, TRADE & LOGISTICS OVERVIEW

Mark Nikolich CEO Braskem America

accessories, and other durable goods. Philadelphia is increasing its prominence as a regional and international trade hub. A lot of credit goes to the leadership team at PhilaPort and the work they are doing in marketing the region’s trade and logistics sector.”

Philadelphia International Airport Along with PhilaPort, PHL also does a large volume of trade annually. The airport generated $13.84 billion in total trade in 2018, and has already done an impressive $8.39 billion in trade through June 2019, a 25.3% increase over its performance to June 2018.

PHL is ranked 56th out of 450 airports, seaports, and border crossings nationwide. The airport has three international trading partners with year-to-date trade over the $1 billion mark: The U.K. ($1.98 billion), Italy ($1.67 billion), and Germany ($1.03 billion). Other top trading partners include Switzerland, France, the Netherlands, Ireland, Austria, Belgium, and India.

Some of PHL’s highest-earning export commodities include medicines; plasma, vaccines, and blood; medical instruments; civilian aircraft and parts; cellphones; computers and computer chips; and electrical supplies. Top Philadelphia imports by air include medicines; plasma, vaccines, and blood; nucleic acids and salts; sulfonamides; medical instruments; vegetable alkaloids; aircraft engines and parts; and insulin, hormones, and steroids.

Like PhilaPort, PHL’s success in global trade is thanks in large part to its strategic location on the East Coast

What are Braskem’s areas of focus in Philadelphia?

In Philadelphia, we have three focus areas: workforce evolution, our local production facilities, and sustainability. Our production facility in the Philadelphia region resides in Marcus Hook. Over the last three years, we have increased the capacity of the Marcus Hook facility by over 25% creating dozens of additional jobs in the local community.

One of society’s evolving concerns is sustainability, especially around plastic waste. Ten years ago, Braskem built the first world-scale renewable feedstock plastics plant in Brazil. We have complimented that investment with numerous local initiatives to create solutions to adequately manage the life cycle of products containing plastics. Over the last 12 months, we have advanced recycling partnerships with the Philadelphia Eagles, Philadelphia Union and Mural Arts Philadelphia.

In an effort to progress our work environment and attract the best local talent, we are emphasizing workplace flexibility, digital transformation, and diversity and inclusion (D&I), which is one of the most relevant topics in todays’ evolving workforce. With our local community partners, we sponsor STEM and D&I programs to provide access to science and leadership programs in the Greater Philadelphia region.

What is your outlook for Philadelphia’s chemical and petrochemical industry?

The Philadelphia region will remain a key player in the national energy revolution due to its proximity to the Marcellus and Utica Shale Gas formation, one of the nation’s largest natural gas reserves in the world. This energy revolution has resulted in over $200B of U.S. chemical investments over the last five years. This local source of energy is cost competitive globally and will be the foundation that drives the petrochemical value chain in the Northeast for the coming decade. www.capitalanalyticsassociates.com

| 87

Matt Cleary Territory Manager Sage Glass/Saint Gobain

How does SageGlass impact the Philadelphia community?

We have numerous pilot and research projects in the region and around the world. In Philadelphia, for example, we donated glass for a long-term research study on the patient experience and healing benefits of natural light and views in the hospital environment.

This was a project from the Children’s Hospital of Philadelphia (CHOP) to determine if installing dynamic glazing, specifically electrochromic glazing, in pediatric inpatient rooms improved the environment for patients, their families and hospital staff. One of the findings of the study was that, in pediatric inpatient rooms retrofitted with electrochromic glazing, patients and their families felt they had more control over their environment, which helps improve the patient experience. This was a milestone for us because an amazing healthcare organization, CHOP, validated our products’ value and benefits. We also have a project coming online at One Bala Plaza that will be Philadelphia’s first smart glass curtwall. It is a five-story atrium facing Southwest that will be fitted with SageGlass. That’s been in the works for a couple years and it is finally coming to fruition.

What are some trends in the work you do?

A huge trend we are seeing in the office environment is open offices. Within that concept, sound disruption is a big issue. One of our largest brands in the United States is CertainTeed, which delivers innovative, highquality solutions for use in residential and commercial construction, including the improvement of interior acoustics. We are also seeing a high demand from industries such as enterprises and corporate offices, higher education, technology and science.

How is the company addressing climate change?

We recently made a bold move to limit the worst impacts of climate change by committing to net-zero carbon emissions by 2050.

88 | Invest: Philadelphia 2020 | MANUFACTURING, TRADE & LOGISTICS

between New York City and Washington, D.C. and easy access to I-95 and I-76, but it also offers certain facilities and services that give it an additional competitive advantage: it operates around the clock; it boasts 10,499- and 9,500-foot runways that can accommodate large cargo planes; and it has taken steps to increase its capacity for cargo shipping by purchasing a 135-acre lot that it plans to develop into an air-freight complex, thereby upping its capacity as a cargo port even further.

Trade policies With its concentration of manufacturing and status as a major trading port, Philadelphia is bound to feel the impact of international trade policies. In addition to the developing trade war between the United States and China, another policy that is expected to have a substantial effect on Philadelphia is the withdrawal of the United States from the Trans Pacific Partnership (TPP) and the ratification of the CPTPP by remaining members. America’s decision to withdraw from the TPP will likely increase the cost of doing business with CPTPP companies, and thereby hurt the logistics sector in Philadelphia and other hub cities while helping to expand China’s reform and opening up as the country makes changes to meet the partnership’s rigorous guidelines, leading to a likely increase in the volume of its trade with partners in Asia and the West (the CPTPP includes Canada, Chile, Mexico, and Peru as members) and, thereby, to a stronger China. For the time being, though, trade at PhilaPort and PHL has continued to grow.

Pharma Philadelphia’s numerous life science incubators, including The Navy Yard, University City Science Center, University of Pennsylvania, Children’s Hospital of Philadelphia, Jefferson Hospital, Drexel University, and The Wistar Institute, frequently produce medical and pharmaceutical breakthroughs and attract talent and investment in droves. The region’s pharma logistics industry is buoyed by the fact that more than 80% of the nation’s pharmaceutical companies are located two hours or less by car from Philadelphia.

Thanks to the region’s tremendous resources and advantages in this sector, it has been able to maintain significant growth. One of the biggest life sciences additions on the way is Discovery Labs, billed as the world’s largest life sciences coworking facility. The 200-acre facility will be located in the King of Prussia suburb, which is also home to a very large mall, and will be able to accommodate up to 3,000 healthcare, life sciences, and technology workers simultaneously.

MANUFACTURING, TRADE & LOGISTICS OVERVIEW

Discovery Labs will technically be born of renovations to GlaxoSmithKline’s former Upper Merion R&D campus, where professionals are already being invited to come work while the renovations are underway. The campus features not only ample seating and amenities that people have come to expect from posh coworking facilities like WeWork, but also the particular kinds of resources that life sciences workers will need, such as a 500,000-square-foot vector manufacturing center, 100,000-square-foot business incubator and laboratory, and a 250-seat auditorium.

Another hot spot for life sciences in Philadelphia is the Navy Yard, where the largest tenant is breakout pharmaceutical company WuXi AppTec. WuXi was one of the first companies to move in to the Navy Yard in 2004 with just 150 employees, but has since grown to more than 600 and occupying more than 380,000 square feet across four buildings in the Navy Yard. WuXi’s main focus is providing resources to pharmaceutical and biotech firms so that they can expedite biological research and drug discovery.

Challenges, innovations As an established manufacturing and logistics center,

PhilaPort and PHL are making facility and logistics improvements in response to the e-commerce disruption.

Philadelphia will need to reckon with one of the industry’s biggest disruptors: e-commerce. More people every year are choosing to buy more things online from all over the world. Since 2000, online sales in the United States have grown by 1,500% and now account for 9% of total U.S. retail sales. Philadelphia has all the resources and infrastructure in place to turn this disruption into opportunity.

The city’s strategic location between New York City and Washington, D.C., make it a major shipping destination. PhilaPort’s proactive improvements to its

Linda Mysliwy Conlin President World Trade Center of Greater Philadelphia

What were some major accomplishments of the World Trade Center of Greater Philadelphia in the last year?

We’ve had a very busy year. Our 2019 Bringing the World to Pennsylvania (BTW2PA) event was a success.

During this major event, we welcomed Pennsylvania’s Authorized Trade Representatives who provide market intelligence and essential information to our client and member companies to help them access customers, agents and distributors. These 15 representatives cover over 50 individual countries. Our 2019 BTW2PA event resulted in 170 one-on-one meetings which ultimately will generate millions of dollars in increased sales for participating companies. Another significant highlight was the completion of a special agreement with our sister organization World Trade Center of Querétaro and Philadelphia International Medicine. The agreement will help us to build important scientific and commercial ties.

Where are the challenges facing Philadelphia’s trade sector?

The global economy has been faced with months of uncertainty as we renegotiate trade agreements like NAFTA, which now is the US/Mexico/Canada Agreement, or USMCA. Companies working in the UK and Europe in general were facing changes because of Great Britain’s proposed exit from the European Union and its repercussions. Another challenge is the application of steel and other tariffs, which is changing the nature of our relationship, not only with key trading partners like Mexico and Canada but also with China. Due to these challenges, we find ourselves being that much more of an important resource for the latest updates in trade policy, trade relationships and how they impact our companies in growing their global business. As we are facing an uncertain time in terms of the changing nature of our trade relationships with major trading partners, we have sought to make sure that we always are an important source of information and guidance for our companies.

90 | Invest: Philadelphia 2020 | MANUFACTURING, TRADE & LOGISTICS

terminals and the Delaware River Navigation Channel dredging to accommodate even larger ships are examples of the region preparing for increased shipping and logistics business as a result of e-commerce.

Similarly, PHL has announced plans to develop a massive air-freight complex that will greatly expand its capacity to meet domestic and international air shipping demand. Once shipments arrive, the proximity of PhilaPort and PHL to I-95 and I-76 facilitates same-day delivery by truck to virtually anywhere on the Eastern Seaboard. “The biggest advantage Philadelphia has is its strategic location. We are at the epicenter of a region that can reach 40% of the U.S. population in a day without the traffic and congestion you have north of us. In addition, the port has an excellent infrastructure when it comes to service providers, terminal operators and carrier services,” said Antonucci of the World Trade Association.

Another important advantage in Philadelphia is the rate at which the city’s vast and diverse labor pool is expanding. There are 2.9 million working adults in the region immediately surrounding Philadelphia, and 650,000 in the metropolitan area itself. One of every six works in the industrial segment, and 30% of the city’s population consists of millennials. This means that Philadelphia has an ample supply of both e-commerce consumers and workers qualified for jobs in the segment.

Looking ahead Philadelphia is already a manufacturing, trade, and logistics powerhouse, and is taking constant steps to not only remain competitive, but to improve its position. The region is home to two major ports, PHL and PhilaPort, that conduct a large quantity and high value of international trade. Both ports are actively undertaking millions of dollars of upgrades to ensure that they are able to attract and accommodate evergrowing amounts of trade fostered by the increasingly global economy and the proliferation of e-commerce.

Along with its ports, Philadelphia’s population of qualified, working-age consumers also continues to grow, and area employers are hiring. Figures from August 2019 indicate that the manufacturing sector has experienced overall growth compared with the same time last year, despite a bit of contraction from the previous month.

There are certainly challenges, too. Fears of an economic recession still loom and the trade war with China continues to rage, which has negatively impacted some Philly-area manufacturers and leaves the rest on edge. The long-term impact of the Trump administration’s decision to pull out of the TPP remains to be seen, but may lead to an even stronger economic rival in China.

Infrastructure & Utilities: It’s Old World charm aside, Philadelphia has embarked on an ambitious path toward becoming a clean city. It eyes an 80% reduction in greenhouse gas emissions with a heavy emphasis on solar and natural gas, while implementing plans to improve water, beautify neglected neighborhoods and march into a smart future.

www.capitalanalyticsassociates.com

| 91

Cleanup time: An old dog learns new tricks as Philadelphia embraces clean energy and emerging tech to become a smart city Philadelphia is an old city, which is part of its charm.

Row houses and cobblestone streets are typical in parts of the historic city. Behind the quaint exterior, however, is a modern infrastructure that delivers water and other utilities across the city, which is working to solve present issues while looking to a cleaner future that includes smart city technology.

Developing solutions to rid the city of pollution and reduce its reliance on fossil fuels are among Philadelphia’s priorities, in tandem with its utilities providers. The area’s major water utilities, Pennsylvania American Water (PAW) and the Philadelphia Water Department (PWD), are actively engaged in rehabilitating their facilities and mitigating any negative impact on the region’s ecosystem.

Philadelphia Gas Works (PGW) and PECO, the largest energy providers in Philadelphia, are attempting to pivot to cleaner energy sources, in keeping with the city’s goal of reducing greenhouse gases.

Further down the road, Philadelphia envisions the broad integration of advanced technologies into its infrastructure that will make resources like signal lights and bridges “smarter.” It has mapped out the plan and its implementation is already underway.

92 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

Ecosystem The first step in revitalizing a suffering infrastructure is to ensure clean water. To that end, the PWD recently implemented Green City, Clean Waters (GCCW), a 25year plan focused on revitalizing Philadelphia’s creeks and rivers, reducing water pollution, and beautifying city neighborhoods by introducing a greener vegetated landscape.

GCCW has already had an impact on the community through a variety of Green Stormwater Infrastructure (GSI) projects. GSI consists of approaches that mimic a natural hydrologic state in an urban context through innovations such as residential rain barrels and downspout planters, complex bioretention swales, rain gardens, tree trenches, green roofs, and urban wetlands.

As of April 2019, 100 publicly-funded GSI projects have been completed throughout the city, with more than 300 additional projects planned.

The projects have also had meaningful indirect benefits. For example, in 2018, the total number of crimes that occurred within a quarter-mile radius of completed vegetated GSI projects was approximately 10% lower than it would have been had GSI not been built. This reduced crime has also saved the city as ( )

INFRASTRUCTURE & UTILITIES INTERVIEW

Grid readiness Preparing the grid for a future that will include solar, other renewable energy sources

Mike Innocenzo President & CEO – PECO How is PECO preparing the grid for an increase in renewables and customer-generated energy?

We are working to make it significantly easier to do business with us around renewables. Applying for service for solar distributed generation requires a much different approach than normal, routine service.

We have developed a specialized group to provide consistent and cost-effective support for our customers during the process of integrating solar or renewable distributed generation. We are modernizing the grid to make it more reliable and resilient, but also to improve its readiness for distributed generation, solar energy and the overall increase in electrification. As electric vehicles and charging stations become more prominent throughout our system, it is important that we stay a step ahead. We have continued to increase investments focused on improving reliability and customer service, safety and security, but we also are focusing on investments to prepare the grid for what we expect to be a very different energy environment in the next 10 to 20 years.

How are you strengthening the grid to protect against the current effects of climate change?

We are seeing more frequent, severe and expensive impacts from storms and greater customer expectations. This requires us to take a new look at reliability and resiliency. We are building new infrastructure, replacing old infrastructure and adding more distribution automation to provide us with more options and capabilities whenever there is an event on the system that impacts customers. For example, we are strengthening the grid – our poles and wires and substations – so that the system can sustain higher winds and tree damage. We are also working with the Pennsylvania Horticultural Society and several communities around tree management,

from tree removal and pruning practices, to ways to replenish and replant trees across our region. And our parent company, Exelon, continues to be a national leader in the discussion around climate change and decarbonization.

What is PECO doing regarding diversity and community impact?

Our focus on diversity, inclusion and commitment to our community are important areas for us as a company. We were named by Forbes as one of the Best Employers for Diversity 2019 and Best Employers for Women 2018. We continue to increase the diversity of our workforce; over 50% of our hires last year were diverse and almost two-thirds of our executives are women or people of color. www.capitalanalyticsassociates.com

| 93

INFRASTRUCTURE & UTILITIES OVERVIEW

( ) much as $337 million in enforcement costs. The 170,000 Philadelphians living within a quarter-mile radius of GSI projects also now have increased access to attractive outdoor spaces where they can engage in active, healthy activities, thereby increasing their own physical well-being and saving a combined $50.1 million in healthcare costs in 2018.

Parks, the traditional urban greenspaces, are another area of focus. Philadelphia’s parks number more than 300, but a 2007 study found that the city’s robust parks system was suffering from neglect and decay. In 2019, Mayor Jim Kenney launched the Rebuild program, a $500 million campaign to revitalize the city’s parks, public recreation centers, and libraries, which is roughly double the city’s previous spending on parks and is largely funded by proceeds from the city’s soda tax. Rebuild’s 25 active projects have had some tangible impacts: Philadelphia’s Parkscore, a rating ascribed by the national nonprofit Trust for Public Land, rose 11 spots to finish 19th out of the 100 largest cities in the United States. However, there is still a massive backlog of projects, and many parks continue to suffer from decay and litter. Some communities have even taken it upon themselves to pay for park repairs and improvements.

94 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

More than 90,000 Pennsylvanians work clean energy jobs.

INFRASTRUCTURE & UTILITIES OVERVIEW

Delaware and Schuylkill Rivers more susceptible to flooding. To combat these threats, the PWD created the Climate Change Adaptation Program (CCAP). CCAP remains apprised of the latest scientific information on climate change and works with all PWD divisions and other organizations, such as the Climate & Urban Systems Partnership, to address the impacts of climate change and adapt to them by implementing proactive and cost-effective strategies.

Another plan that warrants mention is Philadelphia 2035, an aspirational vision of the city Philadelphia wants to be in 2035. Philadelphia 2035 consists of a series of projects organized into one of three cohesive themes: Thrive, Connect, and Renew. Thrive focuses on neighborhoods, economic development, and land use; Connect is concerned with infrastructure and public transportation; and Renew is dedicated to the environment and historical preservation.

Climate change Philadelphia is already enduring the impacts of climate change. For instance, the 12 hottest summers on record in Philadelphia have all occurred since 1991, and four of the seven hottest were in the last decade. Moreover, when there is precipitation, it tends to be heavier, with the two rainiest years ever recorded belonging to the last decade, and the two snowiest winters blanketing the city during the same period.

All these changes have appreciable effects on Philadelphia’s environment, infrastructure, and utilities. For example, higher temperatures make source waters hotter, which can be detrimental to both aquatic wildlife and the water treatment process. Nor is Philadelphia immune to the effects of rising sea levels, which threaten to push the salt line upstream to Philadelphia’s drinking water intakes, and make the

Utilities: Water When not properly managed, accumulated rainwater can damage streets and rooftops and, in the process, become contaminated before flowing into the nearest storm drain and, eventually, into local streams and rivers. Additionally, urban water pollution and industrial runoff contribute to the degradation of local waterways and jeopardize the water supply. PWD is committed to addressing these issues through programs like the CCAP and GCCW, which also looks to restore area waterways through streambank stabilization and trash eradication, and by maintaining up-to-date assessments and proactive plans for protecting area watersheds through the Office of Watersheds.

The Delaware River Watershed Initiative is another ambitious, proactive attempt to improve and protect the waterways of Philadelphia. These waterways include the Pennypack, Tookany, and Wissahickon creeks, which flow into the city from the northwest, and the Cobbs and Poquessing creeks that bound the city to the southwest and northeast, respectively.

Combined, these watersheds span 193 square miles, 61 square miles of which are within the city of Philadelphia itself, and all of which are within the sixth-most populous metropolitan area in the country.

Nearly all their reaches are on Pennsylvania’s list of impaired streams. The initiative’s main goals consist of protecting existing natural land and developing green conservation and recreation spaces, as well as restoring degraded waterways. The initiative and its partners have already restored various riparian buffers, stabilized or restored stream banks, and set up monitoring of 108 sites for improvements in water quality.

Finally, PAW is also working to improve services for its customers. In 2019, the company announced that it will be investing $8 million into upgrading elevated and groundwater storage tanks in 15 municipalities in the Philadelphia region. This rehabilitation project comes on the heels of the company’s $6.6 million investment to upgrade 10 tanks in 2018. PAW will www.capitalanalyticsassociates.com

| 95

INFRASTRUCTURE & UTILITIES OVERVIEW

PAW will invest $8 million to upgrade elevated and groundwater storage tanks. inspect, sandblast, and repaint the tanks to prevent rusting and contamination.

Utilities: Electricity The city of Philadelphia recently launched “Powering Our Future: A Clean Energy Vision for Philadelphia,” which is a plan for reducing the city’s greenhouse gas emissions by 80% by 2050 from 2006 levels. One pillar of the plan is cleaner power generation, including citywide solar by 2030. Some, however, worry that this goal may be too ambitious. The major electricity supplier in Philadelphia, PECO, is only required to increase its use of solar energy by 1%. Members of the community marched in early 2019 to pressure PECO to boost its solar commitment by 20%, and also to create additional green energy-linked jobs in the region, by 2025.

PGW, another major energy provider in Philadelphia, is also seeing some pushback for its plans. The company recently received preliminary approval from the Philadelphia City Council to build a $60 million liquified natural gas (LNG) facility, Passyunk Energy Center, in South Philadelphia. The new facility will generate up to $4 million per year in revenue and expand the company’s energy production capacity.

However, many are protesting the construction of a facility that will produce LNG, a form of fossil fuel, despite the city’s renewable energy goals. South Philadelphia residents have also expressed misgivings about its construction in a neighborhood they say is already unfairly burdened with similar industrial operations, including a large oil refinery that exploded in June 2019. PGW contends that the project will reduce carbon emissions and air pollution overall, and Mayor Kenney is pushing to have solar panels added to the facility to further reduce its carbon footprint.

Utilities: Alternative energies If approved, the solar power component of the 96 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

The Greater Philadelphia region is a world-class epicenter for energy production and distribution.

Passyunk Energy Center will be the largest municipal solar project in Philadelphia. This will help to increase alternative energy production in the city and create more clean energy jobs, an employment segment that has grown by 60% in Pennsylvania over the last five years. In fact, more than 90,000 Pennsylvanians already work clean energy jobs. This figure is more than twice the total number of employees in Pennsylvania’s fossil fuels sector, which had 43,306 jobs in 2019.

The city is also making strides toward its goal of running on 100% renewable energy thanks to a major commitment to a new solar energy facility slated for construction in Adams County. The new 70 megawatt facility will be Pennsylvania’s largest, sitting on a 700acre site in Straban Township near Gettysburg. When it is completed and begins delivering electricity in the fall of 2020, the city of Philadelphia will be its first

INFRASTRUCTURE & UTILITIES OVERVIEW

and biggest customer. Thanks to a power purchase agreement signed by Mayor Jim Kenney, the city will purchase all of the power produced at the new facility for the next 20 years, which will account for about 22% of the city government’s annual electrical needs. In addition to taking a leap toward its stated renewable energy goals, the city government also lauded the deal as helping to increase the state’s supply of available jobs in the renewable energy sector.

Clean Energy Vision roadmap Despite some pushback regarding the scale of its clean energy plan, the city is powering forward. Kenney’s clean energy roadmap outlines current and expected trends in the city’s energy system, and identifies longterm infrastructure-related opportunities aimed at reducing the city’s carbon footprint and improving its renewable energy production.

The city is counting heavily on solar energy, new and updated building codes, and increased transit options to significantly reduce its citywide carbon emissions.

Local industry, commercial and residential homes, and the local electricity system that powers them make up more than 80 percent of Philadelphia’s carbon footprint. To meet its goals, the City of Brotherly Love wants to leverage the sun as one of its major sources of renewable energy. Nearly half of all Philadelphia rooftops are suitable for solar generation, according to a study by Penn State University. Currently, the Philadelphia Energy Authority is promoting its Solarize Philly initiative, a group purchasing program designed to help Philladelphians install solar panels in their homes. More than 2,100 households have expressed interest in solarizing their homes. Additionally, the ( )

®

oundtable:

Energy landscape Leading voices in the energy industry discuss the impact of new technologies on the energy sector and what companies are doing to improve infrastructure and deliver the service of the future, including natural gas and renewables.

Joel Crouse

Director Stanwich Energy Advisors

What are your most in-demand services?

It is an interesting time in Philadelphia and Pennsylvania’s energy sector. We have been providing many procurement services and strategies to fit our clients needs outside of the traditional fixed price products options. We have been focusing on deregulation in Pennsylvania and its impact on how people buy power. For example, we are advising our clients on how to reduce their carbon footprint and we have a new technology available to aid the push toward green power. We are addressing the closure of the Three Mile Island nuclear plant and the effects on our clients. We are figuring out ways to forecast new energy sources and see what the future of energy looks like in Pennsylvania given the big push for cleaner, green energy.

In what areas of your business is technology playing a role?

We are focusing on a new technology around demand/ response. We identify the peak days for the PennsylvaniaJersey-Maryland (PJM) grid and then look at demand/ response to curve the energy. With our channel partners, we then prove on-site availability, whether it is with a battery or a generator, to help satisfy demand when the grid is under the most stress. We are using that high technology to help our clients shed load so they can achieve a better capacity tag. People in Philadelphia are starting to see what is going on in surrounding states, such as New York and Mayor Bill de Blasio’s new green deal. In anticipation of what may happen in Philly, we started to look at Renewable Energy Certificates (RECs) for clients that want to go greener but do not want to put up a big upfront investment.

98 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

Chuck Hurchalla

President Evolution Energy Partners

Which of your services are seeing the most demand?

There is high demand in the commercial, industrial and institutional sectors for our energy efficiency and energy procurement services. For example, commercial real estate is one of our largest and continuously growing customer segments; particularly hospitality, office, multifamily, senior living and data centers. Regardless of industry though, we address inefficiencies across our customers’ mechanical, HVAC and lighting systems.

To what do you attribute this demand?

The opportunities in Philadelphia’s energy sector continue to grow rapidly for a few important reasons. First, businesses and institutions are increasingly recognizing the need to establish and then accomplish sustainability goals to address their corporate environmental concerns and the environmental concerns of their customers.

Second, organizations’ decision making processes around energy have historically been, and still are, based on the economic benefit derived from those decisions. As utility costs and related charges continue to increase, the financial bottom lines of businesses and institutions are becoming more and more sensitive to utility rates and energy consumption. Understanding that the utility cost center is one of the larger line items on an organization’s income statement, it becomes obvious as to why more and more companies and institutions are focusing on increasing energy efficiency and reducing their energy spend. Lastly, Philadelphia is quickly moving forward with various energy regulations that will require property owners to benchmark their energy usage and to improve their energy efficiency.

INFRASTRUCTURE & UTILITIES ROUNDTABLE

Mike Starck

Vice President and General Manager NRG Retail East division

How will the acquisition of Stream Energy’s retail electricity and natural gas businesses impact NRG? The acquisition of Stream Energy helps us expand our natural gas footprint. It will also add about 450,000 customers to NRG’s portfolio. We have a multibrand strategy, which includes NRG, Green Mountain Energy, Reliant Energy and XOOM Energy, and now Stream Energy. It will be a great addition, especially with their natural gas expansion.

What impact are new technologies having on the development and administratrion of environmental energy solutions?

The technology that we have seen on our commercial and industrial side is focused on demand response, price stability and budget management. Energy is one of the highest cost items for small businesses and commercial and industrial companies. We work with our clients to provide them with options around price reliability and risk products. We provide them with the tools to manage their expenses and the costs associated with their energy usage. Through technology, we help drive demand down and help reduce costs when the price is high in the market.

We are also figuring out additional ways to engage with our customers and provide them with options that they want. We also have a relationship with Google and recently launched our Speak & Play plan in Philadelphia.

We are engaging with our clients on usage management and figuring out the types of innovative products they are looking to integrate into their daily lives and their consumption of energy.

John Walsh

CEO UGI Corporation

What is UGI doing to maintain and improve the region’s infrastructure?

We are involved in a significant infrastructure investment program aimed at improving both our natural gas and electric facilities, which are operated by UGI Utilities, Inc., our regulated natural gas and electric utility. Part of our investment focuses on replacing aged infrastructure with contemporary materials. Another component of our investment is driven by increased customer interest in converting to natural gas. That interest corresponds with the development of huge natural gas supplies adjacent to us within Pennsylvania’s Marcellus Shale formation. In our UGI Energy services midstream business, we are building and operating pipelines and gathering systems that bring the new Marcellus Shale gas supply to our customers and to customers across the region. We also are investing in expanded liquified natural gas facilities.

How do you educate and support your clients in the transition to natural gas and renewable energies?

We constantly strive to improve our communications about investments in our system, about new-use technologies, and about our commitment to the safe and reliable delivery of sustainable energy services to our customers.

We continue to provide residents in the communities we serve with the opportunity to connect to our system and to convert to clean-burning natural gas. Every year, we convert approximately 14,000 homes from other forms of energy – principally fuel oil – to clean-burning natural gas.

Given the current cost of fuel oil, we have been able to help residential customers achieve anywhere from $1,000 to $1,500 savings a year in energy costs. www.capitalanalyticsassociates.com

| 99

INFRASTRUCTURE & UTILITIES OVERVIEW

Clean Energy Vision calls for 80% of rooftops to produce clean electricity by 2050. ( ) city has begun solarizing city-owned buildings, such as the Water Department’s Southeast Water Pollution Control Plant, and is studying opportunities for further solar generation on municipal rooftops and other city-owned spaces. The city also plans to take advantage of solar generation opportunities in other parts of the city, including on open land, vacant parcels and parking lots. Many of these solar installations could be large, privately-owned projects or neighborhoodserving community solar installations.

Kenney’s plan calls for 80% of Philadelphian rooftops

100 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

to produce clean electricity by 2050. To that end, the city is working to update and adapt new building codes to create energy-efficient homes and businesses. The new and updated building are expected to become more energy-efficient through the year 2030, with all renovations and completed constructions up to code by 2050.

Part of the Clean Energy Vision includes addressing car-related carbon emissions. As of 2014, transportation contributed 17% of Philadelphia’s citywide carbon emissions. In 2018, the Office of Transportation, Infrastructure and Sustainability (oTIS) rolled out its CONNECT plan, which prioritizes safety, equity, and infrastructure changes to help reduce transit-related carbon emissions. The CONNECT plan will focus on managing congestion and parking, paving worn-out roads, updating the city’s truck network, and working with local organizations to establish a pathway to further electrification of the transit fleet and increase greened acres from new transportation projects. By 2025, Philadelphia is expected to have established sustainable, dedicated funding to support capital improvements, maintenance, and operations of green transportation projects. Through its infrastructure-( )

INFRASTRUCTURE & UTILITIES INTERVIEW

Radical change Three forces driving changes in the energy industry: technology, natural gas, cleaner energy sources

Craig White CEO – Philadelphia Gas Works The energy space is changing rapidly and radically.

How is PGW responding?

There are three main forces driving significant change right now, and we’re moving to take advantage of the opportunities they offer. Technological advances are helping to reduce consumption, support energy resilience, and promote a cleaner environment.

An abundant supply of natural gas is driving down costs and accelerating the move away from coal, oil and diesel, which opens new markets. Demand for cleaner energy is fueling loud messaging and countermessaging and is pushing us to refine and reinforce our value proposition. We see opportunities to thrive in this market by expanding our LNG operations, enhancing our Combined Heat and Power initiative, leading local micro-grid development and updating our customer retention systems.

How have the needs of your clients evolved over the last three to five years?

The days when customers cared only about cost and reliability are long gone. Today’s customers are savvy and they expect more. That means allowing them to look deeper into how we deliver the energy they need.

It also means sharing better info on monthly charges and answering questions about everything from our environmental impact to our community support programs. Utilities today are far more focused on customer experience, customer churn and lifetime customer value.

They have to be – people today are more empowered and engaged, and have greater choice and flexibility in their energy provider. That’s why, for instance, we’re upgrading our digital customer options, including the launch of our Worksites page so people can see where we’re working, an updated bill analyzer so customers can assess their energy use, and text-to-web systems so eligible customers can apply for special programs.

How is technology impacting the way companies develop and administer environmental energy solutions?

The need to be better stewards of our environment is clear. Companies no longer wonder if they should consider the environmental impact of their energy solutions, they do it as a matter of course.

Smart metering, distributed generation, the rise of renewables, fuel cells, micro-CHP and more, are all driven by technological innovations that themselves are influenced by energy consciousness, demandside management and environmental concerns. Here in Philadelphia, for instance, PGW is involved in the Greater Philadelphia Energy Action Team, which unites technologists, energy startups, environmental advocates, utilities and others in order to facilitate the exchange of ideas, insights and experiences. www.capitalanalyticsassociates.com

| 101

INFRASTRUCTURE & UTILITIES OVERVIEW

Tricia Marts Director of Accounts Management– Veolia North America We have recently started a partnership with Maxi-Therm and Practical Steam. Maxi-Therm is a heat exchange system that is 95 percent more efficient and also more sustainable. It is a closed loop, so there is no ventilation, and it decreases energy costs by 8 percent.

We can also offer more competitive rates with these systems, which is something our customers want. Over all we believe this will be a very beneficial partnership in Philadelphia. While Veolia as a company does many different things, Veolia Philadelphia focuses solely on steam.

Part of our strategy for 2019 is to bring industrial, environmental and wastewater services to the Philadelphia market. We are a much larger company than people in the market realize, and steam is just one of our many services.

( )-related strategies, the CONNECT plan seeks to increase average bus speed by 5 percent, transit ridership by 10 percent, and bike-sharing trips by 100 percent and those taken by minority or low-income populations by 120 percent among transit-related improvements by 2025.

All in all, Philaldephia is taking climate change seriously and has long-term, infrastructure-related initiatives that aim to reduce the carbon footprint and be a standard for other major metropolitan cities to follow.

Philadelphia 2035 Another city initiative is focused on the year 2035.

Much like the Clean Energy Vision, the Philadelphia 2035 plan, sponsored by the Philadelphia City Planning Commission, aims to provide a clean, equitable, and healthy community for all residents spread across the city’s 18 planning districts.

Separated in two phases, and developed with over 100 community meetings worth of input, Philadelphia 2035 is a comprehensive plan for the city’s development and growth.The first phase, approved in 2011, established citywide planning goals. For the second phase, the planning commission created individual plans for 18 planning districts that detail recommendations for economic development, transportation, land management, historic preservation and more. The plan, focused on citywide and individual district development, aims to thrive, connect, and renew.

With an additional 100,000 residents and 40,000 jobs expected to come to Philadelphia by 2035, the region is poised for further growth. The plan places a keen 102 | Invest: Philadelphia 2020 | INFRASTRUCTURE & UTILITIES

focus on economic development via a public-private investment that aligns with the plan’s Citywide Vision and District Plans. From an infrastructure standpoint, developers are expected to understand and adhere to the city’s development priorities and goals when identifying areas and neighborhoods suited for new development.

The same goes for residents and business owners, who are expected to verify if a proposed development is in line with the Philadelphia 2035 plan, as well as register for a Citizens Planning Institute. Per the plan, public administrators are tasked to protect constituents from unwanted land uses, strengthen neighborhood centers, and maximize the return on public investments.

Philadelphia 2035 also seeks to connect residents to more efficient, convenient transit options. The plan complements the Clean Energy Vision, as it too calls for increased transit options as a means to reduce the city’s carbon footprint and improve the conditions of worn out roads. The plans aims to restore subway stations throughout the city, transform the existing trolley infrastructure with energy efficient vehicles, and develop more transportation projects in districts and corridors that can support future land development.

In addition to setting a standard for increased renewable energy efforts, Philadelphia 2035 aims to preserve and renew its historic sources. From increased open space to historic preservation, Philadelphia wants tourists and residents alike to enjoy the centuriesworth of rich American history rooted in its foundation while making positive health, social and economic improvements in the process. Known for its rivers, the plan’s Citywide Vision calls for improved access

INFRASTRUCTURE & UTILITIES OVERVIEW

to the region’s waterfronts by transforming land uses and pedestrian accessibility along rivers, such as the Delaware and Schuylkill rivers. The transformation of the waterfronts will see the establishment of water taxis and ferry services to transport passengers to the region’s waterfront activity centers. Philadelphia is also known for its historic buildings and properties. The plan calls for a robust preservation and innovation of culturally, historically, and architecturally significant buildings, sites, and districts. The plan aims to revamp the Neighborhood Conservation District program based on preservation principles that include commercial properties. New development is to be compatible with the historic district guidelines and the city plans to promote tax incentives for rehabilitation of locally designated resources, among other infrastructure-related goals.

Telecommunications In early 2019, Philadelphia announced the roadmap for a massive smart city overhaul called SmartCityPHL. The plan includes the integration of emerging smart city technologies with Philadelphia’s existing infrastructure and resources, such as its streetlights, bridges, and programs like StartupPHL. The program will be

Philadelphia 2035 plan focuses on development through publicprivate investment. overseen by a 20-person advisory committee consisting of representatives from private, public, university and community-based organizations. The committee will establish a policy and infrastructure foundation, create a process for engagement and partnership, and support the implementation of relevant projects with funding.

One of the hallmarks of SmartCityPHL is its local focus. It recognizes that for Philadelphia to have the best future outcomes, its smart city improvements must be catered to its unique needs and the needs of its people. One such catered project is a multilingual

INFRASTRUCTURE & UTILITIES OVERVIEW

‘Pitch+Pilot’ plan will allow residents to call for smart solutions, receive rapid reply. voice platform that will provide easier access to city services for bilingual residents, and another is the open call for innovations called “Pitch+Pilot” through which residents would be able to call for smart solutions and the city could rapidly respond.

Another upgrade that will help bring Philadelphia into the future is the installation of wireless infrastructure that will support 5G, the next generation of wireless service. Wireless providers have already started to install small cell antenna boxes on lamp posts around the city, which boost cellphone coverage on existing networks.

There is some concern that the 1,824 small brown boxes may pose health risks, and others simply consider them an eyesore. To minimize the proliferation of small cell antennas, the city has asked wireless providers to colocate their respective antennas.

Refinery fallout One significant setback for the city was the Philadelphia Energy Solutions (PES) refinery explosion in June. The damage at the site was so extensive that it will not be

possible for operations to continue there, resulting in more than 1,000 PES employees losing their jobs. While this is unfortunate for the workers, environmental activists and South Philadelphia residents welcome the closure of the refinery, which was the largest single source of particulate pollution in Philadelphia.

A question remains, however, about what to do with the site now that it will no longer operate as a refinery under PES. Given the site’s long history of industrial use, it will not be feasible to convert it into greenspace or any other kind of recreational use due to associated health risks. As such, the site will almost certainly have to continue as an industrial park. However, there is still hope of establishing a renewable energy plant at the location.

Looking ahead The city of Philadelphia and the utility companies operating within its jurisdiction are actively working to provide better services to city residents while mitigating their negative impacts on the environment.

The Philadelphia Water Department embodies these efforts through its establishment of the GCCW initiative and the CCAP. These programs envision a Philadelphia in which green stormwater infrastructure is cultivated and waterways are rehabilitated and protected.

The city is also committed to a reduction of greenhouse gases by 80% by the year 2050 as part of its Powering Our Future plan. This plan coincides with initiatives by PECO, PGW, and other providers to rely more on natural gas and solar power. Finally, the city will begin to implement a series of short- and long-term smart city improvements to help bring Philadelphia’s infrastructure into the future without sacrificing its Old World charm.

Banking & Finance: With 125 bank and 190 credit union headquarters, Philadelphia’s banking and finance sector has rebounded handsomely from the severe hit it suffered during the Great Recession. It accounts for about 1,500 new jobs a year and is the third-largest target sector in the city.

But the challenge of another recession means further consolidation could be in the industry’s future.

www.capitalanalyticsassociates.com

| 105

Great rebound: Since hitting a low during the 2008 recession, Philadelphia’s bankers are back, creating jobs and facing a digital future Philadelphia has a long history as a hub of banking and finance, and today it is home to the headquarters of more than 125 banks and 190 credit unions. The business and financial services sector is the third-largest target sector in Philly and accounts for 112,000 jobs - 16.8% of total employment in the city. Although it was among the hardest hit by the Great Recession and contributed substantially to Philadelphia’s net job loss between 20062016, it has since rebounded significantly and has added roughly 1,500 jobs per year since 2013. The jobs created are also competitively high-paying at an average salary of $118,000 annually, making it the second-highest paying of target sectors present in Philadelphia.

Some of the notable banking institutions headquartered in the Philadelphia metropolitan area include WSFS Bank, Police and Fire Federal Credit Union, and American Heritage Credit Union. The area boasts an enormous number of bank branches, around 3,850 in all, which are associated with 225 credit unions and 195 banks from the local region and beyond.The city is also home to The Federal Reserve Bank of Philadelphia, which has a hand in designing and implementing national monetary policy and also supervises banks and bank holding companies.

106 | Invest: Philadelphia 2020 | BANKING & FINANCE

Competitive landscape Competition is fierce among banks at all levels, and this is before factoring in changes in regulations and technology that are upending established ways of doing business. Banks, like community lender Centric Bank,must find ways to differentiate themselves, says Senior Vice President and Main Line Market Leader at Centric Bank Christopher Bickel. “Centric Bank is a full-service, independent community bank that focuses on commercial banking, primarily for smalland medium-sized businesses. A third of our portfolio can be found in the Pennsylvania, South Jersey, and Delaware markets. The banking sector is flooded, and gives us a huge opportunity to demonstrate to this market that we have tremendous value to bring to them. The personal attention and concierge banking solutions we offer our customers is uncommon in today’s banking world.”

One salient sign of how stiff the competition is in Philadelphia is the disparity between the performance of large and small credit unions. Across all of Pennsylvania, credit unions hold about $50 billion in combined assets, but $36 billion of that is consolidated in the largest credit unions. This matters because

BANKING & FINANCE OVERVIEW

smaller credit unions – those with less than $35 million in assets – saw slow loan growth from 2018 to 2019 of 4.46%, while the largest institutions with more than $500 million enjoyed loan growth of 11.3%. The same trend holds when looking at returns on assets (ROA), with the smallest credit unions getting only 0.4% ROA and the biggest posting ROA of 1.07%.

Another damning figure is that the largest institutions saw membership increase by 6%, while the smallest saw it shrink by 1.8%. Fortunately for Philadelphia credit unions, 15 of the 27 institutions with more than $250 million in assets across the entire state of Pennsylvania are located in the City of Brotherly Love, and some of the best ROA can be found in local credit unions such as Philadelphia’s Police & Fire Federal Credit Union (1.4%), the Philadelphia Federal Credit Union (1.18%) and Fort Washington’s TruMark Financial Credit Union (0.99%). Consequently, while many credit unions in the state struggle with ROA and asset growth and are more often forced to consolidate, Philadelphia remains a relative bastion of strong performance.

The merger of banks and other financial institutions is another strong indicator of the level of competition

Financial services is the second-highest paying target sector in Philadelphia. within the industry, and there is no shortage of M&A in Philadelphia. Moreover, because of an overall decline in bank stock prices and adverse reactions to East Coast merger announcements, some experts predict that banks looking to sell to or to merge with larger competitors may be forced to accept deals for slightly less money. When you factor this into the looming and much-discussed possibility of a recession, potential sellers will want to try and make deals before it’s too late. Such factors and forces have already cut the number of local Philadelphia banks from 130 to 90

BANKING & FINANCE OVERVIEW

More than 125 banks and 190 credit unions are headquartered in Philadelphia.

over the past 15 years, and as technology continues to increase in sophistication and in terms of the cost of keeping up, the consolidation trend is expected to continue and probably increase in speed.

Many of the banks likely to purchase institutions in Philadelphia are large, out-of-state institutions and others from the center and western parts of Pennsylvania, including Community Bank System from DeWitt, New York, which holds $10.6 billion in assets; Fulton Financial Corp. (Lancaster, Pennsylvania, $20.8 billion in assets); FNB Corp. (Pittsburgh, $33 billion in assets); OceanFirst Financial Corp. (Toms River, New Jersey, $8 billion in assets); and Provident Financial Services (Jersey City, New Jersey, $9.7 billion in assets). The impetus behind potential mergers is the desire to expand deposits and increase the institution’s geographic footprint in southeastern Pennsylvania.

Key developments At their core, banks are meant to provide loans, whether to companies or individuals. For some, getting those loans is easier said than done. City of Philadelphia officials hope a plan announced in March 2019 will help change that. The program, “Restore, Repair, Renew,” allows Philadelphia homeowners with 108 | Invest: Philadelphia 2020 | BANKING & FINANCE

credit scores as low as 580 to borrow up to $24,999 for 10 years at a fixed interest rate of 3% for a wide variety of home improvement and repair projects aimed at restoring ailing properties and improving quality of life. The projects that qualify for the low-interest loans include mold remediation, radon mitigation, window and door replacement, and roofing repairs, which must be completed by a city-licensed contractor. The program will operate on a $100 million bond, paid for by an increase of the city’s realty transfer tax from 3% to 3.1% ($60 million of the bond will technically go toward paying off the backlog in existing home repair programs, while the remaining $40 million will go to Restore, Repair, Renew). Geared toward addressing the difficulty faced by lower-income residents with poor credit scores or financial health seeking loans for home improvement projects from private lenders, the hope is that a successful program will persuade the private sector to look more favorably upon those disadvantaged people who simply need a bit of help restoring their home and improving their quality of life. For now, nonprofit lender FINANTA and private banker Univest Bank and Trust Co. will be providing the loans under the program. The city will then buy the loans immediately. “We’re involved in a ( )

BANKING & FINANCE INTERVIEW

Record year Acquisitions, strategic initiatives help complete record year, with restructured business segments expected to continue gains

Frank Leto President & CEO – Bryn Mawr Trust What are some highlights for Bryn Mawr Trust in the last year to 18 months?

2018 was a record year for BMT. We completed the integration of Royal Bancshares of Pennsylvania, acquired late in 2017, and we acquired and integrated Domenick & Associates, which was our fourth acquisition in the insurance space.

We launched strategic initiatives that are based around technology and human capital. We have restructured some of our business segments and support structure to ensure our company and our employees are positioned to continue providing our high level of service excellence more efficiently.

The company has grown substantially in the last five years, doubling the size of the bank and our wealth group. Efficient and optimal use of talent and technology will help us continue our growth mission.

We developed a CRM system that was designed for Bryn Mawr Trust’s complex needs. We have multiple business lines and the challenge is that they use different technologies. This new system facilitates interactions between all our business lines and introduces much more efficient access to data.

To have customer and employee interaction data available, we recently implemented the nCino Bank Operating System which combines customer onboarding, account opening, loan origination, deposit accounts, workflow, credit analysis, and added reporting capabilities. On the wealth management side, we implemented eMoney, a wellknown system to facilitate the financial planning process.

Which of your services are experiencing the most demand?

We are in a unique position and are experiencing

high-demand across all our business segments.

Commercial loan demand has been strong for a number of years. Residential mortgage lending, which had been sluggish throughout the industry, picked up throughout most of 2018 and 2019. Our Insurance and Wealth Management businesses are growing significantly.

We have seen an increase in small business activity in the last four to five years. Really, we have experienced an increase in demand for business services overall, including continued strong growth in our Capital Markets area.

Small business lending is enjoying high demand on all levels; from small amount loans up into the millions. The business service area has been fairly healthy over the last five years. www.capitalanalyticsassociates.com

| 109

®

oundtable:

Tech trends In an increasingly digital world, bank customers want to be able to do their banking 24/7.

Area institutions have taken notice and are providing the technology and platforms that are making banking easier and more agile. Invest: spoke with financial leaders to get their take on the technology trends impacting their businesses.

Charles Cowles

Market Executive - Wells Fargo Commercial Banking Pennsylvania/Delaware

How is technology disrupting the banking industry?

We have seen an increase in fintech companies, which is changing the landscape. Wells Fargo is a big believer of technology and continues to reinvest in our platforms and innovate in new platforms. That is the right thing to do, not only for the bank but for customer experience.

We’re in a fast-changing market and our clients need to have access to our systems and platforms 24/7. We provide that through our CEO Mobile app, available for commercial customers, which is designed to be quick and easy and can help increase productivity.

What are your main goals for the bank’s commercial operations in Philadelphia?

We want to continue to support our business customers in this community and attract new customers onto our platform. We have a tremendous opportunity to continue to grow our presence in this region. We’ve got a really talented team of bankers who are well-experienced and a wealth of products and services that Wells Fargo has created to better serve our customers. We are seeing a lot of demand in investor real estate services and that is one of the areas we are focusing on. Wells Fargo is the largest real estate lender in the country and we bring a particular expertise to that sector. When real estate investors come to Wells Fargo, they have all their needs met in just one place, since we can do both on-balance sheet and off-balance sheet loans. Given the size of our balance sheet, we typically do not run out of capacity in terms of delivering that solution to investors in real estate.

We are also focusing on the healthcare, life sciences and technology sectors.

110 | Invest: Philadelphia 2020 | BANKING & FINANCE

BANKING & FINANCE ROUNDTABLE

Joseph Meterchick

Regional President for Philadelphia, Delaware and Southern New Jersey PNC Bank

What technologies or innovations are you introducing to the bank?

We invest billions in technology, cybersecurity, digital products, traditional banking services, as well as new branches and renovations every year. On the innovation side, the survivors in this business will have to adapt to keep pace with investments in new, evolving technologies. We will always have branches.

However, as developments unfold on the technology side financial institutions must provide a safe, easyto-use platform. Whether it’s on a laptop, a computer, phone or tablet, banks must be able to offer seamless banking access and a high quality client experience. If you’re a consumer banking client, you can pretty much do everything on a mobile device that you can at a PNC branch.

What are some unique opportunities provided by Philadelphia’s economic landscape?

For banks and wealth managers, this area doesn’t have the volatile highs and lows that some of the other regions in the country may have. The economy is steady and is made up of traditional businesses, education, medical and research. Over time, many of these businesses are going to grow. That growth will represent an opportunity for both banks and wealth managers to serve the needs of a whole new generation of wealth coming up through the millennial generation and beyond.

The region is a strong, steady base and one of the Top 6 metro areas in the country. Philadelphia is attracting capital, people and businesses, making it a great place to live and work.

Travis Rhodes

Regional President Greater Delaware Valley/Lehigh Valley Region BB&T

What technologies will become a reality for everyone in the coming years?

The ease of doing business, the on-demand, at your fingertip service model is going to be important.

The delivery of products and services is becoming digitalized and the ease of the experience from the consumer standpoint is going to be vital. We need to use the information we have to help create a personalized experience that includes all the different financial products and services the client may need.

Things are evolving so quickly that six or 12 months from now there will be new technologies that we have to be able to adapt to. Historically, banks have been a little slow-paced to roll out new technologies and we need to become more like a technology company and make those kinds of advancements to meet consumer needs as they arise.

How do you support Philadelphia’s growing smallbusiness community?

We have an initiative called “Bank on Your Success,” which is directed to small businesses. This free financial knowledge program helps entrepreneurs begin to understand the value of an income statement, a balance sheet and other banking basics. When they begin to think about their kind of profitability, how to manage their short-term assets, receivables and inventory, this education is essential. That education is ultimately what prepares somebody to be able to withstand or to handle the next downturn, because it helps them understand the levers of a company. That’s foundational banking. www.capitalanalyticsassociates.com

| 111

BANKING & FINANCE OVERVIEW

16.8% of total employment in the city is within the business and financial services sector.

( ) partnership with nonprofit organizations and the city of Philadelphia to provide loans to people who need them to rehab neglected properties. We’ll originate low-interest loans and then service the accounts. Many of the buildings in the city have a lot of history and are in need of rehab, so doing this will help citizens live in better and better-kept homes,” said Jeffrey Schweitzer, CEO at Univest Bank and Trust Co. Another big headline was the rollout of Vanguard’s first commodities fund in June 2019 with more than $126 million in seed money. The fund will be actively managed and will endeavor to outperform the Bloomberg Commodity Total Return Index by investing in commodity-linked derivative investments,T-bills and Treasury inflation-protected securities. In total, it will be a tool for portfolio diversification and a potential hedge against inflation.

This is a high-end product with a $50,000 minimum investment, but as commodities funds go, it is relatively cheap: it is estimated at 0.20% expense to value, compared to the 1.25% ratio of its rivals.

Also affecting the market is WSFS Financial Corp.’s warning of elevated credit costs in the second quarter of 2019. The company, which already made news this year when completing its acquisition of Beneficial Bancorp for $1.5 billion in March, is forecasting $12 million to $14 million in net charge-offs in the second 112 | Invest: Philadelphia 2020 | BANKING & FINANCE

quarter as a result of two cataclysmic events occurring within 30 days of one another during the quarter. One event involved a $5.7 million loan to a refinery that “experienced an isolated event which impacted the facility’s operations” and the other involved a $5.9 million loan to a managed healthcare facility that was placed into receivership by the state. While the identity of the managed care facility is uncertain, the refinery owner was likely Philadelphia Energy Solutions, which has been in and out of bankruptcy and then endured the indefinite shuttering of its South Philadelphia refinery following a massive fire. The announcement led to an immediate 4% drop in WSFS’ stock price.

Still, the bank maintains a very healthy 4% net interest margin.

Insurance Philadelphia is home to a thriving property and casualty (P&C) insurance market, as can be seen from the strong performance of two local insurance companies: Penn Mutual and Philadelphia Insurance Companies.

Philadelphia Insurance Companies (PHLY) grew out of the Maguire Insurance Company, Inc., which was founded in 1962 and expanded to 15 offices across the United States by the mid-1970s thanks to landing a major account with Chevrolet dealers in 1969. Today, PHLY controls numerous subsidiaries in addition to

BANKING & FINANCE OVERVIEW

Maguire Insurance, including Tokio Marine Specialty Insurance Company and Philadelphia Indemnity Insurance Company. It has 1,600 employees in 50 offices in the United States. PHLY had $3.469 billion gross written premiums in 2017, and has held an A++ credit rating from AM Best since 2011.

Penn Mutual is another major player in the city’s insurance market and beyond. In 2018, Penn Mutual paid out $1.4 billion to policyholders or beneficiaries, maintained $2.1 billion in statutory surplus, and marked its 90th consecutive year of maintaining an A rating or higher by AM Best. In addition, Penn Mutual posted $223 million in new life insurance sales, contributing to a total of $3.2 billion in revenue and $333 million in consolidated net income. The company maintains $156 billion in active life insurance policies.

Top banks There are a few common metrics for determining the top banks in a region, including total deposits and market share. Following these metrics, the top banks in Philadelphia in 2018 include TD Bank, N.A. ($141.79 billion in deposits and 25.84% market share); Capital One, N.A. ($123.91 billion in deposits and 22.58% ( )

www.capitalanalyticsassociates.com

| 113

®

oundtable:

Wealth management Today’s financial world is more complex than it has ever been and the need for financial advice has never been higher as baby boomers prepare to transfer their sizable wealth to the next generation.

Joseph Culley

Head of Capital Markets Group Janney Montgomery Scott LLC

What are some of the challenges facing banks in today’s landscape?

The change in demographics is one of the challenges we are facing. Based on our internal projections, our workforce will be majority millennials within six years.

That creates numerous opportunities for a firm like ours to modernize and adjust. We recently made changes to our employee benefits, parental leave and dress code policies, based on feedback from our employee population. Organizational development and diversity and inclusion are some of the other areas we have been investing in due to these demographic and generational changes.

What is the investment profile in Philadelphia?

We have seen an increase in high-net-worth investors coming to Philadelphia. We have significantly addressed the need we had for higher-end, condotype properties that we lacked for years, and with that has come more international investment and out of state investment. One of our newer initiatives is focused on investment education and ways to provide more basic, fundamental knowledge about saving for retirement and investing.

What impact is technology having on banking?

The pace of change is happening more rapidly due to the disruption of technology in financial services. We have invested significantly in our technology platform and recently hired some of our first data scientists. Our company culture is starting to feel less like an investment firm and more like a technology firm.

114 | Invest: Philadelphia 2020 | BANKING & FINANCE

Ted Durkin

Managing Director, Pennsylvania Market Head UBS Financial Services Inc.

What are some unique strengths and characteristics of Philadelphia’s market for investment management?

Philadelphia’s Market for Wealth Management is unique, we are proud to have many intermediaries: family offices, regional banks, RIA’s, PE Firms, along with the major banks and wealth management firms. Our location is an exceptional place for finance. Located between NYC and DC, Philadelphia is at the center of this incredible business corridor.

Philadelphia and our surrounding areas are benefiting from extreme growth and rapid change. We are fortunate to attract and retain millennial talent to Philadelphia.

Our region’s incubator innovation and private equity businesses are creating wonderful opportunities and opening new business ventures. This development, alongside our established businesses, pharma, education, healthcare, and finance, make Philadelphia very desirable. Beyond business, our surrounding communities help our people strike an amazing worklife balance.

What services or areas of business are youe focusing on or looking to grow?

An area where we have distinct opportunity and expertise is advanced planning for small and midsized businesses. Whether succession planning, an outright sale, or strategic alliance, we have capabilities to help our clients succeed in this space. Next-generation planning for businesses is extremely personal and unique. Our financial advisers are equipped with the platform and knowledge to help them achieve their goals.

BANKING & FINANCE ROUNDTABLE

Harris Fishman

President & CEO MassMutual Greater Philadelphia

What changes in market trends have you observed over the last few years and how do you adapt?

One of the megatrends that we are watching is what the media calls, “The Great Wealth Transfer.” Baby boomers now represent 63% of all U.S. financial assets and $59 trillion will pass onto the next generation over the next 45-plus years, which is unprecedented. It’s expected that millennials will inherit most of their baby boomer parents’ wealth, meaning nearly $39 trillion will be passed from baby boomers to their millennial heirs. These generations are known for being polar opposites on many fronts, one of which is their views on financial matters. One element that we find troubling is that oftentimes, the current adviser to a family is not retained by the next generation.

Two out of three heirs fire their parents’ financial advisers upon receiving their inheritance, so we are working to connect with these beneficiaries’ before there is a crisis.

We hold workshops and educational events where we bring intergenerational families together, giving parents the platform to explain to their adult children the implications of the state of their financial affairs.

What are some of the challenges facing the insurance and financial advisory sector?

Our industry faces many challenges: the regulatory environment, technology, and talent acquisition to name a few. But you’re either green and growing, or ripe and rotten. We look at these challenges as an opportunity to do better for our clients, associates and community.

On the other side, the outlook for growth is tremendous, with the number of people moving into our region and into the city.

Joseph McLaughlin Chairman & CEO Haverford Trust Company

What is Haverford’s key focus in terms of clients?

We are in the business of providing clients sound and careful advice and I see a long runway ahead of us that will last for the next few decades. More than ever, people are in need of financial advice. Their investment world is complex and they are tasked with having to provide for their retirement and/or their income and growth needs just as the investment landscape is very complicated.

And the decisions are just as much a challenge for more sophisticated investors. Let me provide an example.

Through this year to date, broad stock markets are up about 20%, and yet, there has been much more money flowing into bond funds over the last six months than there has been to equity funds. This trend has been fairly constant for much of our economic expansion. There has actually been a net outflow from equities mutual funds and ETFs, despite the fact that the equity markets have been so strong. That tells me that people may be confused as to what to do and need help in setting their asset allocation decisions. While bonds are an important ingredient in your asset allocation, interest rates could remain low for a long time, and clients will need professional advice when it comes to meeting their goals.

What areas of your business are you looking to grow?

We have a broad spectrum of individual, institutional and not-for-profit clients and we have experienced steady growth in each base. We have a long history of supporting the not-for-profit community in the greater Philadelphia region. We are a privately-held firm with roots in Philadelphia, and we enjoy helping local organizations and giving back to the community. www.capitalanalyticsassociates.com

| 115

BANKING & FINANCE OVERVIEW

( ) market share); Chase Bank USA, N.A. ($42.54 billion in deposits and 7.75% market share); Wells Fargo Bank, N.A. ($37.57 billion in deposits and 6.85% market share); PNC Bank, N.A. ($24.97 billion in deposits and 4.55% market share); and Citizens Bank of Pennsylvania ($19.26 billion in deposits and 3.51% market share).

Similarly, an area’s best credit unions can be measured by their total assets and membership, among other features. According to these metrics, the top credit unions in Philly include the Police & Fire Credit Union ($5.45 billion in assets and 312,099 members); Citadel Federal Credit Union ($3.54 billion in assets and 208,540 members); American Heritage Credit Union ($2.53 billion in assets and 188,523 members); Trumark Financial Credit Union ($2.31 billion in assets and 119,885 members); and Philadelphia Federal Credit Union ($1.19 billion in assets and 118,946 members).

Advisory HQ also provides a list of the best banks and credit unions for consumers to choose from based on the types and quality of services offered. First, there is the Police and Fire Federal Credit Union (PFFCU), which has 14 branch locations around the city and the surrounding area and offers real estate, auto, and personal loans; checking, money market, IRA, and

Both small and large banking and financial institutions are investing heavily into technology to stay competitive.

BANKING & FINANCE OVERVIEW

share accounts; and a comprehensive mobile banking app that offers mobile deposits.

Next is the American Heritage Credit Union, which has 16 locations in the city and 18 more in the surrounding area. This extremely successful credit union boasts 165,000 members who receive dividends from the credit union, as well as 24/7 access to financial management tools, home equity loans, and more.

Philadelphia Federal Credit Union (PFCU) is also a popular choice, which maintains a personal touch thanks to operating across only 11 branches where it offers personal banking and loans, business banking, and even various property insurance options.

Philadelphia’s large, national banks include Citizens Bank, which maintains 92 full branches and 12 supermarket branches throughout the area. Citizens offers customers One Deposit checking with no monthly fees, a full range of retirement and investment services, student loans and loan refinancing, and checking accounts for businesses. PNC Bank also has a substantial, 24-branch presence in Philadelphia despite being headquartered on the other side of the state in Pittsburgh. The bank offers a full range of services similar to those provided by Citizens, as would be expected from a similarly large regional bank.

Philadelphia also has 17 Bank of America branches,

which connects its customers to an international banking network of more than 35 countries.

Regulations In 2018, there were some significant rollbacks to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Dodd-Frank was originally passed in 2010 in an attempt to address the banking sector’s culpability in the Great Recession of 2008. As a result of these rollbacks, the main regulatory pillars of the act are still standing, including tough regulation of bigger banks, a more substantial and hands-on role for the Federal Reserve, and the continued authority of the Consumer Financial Protection Bureau. However, one major change that has been perceived by some as a weakening of the act is the raising of the “Bank SIFI” threshold, which establishes the size at which a bank falls under mandatory increased Federal Reserve regulation, from $50 billion to $250 billion. However, $250 billion is only the mandatory regulation threshold. The Fed can still apply stricter scrutiny to any bank over $100 billion at its discretion. Therefore, in reality there was only a nominal increase to the mandatory threshold and an overall increase to the Fed’s discretion.

The EU is passing a handful of laws in 2019 that ( ) www.capitalanalyticsassociates.com

| 117

BANKING & FINANCE INTERVIEW

Transformation Tackling No. 1 challenge facing all banks: the rapid change of technology and its impact on customer expectations

Rodger Levenson CEO – WSFS Bank cost savings into technology and delivery systems. We want to make sure that we’re providing an internal and external customer experience that meets expectations in this rapidly-changing world. We also aim to build an architecture and infrastructure that allows us to manage our business so that when customer expectations shift, we can shift quickly with them.

What will be the impact of WSFS’ investment in technology and delivery systems?

We’ve undertaken a five-year, transformational project after our acquisition of Beneficial Bank that aims to address the No. 1 issue all banks are facing, which is the rapid change of technology and how it’s changing customer expectations. Historically, we’ve made significant investments in physical distribution through our branches, and while customers still want and value in-branch service, the fact is that most of the transactional business today is done outside the branches using technology.

As part of our combination with Beneficial Bank, we’re going to consolidate 25 percent of the combined WSFS and Beneficial locations and will reinvest 50 percent (approximately $32 million) of the estimated 118 | Invest: Philadelphia 2020 | BANKING & FINANCE

How have you seen the small business community grow and develop in Philadelphia over the last few years?

Small business continues to be the primary generator of jobs and economic activity, not just in Philadelphia but in our entire region. And we see significant growth in our small business lending activity over the next few years. Our average loan in the small business group is less than $147,000, and when we think about that customer profile, it’s very important for us to maintain a local presence. We have small business relationship managers who know the people in the community and become the point of contact for growing their small business loans. Business sales also comes with a lot of deposits, and that’s been a very healthy growth vehicle for us over the last couple of years.

In what ways does WSFS give back to the Philadelphia community?

Our business model is the traditional community bank model, which benefits both our customers and the bank. In addition to very significant philanthropic giving, our biggest differentiator is a commitment to volunteerism. For example, every associate gets paid four hours per month to serve their community, and in any way they see fit. In 2018, our associates spent more than 14,000 hours serving in this way, and that was before we combined with Beneficial. Now that we’re almost doubling in size, we hope to make an even bigger impact.

BANKING & FINANCE OVERVIEW

Most banks are using blockchain technology to increase data security.

( ) will impact individuals’ personal banking data.

The first is the Payment Service Directive 2 (PSD2).

PSD2’s stated purpose is to harmonize and facilitate cash transactions across the borders of countries within the EU to make the European Economic Area’s vision of freer trade and more permeable borders within the EU a reality. However, under the new framework, certain third-party providers of payment and account information services could access EU customers’ bank account information directly and view their account balances and spending habits in more detail than ever before. This carries several data privacy risks, and could also lead to the annoyance of even more targeted advertisements and the sale of personal data to third parties.

Fortunately, the law has some checks and balances built in to curb predatory or fraudulent practices.

First, third-party providers must apply to become Account Information Service Providers (AISPs) and be approved before they can access private account data.

Institutions must be registered in their home country, but are then free to operate as AISPs anywhere in the EU. The catch to this check is that each country establishes its own standards for accepting AISP applications.

This means that less scrupulous AISPs may be able to legally access account information anywhere in the

Security measures like passwords are going by the wayside in favor of biometrics.

EU by forming and registering in a country with lower standards. Still, the registration process provides at least some check on the ability of third-party financial service providers to access personal financial data.

Another, and perhaps more valuable, check is that even a fully registered AISP is prohibited from accessing an individual’s account data if it lacks that individual’s consent, which must be explicitly provided. PSD2 goes into effect on Sept. 14, 2019.

Another EU regulation dealing with individuals’ data is the General Data Protection Regulation (GDPR).

The GDPR has been in effect since 2018, but went into full enforcement in 2019. In the U.K., the Information www.capitalanalyticsassociates.com

| 119

BANKING & FINANCE OVERVIEW

Commissioner’s Office (ICO), which enforces data protection in the country, fined British Airways and Marriott International for allowing breaches of confidential customer data. British Airways was ordered to pay a $228 million penalty after a breach that affected 500,000 customers’ personal account information, while Marriott was penalized $124 million fine for exposing 339 million guest records. The GDPR provides for a much higher maximum fine than those imposed on these entities, but the fact that these not insubstantial fines were levied at all makes clear that the ICO means business when it comes to protecting data.

Technology and fintech Many banks already have their own apps that allow users to check their account balances, transfer money between accounts or to third parties, set up automatic bill payments, and even deposit checks from anywhere using their smartphones’ cameras.

Generally, banks are forced to adopt these emerging financial technologies (fintech) because customers have grown to prefer their convenience and are leaving brick and mortar banks behind in order to do their banking on the Internet. “It’s an interesting time to be in banking. We have traditional customers who go into our branches for all types of services, and we also have young customers who prefer digital options. So we’re making a significant investment in technology to create an even better online digital presence that gives our clients more access to competitive products. We’re recognized for our personalized approach, so we want that aspect of our business to be reflected in our digital offerings as well,” Jeffrey Schweitzer, CEO of Univest Bank and Trust Co. told Invest:.

Many banks have created their own apps to adapt to their customers’ changing needs.

But customer convenience is only the tip of the iceberg when it comes to fintech. Banks are also using blockchain technology to increase security by distributing a non-editable digital ledger among users to ensure that no single one of them possesses the complete means to access the data, meaning that compromising one user will not compromise the data itself. The use of blockchain in banking provides several benefits, including added security, additional regulatory

BANKING & FINANCE OVERVIEW

Mike Carbone Regional President, Metro PA/NJ TD Bank

accountability, and increased efficiency of transactions through the elimination of traditional intermediary steps. Both on their apps and in person, banks are relying more on biometric identification technology to increase the security of their customers’ data and money. Old security measures, such as pin numbers and passwords, are going by the wayside in favor of these more reliable biometrics. Finally, fintech represents a general increase in lender access to credit, particularly among those who have been historically excluded from the traditional financial industry. Fintech lenders can utilize AI algorithms and alternative data to identify borrowers who are technically classified as subprime but may be at relatively low risk of default. While traditional lenders may not loan to these borrowers, more sophisticated fintech lenders might.

Technology adoption can be a challenge for some financial institutions, especially smaller banks that do not have the financial capacity to keep up with the latest innovations. This challenge is driving many financial institutions to partner with fintech groups to improve their offerings. According to a 2017 report from multinational professional services network PwC, 82% of financial leaders expect to increase fintech partnerships in the next three to five years. Citizens Financial Group, for example, has expanded ( )

How is TD Bank ensuring growth in the evolving banking environment?

Growth is an important part of who we are, especially in this ever-changing banking environment where customers use many different channels for their dayto-day transactions. We need to adhere to and meet customers’ needs no matter how they want to do their banking. We live in an era of tremendous change in distribution and access to money and being accessible is very important to us. Understanding the communities we serve and what is important to them allows us to continuously provide our customers with the most convenient services possible. Financial literacy is also a major focus area for us, and not just for adults: We want to help kids understand how money works and how to be financially responsible. Hopefully, by the time they enter college, they understand the responsibility of a credit card and the responsibility that comes with maintaining and balancing a checkbook. We want to provide this education at an early age because so many people don’t understand the management of cash. If we make that easier for people, we put them in a better position to be successful in life.

In what ways does TD Bank connect and support the small business community?

We are among the best U.S. Small Business Administration (SBA) lenders, not only in this area, but in the country. We impact customers of all sizes within that segment because every customer matters. We recognize that our smallest customer today could be our biggest customer down the road. Growing with the businesses we serve has always been part of our core makeup. Customers want a bank that understands their business. It’s not just about getting the best rate.

It is our responsibility to support our customers as they grow and prosper, and during hard times, too. If we truly understand our customers, we can work with them through any stage. www.capitalanalyticsassociates.com

| 121

Market voices: Small business support The two best ways for a small bank to support the community is through capital for funding businesses and capital for housing. We have a variety of services in both areas. Our largest product line is residential investor financing.

That provides a secondary source for housing in the community, when not many banks are providing finance for these types of investments. I expect the mortgage market to be stronger in 2020.

John Coleman

President & CEO Tioga Franklin Savings Bank

One reason we invested in our M&A advisory capabilities was because we saw the rapid pace that family businesses were selling, either to private equity firms or to strategic buyers. We have a best-in-class practice of meeting the financial needs of middle market buyers, such as private equity funds that target predominantly middle market companies. In addition to the high demand for M&A advice, we have seen a strong demand for our Global Markets business.

We’re seeing growth in our direct bank Citizens Access and high demand for our personal and corporate credit cards on the payables side of the business.

Jeffrey Schweitzer

Daniel Fitzpatrick President of Citizens Bank Mid-Atlantic Region and Head of National Industry Verticals

The economy is strong, and Philadelphia and its surrounding markets are doing very well. All our lines of services are doing great and we are very active in providing capital and lending to customers, from businesses to non-profits to individuals. That’s a result of not just a good market, but of good overall economic conditions. We’re excited about the economic renaissance that’s happening in the Philadelphia market and the high amount of investment we’re seeing in the Greater Philadelphia region.

CEO Univest Bank and Trust Co.

As a credit union, Citadel’s business services have traditionally supported family-run, ‘mom and pop’ businesses. With that said, in the last 10 years, we have seen a higher volume of startup businesses in our communities. Many of our business clients start out with a home equity line of credit or a credit card, and we’re there to finance and support their growth, which sometimes seems like growth overnight. Then, as our partnerships with local businesses flourish, we’ll modify our products to better meet their business needs.

Jeff March

President & CEO Citadel Federal Credit Union 122 | Invest: Philadelphia 2020 | BANKING & FINANCE

BANKING & FINANCE OVERVIEW

( ) its footprint in the fintech sector with over 10 fintech partnerships throughout the last few years, some of the most recent ones with: Transactis, Blend, Vast and Cachematrix. Another example is the recent merger between BB&T Corp. and SunTrust Banks, which was designed to deliver a smarter and easier customer experience through technology and to allow the banks to be more competitive against other institutions that are heavily investing in technology.

“The need for human interaction and human problem solving will always be important, but we also know that delivery of products and services is going to be radically transformed by technology, so we are investing in that.

The SunTrust and BB&T merger will allow us to make those types of investments to continue driving deeper into our relationships and building in markets like Philadelphia,” Travis Rhodes, regional president of the Greater Delaware Valley/Lehigh Valley Region at BB&T told Invest:.

82% of financial leaders expect to increase fintech partnerships in the next 3-5 years: PwC. Technology is also an essential part of new branch models and banking rebranding strategies. For example, Citadel Federal Credit Union’s expansion effort in Chester, Bucks and Montgomery counties, is integrating advanced technology in their new office and branch models. “We model our new office spaces to the needs of the on-the-go consumer and the desire for advanced, self-serve banking technology.

Specifically, we are providing more automated service options and specialized staff,” Citadel’s President and CEO Jeff March told Invest:. “Citadel also will focus on enhancing our online and mobile banking experience in 2019. We aim to provide convenience, simplicity, and trusted service for our members.”

As a result of the convenience that banking online tools present, more and more customers are tending to conduct their banking business online instead

Robert Kane Market President KeyBank

How does the bank support small businesses in the Philadelphia area?

Philadelphia has long been home to successful small businesses, but in recent years the collaboration between the public, private and nonprofit sectors is spurring a new level of growth. Companies are creating quality jobs that are attracting a new generation of talented workers to the region. It is very exciting.

As a bank, our most direct link to supporting these businesses is to provide them with the solutions they need to identify and realize their goals. From accounts to lending, payments, workplace solutions and more, we help small businesses thrive. For example, KeyBank is 13th among more than 1,800 SBA lenders nationally.

In the last five years we have loaned more than $1.13 billion to small businesses across our footprint. We also created an award-winning, AI-enabled tool that provides clients with customized attention and allows a deeper understanding of their needs—the top challenges they face, sales and payment trends and entrepreneurial motivation. In 2019, the biggest challenges smallbusiness owners face are improving cash flow, reducing operating costs, improving financial wellness, balancing growth with quality and hiring and retaining talented employees.

Which of your services is seeing the most growth in Philly and what opportunities does this present?

We’re seeing the most growth in commercial lending, which serves the needs of companies with $10 million to $250 in annual sales. In 2018 we had growth just short of 16 percent. Our differentiator in the market is we are both a commercial and investment bank. Years ago, you had commercial banks and investment banks. They were separate entities. This is important because when a company decides they want to sell, they typically need to hire an investment banker. KeyBank can provide our commercial clients with access to investment bankers as well as industry experts. www.capitalanalyticsassociates.com

| 123

BANKING & FINANCE OVERVIEW

of visiting branches. TD Bank regional President of Metro PA and NJ Mike Carbone explains the bank is ensuring they provide customers with innovations that allow them to bank the way they want. “We are seeing fewer customers come into our stores.

Instead, they are using digital tools to conduct their transactions. The use of artificial intelligence is becoming a major player in understanding customer trends and needs. Technology allows us to better understand the needs of our customers and local community trends.” AI as an advantageous tool to identify customers needs, is also creating more competitiveness between financial institutions due to its benefits in customer support, future outcomes or behavior predictions and automation. According to data from PwC, in Q3 2019, there were $1.9 billion worth of deals going into fintech companies and $1.6 billion into AI companies, nationally. Philadelphia’s diverse scene, numerous educational, financial, life sciences and tech-driven institutions create an attractive environment for fintech companies.

Looking ahead Philadelphia’s banking and finance sector remains robust and sophisticated, with many large and profitable banks already operating in the city.

“Philadelphia and our surrounding areas are benefiting from extreme growth and rapid change,” said Ted Durkin, managing director and Pennsylvania market head of UBS Financial Services Inc. “We are fortunate to attract and retain millennial talent to Philadelphia. Our region’s incubator innovation and private equity businesses are creating wonderful opportunities and opening new business ventures.

The business and financial services sector is the second-highest paying of target sectors present in Philadelphia.

BANKING & FINANCE OVERVIEW

Susanne Svizeny President of the Greater Philadelphia Region OceanFirst Bank

In what ways is OceanFirst leveraging technology to better serve its customers?

OceanFirst understands that customers want banking on their schedule so we are focused on digitalization and the customer experience. If clients don’t want to go into a branch for their banking needs, they don’t have to. For example, consumers can open a free checking account online. People want things done quickly and we are being more responsive through our innovation efforts. We take that same experience our retail customers have to our commercial customers so that it’s not an onerous and overwhelming task to get started or expand your banking services. In that regard, we are continually partnering with fintech companies to offer the most current technology for our customers.

This development, alongside of our established businesses: pharma, education, healthcare, and finance, make Philadelphia very desirable. Beyond business, our surrounding communities help our people strike an amazing work-life balance.”

However, there are challenges with which the industry will need to grapple if it wants to keep up with a changing world. Continued consolidation through mergers and acquisitions are likely as a potential economic recession sets in and technology changes the way people bank and further reduces the dependence on physical branches. Banks and their customers will also need to be aware of the risks of digital banking, such as the security risks posed by hackers and the potentially invasive practices sanctioned under PSD2, as well as defenses against these risks, such as blockchain.

What impact will OceanFirst’s expansion have on the Philadelphia area?

OceanFirst has a strong presence throughout New Jersey and as a result of the synergies between the Philadelphia and New Jersey many people in the Philadelphia market already know, and even bank, with OceanFirst. Our OceanFirst team prides ourselves on being relationship-focused and nimble resources for our customers and the community. We are here to help business owners throughout the greater Philadelphia region be successful by delivering commercial financing solutions for a wide-range of needs. Our team is focused on real estate and commercial businesses and understand Philadelphia has been booming on growth and economic expansion in both of those areas. .

What is your outlook for the coming year?

The economy is still healthy and strong, but there are some uncertainties. The businesses I have been working with in the greater Philadelphia area are doing quite well. Philadelphia is a diverse community and has many different industry segments that are performing well. www.capitalanalyticsassociates.com

| 125

Education: There are 115 universities and colleges in Philadelphia. These institutions of higher learning contribute to the economy and are often the vanguard for new research and innovation. They are also at the forefront of a widespread challenge: training a new generation of professionals to suit the needs of a new world economy.

www.capitalanalyticsassociates.com

| 127

Beyond theory: Educators are innovating with new technologies and partnering with businesses to deliver the skills the private sector demands Philadelphia has a long history as a bastion of education. It is home to a venerable Ivy League university as well as cutting-edge research institutions and community colleges. These institutions have fueled the development of vibrant life sciences and technology sectors, which attract talent and funding from around the country and the world that help the city continue to evolve and grow.

However, there is still some work that needs to be done to ensure that this rising tide does indeed lift all boats. Along with local and state government and industry partners, these educational institutions provide comprehensive workforce training programs to ensure that workers have the skills that today’s employers are looking for.

The challenge isn’t new. Workforce education has been a hot topic ever since a new generation began to enter the workforce and employers noticed a misalignment between the skills they needed and the skills these employees actually had. In Philadelphia, where approximately 40,000 people are unemployed and even more are underemployed, taking steps to ensure that people are qualified for good jobs is essential. To that end, there is a growing number of 128 | Invest: Philadelphia 2020 | EDUCATION

state, city, nonprofit, and corporate initiatives that are helping to bridge the gap between workforce capabilities and employer needs.

For example, Pennsylvania Gov. Tom Wolf’s administration has spent millions of dollars on numerous programs throughout the state that seek to address skills training broadly and from the ground up. Specifically, the state allocated $30 million in 2018 to a workforce development program called PA Statewide Movement for Accountability, Readiness, and Training (PAsmart). $10 million of that allocation went to job training and apprenticeship programs, while the other $20 million went to programs that teach valuable skills to children from Pre-K through high school, particularly the necessary competencies for success in STEM fields. In 2019, PAsmart’s budget was upped to $40 million, again with $10 million and $20 million going to job training and preschool through high-school education, respectively, plus a $4 million boost to the state’s Manufacturing PA Training-toCareer Grant program and $6 million to expand adult career education and training programs. In total, $2.5 million from PAsmart money made its way to Philadelphia in 2019, which was distributed among ( )

EDUCATION INTERVIEW

Outside the box Country’s first design and medicine medical degree, world’s first dual-medical degree program among major accomplishments

Stephen Klasko, MD President – Thomas Jefferson University CEO – Jefferson Health What have been some recent accomplishments for Thomas Jefferson University?

Our University started the first design and medicine medical degree in the country. We merged with one of the top fashion universities, and, in 2019, we ranked No. 3 in fashion design in the country and No. 7 in the world. We also started the world’s first dual-medical degree program, enabling a cohort of physicians to practice medicine in both the United States and the European Union. This partnership with the Catholic University of the Sacred Heart in Rome will allow students to obtain a joint U.S.-EU medical degree within just six years.

In addition, we launched the nation’s first academic department of integrative medicine. The new department, which formalizes the teaching of integrative medicine alongside other medical departments, is supported by a $20 million commitment from The Marcus Foundation, Inc. We have created the Institute for Emerging Health Professions to provide the training needed to fill future career, training and certification gaps in healthcare practice and delivery. For example, we offer certificate programs in Cannabis Medical Education and Research with the goal of creating the first Masters Degree in Cannabis research. We are also creating the first college of digital health. We have the ability to imbue innovation into our academic, philanthropy and clinical pillars to ultimately take better care of our people.

In what ways does Thomas Jefferson University and Jefferson Health leverage technology and innovation to better serve their students and patients?

Healthcare with no address will be the future. We have been focusing many of our resources towards

innovation and technology. For example, we participated in a pilot program to keep diabetic patients healthier by using digital technology. We have the second-largest neurosurgery unit in the nation, and we partnered with InTouch Health to jointly develop new telehealth solutions to improve patient access and quality of care while reducing overall healthcare costs. We also have the “Cancer Care 360” initiative which provides patients with innovative and researchbased care across the continuum of cancer treatment.

In addition, we are beginning to work with Mindstrong, a healthcare innovation company, to use digital footprinting technology to help with mental illness diagnosis. We are also leading in the simulation field.

We teach our students that mental, physical and social health must be addressed together in the future. www.capitalanalyticsassociates.com

| 129

EDUCATION OVERVIEW

Philadelphia is home to the second-largest university population in the United States.

( ) two local industry partnerships, administered by Philadelphia Works Inc., and 21 apprenticeship and preapprenticeship programs.

Philadelphia Works is instrumental in Philadelphia’s vision of developing a thriving workforce. The institution is the Workforce Development Board for the city, which means that it invests public resources, such as the PAsmart grant money, and manages employment services that help increase access to genuine career opportunities for local residents by helping these potential employees become more suited to employers’ needs. Philadelphia Works accomplishes this by providing career guidance, job training, and job placement services throughout the region and in a variety of industries. The organization also remains abreast of shifts in the local labor market, tests new workforce strategies and introduces promising solutions. It is also a partner of Philadelphia’s comprehensive, crosssector workforce development strategy called Fueling Philadelphia’s Talent Engine (FPTE).

FPTE’s goals overlap with the mission of Philadelphia Works and other regional workforce education programs: it seeks to bridge the gap between employees and employers when it comes to necessary job skills through education, training, and support services. Specifically, FPTE has three objectives: to 130 | Invest: Philadelphia 2020 | EDUCATION

prepare Philadelphians with the skills employers need for a world-class workforce; to address the barriers that prevent Philadelphians from accessing meaningful career opportunities; and to build a workforce system that is more coordinated, innovative, and effective.

By 2020, FPTE hopes to have spent $13 million on workforce education and training, while matching 16,000 young people annually with high-quality jobs. On the employer side, FPTE calls on businesses to become “Model Employers” by supporting local schools and engaging youth, providing career development for employees, and creating opportunities for priority populations like returning citizens and immigrants.

Other workforce training programs, initiatives, and organizations that are active in the region include the American Red Cross, Brightwood Career Institute, Center for Social Policy & Community Development, Congreso de Latinos Unidos, Connection Training Services, District 1199C Training and Upgrading Fund, Home Care Associates, JEVS Human Services, Community College of Philadelphia, Lincoln Technical Institute, and Philadelphia Job Corps Life Science Institute – all of which offer certain job training programs for free. Local institutions of higher education also offer career and workforce

EDUCATION OVERVIEW

development programs to both students and the general public, including Drexel University, Temple University, and the University of Pennsylvania.

High-tech impact From the introduction of computers and smart boards into the classroom, to distance learning via the internet, technology has had a far-reaching impact on higher education for students and educators alike. There are numerous examples of this growing interaction in the Greater Philadelphia area. Here are a few of the most recent.

Salus University, located in Elkins Park, a short distance north of Philadelphia, recently unveiled its Virtual Reality Simulation Lab, which features cutting-edge VRmagic equipment and software for use in virtual retinal examinations and revolutionizes ophthalmological instruction. Their lab has eight workstations that consist of a touch-screen monitor, a model patient head, and the tools needed for either direct or indirect ophthalmoscopy.

Students use these stations to test various skills, such as finding shapes on the retina, examining objects found on a retinal map, locating and identifying retinal pathologies, and using case studies to ( )

EDUCATION INTERVIEW

Three goals Impact, inclusion, innovation to tackle global challenges and shape future leaders

Wendell Pritchett Provost – University of Pennsylvania

What are your top priorities as provost?

All our work at Penn centers on three goals: impact, inclusion, and innovation. We are committed to research and scholarship that make a tangible impact on the world’s most urgent challenges, and to training future leaders who are committed to that kind of positive social impact. The university also has a unique role as an incubator of innovation, where people come together across interests and perspectives to make creative breakthroughs that change the world. And we have a profound responsibility to diversity, equity, and inclusion in our community: our students can only learn and the greatest advances in research and scholarship can only arise by bringing together the widest possible range of ideas, perspectives, and backgrounds.

What are some of your efforts to foster innovation and tech?

Penn is a leader in using new forms of technology to enhance our educational experience, both in and out of the classroom. We are a pioneer in online learning, and our Online Learning Initiative is a core aspect of our mission of inclusion. From the outset of our engagement with online learning, we believed that it should also help us develop new educational approaches for our full-time students on campus. For example, technology enables us to develop what we call Structured Active In-Class Learning, which “flips” the traditional classroom, especially for introductory science and math classes, so that students work collaboratively on solving problems when in class and traditional lecture content can be absorbed more carefully outside of class.

What is Penn’s relationship with the business community and how do you foster closer working ties?

We significantly jump-started our role in the Philadelphia business community with our Pennovation Works development and its anchor building, the Pennovation Center. This highly visible and accessible 23-acre site offers incubators of innovation for entrepreneurs and researchers across our area. Pennovation Works accelerates the translation of Penn research into commercial products, while it also expands our values of research, innovation, and collaboration beyond the Penn campus. Inventors and entrepreneurs work together with Penn researchers in innovative, new spaces designed to enhance collaboration and teambuilding. Businesses located at Pennovation Works are also eligible to receive state and local tax benefits, including abatement of the Business Privilege Tax, Net Profit Tax, and Real Estate Tax. www.capitalanalyticsassociates.com

| 133

EDUCATION INTERVIEW

Meeting demand New facility, projects provide opportunity to meet emerging biomedical workforce needs

Christopher Fiorentino President – West Chester University graduates in the biomedical engineering arena, and this project will help provide the workforce for these types of firms. We need to make sure that we are providing a qualified workforce to support businesses, and this will be a major step in that direction, in conjunction with the many other programs that we have at West Chester University.

What is the projected impact on the university and community of the new Sciences & Engineering Center and The Commons building?

The 176,000-square-foot facility is the largest building project in West Chester University’s 148-year history, and at any of the state universities in Pennsylvania.

We expect it to be open and operating by fall of 2020.

Upon completion, the new $130-million facility will be home to the University’s rapidly growing health science curricula, physics, and our new biomedical engineering program, which launched in fall 2019.

We will also have the ability to use technology-based simulations, particularly for our nursing students. This project was launched in response to the major presence of biomedical and pharmaceutical companies in Chester County. There is a high need in this region for 134 | Invest: Philadelphia 2020 | EDUCATION

What are the biggest areas of growth at West Chester?

The biggest area of growth is in the business program, both at the undergraduate and graduate levels. Our MBA program has become our largest program at the graduate level. It recently transitioned from primarily face-to-face to an online program to meet the needs of our students. Our MS in human resources, also an online program, has grown dramatically over the last two years. The University has also added doctoral programs in nursing, public administration, psychology, and education. Many of these programs are enjoying enrollment growth, and offer students the flexibility of online courses. In fact, as another point of pride, our new Doctor of Psychology in Clinical Psychology (Psy.D.) program has recently been accredited by the American Psychological Association (APA).

How is West Chester integrating technology and innovation to better serve students?

Earlier this year, we opened a renovated Anderson Hall, which is a historic gem of the University and the Borough of West Chester, as well as the largest classroom facility. While preserving the building’s historic exterior integrity, the inside of the building has been completely transformed. We have moved heavily in the direction of immersive learning and flexible classrooms. The rooms are configured so that students can connect their electronic devices directly to screens around the room and work on projects together within the classroom.

EDUCATION OVERVIEW

Joy Gates Black President –Delaware County Community College

We are looking to expand our healthcare programs. Our partnership with West Chester University and Drexel University has been successful and we want to continue to meet that need. We are looking at creating another campus at the southeast end of our county to better meet the needs of students in the Upper Darby and the Sharon Hill area. To address the needs of all our students, our support services focus on food and transportation insufficiency, success coaching, financial literacy and other initiatives that enable students to achieve their goals. We want to holistically advise our students and support their other needs so that they can continue to successfully pursue and complete their education.

( ) examine a hypothetical patient. The simulator can also be projected for group learning.

Beyond training, the partnership between business and academia is a two-way street that benefits both sides. A good example is New Jersey-based Amicus Therapeutics’ $50 million expansion of its collaboration with the University of Pennsylvania’s Perelman School of Medicine. The pact will cover at least five years with annual investment of $10 million

by Amicus in Penn’s Gene Therapy Program, with the possibility of extending the collaboration again. The main goal of the partnership is the development of drugs that treat or cure rare and terminal metabolic diseases. This additional commitment is on top of Amicus’ February 2019 launch of its Global Research and Gene Therapy Center at uCitySquare, right next to Penn’s Wilson Lab, the latter of which is focused on gene transfer technology. The $50 million will go toward advancing the Wilson Lab’s preclinical research programs while affording Amicus the option to license some of the technologies invented as a result of the collaboration.

International education Given the prestige of the colleges and universities located in and around Philadelphia, it is not surprising that students apply not only from around the country, but around the world. Penn, for example, received 8,316 applications from international applicants in 2018, 493 of whom received admissions offers (5.9%). Fourteen percent of the class of 2022 consists of international students, with 10% from Africa and the Middle East, 46% from Asia, 5% from Australia and the Pacific, 14%

Partnership between business and academia is a two-way street that benefits both sides. from Canada and Mexico, 8% from Central and South America and the Caribbean, and 16% from Europe.

Enrollment of international students at all levels in 2018 totaled 5,333. In addition to attracting international students to Philadelphia, the Ivy League school also sends its own students across the globe to study.

Penn ranked No. 1 in the Ivy League for the number of students studying abroad (and 14th nationwide among doctoral/research institutions), with students earning academic credits in 85 countries, according to 2018 data. University of the Arts is another example of how education is looking internationally to train its student body. “We are thinking of ourselves internationally and how we connect with a much broader group from an intellectual and diversity standpoint. For example, we launched a new international dance program last year.

Every year, we participate in Camping, a major ( ) www.capitalanalyticsassociates.com

| 135

ÂŽ

oundtable:

Curriculum updates: Educational institutions are not only training students in academics, they are preparing them for the challenges of the workforce. Education leaders discuss how the changing dynamic requires schools to adapt their programs to fit the needs of the business community.

Guy Generals

President Community College of Philadelphia

How are you adapting your programs and courses to the changing demands of the local business environment?

We have developed a couple of new programs: fashion merchandising and business leadership programs. We are also rolling out a post-graduate accelerated nursing program, which is designed specifically for people that already have a bachelor’s degree and want to acquire a more technical degree. We have made significant progress in our programmatic areas. With the purpose of strengthening workforce development, we have aligned ourselves with the city’s plan for increasing the talent pipeline.

In addition, we have been working with one of the local unions to strengthen our early childhood development providers. We have expanded our suite of advanced manufacturing and career development programs as well. CCP is gaining exposure as a major player and a transformative institution in the City of Philadelphia.

Which of your programs are seeing the most demand and why?

Our business program continues to have the greatest demand. Its portfolio includes computer science, computer networking, business administration, marketing and management. Our health science programs have a huge demand as well. For example, we have received about 4,000 applications for our nursing program, while we only take about students 200 a year. We have an important eds and meds industry in Philadelphia and it is part of our mission to provide support services for the medical professions.

136 | Invest: Philadelphia 2020 | EDUCATION

EDUCATION ROUNDTABLE

Michael Mittelman

President Salus University

What changes at Salus University are improving the way it delivers education?

Salus University has continued to define the future of health science education since our inception 100 years ago. To that end, we have continued to innovate and set the standard. This past year, we completed construction of the Lombardi classroom, our newest and largest classroom, and have also integrated cutting-edge learning technology into every one of our classrooms to allow students to follow the lecture in real time and have access to the lecture recording as well. To continue to lead the way in health science education, we completed scenario planning; designed to explore “alternate futures” based on the ultimate disruptions that might occur at the intersection of higher education and healthcare delivery.

How is Salus innovating to make sure its student body is prepared for today’s working environment?

Throughout our 100-year history, we have been at the forefront of change in the professions that we teach. Salus is taking that leadership role once again as technology is changing the way that health professionals practice and how they are taught. We are using virtual reality to teach anatomy and diagnostic skills on a wide range of pathologies. We are adopting a telehealth curriculum. We are using fully-integrated, digital refraction technology in our Chestnut Hill teaching clinical facility. By embracing these technologies and retaining our focus on how to interact personally with our patients, Salus is advancing its mission to advance integrated healthcare through innovative education, research and clinical services.

Julie Wollman

President Widener University

How is Widener’s curriculum changing and which programs are seeing more growth?

Widener’s robotics engineering undergraduate program launched in fall 2018 and we opened a new state-ofthe-art robotics laboratory with funding from a generous donor. We have also introduced a new occupational therapy doctoral program, which will be housed in a completely renovated building that will open in fall 2019. We have experienced the greatest growth overall in graduate programs, where we are helping students to advance into high-paying jobs. Our graduate programs now account for more than 50 percent of our enrollment, with the greatest areas of growth in the health sciences, especially our programs in nursing, physical therapy, occupational therapy, clinical psychology, and also social work. At the undergraduate level, the growing areas are engineering and sciences, especially biology and psychology.

Ninety-five percent of Widener’s 2018 graduates achieved their first career goals within six months of graduation. To what do you attribute this outcome?

It’s a combination of factors. First, our faculty’s commitment to every student helps them to achieve their career goals. We also make experiential learning opportunities central to a Widener education. These opportunities for internships, clinicals, and research prepare our students for the work they will do once they graduate. We recently redesigned our career services office to have even greater impact. Our Career Design and Development staff start working with students before they are even admitted to Widener. www.capitalanalyticsassociates.com

| 137

Daniel Schidlow Former Dean Drexel University College of Medicine

As a college of medicine, what affiliations do you have in the region?

Unlike some of the other medical schools in the city, we do not own our own hospitals. We have affiliations with about 20 hospitals, mainly in the commonwealth. Our primary affiliations in Pennsylvania are with Hahnemann and St. Christopher’s Hospital for Children, owned by American Academic Health System. In addition, we have four Regional Campuses in the commonwealth; one in Sacramento, California, with Kaiser Permanente; and over a dozen affiliated institutions where our students receive part of their education. We are excited about plans already underway to build a new medical school branch campus at Tower Health in West Reading. This initiative will create many opportunities, not just for the college of medicine, but also for the university itself to collaborate with local educational organizations in Berks County and its neighbors. This new relationship will enrich student experiences by making students part of an outstanding organization with a strong commitment to the community and excellent facilities and programs.

It will also enhance clinical care and recruitment of physicians to the area and contribute to increased urban and industrial development in the area.

How is the College of Medicine contributing to the fight against the opioid epidemic?

In December 2018, the college of medicine was given a $1.5 million, three-year grant to address the opioid epidemic. Several of our scientists and physicians are directly or indirectly involved in neuroscience and behavioral research and care related to this issue. The importance of addressing the issue at the medical school level is multipronged. We need to address the social and psychological determinants of addiction. As physicians, we have a duty to be circumspect and thoughtful in the way we prescribe pain medicines. As an academic health center, we can reach at-risk individuals in the community for evaluation and offer evidence-based treatment.

138 | Invest: Philadelphia 2020 | EDUCATION

( ) international dance festival in Paris, as one of two invited representatives from the United States. Also, we curated the Special Exhibition of the United States at the Beijing International Arts Biennale this year. This is the first time the United States has participated,” said university President and CEO David Yager.

Jefferson University also has a strong international focus, with 379 international students, or 10% of its total enrollment, in its class of 2017 from such diverse places as Saudi Arabia, Canada, India, South Korea, China, Malaysia, Jordan, Nigeria, the Bahamas, Ghana, Taiwan, Greece, Iran, Italy, Norway, Russia, and many more. Jefferson also made history in 2018 by announcing its collaboration with multiple Italian institutions on a first-of-its-kind dual medical degree program geared toward enabling doctors to practice freely in the United States and the EU. Through the

Philadelphia area universities continue to expand STEM programs and majors, mirroring the development of the area’s job market.

EDUCATION OVERVIEW

Eric Darr President – Harrisburg University of Science and Technology

From a programmatic perspective, we are looking into hiring world-class faculty to fill out our programs on the technology side. The esports area is a recognition that people today love video games, and playing competitively online. Our purpose is married to our students’ interests, and as a result we have a focus on esports and technology. This is also an opportunity to make a national and international name for the university. A year and a half ago, we won the Overwatch National Championship. It was featured on ESPN, in prime time, for an hour, and they mentioned Harrisburg University 88 times in that hour. You can’t buy that kind of publicity.

program, students at the University of the Sacred Heart in Rome can earn a Doctor of Medicine degree from its School of Medicine and Surgery, in addition to a Bachelor of Science degree and Doctor of Medicine degree from Jefferson – all in just six years. The program helps students bridge the requirements gap between European and American medical education requirements. The former consists of six years of education without an undergraduate requirement, while in America a four-year undergraduate program must be completed before completing another four years of medical school.

Growth There has been a great deal of growth among Philadelphia’s institutions of higher education over the last few years, in terms of both geographic footprint and educational offerings. One move by Drexel University, announced in 2019, exemplifies both: the University will be constructing a building in West Philadelphia that will house two schools, Powel Elementary (Powel) and Science Leadership Academy Middle School (SLAMS). Drexel has raised $29 million for the new building, and the Philadelphia School District will contribute an additional $7 million.

Drexel will own the building, and the school district will lease it for $12 per year for 35 years, a feature of the deal that some members of the school board pointed to as ironic, given that the school district sold the lot on which the building will be built to Drexel just a few years ago. Drexel has vowed to retain the racial and economic diversity of both schools after it begins to support them. Drexel also began construction of a fouryear regional medical school in 2019, in partnership ( ) www.capitalanalyticsassociates.com

| 139

®

oundtable:

Regional education The Philadelphia region offers a plethora of educational choices. Here, leading institutions discuss the programs that are attracting the greatest demand, innovation, and how they are adapting online learning to reach more students.

Chris Domes

President Neumann University

Father Peter Donohue President Villanova University

What are the fastest-growing areas at Neumann?

We have seen significant growth in communications and digital media. Our enrollment in this major has tripled since we opened the Muller Communication Center, which has cutting-edge technology in two television and three radio studios. Biology and health science programs are among the fastest-growing areas as well. Students are interested in getting a solid biology background in order to get into a pre-med or other preprofessional program in the health sciences, a field in which career options are expanding every year. We just launched our data science analytics and cybersecurity programs. Based on our projections, this will be one of the fastest-growing majors over the next 10 years.

What are some of Villanova’s significant community partnerships?

We have started a new partnership with the Posse Foundation, a prestigious college access, success and youth leadership development program. The Foundation draws from an extensive pool of talented students from 10 cities across the country. Villanova has chosen New Orleans, and beginning in 2020, we will have 10 highachieving students each year from New Orleans attend the University. These academically-gifted students with diverse backgrounds will receive a full, four-year scholarship to Villanova. We participate in a similar program locally called Philadelphia Futures, and we offer full scholarships to three local students every year.

How are technology and online programs affecting Neumann?

We’re moving to a significant online education offering at the university. In the last few years, we ramped up our online programming and we just invested in an instructional designer who will help the faculty to enhance online learning for our students. We are moving all of our graduate programs to become either fully online or blended.

We have a number of adult programs that are completely online. For example, we offer an online program for first responders and emergency personnel, such as police officers and firemen. Through our online program they can complete their undergraduate degree which also integrates any training they have received as first responders. This is just one of the many ways our online work impacts many people around the country.

What are Villanova’s main areas of focus to improve the student experience?

We are constantly looking at integrating more interdisciplinary work and creating new cross currents between our academic departments. We have a new strategic plan that focuses on our Augustinian pedagogy and how we can be more cross-disciplinary in terms of our academic programming. The strategic plan will create more synergy in our academic programs and prepare students through the integration of various disciplines to enrich their academic experience. We are also focusing on career services. We are looking to expand our efforts in that area and make the Villanova Career Center’s services available to our alumni for life. We want to help alumni who wish to change their careers or advance in their careers and provide career counseling for a lifetime, both during their time on campus and long afterward.

140 | Invest: Philadelphia 2020 | EDUCATION

EDUCATION ROUNDTABLE

Damian Fernandez Chancellor Penn State Abington

What are Penn State Abington’s latest curriculum innovations?

We plan to introduce a number of new programs as a result of our five-year program development plan.

Those demand-driven programs are based around technology, business, liberal arts and sciences. For example, one of our popular minors that will become a major is health humanities. We are committed to the liberal arts and sciences and want to provide different pathways for students in health professions by integrating culture, religion, ethics and history. Our Top 3 programs are business, psychological and social sciences, and information sciences and technology. We are adding a computer science and a project and supply chain management program. We are expanding online programs, and we are starting our first graduate degree in association with the Penn State Great Valley School of Graduate Professional Studies.

What is the importance and impact of Penn State Abington’s global programs?

We are becoming a destination for international students and will welcome over 500 international students this fall. We are committed to global learning through technology. Our Real-time Interactive Classroom (RIC) connects classrooms across the world and provides a compelling learning environment. In October 2018, we received the largest gift in campus history, a $17.3 million commitment from alumnus Stephen Taub, which will support student scholarships and global engagement programs. We want to provide students from all walks of life with access to an international experience.

Aaron Walton

President Cheyney University of Pennsylvania

On which academic programs is Cheyney putting a special focus?

We are beginning to look at some of the emerging fields and professions. There’s no question that professions technology, medical, financial services lead to gainful employment in today’s society. A lot of our strategic planning aims to reshape our academic focus toward the jobs of the future. We’re talking about becoming a 21st century model institution in which there’s significant emphasis on the quest for excellence in academics, character and social responsibility.

We are placing particular emphasis on the medical services arena. Our partnership with Jefferson University introduces significant opportunity for individuals who are exploring healthcare professions.

What has been the impact of the partnerships cultivated through the Institute for the Contemporary African American Experience?

As we engage in partnerships, they must have two key components: giving experiential opportunities to our students and helping to preserve the university.

Jefferson University, Epcot Crenshaw and Starbucks are our initial partners. Our partnership with Jefferson has several objectives. First is the research projects that help address health disparities in diverse areas of Philadelphia. Second is the intervention strategy and pipeline of Cheyney University graduates to Thomas Jefferson. Over the last three months, our students have explored opportunities of that nature at some of the Jefferson outlets. www.capitalanalyticsassociates.com

| 141

Market voices: Business schools

Joseph DiAngelo Dean Erivan K. Haub School of Business - Saint Joseph’s University

We do significant work in data analytics, cyber security and cyber analytics through our online data analytics and cyber analytics program. In fact, we work with Tableau Software and local companies such as Johnson & Johnson and Comcast, who play a very active role in supporting our students in regards to that programming. We also provide executive education and leadership training for many companies in the area. In addition, our custom-built Wall Street Trading Room gives students the opportunity to apply and practice financial analysis and risk management skills before entering the high-tech business arena. Our students can achieve certification by Bloomberg using our trading room. When graduates of the Haub School of Business become practitioners, they can immediately use their experiences from the campus trading room in their professional careers.

We have a new real estate program which has garnered significant student interest and is really taking off. We have an undergraduate major and an MBA concentration. Our part-time MBA programs, both on-line and face to face, are growing. A couple years ago, we revised our MBA program to make it much more interdisciplinary and flexible, which is what people are looking for. We continue to see growth in our analytics programs at the graduate and undergraduate levels. The success of our program is driven by our projectbased approach which enables students to develop the skills to craft and present data-driven business insights.

MarySheila McDonald Dean La Salle University School of Business

Paul Jensen

Dean Drexel LeBow College of Business

Philadelphia is one of the most competitive markets for AACSB-accredited schools. What differentiates us is that we intentionally provide numerous professional engagement and leadership opportunities for students starting in the freshmen year. I have two student advisory boards, including the Dean’s Freshman Advisory Board, and we have expanded the number of student clubs to create exciting, fun and educational venues for students to explore industries and careers including the Business of Sports Club, Podcast Club, Business of Fashion club and the CEO-Collegiate Entrepreneurship Organization. We have a Digital Media Lab in which students and faculty do social media listening and analysis of data on some of the largest firms in the world. One of the hallmarks of Lasallian education is ‘meeting students where they are.’ We are constantly looking for innovative curricular, programmatic and co-curricular ways to help Gen Z business students explore and ultimately integrate their passions and interests into meaningful careers.

142 | Invest: Philadelphia 2020 | EDUCATION

EDUCATION OVERVIEW

Thirty-eight percent of the Philadelphia population 25 years and older have a bachelor’s degree or higher. The U.S. average is 30%.

Not to be outdone by its neighbors, Temple is ( ) with Tower Health. The 150,000-square-foot campus is located in Wyomissing and should be fully embarking on several construction projects during completed by April 2021, admitting its first class three the summer of 2019, including the Charles Library, which can house 2 million books in its BookBot robotic months later.

West Chester University recently broke ground retrieval system and will also feature a café: renovations on what will be the largest building constructed by to the College of Liberal Arts, particularly the addition the university in its 148 years. Called the Sciences of a new professional development and academic & Engineering Center and the Commons, the advisory center on the first floor of Gladfelter Hall and a courtyard for Anderson Hall; 176,000-square foot, three-story and a comprehensive renovation project will cost $130 million of Independence Blue Cross and include a 450-space parking Recreation Center. An extensive garage. It will become the home of aesthetic overhaul of 1300 the university’s expanding health Residence Hall is also under way. sciences, physics, and biomedical Finally, Penn has its own engineering programs. Donations litany of renovations and new totaling $2 million are funding the construction in the works, early stages of construction. including The Pavilion, Penn’s Jefferson has also grown by largest capital investment in 25,000 square feet with the Paul Katz its long history, which will addition of its new $7 million University of the Sciences provide Penn Medicine with Institute for Bioprocessing. The 700 new beds and 50 surgical facility was renovated from an existing two-story building, and will feature programs and procedure rooms, and the $46 million Wharton that will educate and train more than 2,500 people every Academic Research Building. Penn is also carrying out year in how to produce life-saving biotherapeutic drugs. renovations to Franklin Field, the McNeil Building, The institute will partner with companies to provide and the Museum Coxe and Harrison, as well as a new workforce training to pharmaceutical professionals, and 450-bed student residence, New College House West. will also work with universities to teach bioprocessing engineering students. It will open with eight employees Meds and eds and plans to grow to 24 over the next three years.

All of these expanding, world-class universities and

We are focused on science and healthcare — that is where the jobs are.

www.capitalanalyticsassociates.com

| 143

EDUCATION OVERVIEW

Ronald Matthews President – Eastern University

We started a new, more flexible undergraduate model in Fall 2018, called Eastern University FastPass.™ This model allows students to complete an undergraduate degree in three years. The program includes two free online summer courses each year for full-time, residential students, with a reduced-tuition option for commuters. The free online summer classes can also be used to lighten course loads for students who have to work, or for athletes ,musicians, dancers, or actors who have busy schedules during the school year. With Eastern University FastPass’s flexible approach, students can also use the free summer classes to easily double major or earn multiple minors.

research institutions concentrated in one metro area people who helped ignite pharma as an industry in have helped Philadelphia develop into one of the Philadelphia and the surrounding regions. We have nation’s top life sciences hubs. In 2019, commercial been a part of Philadelphia’s growth in this sector real estate services and investment firm CBRE since the beginning,” said Paul Katz, president of the ranked Philly eighth out of all the biggest American University of the Sciences. “We want to continue to life sciences hubs, measured in terms of number of build on that legacy. We want to continue to build on scientists in key industry categories, industry funding that legacy. We are focused on science and healthcare for local life sciences companies, size and long-term — that is where the jobs are. Data science is growing, growth of their life sciences workforce, and their so we have added programs in that area. We are getting much more involved in informatics, as well inventory of industry lab space. as genomics. We are growing Philadelphia’s high rank was and evolving along with the thanks to a particularly fruitful developing sectors in health and 2018 for the sector, with the highest science.” level of life sciences funding The bulk of the activity is in pouring into the city since 2007 University City and Center City, and more than 50,000 people where the heaviest concentration working in life sciences R&D, of institutions of higher education manufacturing, and medical, are located. It is in this area that the diagnostic, and testing labs.

345,000-square-foot 3675 Market “We’re seeing that innovative life Street building containing the first sciences companies are growing Cambridge Innovation Center in in Philadelphia and growing Deborah Diamond the region is located and which is in prominence nationally. The Campus Philly near full occupancy. Nearby, Penn University City Science Center — the first and largest urban research park in the United and Johnson & Johnson Innovation partnered at the States — and the other things happening in University Pennovation Center to launch the JPOD@Philadelphia City are fueling the growth of this emerging sector in incubator program. Philadelphia also ranked sixth in Philadelphia,” said Campus Philly President Deborah funding from the National Institutes of Health at $990 Diamond. As the industry grows in the region, schools million in 2018 – half of which went to Penn. are adapting, even those that were already heavily programming for this segment, like University of the Looking ahead Sciences. “If you go back to 1821, when the school One of the biggest challenges facing higher education was founded, some of our first graduates were the in Philadelphia is the continued need to align the

We’re seeing that innovative life sciences companies are growing in Philadelphia.

144 | Invest: Philadelphia 2020 | EDUCATION

EDUCATION OVERVIEW

Jefferson’s Institute for Bioprocessing will educate more than 2,500 students every year.

Philadelphia is widely considered the best city in America for diversity in STEM fields.

training and education they provide to students with the skills desired by employers. This remains a moving target as technology continues to evolve and have transformative effects on a variety of industries and the ways people work within them.

Universities and other educational institutions in Philadelphia are working closely with government officials and industry stakeholders to ensure that their curricula are providing students with the proper experience to meet the demands of a changing world.

City Year Philadelphia, an educational nonprofit that provides individualized support for students, is one example of how the different organizations coordinate with academia to improve education and move students into the workforce. Darryl Bundrige, executive director and vice president of City Year

Philadelphia, says the group’s work is more than promoting diversity. “We go beyond diversity to having strong procedures and systems that promote inclusivity, equity, and a sense of belonging, and that is the journey that we are on both locally and nationally. We have strong relationships with the city of Philadelphia, the state, the school district and our corporate individuals, and that is critical for the job we do.”

Barbara Lettiere President – Immaculata University

We recently added a second-degree Accelerated Bachelor of Science in Nursing program, which is designed for students who have an undergraduate degree in another discipline. The program will allow them to earn a BSN degree in as short as 15 months. The interest level for this degree has been rich. We also added a Master of Science in Health Care Management, which was a recommendation from one of our board members who works in the healthcare industry and considers this is a deficiency in healthcare training.

www.capitalanalyticsassociates.com

| 145

Montgomery County: Montgomery County, or Montco, has emerged from the bedrock of U.S. history to seal its place as a dynamic and diversifying regional economy strong in retail and industry. Home to both small businesses and leading corporations, proactive initiatives like MontcoForward are updating the county’s approach to economic development, while ensuring its workforce is educated and competitive.

www.capitalanalyticsassociates.com

| 147

Fast forward: Montgomery County has the fastest-growing economy in the greater Philadelphia area, and it is preparing for more Montgomery County has been a part of history since before the founding of the United States, known as a place where revolutionary warriors wintered, and abolitionists admonished their countrymen to repudiate slavery. Today, a different kind of progress is underway, as the county strives to enrich the lives of its residents and make Montgomery County the place to live, work, learn, and invest. Whether it is the strengthening of an already strong economy that continues to add more and higher paying jobs, the undertaking of massive infrastructural improvement projects that will improve travel within the county and connect it to other major labor markets in the region, or the growing selection of top healthcare, education, and shopping, Montgomery County has a diversity of place, people, and opportunities all in a location that is truly the keystone of the Northeast corridor of the United States.

History Montgomery County has an exciting history that predates not only its designation as a separate county from Philadelphia County, but also the formal existence of the United States of America. Valley Forge, 148 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

within Montgomery and Chester counties, hosted the fabled winter camp of Gen. George Washington and his troops following the Battle of Edge Hill. In 1784, the residents of what became Montgomery County petitioned the Pennsylvania State Assembly for a new county separate from Philadelphia County, primarily based on their excessive distance from the county seat.

The petitioners were granted their new county, and it was named after Gen. Richard Montgomery. Its muchcloser county seat in Norristown, which was named for local landowner Isaac Norris, was laid out in 1784 and incorporated as a borough in 1814. Later in its history, Montgomery County became active in the abolitionist movement thanks to its close association with the slavery-abhorring Quaker sect. It was also home to abolitionists Lucretia Mott and Hiram Corson, and had several stops along the Underground Railroad. The area’s traditional industry was primarily agricultural, with several family farms dotting its landscape during the 19th century.

Today, Montgomery County is home to both small businesses and major corporations, as well as some of the country’s best schools, all of which are easily accessible from Philadelphia and the surrounding

MONTGOMERY COUNTY OVERVIEW

region by road and rail. It is also among the region’s favored counties to live in Pennsylvania, ranking No. 1 of 67 counties and No. 1 for families in a 2019 study by niche.com that awarded the county an overall A+ grade. In terms of diversity, the county scored a B+ grade based on ethnic and economic diversity.

Montgomery County is also second in foreign-born population behind Philadelphia County.

General economy Montgomery County has the fastest-growing economy of all the counties surrounding Philadelphia. It is beating neighboring Bucks County in terms of business growth by 34%. Indeed, Montgomery County’s GDP added $2.6 billion during the four years

to 2018. Between 2013 and 2016, the county added 14,035 jobs, a 3% increase in total workforce. During this same period, Bucks County added 1,698 jobs and $1.9 billion to GDP. In addition to excelling at job creation, Montgomery County also performs well in terms of the salaries earned by its residents: the median household income of a Montgomery County resident is $87,304, well above the national median of $60,336. Moreover, income inequality in the county measures 0.472, according to the Gini Index, which is below the national average. The most commonly held occupations in the area include management (59,037 people), office and administrative support (51,322 people), and sales (45,019 people), while the highest paying occupations include legal industry positions ( )

®

oundtable:

Opportunity blueprint The Montgomery County Board of Commissioners discuss the opportunities that are unique to the county for businesses and individuals. They also reveal the efforts taken and planned to achieve sustainability across the county.

Valerie A. Arkoosh MD, MPH

Chair Montgomery County Board of Commissioners

What business opportunities are unique to Montgomery County?

Montgomery County is home to a robust and growing tourist industry. In addition to premier destinations such as Valley Forge National Historical Park and King of Prussia Mall, we are working with Valley Forge Tourism & Convention Board on bringing other events and locations into the fold. Our collection of lush parks and trails, Elmwood Park Zoo, Cirque du Soleil performances at the Greater Philadelphia Expo Center, and the USA Climbing Sport & Speed Youth Nationals are all included in the Montgomery County tourism experience and we will continue to add more.

Montgomery County has a thriving economy, connected communities, an abundance of educational opportunities, rich cultural assets, open space, and recreational opportunities. We welcome any business or individual who can add to the experience.

What are some of the county’s efforts to develop sustainable operations?

Sustainability is a critical component in all of our plans. In addition to our current wind turbine and Justice Complex improvement projects, we continue to make progress on the Montco 2040 Comprehensive Plan to increase energy efficiency in our operations throughout the County. Our Planning Commission’s Complete Streets program works with municipalities to make areas walkable, bikeable, ecofriendly, and to provide access to alternative transportation methods, which decrease our carbon footprint and the detriment to our local ecosystem.

150 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

MONTGOMERY COUNTY ROUNDTABLE

Kenneth E. Lawrence Jr.

Vice Chair Montgomery County Board of Commissioners

How is Montgomery County setting an example for businesses and creating an attractive environment for residents?

We are working hard on our transportation and infrastructure, repairing our roads and bridges, and making sure these are in good, working condition. We implemented a parental leave policy for our employees.

The new policy is not gender-specific and employees can get six weeks off for the birth, adoption or guardianship of a child. We believe that will spur area companies to implement similar initiatives. Montgomery County has the best trail network in the region. We have close to 100 miles of trails, including the Schuylkill River Trail, which is the most popular trail in the region, and we are working on expansion, improvements and new connections for many of our trails.

What is the county doing to develop sustainable operations?

Sustainability is important for us as a county government and we want to take a leadership role. We announced a wind energy purchase that will power all of the county’s electrical accounts. The commissioners also made a commitment to transition to renewable energy for heating all county-owned buildings and powering all countyowned vehicles by 2050. Another major project is a new justice complex, which is part of six individual construction projects in downtown Norristown to address service, operational and energy inefficiencies and modernize county buildings for the future. We are taking every step to make sure that sustainability is a major part of that project so that we’re not increasing our energy footprint.

Joseph C. Gale

Commissioner Montgomery County Board of Commissioners

Where are the opportunities for growth in Montgomery County, and what particular industries or types of businesses are you targeting?

Manufacturing continues to be a strong growth segment and a focus for job opportunities and training.

Montgomery County is home to the most manufacturing jobs in the Commonwealth, especially in the biotech and pharmaceutical industries, which are prevalent here.

The Montgomery County Commerce Department’s annual Manufest event and free manufacturing training boot camps help to prepare a new workforce to match employer needs. We are also seeing a lift in small business growth such as eateries, specialty shops, and custom services, and small to midsize corporate firms in different areas of the county. For example, Pottstown Area Industrialization Development, Inc., has seen a surge in commercial real estate sales and business expansion over the past year creating more jobs in the area.

How does the county plan its approach to environmental sustainability?

A large part of our sustainability plan includes preserving open space and farms. One example is our Planning Commission’s collaboration with the Commonwealth, Plymouth Township, and the McKeown Family to permanently preserve Maple Acres Farm, the last farm in Plymouth Township. Preserving the farm moves us closer to our goal of preserving 14,600 acres on 246 farms by 2040. These working farms represent a viable segment of our economy, contribute to our local ecosystem, and continue to spawn a sense of community for our residents. www.capitalanalyticsassociates.com

| 151

MONTGOMERY COUNTY OVERVIEW

Mixed-use project Bryn Mawr Village has been key in the revitalization of Lancaster Avenue.

( ) ($94,701), computer and mathematics ($87,125), and management ($86,683). In terms of industry, the county leads the state in manufacturing. “Montgomery County is No. 1 in Pennsylvania for manufacturing.

We have more manufacturing jobs than any of the 67 counties in Pennsylvania. There are numerous opportunities in manufacturing, especially in the biotech and pharmaceutical industries,” Montgomery County Commissioner Kenneth Lawrence, Jr. told Invest:.

Not content to sit on its laurels, the county has undertaken an initiative to not only maintain but improve its strong economic performance.

MontcoForward was created by the Montgomery County Commerce Department to meet the county’s need for an updated approach to economic development that recognizes the key role of collaboration among individuals and organizations.

MontcoForward provides a way for individuals, entrepreneurs, investors, businesses, communities, and institutions to get answers about economic and workforce development and related services, whether they are already active in the county’s economy and looking to grow or seeking to break into the area for the first time. As part of MontcoForward, The Valley 152 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

Forge Tourism & Convention Board partnered with the Montgomery County Commerce Department to promote the county’s 80 hotels offering around 9,200 rooms; 30-plus craft breweries, wineries, and distilleries; 53 golf courses; close to 100 miles of trails; more than 200 arts and culture attractions; and 1,600 restaurants. The collaborative effort included a promotional video that illustrates the county’s advantages. “We worked with the county and the Montgomery County Commerce Department on a video project and marketing strategy. It’s one of the first times that has been done with tourism,” said Michael Bowman, president and CEO of the Valley Forge Tourism & Convention Board. “We collaboratively worked through MontcoForward’s brand and we produced a video with various college presidents and industry and tourism leaders to showcase the county.

The economic drivers for industry continue to grow.

There are great schools in Montgomery County and things to do. Montgomery County has a great location in proximity to Philadelphia, New York, Washington D.C., and is well-connected through all the main highways.”

The overarching objective is to showcase the county as an ideal destination for people to live, work, learn, invest, and visit — Valley Forge National Historical

MONTGOMERY CONSTRUCTION COUNTY OVERVIEW

David Zellers Director Montgomery County Commerce Department

Park alone attracts 1.8 million visitors annually and had a local economic impact totaling $36 million in 2018.

MontcoForward was expanded in May 2019 to provide additional web-based information about business development, including data on the county’s business climate, industry trends, customer demographics, competition, and transportation.

Critical improvement projects In addition to MontcoForward, the Montco 2040 Comprehensive Plan, as its name suggests, focuses on all aspects of the development of Montgomery County through the year 2040. Montco 2040 was formally adopted on Jan. 15, 2015 as an overhaul of the 2005 comprehensive plan. Montco 2040 provides a comprehensive framework for the local plans of municipalities throughout the county, and offers guidance on intermunicipal issues, such as highways, public transportation, flooding, trails, growth trends, redevelopment trends, shopping needs, the impact of large developments, housing needs, natural systems, and economic growth. Montco 2040 has been hugely successful, even winning national awards, and this is due in no small part to the inclusion of public input during its development. Individual citizens, ( )

What is the main achievement of the Montgomery County Commerce Department in the last year?

One of the cornerstone accomplishments this year has been the launch of our new web platform, MontcoForward.org. We worked very closely with our tourism board (the Valley Forge Tourism & Convention Board) and with our planning commission (the Montgomery County Planning Commission) to put something together that would, in one place, help a variety of different constituencies learn more about the county, be excited about having or expanding a business here, and relocating here.

The website includes a host of demographic and business intelligence information (with geospatial components), resources on who to talk to, information on all our great partners in our growing partner network, and also includes our MontcoForward video, which was really a special and exciting initiative to help promote Montgomery County as the place to live, work, learn and invest.

What opportunities does Montgomery County offer to businesses seeking to expand or relocate?

First of all, over half the population has a bachelor’s degree or higher. Moreover, Montgomery County has the most manufacturing jobs in Pennsylvania. We have a diversely skilled workforce. We are very fortunate in that businesses are looking at this area. There are close to 100 institutions of higher education within 50 miles of the county, as well. Our county property taxes are the lowest of Philadelphia’s collar counties.

We are also at the keystone of the Northeast corridor of the United States, running from Boston all the way to the research triangle in North Carolina. And that proximity to so much talent, so many other businesses and opportunities gives us a really unique location advantage. Our proximity to Philadelphia provides a natural linkage and connection to the excitement of the city. www.capitalanalyticsassociates.com

| 153

Market voices: Great offer

Michael Bowman

President & CEO Valley Forge Tourism & Convention Board

I see tourism only growing. One of the opportunities that we continue to build up in Montgomery County is fitness tourism, especially youth sports. That could be basketball, volleyball, soccer, cheerleading or dance. What’s great about this niche and this business model is that families travel for youth sports.

It’s usually on weekends and shorter periods. When they come to various destinations, they want to explore and enjoy all the assets they normally don’t get to see. We are in the process of working through final plans to attract a developer and a partner to build or improve and increase the number of fields that we have and our indoor facilities for youth sports.

Montgomery County has made a significant investment in trails and open spaces. Our 96-mile trail system has been expanded for county residents, connecting them to the region’s trail network, the Circuit. We are preserving open spaces, whether parks or land with environmental benefits, especially along the Schuylkill River and other waterways that provide places where people can hike, bike, birdwatch, or kayak. We have a tremendous amount of open space and an extensive park system. We also look at and review planned development in the county through our zoning ordinances. When we adopted Montco 2040: A Shared Vision, we looked at how we could provide sustainable growth in the county to preserve our open spaces while investing in our communities, preserving our historical character, and promoting businesses to grow.

Greg Waks

Chairman - Board of Supervisors for Upper Merion Township

Jody Holton

Executive Director Montgomery County Planning Commission

We have a community of employers that are always looking for qualified people. We also have a number of growing amenities in our township, which also helps to drive employees to live in our community. These amenities include a community center and a pool with increasing membership and a growing number of trails and sidewalks, which helps people live an active lifestyle. Our low taxes are also among the main drivers for residents and businesses. Both the public and private sectors offer numerous amenities for the community because the employees we want to attract are also interested in having a quality lifestyle.

154 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

MONTGOMERY COUNTY OVERVIEW

Dennis McGonigle Chief Financial Officer – SEI

The Oaks headquarters project is well under way, and we expect to finish the expansion of our existing North Campus by late spring 2020. Eventually, we want to bring all of our Pennsylvania employees back onto a single campus and give us some additional room for growth, as the new building will significantly expand the office space available at our Oaks headquarters. The construction reinforces our presence in and commitment to Montgomery County, which has been our home for over 20 years and will continue to be. As a global company, we keep expanding our footprint and attracting talent, and that is healthy for Montgomery County’s growth.

of homes available shrunk by 19% to 2,403 in August 2019 from 2,980 in August 2018. For the homes that are being sold this year, they are going faster and netting more: the average number of days that a house is on the market dropped from 41 in August 2018 to 38 in 2019, and the median sale price climbed 6% year over year from $304,950 in August 2018 to $322,495 in August 2019. It also appears to be getting more expensive to rent in Montgomery County, with median rent climbing from $1,057 in 2010 to $1,211 in 2017.

Another interesting facet of Montgomery County’s real estate market is its retail space offerings that make it a leading shopping destination in the Northeast corridor. The retail kingpin, of course, is the renowned King of Real estate Prussia mall. The mall has long The county’s growth over the been a draw to shoppers from the past few years has spurred a surrounding region and beyond, commensurate expansion of with 22 million visitors annually. its real estate market. While Michael Bowman It now has plans to expand into a the county hit some major Valley Forge Tourism & Convention Board multi-use space with apartments, milestones in 2017 and continued a hotel, office space, and outdoor strong in 2018, some evidence of a cooldown emerged in 2019. For example, the total space. The project will make use of the vacant J.C. number of single-family homes sold throughout the Penny property at the mall, and will boost the mall’s county in 2017 was 12,202, the highest number in a value from $2 billion to more than $3 billion. decade. However, the total number of homes sold in 2018 fell slightly, to 12,036. The latest data from August Transportation 2019 indicates that 1,042 units were sold that month, The King of Prussia region is also at the heart of one compared to 1,232 in July 2019, and 1,203 in August of Montgomery County’s most ambitious transportation 2018. However, it is worth noting that this decrease in plans. The Southeastern Pennsylvania Transit Authority sales may be linked to a decrease in the inventory of (SEPTA) has plans to extend the Norristown Highhomes for sale compared to last year: the total number Speed Line to King of Prussia, a project that would ( ) businesses, organizations, community leaders, and municipal officials were invited to numerous public meetings and presentations, were asked to complete a survey, which 2,500 residents completed, and had access to videos, webinars, and draft plans designed to inform them about the plan. Finally, there was a public hearing on the final draft. To facilitate the implementation of Montco 2040 and its underlying goals throughout the county, the Montgomery County Board of Commissioners announced the Montco 2040 Implementation Grant Program, which has awarded $5.5 million in funding for 56 projects across 38 municipalities through the 2019 cycle.

The economic drivers in Montgomery County continue to grow.

www.capitalanalyticsassociates.com

| 155

MONTGOMERY COUNTY OVERVIEW

link University City, Center City, and Upper Merion, the region’s biggest employment hubs, by rail. The project will cost SEPTA an estimated $1.2 billion, although funding remains an unanswered question.

The expectation at present is numerous sources of funding, with one source almost certainly being federal grant money. Another potential source is a New Starts grant from the Federal Transit Administration, which the project would likely qualify for because it will add 9,500 more trips on the Norristown High Speed Line than it currently handles. However, the New Starts grant will cover, at best, approximately half of the project’s cost, leaving SEPTA to figure out how to fund the balance. SEPTA will also need to secure $600 million in funding before it would even be entitled to apply for federal grants. For now, SEPTA has approved payment of $7 million (out of a decade-old grant of $20 million) to the engineering firm HNTB to provide detailed plans for the project. SEPTA hopes to have a better idea of where the balance of the funding will come from in 2020, based in part on the plans provided

by HNTB. Upper Merion will soon be home to the world’s largest co-working

Manufacturing community.

Montgomery County is already one of the largest manufacturing hubs in Pennsylvania, and the sector now expanding into the county to take advantage continues to be one of the fastest-growing in the of the demand, and space, for new healthcare and region. To ensure a steady supply of qualified workers, life sciences facilities there. For example, Jefferson the Montgomery County Workforce Development Health (Thomas Jefferson University) opened its new Board offered free manufacturing boot camps to Jefferson Institute for Bioprocessing in Montgomery anyone interested in pursuing a career in the growing County in 2019. The $7 million facility was the product field. The six-week camps, started in mid-September of a partnership between Jefferson Health and Dublin, 2019, were offered to support the Southeastern Ireland-based National Institute for Bioprocessing Research and Training. The Pennsylvania Manufacturing institute is the first of its kind in Alliance, which is a collaborative North America and will allow bioorganization comprised of pharmaceutical professionals manufacturers throughout the and students to obtain handsregion. The content of the boot on education in the production camps included workshops on of biotherapeutic medicines resume writing, interview skills, through collaboration with local and industry basics. Participants pharmaceutical companies. could also work toward their At opening, eight employees OSHA 10 Safety Certification Kenneth Lawrence occupied the 250,000 square-foot and receive career coaching.

Montgomery County facility, with plans for the staff to Upon completing the boot camp, participants will have a chance to connect with local triple to 24 over the next three years.

Another exciting healthcare expansion into employers.

Montgomery County is the Children’s Hospital of Philadelphia’s (CHOP) announcement that it plans Healthcare Montgomery County’s healthcare sector benefits to open a new specialty care and urgent care center from its proximity to Philadelphia’s world-class in Abington Township. The proposed 37,000-squarehospitals and research centers, many of which are foot facility will include up to 30 exam rooms and

We have more manufacturing jobs than any of the 67 counties in Pennsylvania.

156 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

MONTGOMERY COUNTY OVERVIEW

a gym for physical/occupational therapy. The main outpatient services offered at the specialty care facility will include cardiology, orthopedics, ENT, neurology, pulmonology, endocrinology and diabetes, and gastroenterology and nutrition. The urgent care center will offer after-hours care to children with mild to moderate illnesses or injuries. When it opens in 2021, the new facility will join five existing CHOP facilities in Montgomery County, with a new inpatient hospital also expected to open in King of Prussia in 2021.

The healthcare segment in the county also is now underpinned by the Discovery Labs co-working space that opened in Upper Merion County this year. It is the largest co-working space in the world and will focus on healthcare, life sciences and technology. In an interview with Invest: Philadelphia, Greg Waks, chairman of the Board of Supervisors for Upper Merion Township, highlighted the importance of the new space and the other opportunities arising in the area. “With the opening of Discovery Labs, which will be one of the world’s largest co-working communities, there will be numerous opportunities for businesses in the healthcare, life sciences and technology sectors. Upper Merion also offers multiple ( )

®

oundtable:

Testing fresh waters Education plays a large role in Montgomery County’s growth and attractiveness, and its institutions of higher learning are taking the necessary measures to ensure students get the education that will help them meet the expectations of a demanding and evolving business community. Leading educators discuss the challenges and opportunities ahead.

Brock Blomberg President Ursinus College

How is Ursinus College dealing with the trend of diminishing enrollment?

We are actually bucking the trend. We had a magnificent year in 2019, but it wasn’t just about attracting more students. We were able to enhance diversity and strengthen academic quality in our student body, while keeping the same commitment to a growing number of scholarships. Part of it is that we are small in the right way.

We are intimate, our students get to know their faculty and student affairs staff, and our entire curriculum is built on four questions, which we call the “Ursinus Quest”: How do I understand the world? How should we live together?

What matters to me? And, what should I do? This last one adds an element of action. If students come here with the idea that they own their education and that it is going to be driven by questions like these, it invigorates them.

What are the more popular majors in the college and which have seen the most growth?

Many students coming to a liberal arts college are undecided about their majors. We offer many opportunities for students to pick and choose and we have found that often, many students pick multiple majors that are complementary. Our most popular majors are in the areas of health and science. We invested in the Innovation and Discovery Center, an academic building that combines science, entrepreneurship and public affairs all under one roof. That helped attract many students who wanted science-related majors; in fact, almost half of our new students came for that. The other popular majors here are business and economics, health and exercise physiology, and media and communications.

158 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

MONTGOMERY COUNTY ROUNDTABLE

Deanne D’Emilio

President Gwynedd Mercy University

The Gwynedd Mercy University Board has approved a new five-year strategic plan. In what areas is that plan focused?

It has four themes. One is distinctive teaching and learning, and of course that focuses on program development. The overarching goal of that theme is for Gwynedd Mercy University to become a Catholic university leader in professional and healthcare education. Another theme is the transformative student experience, which is going to focus on actual programming for students that will distinguish Gwynedd Mercy University from what I would call the “sea of sameness” that exists in this part of Pennsylvania with small, private higher education institutions. The third theme is called Empowered Community, which is more internally focused on how we function, our systems and campus master planning, and the fourth theme is called Compelling Brand, which is focused on how we showcase Gwynedd Mercy University in Pennsylvania and the region.

What are some unique challenges for higher education in the area?

The fact that there are so many institutions of higher education in the region is without question a challenge.

Within 30 miles of this institution, there are 46 others.

Many are small, private institutions like us. An additional challenge is the well-documented decline in the number of students graduating from high school in the foreseeable future and the immediate past, so there will be fewer traditional students to attend all of these undergraduate institutions.

Ajay Nair

President Arcadia University

What opportunities does Philadelphia provide for higher education?

Our close proximity to the city is a major draw for our students. We think of ourselves as a global institution, with a strong presence in 12 countries around the world.

That’s remarkable for a midsized liberal arts institution.

We also think about Philadelphia as a global destination.

Besides our study abroad programs, we’re investing in internship opportunities in Philadelphia. We’re developing a project for Arcadia students and students around the globe to study and work in Philadelphia. This will be another pioneering chapter in Arcadia’s history.

What are the biggest challenges facing liberal arts education today?

We hear a lot about the challenges related to the workplace. In other words, how do we prepare students for the workplace through a liberal arts education?

Certainly that’s a key motivating factor for us at Arcadia, but we’re digging a bit deeper there. We’re producing work-ready and life-ready students who have deep critical thinking skills and are prepared for the workforce and life’s challenges. Social impact is the essence of liberal arts, and we’re preparing change agents who want to make an innovative difference in their communities.

What are your areas of focus for the university?

At Arcadia, we have a big focus in health sciences innovation, with nationally-ranked programs in our physical therapy and physician’s assistant program. Both of these degrees will see investments in a hybrid online version of the programs. www.capitalanalyticsassociates.com

| 159

MONTGOMERY COUNTY OVERVIEW

Montco 2040 Implementation Grant Program has awarded $5.5 million in funding for 56 projects through 2019.

( ) opportunities for companies in the medical sector, especially with the presence of the Children’s Hospital of Philadelphia Specialty Care and Surgery Center and a new hospital on the way, as well as a Main Line Health Center in King of Prussia, which will be home to a new Women’s Specialty Center. For people who are interested in establishing any type of business in the medical or healthcare space, we have a wide variety of opportunities in our township.”

Education In addition to the county’s proximity to the institutions of higher education in Philadelphia, including the University of Pennsylvania, Drexel University, and Temple University, Montgomery County is home to a host of excellent schools within its own jurisdiction: Montgomery County Community College, Arcadia University, Gwynedd Mercy University, Haverford College, Bryn Mawr College, Ursinus College, and more. To highlight the achievements of just one of the county’s premier schools, Montgomery County Community College was named one of the best community colleges in Pennsylvania, based on transfer rate, graduates who go on to complete degrees and certificate programs, student retention rate, and cost of attendance. According to the Schools.com 160 | Invest: Philadelphia 2020 | MONTGOMERY COUNTY

Valley Forge National Historical Park attracts 1.8 million visitors a year. ranking, Montgomery County Community College placed third, behind only Bucks County Community College and Butler Community College.

Looking ahead Montgomery County continues to grow and add to its legacy. From its historical roots to its modern identity as a retail mecca, hub of industry, and flourishing economy, the county has always managed to dynamically meet the needs of its residents.

Through a series of proactive initiatives designed to keep the county’s economy and population growing, its workforce educated and competitive, and its infrastructure up to the increasing demand, Montgomery County is ensuring that it will continue to be a competitive presence in the region.

Capital Analytics would like to thank Montgomery County and The Valley Forge Tourism & Convention Board for its contributions in compiling this chapter. To learn more, visit their websites: https://www.montcopa.org/ and https://www.valleyforge.org/

Healthcare: It’s an interesting time for the healthcare sector in Philadelphia.

The fight over the Affordable Care Act is again gearing up, but jobs growth and funding are two positives as the industry continues to demonstrate powerhouse strength. Getting better access for those who need it most remains a key challenge.

www.capitalanalyticsassociates.com

| 161

Positive attraction: The local health sector faces challenges but the industry is booming, reinforcing the city’s reputation as a major health center Healthcare in Philadelphia and the country as a whole is navigating an eventful period. Perhaps the biggest headline is the renewed fight over the constitutionality of the Affordable Care Act, which has made it back up to the state appeals court level. It is likely that the Act will be before the Supreme Court again before long, and become a central feature of the 2020 presidential campaign.

While this controversy of nationwide proportions will obviously affect Philadelphia, there have been other more local developments, too. Job growth and funding are both up in the Philly healtchare industry as millennials and major healthcare providers and research companies move into what was recently named one of the country’s top healthcare and life sciences hubs, and new labs and offices are opening often. “About six out of 10 healthcare providers are trained in Philadelphia. Being able to link experts and provide them with opportunities for education is a great offering available in this city,” said Edgar Vesga, executive vice president and chief operating officer at Philadelphia International Medicine. “Philadelphia as a whole has numerous opportunities for everybody, not only for the visitor who is coming for business, but also 162 | Invest: Philadelphia 2020 | HEALTHCARE

for patients, professionals, tourists and students,” he said.

At the same time, one of the city’s historic hospitals faces closing, with the community reeling and searching for last-ditch means to keep it open. Other crises, such as the opioid epidemic and barriers to affordable healthcare for disadvantaged people, remain the focus of state and local initiatives. These include strict limits on opioid prescriptions, clinics that offer affordable care and expanded access to clinical cancer treatment trials.

Performance 2018/2019 Philadelphia has long been considered a healthcare and life sciences center, and that reputation has been reinforced in 2019 by the city’s inclusion on a list of the top life sciences hubs in the country compiled by investment firm CBRE. Philadelphia ranked eighth overall based on its number of scientists in key industry categories, its industry funding for local life sciences companies, size and long-term growth of its life sciences workforce, and its inventory of lab space. Although still not quite reaching the runaway success of hubs like Cambridge, Massachusetts, and

Clint Matthews President & CEO Tower Health

What are the fastest-growing areas of service and care in Philadelphia today?

As improved technologies and clinical efficiencies have reduced the need for inpatient admissions, Tower Health has positioned itself to offer care at the right place and at the right time across the continuum of care. For example, we are the largest provider of urgent care in southeastern PA. We also recently established Tower Health at Home to provide homecare in the communities we serve. Inpatient and outpatient surgical expertise across a range of specialties remains a growing part of our service offering. We also recently opened our Tower Health Transplant Institute which will provide kidney and liver transplants, along with associated medical treatments for kidney and liver diseases. Tower Health’s partnership with Acadia Healthcare will open a new behavioral health hospital in Berks County in summer 2020 to help address the increasing need for behavioral health services.

What are some of Tower Health’s efforts in innovation and technology?

We have a strategic focus to enhance our telemedicine services so that we can support digital interactions between patients and providers. This can improve access to care, as well as convenience for patients.

We also have expanded our capabilities in roboticallyassisted heart surgery and bariatric surgery. In August Tower Health installed the Epic electronic health record (EHR) system throughout all Tower Health hospitals and physician practices. Our teams worked diligently on this initiative over the past two years. The first phase of the project was to replace and significantly upgrade the network infrastructure to meet Tower Health standards and provide a consistent user experience. The single, shared EHR brings patients health information from our hospitals and physician practices into one record, which supports enhanced clinical decisions, outcomes, and a seamlessly coordinated patient experience.

164 | Invest: Philadelphia 2020 | HEALTHCARE

San Francisco, life sciences funding in Philly in 2018 reached its highest level since 2007. In fact, Philly ranked sixth nationwide in terms of funding received from the National Institutes of Health in 2018, with a total funding of $990 million. This funding spike should have a positive downstream impact on life sciences employment in the area, creating even more jobs on top of the 50,000 local people already employed by the industry. Much of the recent growth in Philadelphia has been concentrated in West Philadelphia, University City, and Center City, given those areas’ proximity to the city’s premier medical research institutions, including Penn, Temple, Drexel, and Jefferson. Recent headlining projects and partnerships include the 340,000-square-foot 3675 Market Street Building, which had little vacancy remaining by the time of its completion and which is anchored by the region’s first branch of the Cambridge Innovation Center; Penn’s partnership with Johnson & Johnson Innovation on the JPOD@Philadelphia incubator program at the Pennovation Center; Spark Therapeutics’ expansion at the Schuylkill Yards development; and WuXi AppTec’s growth at the Navy Yard.

In addition to research and development, health systems and hospitals are also major job creators and magnets for life sciences funding in Philadelphia. Some of the largest hospitals and health systems in Philly, based on number of licensed beds, are Jefferson Health, Penn Medicine, Tower Health, Main Line Health, Universal Health Services, Virtua, Temple University Health System, Einstein Healthcare Network, Children’s Hospital of Pennsylvania, Hahnemann University Hospital, and St. Christopher’s Hospital for Children.

The last two hospitals on that list, Hahnemann and St. Christopher’s, are currently at the heart of a major story that has the Philadelphia healthcare community and the city at large on high alert.

Hahnemann and St. Christopher’s are operated

by Philadelphia Academic Health Holdings (PAHS), a subsidiary of American Academic Health System (AAHS), and were among a list of companies including PAHS itself that voluntarily filed for Chapter 11 bankruptcy in June 2019. Along with the bankruptcy announcement, PAHS also announced plans to indefinitely wind down operations at Hahnemann

by Sept. 6, 2019, an announcement that shocked and saddened Hahnemann patients and employees who rely on the hospital for their treatment or their jobs – the hospital has 496 beds and employs approximately 2,500 people who will now need to look elsewhere. The decision to close Hahnemann was spurred by what PAHS referred to as continuing and unsustainable ( )

HEALTHCARE INTERVIEW

Care advocates Business community partnerships, university alliances, personalized resources for shared accountability

Daniel Hilferty CEO – Independence Health Group How is Independence Blue Cross working to make access to healthcare easier and more accessible?

So much is changing in healthcare. That’s why we want our members to know they can trust that Independence will advocate for them and work to ensure their access to quality, affordable care. We are 100% committed to our members and our community.

We are passionate about making a positive impact on the communities we serve. We are also focused on serving our members’ needs wherever they might be on the health continuum. Each interaction we have with a member, no matter how minor, is a chance to deepen our understanding of their health and identify opportunities to improve it. That’s why we are responsive, go above and beyond, and develop long-term relationships. It is also why we partnered with Comcast to create Quil Health, a technology and engagement company, which will create a more seamless and easier-to-navigate health journey for patients.

How is Independence improving healthcare for Philadelphians?

Our approach emphasizes shared accountability for the quality and cost of care. For example, through our current contract with the University of Pennsylvania Health System (UPHS), Independence has a 30-day readmission guarantee from UPHS on all inpatient services and surgeries. The results of this program have been phenomenal. After the first year of implementation, UPHS saw a 25 percent reduction in readmission rates. These results prove just how much we can achieve if we innovate together on purposeful programs to improve patient and member care.

We also provide members with personalized resources and tools to help them achieve their health

goals. This includes improving their health and well-being, managing chronic conditions, better understanding their health benefits, and managing health finances. One of these key resources are our health coaches – registered nurses who are available to answer health-related questions and address concerns. If members need assistance to help manage certain conditions, such as asthma or diabetes, our health coaches can help.

We also have a range of online tools aimed at helping members achieve their well-being goals. IBX Wire, for example, is a private member communication channel that has helped to engage our members and encourage healthy habits. small-scale tests of our memberfocused technologies and tools have demonstrated powerful results. www.capitalanalyticsassociates.com

| 165

HEALTHCARE INTERVIEW

Digital shift How one of the country’s leading hospitals is staying on vanguard of the digital advanceds in medicine

Kevin Mahoney CEO – University of Pennsylvania Health System provide patients with the care they need even when they’re not in our facilities. We want to make it as easy as possible for them and their families. . Our Center for Connected Health is a great example of where that work is taking place.

The third factor that is critically important is our engagement with our faculty and employees. With over 40,000 employees and a turnover of less than 10%, we want to remain a place where people can advance their career. We want people to not only work here, but to retire from Penn Medicine.

We also are trying to make a difference in the opioid crisis, in bringing proper nutrition to people in food deserts and other challenges facing the community.

We’re trying to be a force for good, not just in curing cancer and heart disease, but also on many of the daily public health issues we face that are exacerbated by socioeconomic struggles.

UPHS ranks among the nation’s top hospitals. How will you ensure a continuation of this high-level performance?

We want to stay at the advanced end of the health care delivery spectrum. Penn’s role as a university is the creation and dissemination of knowledge, so our chief priority is working to ensure those goals. That is manifested in our new building, The Pavilion, which is a $1.5 billion, 1.5-million-square-foot advanced pavilion where we’re going to continue our role discovering and deploying the next generation of treatments and cures for diseases of all kinds. Another element that is important to us is digital health. Healthcare is shifting rapidly to the outpatient setting and to new ways of delivering care through smart devices, and we have some of our brightest minds working on how to 166 | Invest: Philadelphia 2020 | HEALTHCARE

How is Penn Medicine ensuring investments in the right technologies?

The first of our core principles is design for change. We designed The Pavilion with the expectation of meeting future technologies by having a flexible facility that can adjust to different situations. For example, every room can be an intensive care unit or a medical-surgical bed, which ensures that we can always provide the right level of care to each patient.

We also want to provide more procedures like MRIs at bedside rather than having the patient move to a different area. With that in mind, we reinforced the floors so we could be able to move devices such as MRI magnets. We are not sure when events like these are going to happen or what the future is going to bring, but we want to be prepared to be the place that can rapidly adapt to new technology advances that will improve and speed care.

HEALTHCARE OVERVIEW

( ) financial losses of between $3 million and $5 million each month. Several organizations, as well as the state and city governments, have called for options to keep Hahnemann open, citing the potential harm of such a short-notice closure on both patients and employees. The city has already partnered with Philadelphia Works to hold a job fair to help the workers displaced by the closure find positions at other healthcare providers in the region. Although it was included in the bankruptcy filing, PAHS announced that it had no plans to close St. Christopher’s.

Health policy The healthcare sector in Philadelphia is naturally affected by changes in healthcare policy at the federal, state, and local levels, and 2018 and 2019 have seen their fair share of such changes. Perhaps the biggest piece of health policy news is the renewed

Philadelphia ranked sixth nationwide in terms of funding from the NIH in 2018. battle over the Affordable Care Act (ACA). The new battleground is a federal appeals court in New Orleans that is reviewing a lower court’s decision that the ACA is unconstitutional, a decision that, if upheld, could drastically impact the U.S. healthcare system.

Twenty million people across the country already get their healthcare coverage through one of the various programs created under the law. Another aspect of the law that could be upended by the outcome of this case is the pathway for approval of generic copies of expensive biologic drugs, which would have a serious impact on Philadelphia, where numerous companies that produce such pharmaceuticals are located. The crux of the case, Texas v. United States, is the elimination of the individual mandate as part of the Tax Cuts and Jobs Act in 2017. The mandate, which imposed a tax penalty on individuals who failed to maintain health insurance, was previously

Larry Kaiser Former President & CEO Temple University Health System

What are the fastest-growing areas of service and care in Philadelphia today?

We are seeing the most growth in the shift from an inpatient-care setting to an outpatient setting and many of the surgical procedures we used to perform in an inpatient setting are now being done as outpatient procedures. We are continually developing our more complex types of care. For example, for the second year in a row, our lung transplant program was ranked No. 1 in the country for volume last year, with 144 transplants. In addition, we are about to perform our 200th pulmonary thromboendarterectomy, which is a high-risk procedure that essentially cures people of right heart dysfunction.

We also offer the full spectrum of transplants to this community, from kidney transplants to liver transplants to bone marrow transplants. We are also one of the few places in Philadelphia that offers pancreas transplants.

Behavioral health also continues to be a significant area for us. Our Crisis Response Center at Episcopal Campus is seeing over 1,000 patients a month, not just with major psychiatric illness, but usually with accompanying opioid dependence issues.

In what ways is Temple Health supporting community health in Philadelphia?

We are committed to serving the people of North Philadelphia, which is an underserved population. As part of our many efforts to impact the local community, we have been developing a project, which is funded by the state’s Health Enterprise Zone (HEZ), to transform a local elementary school into a trauma-informed school.

Trauma-informed schools have shown improved attendance and test scores as well as higher graduation rates. It has been proven that preventing and responding to adverse childhood experiences leads to lower chronic health risks and has an impact on illnesses that minors may be subjected to as adults. By creating this traumainformed school we aim to identify these problems and mitigate some of these traumatic experiences. www.capitalanalyticsassociates.com

| 167

HEALTHCARE OVERVIEW

Philadelphia was home to the first hospital and medical school, and leads the nation in healthcare education.

upheld by the U.S. Supreme Court as a valid exercise of Congress’ taxing power, and by removing the taxrelated individual mandate the entire remainder of the ACA was rendered unconstitutional. As expected, Republicans are generally pushing for the ACA to be deemed unconstitutional, Democrats are defending the ACA, and legal scholars are politically divided but generally doubt the legal basis of the Texas case – the Tax Cuts and Jobs Act only eliminated the individual mandate while leaving the rest of the ACA largely intact, which seemed to indicate Congress’ clear intent to keep the rest of the ACA. What does all this mean?

The ACA will be at the center of the 2020 presidential election, and the outcome of that election and this case could have a sweeping impact on Healthcare in Philadelphia and the rest of the country.

At the state level, a noticeable piece of healthcare 168 | Invest: Philadelphia 2020 | HEALTHCARE

policy in 2019 was the passage of legislation by the state Senate that would limit opioid prescriptions in Pennsylvania. As part of the ongoing state- and nationwide efforts to curb the damage caused by the opioid epidemic, the Pennsylvania Senate voted unanimously on a bill that would impose a sevenday limit on prescriptions of opioid painkillers to adults, expanding on a 2016 law that placed the sevenday limit on minors and emergency room patients.

Pennsylvania was a trendsetter in opioid prescriptionlimit legislation, and now most states have some kind of limit on prescriptions of the painkillers that are linked to opioid and heroin abuse and overdose.

Another major healthcare trend is the proliferation of medicinal marijuana throughout the United States – a trend that has now taken root in Pennsylvania and is becoming prevalent in the Philadelphia region.

HEALTHCARE OVERVIEW

Up to eight new dispensaries are planning to open in the region some time in 2019, and the area’s first local medicinal marijuana grower/processor is also set to begin operations this year. Moreover, the state will select approved growers to work with the eight medical schools in Pennsylvania that are conducting medical marijuana research, and five of those schools are in Philadelphia.

So far, industry insiders report that there is not too much money to be made, yet. In its first year, medicinal marijuana sales in Pennsylvania grossed $132 million in total sales and realized $2 million in tax revenue for the state from growers/processors, but this is nowhere near the full earning potential of the marijuana industry. The real money, say insiders, will come if, or when adult recreational use becomes legal.

In addition to the need for additional regulatory changes, Pennsylvania’s medical marijuana sector faced significant challenges related to supply and software. Because marijuana is a plant, it takes time to grow, and the rate at which growers could produce was simply unable to keep up with demand for the product, but additional growers and less stringent regulations regarding product inspection could help to alleviate this problem. The other issue was related to the computer system that the Health Department selected to manage inventory and sales, which supposedly crashes constantly and leaves dispensaries unable to operate, thereby impeding patients’ access to their medication. The Health Department is working with the contractor that developed the site to improve its operation.

Remy Richman Vice President, Chief Growth Officer, Keystone Market (PA, DE, WV) Aetna

What has been the impact of the merger with CVS Health?

November 2019 is the one-year anniversary of the CVS Health-Aetna merger. By combining our assets, we are looking to fundamentally transform the consumer health experience. Part of this transformation means making health care delivery in our communities simple.

Health care is traditionally a complex, challenging, emotional and a difficult We are utilizing our presence in 10,000 communities to provide timely and targeted interactions with our customers.

For example, our MinuteClinic offering is complementary and collaborative to primary care—and helpful to the system overall. MinuteClinic providers are focused on delivering high quality, accessible and affordable care for acute, preventative and chronic conditions. Furthermore, our extended hours and broad community reach can help make care more convenient and accessible. We are also going to transform the retail space in over 10 to 15 percent of our CVS retail footprint by 2021. We expect to open up to 1,500 HealthHUB locations in communities across the country by that time.

What will be the main contribution of the HealthHUBs for consumers?

Many people do not have access or do not engage in basic primary care. We have a unique ability to find and identify future customers who are not receiving primary care and help refer and transition them to a highquality specialty-provider community in our region.

The healthcare provider community is facing a capacity shortage. Unfortunately, providers cannot be in every neighborhood, and cannot be open 24/7. Through our local presence in communities across the country, we have the opportunity to see up to 5 million people a day who walk into a CVS Pharmacy location and provide a unique, digital, geofencing opportunity. When not in our stores, we also can engage consumers through their smartphones.

170 | Invest: Philadelphia 2020 | HEALTHCARE

Health insurance In July 2019, Pennsylvania became one of a handful of states, including neighbor New Jersey, to transition away from using HealthCare.gov as its ACA-compliant insurance marketplace and toward administering its own state-based exchange for residents in need of individual health plans. Some 400,000 residents in Pennsylvania are enrolled in plans purchased on the HealthCare.gov marketplace. The new state-operated exchange could reduce the premiums paid by these Pennsylvania residents by as much as 10% by operating at a lower cost than what it takes the federal government to run HealthCare.gov. Specifically, the state marketplace would save insurers from having to pay the 3.5% user fee imposed by the federal government on all plans sold through HealthCare. gov. This fee cost insurers a collective $98 million in 2019, whereas the state system would only cost $30 million to run, with the savings being combined with federal funding into a reinsurance fund. The new marketplace should be implemented in time for enrollment in plans that take effect in January

Philadelphia is home to extensive hospital systems and numerous biomedical and pharmaceutical companies.

HEALTHCARE OVERVIEW

Angela Foreshaw-Rouse Manager – State Operations and Community Outreach AARP Pennsylvania We are seeing a demographic shift in Philadelphia. By 2035, the number of people 65 and older will reach about 73 million.

That is a lot of people to take care of and AARP is helping our large and small cities to prepare to deal with that influx. At that point, statistics indicate that one in five Americans will be 65 years or older. We need to start to prepare and provide broader access to health. Many larger cities are dealing with housing and transportation safety for much of the older population, and that is something that AARP is looking at around the country. Specifically in Philadelphia, we are looking at those trends and working with elected officials to help provide better affordable housing options, better access to health and safer transportation. We are also looking at how cities accommodate the population growth and ensure there are enough open and green spaces for people to participate in.

2021, provided the federal Department of Health and Human Services approves the new system.

Cancer research and care Cancer research is among the major priorities of healthcare researchers, and as a life sciences hub, Philadelphia boasts a healthy supply of companies that fund or engage in innovative cancer research. In fact, Philly is such a hotspot for cancer research that it hosted its own MedCity CONVERGE Conference in the summer of 2019 to showcase some of the top startups in the area that are revolutionizing cancer research in such diverse areas as digital pathology, drug delivery, improvement of patient experience, and state-of-the-art testing. These innovators include Cadex Genomics, which develops molecular diagnostic assays to improve cancer patient therapy; Cofactor Genomics, which develops database tools to support more expedient, cost-effective, and successful clinical trials; Ezra AI, Inc., which seeks to enhance prostate cancer detection using AI-run MRI scans that are then analyzed by radiologists; Medial EarlySign, which created technology to detect early signs of high-risk patient trajectories in existing lab results and data obtained during the course of routine care; and XRHealth, which created an XR platform that combines medical applications with advanced data analytics. This is only a handful of the Philly area www.capitalanalyticsassociates.com

| 171

HEALTHCARE OVERVIEW

Pennsylvania Biotechnology Center will raise a $50 million investment fund. startups that were highlighted at CONVERGE, and there are many others not present at the conference that are making important contributions to cancer research.

There is also no shortage of exciting funding news in the Philadelphia cancer research scene. First, there is Geneos Therapeutics, a cancer immunotherapy startup that was spun off from large, publicly-traded Inovio Pharmaceuticals, which raised $10.5 million in a private stock sale early in 2019. The money will help fund development of Geneos’ immunotherapy platform that targets neoantigens, the mutations that accumulate as tumors develop, based on each individual patient’s unique tumor mutations. The platform is part of the new immunotherapy approach to cancer treatment that has taken off over the last decade, which focuses on boosting the patient’s own immune system as a way of combating cancer.

Pennsylvania Biotechnology Center also declared that it plans to raise a $50 million investment fund and add a second, 50,000 square-foot building and bio-accelerator

Philadelphia leads the nations in healthcare innovations thanks to its universities, hospitals and thriving tech and pharma communities.

program to bring new drug and medical device firms to its campus in Bucks County that will serve as a complement to the massive 1.6 million-square-foot incubator in King of Prussia, The Discovery Labs.

Health technology Philadelphia is not only attracting old-school life sciences firms. Cutting-edge biotech firms are also

HEALTHCARE OVERVIEW

Sam Menaged Founder & President The Renfrew Center

flocking to the city. The existing strength of Philly’s life sciences scene and its ample talent pool is attracting these firms, and their innovative tech will help make the sector even stronger. Approximately 87% of all pharmaceutical and biotech companies in the United States already have offices in the Greater Philadelphia area, including 30 cell and gene therapy development companies. The Philly life sciences industry was where some of the founding, FDA-approved breakthroughs in gene therapy and gene editing were developed. Thanks to this existing robust industry, as well as the top-tier research institutions and 85 hospitals and clinics in the region, Philadelphia has an extremely deep and diverse healthcare talent pool that is another factor influencing the decision of firms to move here. And instead of cut-throat competition, all of these firms and institutions have formed a close-knit community that frequently collaborates and cross-funds. For example, Iovance Biotherapeutics chose to operate in the Philadelphia Navy Yard because WuXi AppTec was already there, and the two companies plan to work together often. Finally, biotech companies want to be in Philadelphia because historic breakthroughs are being made here and unprecedented growth in lab space, funding, and more is taking place at a rapid pace.

More than a few homegrown Philadelphia area

What programs are seeing the most growth across the Renfrew Center’s highly specialized programs?

While the need for eating disorder treatment services is exponentially expanding overall, the Renfrew Center has seen the most demand for patients with a diagnosis of Binge Eating Disorder (BED). This trend parallels the national rate of BED as the most common eating disorder in the U.S. This disorder was not recognized by the Diagnostic and Statistical Manual of Mental Disorders (DSM) until 2013, which unfortunately made insurance options limited. Now, with this diagnosis approved by the DSM, insurance companies are covering treatment for the disorder, as well as the severe medical complications that accompany it.

The Renfrew Center’s Binge and Emotional Eating Program utilizes a psychotherapeutic, experiential approach to self-care, in which participants learn to shift their focus from self-denigration and body hatred to self/body acceptance and from weight consciousness and dieting to mindful eating.

What unique opportunities does the city of Philadelphia provide for the healthcare sector?

The Renfrew Center has strong relationships with insurance companies throughout the country and, in particular, with Independence Blue Cross (IBX), Aetna, Cigna and United Healthcare, which have major offices in the Philadelphia region.

Since Renfrew’s founding in 1985, insurers have recognized us as an essential part of the continuum of care for eating disorders. The Renfrew Center of Philadelphia provides expert residential, day treatment, intensive outpatient and outpatient services. Our solid partnerships with insurance companies over the years and our full continuum of care in the Philadelphia area have allowed us to provide treatment to patients close to home. www.capitalanalyticsassociates.com

| 173

Jack Lynch President & CEO Main Line Health

What are some recent accomplishments for Main Line Health?

At Main Line Health, we have a strong focus on four critical pathways to Performance Excellence: eliminating harm; top-decile performance in all our quality metrics; delivering equitable care; and ensuring affordability. These pillars guide every decision we make across our organization. This year, Main Line Health opened a new patient pavilion at Bryn Mawr Hospital, a $250-million construction project. In 2018, we fully implemented our new electronic medical record, and opened phase one of our new emergency department renovation and expansion at Lankenau Medical Center.

Main Line Health is addressing social determinants of health through several population health initiatives.

For instance, Main Line Health is the founding member of Together for West Philadelphia, a collaboration of organizations in the Philadelphia region dedicated to fostering shared projects in order to maximize impact in the areas of health, education, food access and opportunity for the residents of West Philadelphia. Also, our LGBTQ Inclusive Care program has launched across the System with a team of care providers specially trained around the needs and special considerations we should be sensitive to when caring for the LGBTQ community. We have already seen growth in patient volume and interest from the community because of this program.

What is the status of the Women’s Specialty Center at Main Line Health King of Prussia?

It is a $35 million, 100,000-square-foot facility that will serve as a premier destination for enhancing health and wellness, primarily of women, in collaboration with a large women’s health group called Axia Women’s Health. It will focus on the distinct preventive, diagnostic and treatment needs of women, all under one roof, as we expand our women’s health services.

174 | Invest: Philadelphia 2020 | HEALTHCARE

Hundreds of millions of dollars for healthcare research and innovation are pumped into Philadelphia each year.

biotech innovations warrant a spotlight. Health Genie is an app that allows users to track all the information about their family’s doctors, medications, immunizations, upcoming appointments, and relevant documents in one place. While still in beta testing, the product promises to take the mess and confusion out of managing your family’s healthcare. In a similar vein, HandsFree Health, run by former U.S. Healthcare and Aetna President Mike Cardillo, has launched a virtual assistant called WellBe that is essentially the Amazon Alexa of healthcare. The WellBe will employ voice recognition software to connect each member of a family with their healthcare providers and track their own health habits. WellBe will provide medication and appointment notifications, medical cost estimates, and answers to questions about healthcare and insurance. It will even provide alerts if elderly or disabled users need medical assistance but can’t call for help themselves. The WellBe will come in two versions, a consumer model for use in the home and a commercial model for use by providers.

Another company, MedCrypt, is pioneering software that will provide essential support to products like Health Genie and WellBe. MedCrypt allows vendors to encrypt users’ health data to ensure only trusted

HEALTHCARE OVERVIEW

sources can instruct and access medical devices and in Philadelphia and increase healthy behaviors. We alert vendors of unusual behavior. The company got awarded the Top 3 companies with an investment $5.3 million in Series A funding to expand its sales source, and it was an exciting opportunity for us to and engineering staff and develop its technology fund local community groups,” said said Jennifer Davis, the Association’s senior further. Security software is vice president and executive vital in a world where healthcare director. data is becoming increasingly integrated with technology, and therefore susceptible to C ommunity and accessible infiltration by hackers. care The American Heart Association The goal of the health services is also participating in the sector should not simply be technology realm. The association providing high-quality healthcare, collaborates with a variety of but providing high-quality organizations, funds research and healthcare that is accessible to Edgar Vesga-Arias advocates for a healthy lifestyle. It all members of the community.

Philadelphia International Medicine recently launched an accelerator This very issue was addressed to drive change in the community. by the Pennsylvania Legislative “For 94 years, we’ve supported research projects, and Black Caucus in July 2019. Specifically, the Caucus that’s critically important for us and the communities hosted a hearing on health disparities affecting African we serve. We launched the EmPOWERED to Serve Americans at Philadelphia’s Einstein Medical Center.

Urban Health Accelerator™ Philadelphia in September The hearing consisted of testimony from doctors, nurses, 2018, which is an innovative program to address some advocates, and public health experts who demonstrated, of the challenges within our communities. The goal of through troubling statistics, how black and Latino this initiative is to cultivate community transformation people have worse health outcomes than white people.

About six out of 10 healthcare providers are trained in Philadelphia.

www.capitalanalyticsassociates.com

| 175

Barry Freedman President & CEO Einstein Healthcare Network

What benefits is Einstein Healthcare Network expecting from its merger with Jefferson?

The merger is important to Einstein Healthcare Network and the community because it will provide an opportunity for Einstein to preserve its mission to care for the underserved populations of Philadelphia, Norristown and Montgomery County. The opportunity to enhance our programs and strengthen our financial position, as a result of the merger, will produce synergies for Einstein that are anticipated to be at least $40 million a year. This is significant for us, since the patients we see at our urban campusis a mix of 85% governmental-insured patients. With the scale, we can achieve through this merger we can use the efficiencies not only to preserve our mission, but to enhance and grow some of our programs to better serve our neighborhoods.

How is Einstein leveraging technology to better serve its patients?

We are advancing capabilities that are new to Philadelphia and sometimes pretty novel across the United States. We were one of the earlier pioneers in 3D mammography and we have used technology to make sure that we do things better in terms of reducing our C-section rates. We also introduced specific clinical techniques that were first identified in the Philadelphia region. Our single most visible program is rehabilitation medicine. MossRehab has the largest robotic treatment program in the nation. It has been the top-ranked rehabilitation hospital in Pennsylvania and Top 10 in the United States by US News and World Report for the past 10 years. Our ReWalk program, a motorized exoskeleton suit that enables patients with lower limb disabilities to independently stand, walk and, in some cases, climb stairs, is an example of how Einstein and MossRehab stay at the forefront of technology and robotics. The merger with Jefferson will further allow us to enhance our efforts in innovation and technological advances.

176 | Invest: Philadelphia 2020 | HEALTHCARE

About six out of 10 healthcare providers in the U.S. are trained in Philadelphia.

These bad outcomes are exacerbated by living in poor neighborhoods due to a lack of healthy foods and programs supporting active lifestyles, and there are even problems with lead poisoning among youth in poorer areas. These negative outcomes also impact maternal health, with mothers and their children languishing without proper housing and healthcare. The testifying experts urged legislative action to help combat these systemic impediments to good health for minorities and people in poor communities.

While people in need wait for legislative action, some organizations are already providing affordable, accessible healthcare and clinical trials to West Philadelphia neighborhoods that need it. For example, California-based Lazarex Cancer Foundation (LCF), Drexel University, and King of Prussia-based Greenphire have teamed up to launch an initiative that will help increase participation in cancer research trials among residents of the Greater Philadelphia area. The program, called IMPACT, was originally created by LCF to remove the financial barriers to clinical trial participation among disadvantaged patients, and in some cities doubled the number of people of color who participated in trials. In 2018, LCF partnered with Drexel to bring IMPACT to West Philly and opened a clinic to provide routine medical care and checkups in addition to spurring increased participation in clinical trials. It has since brought Greenphire on board. Greenphire’s ClinCard will help patients get the best benefit out of the clinical trial system

Dan Bradley President Select Medical Outpatient Division – NovaCare Rehabilitation

How are you leveraging technology?

We recently launched a digital engagement tool called Strive. This tool allows us to communicate with our patients via email and text messaging from their first visit to the day they finish care. We are able to share information regarding their injury or condition, home exercise programs, appointment reminders, center updates and more. Once they have healed and ended care with us, we remain connected and check in periodically to see how they’re feeling and share health and wellness information. We have seen great results. We also developed a clinician empathy tool called ChitChat®. This assessment helps evaluate our therapists’ empathy and effective communication with our patients. This is done through a therapist selfassessment and colleague-to-colleague feedback. We feel that this tool, coupled with outstanding clinical care, helps our patients achieve better outcomes.

We are ready to launch a new mobile-friendly and consumer-driven website. Focusing on the consumer journey and how they’re searching for healthcare services, our new site will allow people to easily locate a convenient center, find specific services and request an appointment. We offer complimentary consultations to determine if physical therapy is appropriate or if a patient needs to see a physician. We also invested in a robust analytics platform to determine geographic areas where there’s a need for physical therapy. Using this analytics tool, we are looking to open 15-20 centers within the Philadelphia area next year.

How are you encouraging community health?

Part of our strategy in Philadelphia and other areas is addressing the opioid crisis. Numerous studies – internal and externally published – confirm the effectiveness and benefits of physical therapy. We continue to educate and encourage consumers to try physical therapy before they begin medication for pain. This continues to be a major area of focus for us.

178 | Invest: Philadelphia 2020 | HEALTHCARE

It estimated that 20 percent of the Philadelphia workforce is employed in the healthcare industry.

by expediting reimbursement for their participation to a reloadable debit card. Taken as a whole, the initiative hopes to expand the range of people who know about the clinical trials and who are able to participate in them. UnitedHealthcare of Pennsylvania & Delaware is also looking for ways to provide more affordable care.

It unveiled a new product in January called Navigate.

“Now, we’re able to offer a less costly product that’s still able to maintain a fairly competitive benefit level, especially to our small business membership. It’s a simple, one network HMO in which people have access to our full network of physicians and hospitals, which includes all of them in the Philadelphia five-county area,” said company CEO Dan Tropeano.

Another example is the work of the American Heart Association. “The Heart Association is in a very unique position as a science-based organization and as a trusted brand to be a catalyst for good in communities of greater need in Philadelphia. Along with our community partners, we play a significant role in improving access to healthy food, health education (particularly around blood pressure, since 50 percent of African Americans in Philadelphia have hypertension) and quality healthcare. There are many other things that play a role in achieving a healthy lifestyle, and we’re bringing content experts together to create solutions,” said the American Heart Association’s Davis.

HEALTHCARE OVERVIEW

Looking ahead As Philadelphia continues to grow in importance as a healthcare hub, it will only continue to attract more talent and companies in a virtuous cycle of improvement. The research companies moving into locations like the Navy Yard and King of Prussia cite the city’s world-class talent pool, fueled by the wealth of nearby research institutions and hospitals, as one of its top attractions, as well as the impressive roster of life sciences pioneers already operating in the area.

The vibrancy of Philly’s healthcare scene is already drawing comparisons to Silicon Valley, and as the sector continues to attract more funding and create more jobs, the description will become more and more apt.

But there are still remaining challenges. Too many of the city’s residents lack access to its impeccable healthcare, an injustice that the state legislature and numerous nonprofit corporations are working to address. One plan consists of the state taking over from the ACA’s HealthCare.gov marketplace and operating its own, cheaper marketplace so that it can pass the savings on to residents. Another initiative involves going right to the areas in need and providing access to healthcare directly to those who need it.

“Access remains a key challenge in helping patients manage their conditions. Community healthcare access One area that remains underserved is mental health.

According to the Centers for Disease Control and can be defined by two tracks: the availability of primary Prevention, almost 4% of adults over the age of 18 have care and the ability to get to where care is offered,” experienced serious psychological distress in the past said Remy Richman, vice president and chief growth month and there were amost 57 million visits to a officer, keystone market (PA, DE, WV). of Aetna, which physician in 2016 that resulted in mental, behavioral is opening 1,500 HealthHub locations in CVS Pharmacy stores across the country, selecting and neurodevelopmental Philadelphia as one of the first disorders as the primary communities for the launch. diagnosis. A 2019 Mental Health “Our HealthHUBs and retail in America report showed that locations are poised to become over 18% of American adults have the destination that employers a mental health disorder. can send their workforce to get “Mental health coverage necessary preventive care and has been a major focus area wellness activities rather than for the Renfrew Center. As the build or invest in solutions at their pioneer in the field of eating Jennifer Davis worksite. We will be the virtual disorders, one of our missions American Heart Association and physical provider of wellness is to take responsibility for resources for the community in the expanding public awareness future. Not every employer has the and understanding about mental health. As a result, in 1990 we established the substantial resources necessary to develop an in-house Renfrew Center Foundation, which advances eating wellness system while over 70 percent of Americans disorders education, prevention, research, advocacy live within five miles of a CVS Pharmacy location. This and treatment. In addition, our nonprofit foundation product is not officially named or funded.”

These efforts, and others, aim to ensure that Philly offers scholarships to bring better access to treatment for patients in need,” said Sam Menaged, founder and doesn’t just have great healthcare, but equitable healthcare. president of the Renfrew Center.

We’re bringing content experts together to create solutions

www.capitalanalyticsassociates.com

| 179

HEALTHCARE OVERVIEW

180 | Invest: Philadelphia 2020 | HEALTHCARE

Life Sciences: Philadelphia’s life sciences sector, which includes biotech, pharmaceuticals and medical devices, is defining itself as a world-class hub, ranking eighth nationwide and drawing comparisons to Silicon Valley as it fosters research and innovation. The combination of a burgeoning startup ecosystem and a fertile academic landscape is underpinning the industry’s success in the city.

www.capitalanalyticsassociates.com

| 181

Life time: The life sciences sector is attracting talent, money and Big Pharma to make Philadelphia a flourishing hub Life sciences is an industry that studies life and living organisms, including physical structure and chemical and molecular interactions. It encompasses biotechnology, pharmaceuticals, medical devices and a host of other disciplines that study how living organisms interact with each other. Among life sciences hubs nationally, Philadelphia ranks eighth, according to CBRE, which analyzed four categories: number of scientists, industry funding, size and long-term growth prospects and laboratory space.

Philadelphia also raked in $990 million in funding from the National Institutes of Health in 2018 – making it the sixth-biggest benefactor – and the University of Pennsylvania was awarded about half of that funding.

The CBRE report projects the life sciences space will continue expanding, with increasing attention from venture capital firms, which was estimated at around $15.8 billion for the year ending September 2019.

Performance Philadelphia is attracting more and more life sciences companies that span the width of the value chain, from pharma company Spark Therapeutics to innovative Chinese manufacturing firm WuXi AppTec, which 182 | Invest: Philadelphia 2020 | LIFE SCIENCES

has added at least 200 jobs since 2008 when WuXi PharmaTech bought Philadelphia’s AppTec Laboratory Services. The potential for alliances with academia furthers the city’s appeal. Philadelphia’s educational institutions are dedicated to all aspects of healthcare, but most importantly for life sciences is the focus on gene therapy. One example of this symbiotic attraction is the University of Pennsylvania’s partnership with Johnson & Johnson Innovation to launch the JPOD@ Philadelphia incubator at the Pennovation Center in mid-2018. “Healthcare innovators are mission driven, smart and ambitious, but their game-changing ideas have a long, risky and expensive journey to reach the patients and consumers. By providing access to the expertise and resources of the Johnson & Johnson Family of Companies, we hope the innovators in Philadelphia and across Pennsylvania will increase their probability of making a difference for all of us,” said Melinda Richter, Global Head, Johnson & Johnson Innovation at JLABS in a press release to mark the collaboration.

Another notable collaboration in the making is Wexford Science + Technology and University City Science Center’s uCity Square project, a 13-story,( )

LIFE SCIENCES INTERVIEW

Advanced help Philadelphia emerges as a leader in cell, other therapies as more companies broaden footprint

Felix Hsu SVP, Global Head – WuXi Advanced Therapies What were some highlights for WuXi Advanced Therapies in Philadelphia over the last 12-18 months?

Over the last 12-18 months, WuXi Advanced Therapies (ATU) has emerged as one of the global Contract Development and Manufacturing Organization (CDMO) leaders in advanced therapies by developing several platforms to help our customers get their products to clinics sooner for the benefit of patients worldwide. With our enabling capability, we are winning trust from an increasing numbers of partners.

As an example, we were selected as a manufacturing partner for advanced therapies by the California Institute for Regenerative Medicine (CIRM)-funded IQVIA (formerly QuintilesIMS) Stem Cell Center.

What makes Philadelphia an attractive hub for companies like yours?

Philadelphia has emerged as a leader in cell, gene, and other advanced therapies. Philadelphia and the surrounding tri-state area is a remarkable biotechnology and life sciences community. This hub of innovation is of vital economic importance to the states of Delaware, New Jersey, and Pennsylvania. The area’s vast array of leading universities and research institutions has fostered an attractive collaborative environment that we have embraced. Since coming to Philadelphia 15 years ago, WuXi AppTec has diligently built and served the tri-state area with its leading CDMO) and Contract Research Organization (CRO) services by helping to reduce the complexities of manufacturing by providing integrated platforms that enable cell and gene therapies to be developed, manufactured, and released faster and with greater predictability.

What is the impact of WuXi Advanced Therapies on the local economy?

WuXi Advanced Therapies has gone from having 140

employees in 2009 to 700 employees today. The large majority of our people are from the local talent pool.

Our business growth has had a positive impact on the local area as we are adding good healthcare jobs to the economy.

How do you face the lack of infrastructure for manufacturing capacity?

We have added and are adding manufacturing and testing capacity to help meet the needs of the industry.

We have modular capacity that allows us to semi tailor our manufacturing suites to suit our customers. Our fourth building, which is under construction will more than double our testing capacity to better service our manufacturing and testing clients. www.capitalanalyticsassociates.com

| 183

LIFE SCIENCES OVERVIEW

David Payne VP of Medicine Opportunities Research Unit – GlaxoSmithKline

GSK Upper Providence is a major research and development (R&D) site in the region that employs more than 3,400 people just outside Philadelphia. In fact, the site is GSK’s hub for pharmaceutical R&D in the U.S., which represents 40 percent of our global pharmaceutical R&D workforce. Our focus areas are immunology, oncology and human genetics. This realigned focus comes from Emma Walmsley and Hal Barron, our CEO and Chief Scientific Officer, respectively. In addition, our recent acquisitions and collaborations that align with this strategy significantly enhance our pipeline and capabilities.

( ) 389,000-square-foot building that features 15-foothigh ceilings and contains a mix of office and lab space.

The project is expected to break ground by year-end and will be finished by 2021. It will neighbour the recentlycompleted 345,000-square-foot hybrid lab/office building at 3675 Market St, which opened in October and has already been fully leased by companies such as Spark Therapeutics, Amicus Therapeutics, Invisible Sentinel and biotech incubator Cambridge Innovation Center.

These kinds of life sciences hubs are expected to create a network for companies across the value chain, not just pharma companies and developers of medical devices. “A lot of the growth we are seeing is in the life sciences arena, especially in therapeutics. That will draw other entrepreneurs and lead to additional advancement in areas such as medical devices and digital health. Life sciences is clearly the strongest area of innovation in Philadelphia, but it will spawn activity in other areas that are complementary,” said Steve Zarrilli, president and CEO of of the University City Science Center. Not only is Spark Therapeutics leasing space in uCity Square, but it also is looking to establish its headquarters at Schuylkill Yards.

Major attraction By offering first-class incubators and funding to life science startups, Philadelphia is also attracting the majors. At the beginning of the year, Spark Therapeutics’ novel gene therapy technologies led Swiss pharma giant Roche to make a $4.8 billion bid for the company.

As Roche tries to expand its footprint outside of cancer treatment, the Spark acquisition will give it eye disease gene therapy Luxturna, as well as four products that are undergoing clinical trials and programs studying 184 | Invest: Philadelphia 2020 | LIFE SCIENCES

Huntington’s and haemophilia. Much of Spark’s early research for its cutting-edge technologies was conducted at the Children’s Hospital of Philadelphia.

Roche is not the only Big Pharma player Philadelphia is attracting. In September, GSK completed a $120 million expansion of its Upper Merion manufacturing site to bring its R&D and manufacturing teams under the same roof. In Philadelphia alone, GSK employs more than 3,400 people.

Creating a hub WuXi AppTec already expanded within its Navy Yard base, announcing last October it would be developing its fourth building with a price tag of $38 million.

This will mean it covers a total of 380,000 square feet and employs more than 600 people at the Navy Yard campus. The new square footage will double the company’s cell and gene therapy testing space. And in May, the manufacturer announced it would expand its offering for Iovance Biotherapeutics by expanding its production line for Iovance’s metastatic melanoma and cervical cancer treatments. “WuXi has been a strong partner in developing the Iovance TIL product and we look forward to further expansion of our ongoing relationship,” said Maria Fardis, President and Chief Executive Officer of Iovance in a press release. WuXi is such a strong partner, in fact, that the agreement convinced California-based Iovance to establish its own 136,000-square-foot office, lab, and light manufacturing facility in the Navy Yard.

With WuXi AppTec’s expansion, the entire value chain is growing. In October, the company announced it signed a collaborative agreement with software provider TrakCel for optimized supply chain management.

LIFE SCIENCES OVERVIEW

Technology, innovation, education When working on vast amounts of sensitive and potentially life-altering data, accuracy and efficiency is key for life sciences companies. Not only is Philadelphia’s life sciences industry attracting manufacturing, logistics and R&D but a key way to tie all these pieces together is through smart data and analytics systems. Ciright Systems is one of the companies that offers technology services to streamline these operations. “The predominantly IT infrastructure systems that have been put in place are usually 10 to 20 years old and although they work well today, they are in a silo and they’re not normalized across the enterprise,” says CEO Joe Callahan. “We made a significant donation to Drexel University of all our IP and technology, and it is deploying it on a case by case basis across all the university’s information systems.” This is a 10-year program to try to reduce its current IT budget from $35 million to $10 million over the next 10 years and instead of increasing the budget, Ciright will reduce it every year by updating existing legacy systems and automating the users’ experience in that system, all through a single application. “Once it is proven at Drexel, we are hoping to scale that to all the universities in the marketplace,” Callahan adds.

Big Pharma companies like GSK know the value of speedy and efficient information. In an ever more crowded and highly regulated life sciences space, one overlooked detail can be the difference between nabbing a multibillion-dollar patent and being pipped to the post by a competitor. “We are seeing the impact of advanced data analytics,” says GSK’s Payne. “This is a critical tool, as we’re shifting to an R&D structure ‘driven by genetics’ and pursuing targets with robust

genetic validation.” In addition, artificial intelligence is being applied to the drug discovery process. .

Certain life sciences companies and institutes are using data and technology to create enough certainty to carry out research that would previously have been unthinkable. One of these is The Wistar Institute. “Our efforts in cancer research have been focused on therapeutic targets that traditionally would be considered too risky by the pharmaceutical industry,” says Dario C. Altieri, M.D, the institute’s president and CEO. “We are developing new promising molecules that we hope to move to clinical trials soon for pancreatic cancer and melanoma.

A molecule that we have created and advanced through preclinical studies is currently being tested in a phase I clinical trial for a relatively rare type of tumor called nasopharyngeal carcinoma.”

Altieri hopes to open a second trial based on Wistar’s discoveries at one of Philadelphia’s leading clinical cancer centers.

Human capital Despite the innovativeness of life sciences, it is not a new niche that has sprung up in Philadelphia.

It is the product of years of fostering the pipeline and long-term profitability. The city’s life sciences trade association Life Sciences Pennsylvania (LSPA) was founded in 1989 and works with the public and private sector to ensure the city is a favourable place for life sciences companies to set up shop. “LSPA delivers two valuable services – public policy clout, and strategic connections that can advance you and your organization,” says the association on its website.

One of the association’s main priorities is ( )

Steve Zarrilli President & CEO – University City Science Center

We recently opened our newest building in uCity Square, located at 3675 Market Street. This is a first-of-its-kind technology and life sciences hub dedicated to advancing innovation by leveraging the unique but complementary assets of the uCity Square ecosystem.

There’s nothing like it right now in the Philadelphia region. Spark Therapeutics and Invisible Sentinel are two of the companies located in University City, and we recently announced that Amicus Therapeutics is creating one of their research centers here as well.

These and other companies at uCity Square will play a significant role in the growth of Philadelphia’s life sciences sector.

LIFE SCIENCES INTERVIEW

Rare moves Push toward cures for rare diseases includes new science and technology center

John Crowley Chairman & CEO – Amicus Therapeutics

What are your expectations for the Global Research and Gene Therapy Center of Excellence that Amicus is building in uCity Square?

We are building what will be an important center for Amicus, the birthplace of all our science and technology for the gene therapy space, moving toward cures for rare diseases. Our 75,000-squarefoot space in the building is under construction and we expect it to be completed by the end of 2019.

We have already hired a number of employees for this new facility and we expect the pace of hiring to increase over next year. Within a couple of years, we project there could be upwards of 200 scientists and drug developers working not only on developing technologies and treatments, but on potential cures for genetic diseases.

186 | Invest: Philadelphia 2020 | LIFE SCIENCES

What is behind the expansion of your gene therapy collaboration with University of Pennsylvania?

This is a significant collaboration for us. The first collaboration with UPenn was announced in October 2018, and the work realized by UPenn scientists and Amicus around protein engineering in the biology of Pompe disease combined with gene therapy expertise proved to be a valuable and powerful combination.

Just seven months into the collaboration we had groundbreaking research results. That led to our second collaboration, which will expand from three to six programs for rare genetic diseases. We will now pursue research and development of gene therapies for lysosomal disorders, including Pompe and Fabry diseases, which are among the most devastating rare diseases. Through this second agreement, Amicus will have access to exclusive disease-specific rights to collaborate with Penn’s Gene Therapy Program for the majority of the 50+ lysosomal disorders and 12 additional rare diseases. This is the most significant collaboration for Amicus to date and it gives us more resources, with the help of 250 Penn scientists at the Wilson Lab, to drive this science forward.

In what ways is technology disrupting Amicus’ work?

The work we do is almost like the textbook definition of disruptive technology. For example, most of the diseases we work with have no treatments and are fatal, most of them in children. These technologies have the potential to offer families a cure for a child diagnosed with a genetic disorder. That is as disruptive as you can get with technology. Even in diseases like Pompe, where there are existing first-generation therapies, technology allows us to disrupt that paradigm and develop cures.

LIFE SCIENCES OVERVIEW

( ) ensuring a steady supply of qualified human capital to join the biggest pharma companies in the world that see the opportunity in the Philadelphia market.

The city’s University of the Sciences, or USciences, was founded in 1821 as Philadelphia College of Pharmacy – the first of its kind in North America. It now offers more than 30 programs ranging from bachelor’s to doctoral degrees in health sciences, healthcare and health policy. “There has always been a push from this region to become a hub for biotechnology and life sciences.

The benefit will be significant for a number of academic institutions and private organizations, helping to attract new talent, capital and opportunities, while creating a culture of entrepreneurship,” says Wistar’s Altieri.

Looking ahead Great progress has been made in the local life sciences sector, although many aspects remain to be addressed.

As the region has built up a pipeline of world-class scientists, one thing is missing from the equation, Christopher Molineaux, President and CEO of Life Sciences Pennsylvania (LSPA), said in an interview with Philadelphia Magazine. “There are a lot of senior-level pharma executives, and development stage scientists

in the region because of the legacy of the Big Pharma companies here, but we don’t have enough CEO-level, startup executives in the region to accommodate all the companies that are being created here,” he said. He added that investment attractiveness depends on the calibre of those at the forefront of these life sciences companies.

“Money is portable. I believe the money will follow the executives and the management teams that have a track record of success.”

With a huge pool of talent to pick from, the ability to attract impressive industry funding, exciting longterm growth and scale prospects and ever-increasing laboratory space, it is easy to see how Philadelphia is attracting and retaining more and more life sciences companies. “Moving forward, we are going to see substantial progress with regard to companies that want to call Philadelphia home, especially in the life sciences arena,” Zarrilli continues, adding that there is even more opportunity to come. “We’ll see an everchanging physical infrastructure that will continue to grow — especially on and around Market Street in University City, where there are plans to develop 12 million square feet of new space over the next seven to 10 years, beginning in 2019.”

www.capitalanalyticsassociates.com

| 187

Tourism, Arts & Leisure: Iconic music venues, more public art than any other U.S. city, a rich history that saw the birth of a nation and a sports-crazy population that supports teams in all Big Four major leagues – the city of Philadelphia and the surrounding region is gaining prominence with tourists of all kinds.

www.capitalanalyticsassociates.com

| 189

In a Philly mood: Tourism industry demonstrates rapid growth that shows no signs of slowing down The U.S. Declaration of Independence was signed here, giving birth to a nation. It hosted the country’s first library and first hospital and has hundreds of attractions, cultural institutions and historic sites. No wonder, then, that Philadelphia’s tourism industry is growing at an unprecedented pace, with 2018 a recordbreaking year across a number of parameters. The city attracted 45 million visitors, up nearly 2% on 2017’s figures, and 88% of those visitors came for leisure.

With regional visitor spending up by 6.1% on the year to $7.6 billion, the total regional economic impact was $12.2 billion – over 3% of the city’s GDP. With $1.4 billion in revenues from hotels alone in 2018, the region is adding 25 hotels with 3,735 new rooms by 2020 across budget, boutique and luxury brands to cater to the needs of every traveler, whether they come for business at one of Philadelphia’s worldclass convention centers, for a sporting event at one of its state-of-the-art arenas or simply to enjoy the arts and culture the city provides.

“Philadelphia’s hospitality industry keeps evolving.

Every year there seems to be a new reason to come to the city, whether it is a new attraction or a new event,” Ed Grose, executive director of Greater Philadelphia 190 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

Hotel Association (GPHA), told Invest: Philadelphia.

“The city’s success also invites new hotel products with many hotel projects already underway. This is the main reason why we started the Philadelphia Hospitality Investment Levy and are changing our marketing strategy; we want to make sure that we can maintain the success that we have had and increase demand to meet the new supply.”

Business tourism Philadelphia is home to a host of business meeting sites, but none as iconic as the 1-million-square-foot Pennsylvania Convention Center in Center City. Since the opening of the convention center in 1993, the number of hotel rooms in Center City has increased by nearly 120% to 12,206. In 2018, the center attracted 1.2 million attendees, 202 conventions and had an economic impact of $589 million. “We have had a great year at the Pennsylvania Convention Center (PCC),” said John McNichol, president and CEO of Pennsylvania Convention Center Authority. “We have hosted 19 city-wide trade shows, which has increased the economic impact significantly on the city and region.

We have seen a huge growth of hotel inventory. ( )

TOURISM, ARTS & LEISURE INTERVIEW

Art at work Renovations at Philadelphia Museum of Art near completion; will help preserve world-renowned collection

Timothy Rub CEO – Philadelphia Museum of Art How is the Philadelphia Museum of Art remaining a goto attraction while undergoing a major renovation?

Our renovation project began over two years ago and we expect to complete it in September 2020. This is the first comprehensive renovation and expansion of our landmark main building since it opened in 1928. It needed a lot of work.

We are replacing or upgrading outmoded building systems and renewing our infrastructure in ways that are essential for both the safety and enjoyment of our visitors as well as the care and presentation of our world-renowned collection.

We have remained open to the public throughout the renovation and we have been presenting special exhibitions that highlight major areas of our collection that have not been shown on a regular basis. These exhibitions have been tremendously popular and have helped the public understand just how deep and rich our collection is.

Attendance also has remained strong during the construction period, which is a testament to the enduring appeal of the museum. Indeed there is a great deal of interest in our collection not only in Philadelphia, but throughout this country and abroad.

All of these responses augur well for the future prosperity of the museum. And that’s great, because once our renovation has been completed we will be able to do more by expanding our programming and activities in new spaces.

What is the role of the arts sector as an economic driver and job creator for the region?

Today, no matter where you may be, everybody recognizes that art museums are an important part of the economy and the vitality of our cities. The cultural “ecosystem” here in Philadelphia is a major

contributor to the quality of life that we enjoy and the help to attract new residents, not to mention bolster tourism.

Philadelphia has great historic buildings and many remarkable collections. The arts are one of the reasons why tourism remains robust, and they are a key to Philadelphia’s future.

And speaking of the future, the Philadelphia Museum of Art is also committed to engaging new audiences. We are especially interested in attracting millennials and families. The participation of both of these groups has increased significantly during the past decades and continues to rise. This trend augurs well for the continued prosperity of both the Philadelphia Museum of Art and the city it was founded to serve. www.capitalanalyticsassociates.com

| 191

TOURISM, ARTS & LEISURE OVERVIEW

Philadelphia Convention Center attracted 1.2 million attendees in 2018. ( ) By the end of 2019, we will have added almost 25 new hotels in the city of Philadelphia, which is a great sales factor for our convention business. We have extended our labor agreement, known as Customer Satisfaction Agreement (CSA), with all our trade show partners to the year 2029. The CSA provides permanency for work rules and customer predictability. It also gives us a significant competitive advantage, particularly in southern urban centers. The CSA enables exhibitors to drive down cost, increase efficiency and streamline processes, making the PCC more attractive to meeting planners.”

More growth is expected and the city is preparing accordingly. Visitation at the city’s official visitor center, Independence Visitor Center Corporation, is approximately 80% domestic and 20% international visitors, with a significant number of convention attendees, according to President and CEO James Cuorato. “We are about to move into an expanded

The Met Philadelphia is over 100 years old and a staple in the community.

convention-market cycle, and more, and larger, conventions are coming to the city. As we get into 2020, the convention numbers will start to increase.

It is a good time for Philadelphia’s tourism as well as for the Independence Visitor Center.” There has been significant growth in the convention attendance numbers, too, adds John McNichol, President & CEO of Pennsylvania Convention Center Authority. “The year-over-year attendance from shows from other cities to Philadelphia tends to increase annually.”

As the convention center breaks records for attendees, major hotel chains have clustered around

TOURISM, ARTS & LEISURE OVERVIEW

Jeff Guaracino President & CEO Visit Philadelphia

its valuable real estate in Center City. Major hotel chains such as The Hampton Inn, Wyndam, Sheraton, Le Meridien and Hilton all have hotels a stone’s throw from the convention center. There is an option for everyone, with a Best Western just two blocks to the north and the Ritz-Carlton just two blocks south, past City Hall. In fact, there are 11,460 hotel rooms within a 15-minute walk of the Pennsylvania Convention Center.

Philadelphia’s hotels hit record occupancy in 2018, with Center City hotels registering average rates of 79.6% and 91% on Saturday nights. Average daily rates were up to $191 from $185 in 2017. More people paying more money means more tax dollars to attract more tourism because of the way the hotel tax is set up. From the 8.5% tax on the cost of a stay, 4.94% tax goes to the Pennsylvania Convention Center Authority, 2.03% to the Philadelphia Convention & Visitors Bureau and 1.53% to Visit Philadelphia. “Philadelphia’s tourism success can be felt throughout our economy,” said GPHA’s Grose to Visit Philadelphia. “2018 saw higher average occupancy and ADR every day of the week compared to 2017. All of our hospitality partners worked together to achieve these great results that generate taxes, support job growth and spur economic development in Philadelphia.”

With new hotels opening in Philadelphia, such as the Four Seasons in 2019 and The W and Element in 2020, Grose expects a great impact on the economy and type of visitors the city receives. “They will also provide

What milestones highlighted the past year for tourism in Philadelphia and the surrounding area?

It is an exciting time for the travel and tourism industry, especially in Philadelphia and our five-county region.

In 2018, Greater Philadelphia experienced its ninth straight year of record visitation and the highest number of passengers through Philadelphia International Airport since 2008. Cities around the world are looking at investments, both private and public, made in Philadelphia and how they’ve positively impacted the city’s tourism ecosystem. Recently, we’ve seen enhancements to the city’s historical, cultural and dining options, the Pennsylvania Convention Center and to our stadiums in South Philadelphia. These are just a few examples, but they show us how appealing our city’s product is when viewed holistically.

How is technology changing the tourism industry?

The availability of cutting-edge technology has presented a giant opportunity for tourism. Smart devices and apps ensure that people can easily find a city’s hidden gems and neighborhoods, allowing for the authentic experiences that many of today’s younger travelers seek. However, it’s also important to remember that the industry is now marketing to four generations of travelers—Baby Boomers, Gen X, Millennials and Gen Z—for the first time in the country’s history. The challenge and opportunity comes in presenting Philadelphia’s appeal to all four audiences.

Where are the opportunities for growth?

Great opportunity lies in the multicultural market, specifically the Latinx, LGBTQ and African American audiences. This year, we’ve invested more than a million dollars in these efforts, including a three-year Filadelfia – You Gotta Feel It campaign directed at the millennial Latinx market. We believe that by reaching out and inviting new markets to discover Philadelphia, they’ll be compelled to visit. www.capitalanalyticsassociates.com

| 193

Julie Coker Graham President & CEO Philadelphia Convention & Visitors Bureau

In 2018, the city had the highest number of conventions in a decade and an increase in overseas visitors. What is driving this growth?

The U.K. and China continue to be strong markets for us, followed closely by Germany, India and Italy.

However, overseas visitation is primarily tied to airlift.

Through the incredible efforts of the Philadelphia International Airport, we have continued to add new routes and new service providers. The number of international nonstop flights that the Philadelphia International Airport has added has significantly helped. And, when combined with our local arts and culture, historic attractions, award winning food scene and tax-free shopping, we have really strong drivers for attracting overseas visitors. In terms of convention attendees, the Pennsylvania Convention Center’s strategic location in the heart of downtown is a big draw for visitors. Another draw for conventions is the continually expanding hotel product and the city’s accessibility and walkability. We are a vibrant city and our nightlife options for convention attendees keep expanding. Additionally, our knowledge economy and the diversity of business and industry in our market provides a great backdrop for conventions.

What areas is the PHLCVB focusing on?

We continue to focus on convention business and the association market, which is the primary market for us here in Philadelphia. However, we are making a concerted effort surrounding corporate meetings.

We are looking to bring in larger corporate meetings for several reasons. They book more short term than association meetings, so they can easily round-out a citywide convention calendar. Corporate meetings also aren’t as seasonal so they fit nicely into slower periods. Our number one goal is to keep the convention calendar filled on a consistent basis which provides more opportunity to support the 74,000+ hospitalityrelated jobs in the city.

194 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

multiple opportunities for people trying to enter the hospitality industry, generating hundreds of jobs. We are already in conversation with these hotels to make them part of the GPHA,” he said.

Arts and culture The Philadelphia Convention & Visitors Bureau, Visit Philadelphia, Greater Philadelphia Hotel Association, the Convention Center and the Independence Visitor Center are generally regarded as the backbone of the hospitality industry in the city. But Philadelphia’s rich history and culture means the city ist diversifying away from just being a convention city and attracting visitors for new reasons. “World-class museums, cutting-edge galleries, and ubiquitous street murals make this city a trove of creative riches,” said New York Magazine of the city.

History is always going to be at the top of the list of main drivers.

James Cuorato Independence Visitors Center

While often people come for conventions, they stay for the richness of the city, says McNichol. “The city of Philadelphia is doing very well and we see great economic development in and around the city. People are looking for something new and we are constantly refreshing the product with great restaurants, arts and culture experiences and new hotels, which makes the city attractive for attendees.” And this dynamic works both ways as convention organizers look to host events in cities that are able to draw visitors on their own merits. “The fact that Philly is thriving helps with the decision-making process of our exhibitors on the destination side. The industry is now selecting experience, and what a city can offer outside of its convention center. Philadelphia has had positive growth over the last few years,” he says.

Philadelphia is home to the Liberty Bell, the iconic sign of U.S. freedom and Penn’s Landing, named after William Penn, the founder of the state. The waterfront district has undergone a renaissance in recent years and now is a venue for music festivals and concerts in summer and ice rinks in winter. The Spirit of ( )

TOURISM, ARTS & LEISURE INTERVIEW

High note Innovation attracting younger demographic, helping drive sales goals

David Devan General Director & President – Opera Philadelphia How is Opera Philadelphia performing from a sales viewpoint?

Opera Philadelphia has been exceeding sales goals with shows like last winter’s A Midsummer Night’s Dream and 2018’s Carmen, and I think we are doing that because we’re attracting a younger demographic.

Our Festival O19 is loaded with innovation, which is our norm. We have two world premieres: Denis & Katya, which is about two young teenagers’ interaction with social media at difficult times in their lives, and Let Me Die, which combines death sequences drawn from the canon of tragic opera, along with original narratives and music. We are also doing Opera on the Mall, which broadcasts performances from Opera Philadelphia on Independence Hall, among other events.

What impact has Festival O had on the local scene?

The impact of Festival O has been local, national and international. Locally, it has animated the city and has enlarged artistic partnerships. We are now working with all sorts of art organizations as part of the festival. It has also developed a new audience, mostly young. That is the biggest impact; we now have more customers than five years ago. We work with Visit Philadelphia, PHL Convention and Visitors Bureau, and other agencies that promote the city and create local pride. Because we do so much new work, what we are doing is affecting the field of opera nationally in terms of the field celebrating and participating in contemporary art activity. Internationally, we have become recognized as one of the most innovative opera companies in the United States. That is evidenced by our winning the FEDORA-GENERALI Prize for Opera and the important nominations that we receive from the International Opera Awards. Our international partnerships exceed the number of partnerships we do nationally. In Philadelphia, we have a world view

and international arts perspective because we have become something that international producers want to work with.

Arts in general play a vital role in economic development. They have a wide ripple effect and help brand the city. Tourism is one of the largest economic activities in any city. People travel because of arts and culture, so Opera Philadelphia is trying to celebrate that and become a tastemaker where people come to touch the future of that musical expression. We believe that will have a long-term impact. Over the last three years, we have seen growth in our out-of-town business.

We are about to launch a national council because we have many people who live outside Philadelphia and are visiting with the purpose of attending Festival O. www.capitalanalyticsassociates.com

| 195

TOURISM, ARTS & LEISURE OVERVIEW

( ) Philadelphia offers river cruises past the SugarHouse Casino, which provides a party hot spot.

The city is also home to more public art than any other U.S. city, with nearly 4,000 murals. It also has 26 museums dedicated to history, science, art and religion. It is exactly this combination of culture and entertainment that draws approximately 43.3 million tourists each year. About 836 million was spent on recreation and 1.1 billion was spent on retail in 2018.

“History is always going to be at the top of the list of the main drivers for visitors to Philadelphia,” said Cuorato.

“The culinary sector has also become a top attraction and we have seen significant growth in that area. Our waterfront is experiencing tremendous growth and has been an attractive area for visitors. There are new hotels coming to the area and that will help expand the tourism market as well.”

Philadelphia is considered by many as one of America’s greatest food cities.

Entertainment In entertainment terms, Philadelphia has a little bit of everything. Not least, it is able to attract shows from the biggest names in show business because of its wide array of music and entertainment venues. World Café Live is not only home to the WXPN radio station but also an iconic live music venue. The Academy of Music and Curtis Institute of Music are prestigious organizations that attract world-class talent and offer free recitals.

And with contemporary theater operations Pig Iron Theatre Company’s vaudeville offering and L’etage’s

Geoff Gordon Regional President – Live Nation Philadelphia

All these efforts have a holistic approach. It’s not just about having one venue and make everybody go to one place. We have numerous offerings, whether it be the Theatre of the Living Arts, the Foundry, Punchline Philly, the Fillmore, or the Met, within a radius of a few blocks. We also partner with VISIT PHILADELPHIA, C3, the mayor’s office and all the consulates at large. In terms of opportunities for employees, we are the only promoter in the city that has organized labor in every one of our venues, clubs and stadiums.

We believe in organized labor and in training folks to have careers.

There are serious careers in the music and entertainment business, whether it be catering, managing or setting the sound and lights, or even in venue construction. We recently created Kid Nation as a way of inviting younger members of our community to learn about career opportunities in the live entertainment industry.

196 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

TOURISM, ARTS & LEISURE OVERVIEW

Larry Korman

Philadelphia is home to more public art than any other U.S. city.

cabaret and drag shows, there is something to satisfy all tastes.

Philadelphia hosts the nation’s oldest playhouse, the Walnut Street Theater, which was established in 1809 and named a National Historic Landmark in 1964. As home to American Bandstand from 1952 until 1989, the city has a plethora of jazz venues from the Philadelphia Clef Club of Jazz and Performing Arts to lower key venues such as Chris’ Jazz Café and South.

Bon Appetit ranked Philadelphia as “One of America’s Greatest Eating Cities.” Michael Solomonov of Zahav on St James Place was named Outstanding Chef, Greg Vernick of Vernick Food & Drink on Walnut Street was named Best Chef, Mid-Atlantic and Stephen Starr of Starr Restaurants on Chestnut Street was named Outstanding Restaurateur in 2017 by the James Beard Foundation.

And for those that prefer to be outside, Philadelphia’s urban park system, including Fairmount Park, offers 10,200 acres with 63 parks, over 270 hiking trails and 200 historic buildings. The city has 426 miles of bicycle lanes, the most per square mile of any U.S. city, according to Select Greater Philadelphia.

Finally, there is the Reading Terminal Market, one of the country largest and oldest public markets that is working to improve visitor experience. We finished raising capital for the biggest capital improvement the market has had since 2011, when it was expanded. We will renovate Filbert Street, which is a one-way street in front of Reading Terminal. That space will be transformed into a pedestrian-friendly street, enhancing the outdoor experiencearoundthemarketwithanoutdooreventsspace and a redesigned front-door experience for the Reading Terminal. We expect to start construction between Q1 and Q2 2020. This project will make the space ( )

President AKA Hotel Residences

What were some highlights for AKA Residences in 2018?

We’re working on a partnership to significantly grow our brand globally while also making a further commitment in Philadelphia with a new project that will dramatically enhance the architectural canvas for residential real estate. With respect to expanding our horizon, we’re blazing new trails with new, “vertical” villages and going even further outside the box than we have before when it comes to amenities and services.

At AKA Rittenhouse Square, we built a new lobby with a two-story green wall, creating more continuity and fluidity between the lobby, restaurant, bar and second floor amenities, and bringing some of those elements into the suites.

What are the biggest drivers for temporary or new residents to the city today?

The sports teams are certainly a driving force. We attract a lot of people who play for professional sports teams. The movie and film industry in Philadelphia is a big driver for us as well. Almost every month, we’ve had a production company staying with us. New job opportunities at companies such as Spark Therapeutics and Comcast bring more opportunities. Some of this workforce stays with us for a few months and then finds permanent housing. People come from all over the world and stay with us, embracing the idea of the evolution of home.

How have you seen residential real estate change in Philadelphia over the last years?

Beyond just the historical elements, there are leaders in different industries and local companies that have elevated living and working in Philadelphia. This is a modest market and one that’s constantly pushing and striving toward that next level. Each year, the city has taken steps forward and becomes a better place to work and live. www.capitalanalyticsassociates.com

| 197

®

oundtable:

Destination city Hotels in the city enjoyed a record year in 2018 in terms of occupancy as more travelers discover the arts, culture and history of the region. The streets of Philadelphia are bustling and hotels are doing their part to cater to the latest guest demands.

Jay Dellavecchia

General Manager The Westin Philadelphia

How has Philadelphia’s hospitality industry evolved during the last few years?

Philadelphia continues to be a thriving destination.

Regardless of the day of the week or time of day, the streets of Philadelphia are bustling with people. The energy in our great city is just amazing. There hasn’t been a significant change in the profile of our guests.

However, since the Marriott Starwood merger, the integration of Marriott reservation systems and the roll-out of their Bonvoy loyalty program, we have seen a significant increase in legacy Marriott guests staying at our hotel. One of our missions when Hersha Trust purchased the Westin Philadelphia in July 2017 was to reposition the hotel. Our goal is to be the preferred hotel for business and leisure overnight guests as well as for corporate meetings and social events, such as weddings, bar mitzvahs, bat mitzvahs, galas and fundraisers.

What are the biggest draws for booking at The Westin?

We provide attentive, personal service every day. We understand how fluid travel is and we are flexible to meet the changing plans of our guests. The Westin Philadelphia is conveniently situated for the business traveler. It is within walking distance of premier shopping and dining, the Convention Center, the arts, attractions, museums and public transportation.

We are very fortunate to be located in the business district of Philadelphia and the Rittenhouse area. There is no better location than where The Westin Philadelphia is situated. All around the hotel, we are experiencing tremendous growth, from corporate to residential development.

198 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

Jim McSwigan General Manager The Notary Hotel

What are some key elements of The Notary Hotel’s renovation?

Formerly the Courtyard by Marriott, we are being reborn as The Notary Hotel. Our renovation started in October of 2018, and will be completed in mid-July.

Some of the elements of the renovation include fully reimagined rooms, public workspaces for guests, a new shower experience in all rooms and a modern fitness center. We have maintained an element of history with 1920s-inspired décor and furnishings, while introducing a modern feel. We offer the latest and greatest when it comes to providing guests with a great space, not only for business meetings, but for social events, weddings and any type of celebration.

The next big pieces are the lobby and the restaurant.

The lobby is being redeveloped, with a redesigned desk area and decorative elements that will create memorable moments for our guests. We also provide the latest technology when it comes to the check-in process. For example, our mobile app allows our guests to go directly to their room without having to stop at the front desk.

What changes have you seen in the Philadelphia’s hospitality industry?

Philly has been put on the map with recent significant events such as the Democratic Convention, the Pope’s visit and the NFL Draft. The city of Philadelphia has done an awesome job in displaying what Philly has to offer our visitors. Philadelphia is a city of firsts and has a rich history. The food scene is on the rise, with numerous restaurants opening in the area.

TOURISM, ARTS & LEISURE ROUNDTABLE

Jerry Rice

General Manager Cambria Hotel Philadelphia Downtown

How far has the Cambria advanced since its opening last year?

The Cambria Hotel Philadelphia Downtown Center City is actually a four-part redevelopment of half a city block. Since the Cambria hotel opened last year, we also have opened our rooftop restaurant and bar, Attico, one of the most talked about spaces in the city, which overlooks Broad Street and the Avenue of the Arts.

Pearl Properties, our owner and developer, outfitted the ground floor of the hotel with space for the new Del Frisco’s Grille restaurant and The Lucy by Cescaphe, a high-end event venue that can accommodate up to 500 people, which opened in December.

In which ways has Philadelphia’s hospitality sector changed over the last few years?

There have been many changes in Philadelphia. The management of the Convention Center changed, and this new relationship has sparked significant growth in convention RFP’s and traffic, hitting record highs in the number of conventions as well as their size and scope. Philadelphia is the birthplace of democracy and that historical relevance draws people to our area. We have seen major corporations move into Center City.

Take Comcast, for example. They’ve recently opened their technology center in Center City with a beautiful 60-story high-rise, which will house one of more than 11 hotel projects that are on the books for Philadelphia.

So development is hot in Philadelphia. Continued records for weekend occupancy in the low- to mid-90% underscores that Philadelphia is not only a destination for business, but for leisure travelers as well.

Michael Roberts

Area General Manager The Windsor Suites Philadelphia

What is the current landscape for the hospitality market in Philadelphia??

We have more leisure business coming into the city.

The market has expanded significantly and the number of hotels in Philadelphia has increased over the last few years. The profile of the city has been raised and, as a result, the convention business and the amount of inbound travel have increased. Occupancy and average rates for the city keep increasing year over year and the hospitality industry continues to benefit from the improvements Philadelphia has made as a city.

What do you think is the biggest draw for tourism in the city?

The biggest draw for tourism in Philadelphia, specifically during the weekend, is the food culture and how vibrant the city has become, whether it is sporting events or shows at the Kimmel Center for the Performing Arts or just enjoying the great dining scene that we have. The historical attractions are still popular and continue to be a driver as well.

How are you improving the visitor experience?

We have multiple partnerships to enhance our visitors’ experience. I am part of the Parkway Council and we work closely with the city to make this neighborhood vibrant and to make sure we are bringing the right events to the area. As a hotel association, we work closely with the city to make sure we’re pushing through the right legislation for the hospitality community. Hospitality is the biggest employer in Philadelphia and it is important that we make sure that we are taking care of our employees. www.capitalanalyticsassociates.com

| 199

®

oundtable:

Sports in the city Philadelphia is a sports city. It is home to four Major League teams, an arena football team and an esports team. The fanbase is robust and dedicated. Here is how teams are engaging fans and what their goals are for the year and beyond.

Ron Jaworski Co-Owner Philadelphia Soul

What are your main goals for this year?

The growth of the Arena Football League is absolutely paramount. We have partnered with ESPN as our broadcast partner. Our mission is to grow the league, and in order to do that, we just partnered with the DraftKings to launch a new daily fantasy sports game ahead of the AFL’s 2019 season.. We also recently located our league offices to Philadelphia and we already have new teams in Atlantic City and Columbus, which goes in hand with our expansion goal. I don’t think we could make it if we didn’t have great local sponsorship. We have a phenomenal, supportive group in Philadelphia, and last year, we drew over $2 million in local sponsorships.

Philadelphia is passionate football-wise.

What are some of the Soul’s efforts to attract local visitors and engage with the community?

We are as philanthropic as any professional sports team in this city. Our biggest impact in the community has come through our Soul Moving Experience program. This program allows corporations and community members to award tickets for kids who live in underserved areas.

The program has allowed more than 115,000 children to experience our professional football games.

What is your outlook for Philadelphia sports?

Philadelphia is the greatest sports town in America. When I came to Philadelphia in 1977, I realized what an incredible, passionate town this is. Besides the professional teams, Philadelphia has great collegiate teams. There are many sport-related activities that people can do in this community. I’m a big fan of every team in the city.

200 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

Joe Marsh

CBO Philadelphia Fusion

What are some recent accomplishments for the Philadelphia Fusion?

Making the 2018 Grand Finals in July 2018 was a big moment for us, since it was the inaugural season of the Overwatch League. After we saw thousands of Overwatch fans turn out at the sold-out Barclays Center in Brooklyn, we knew the demand was there to build an esports arena of our own. In April 2019, we announced that we would invest $50 million in Fusion Arena, the largest new-construction, first purpose-built esports arena in the Western Hemisphere. The arena will help us change the landscape of the gaming industry on the East Coast and around the world.

What are some of your growth initiatives for the 2020 season?

Over the past two seasons, we’ve made a significant effort to host Fusion watch parties and create consistent touchpoints for our fans to gather and celebrate our team.

We learned that fans will travel just about anywhere in Philadelphia to support their local esports team, hosting watch parties throughout just about every neighborhood in the city. The 2020 Overwatch League season is our first chance to have our team in market full-time and our first opportunity to sell tickets to the three homestand weekend events we have lined up at The Met Philadelphia and Atlantic City Boardwalk Hall. Having the team in Philadelphia will allow us to have more live interactions and exhibitions with fans, sponsors and partners. We are consistently engaging with our fans on social media, meeting with them in person and ensuring our community is happy with the product we’re providing.

TOURISM, ARTS & LEISURE ROUNDTABLE

Mike Shane

CBO Philadelphia Flyers and Wells Fargo Center

What can fans expect from the Transformation 2020 initiative for the Wells Fargo Center?

Transformation 2020 is an initiative that began three years ago and the latest and most impactful phase is set to culminate by the end of this year. Last year, we focused on the mezzanine level, replacing all the seats and renovating the concourses, adding new concession areas. This year, we reimagined several different levels of the arena. Our new scoreboard is state of the art, first-of-its-kind and almost double the size of its predecessor. It’s also going to be the largest scoreboard of any arena that hosts both an NBA and NHL team and has an unprecedented ability to move and transform.

One of our crown jewels is our new Center City Club, an all-inclusive membership club unlike anything we’ve ever had before. It is right on the ice level and covers about 7,500 square feet. We are reserving access to this club for the best seats in the arena, so only the first 10 rows, right at center ice, will have access.

How have you improved your relationship with fans?

We’ve reimagined what it is to be a season ticket holder with the Flyers. It is now an all-encompassing membership, called “Inside Edge.” Being an Inside Edge member means more than just having a ticket to the game. It is a 365-day relationship with the team. It gets you exclusive access to events throughout the year with our players, coaching staff and front office. It gets you exclusive discounts when you’re at the game, like on food and beverages, and up to 20% off on merchandise. Our approach to this entire phase of Transformation 2020 was to create spaces and experiences for all types of fans.

John Weber

Sr. Vice President, Ticket Operations & Projects The Philadelphia Phillies

How did the previous off-season impact ticket sales?

The last off-season was incredible for ticket sales, because of all the moves that our baseball operations team made. We signed or traded for Bryce Harper, David Robertson, Andrew McCutchen, J. T. Realmuto and Jean Segura, which helped the sales team move forward. We have had a great ticket sales season and are projecting over 2.7 million this year, which represents an increase of over 570,000 tickets sold in comparison to last year. Our fans responded to the excitement of the season and we are excited about the future. With all these changes, we are on track to a strong 2020 season.

How has technology helped The Philadelphia Phillies facilitate fan experience?

Technology has allowed us to interact in a different, convenient way with our fan base. Our MLB Ballpark app and My Phillies Tickets platforms have represented a win-win for us and our fans. Facilitating digital ticketing and access through mobile phones and other devices has been well-received by our fans.

What is your outlook for the franchise over the next year?

I’m excited about the future of the organization in general. We have several star players and a talented minor league system. We have a great ownership group that is giving us all the resources behind the scenes to be successful. We have made several recent changes to the ballpark: they include The Yard where kids can play wiffle ball and other interactive games. www.capitalanalyticsassociates.com

| 201

TOURISM, ARTS & LEISURE INTERVIEW

Beyond the hoop Philadelphia 76ers enjoy highest attendance in NBA, but organization’s reach goes beyond the court

Scott O’Neil CEO – Philadelphia 76ers/Harris Blitzer Sports & Entertainment an unparalleled understanding of the power of our brand. We have incredibly talented people, on and off the court, with really high expectations in the most passionate sports city in the world.

How important is it to the 76ers as a global brand to leverage your players with international backgrounds?

The NBA is the most global sports league. Some might argue football is more global, but there are so many elite football leagues, whether it’s the Premier League, Bundesliga, or La Liga. For basketball, there is only one: the NBA. We have players from five continents on our team. Having such a diverse, global roster certainly helps drive our fan base, from North America to Australia to Africa to Europe to South America. Last year, we played in China, in Shanghai and Shenzhen.

Around 50 million people in China watched the games on television. The facts and stats are actually beyond comprehension.

The Philadelphia 76ers averaged the highest attendance in the NBA last season. To what do you attribute that success?

The product is incredible. The 76ers are one of the marquee professional sports franchises in the world, let alone the NBA. Two of the preeminent superstars in all of sports, Ben Simmons and Joel Embiid, are both under 25 years of age. Tobias Harris has been an All-Star.

Al Horford’s a four-time All-Star. Josh Richardson is a future All-Star. That’s a truly impressive starting five.

Derrick Hayes, who runs our In-Game Entertainment, puts on a world-class show. Ben Cobleigh, our VP of Ticket Sales and Service, is an elite executive. Katie O’Reilly, our Chief Marketing Officer, is one of the most talented marketing professionals in the world.

And our President, Chris Heck, is the maestro with 202 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

What is the Sixers Innovation Lab and how is it helping improve education in the community?

We were fortunate enough to build what is widely regarded as the most influential and greatest training complex in the world of basketball. As part of this incredible complex, we made about 8,000 square feet available to early stage companies and entrepreneurs.

We provided them with consulting in marketing, branding, sales, legal expertise; we covered their food and housing; we provided the greatest entrepreneurial mentor in the business: Seth Berger. Early stage companies generally don’t have robust budgets. Most are working off a shoestring. But the way that these starts-ups understand their customers is unique. The way they leverage consumer platforms, like Reddit, for example, to do market testing, has been eye-opening and very influential.

TOURISM, ARTS & LEISURE OVERVIEW

www.capitalanalyticsassociates.com

| 203

TOURISM, ARTS & LEISURE OVERVIEW

Philadelphia will host the MLB All-Star Game in 2026.

( ) exciting and engaging for the public and will also extend the market experience beyond our four walls,” said Anuj Gupta, the market’s General Manager.

Sports Besides arts and culture, Philadelphians also love their sports. The city is the No. 1 most sports-crazed city in the United States, according to Travel + Leisure. “Last year, the Philadelphia Convention & Visitors Bureau (PHLCVB) was able to entice the 2026 Major League Baseball All-Star Game and it is working to bring the 2026 FIFA World Cup and other sporting events that year in celebration of the 250th anniversary of the signing of the Declaration of Independence,” said GPHA’s Grose.

Philadelphia, an iconic sporting city, is one of only 12 cities that hosts teams from all of the Big Four major US sports leagues: the Philadelphia Phillies of Major League Baseball, the Philadelphia Eagles of the National Football League, the Philadelphia 76ers of the National Basketball Association and the Philadelphia Flyers of the National Hockey League. The city has hosted the NFL draft 17 times since it hosted the first ever in 1936.

It is also a regular host of MLB’s All-Star Games and raised numerous notable athletes and Olympians. Bobby Clarke of the Flyers, Wilt Chamberlain of the 76ers and Kobe Bryant were all born and raised in Philadelphia.

204 | Invest: Philadelphia 2020 | TOURISM, ARTS & LEISURE

If the city is successful in its bid to host the 2026 World Cup, that could have a significant economic impact. The last time the World Cup was played in the United States, in 1994, the reported economic impact was $1.45 billion.

Looking ahead Unlike many big cities like New York, Washington or even San Francisco, Philadelphia offers a range of options that do not break the bank. In fact, Philadelphia is No. 5 on Money Crashers’ ranking of Best US Cities to Visit on a Budget. It is also relatively easy to get to, with the Philadelphia International Airport serving 31.7 million passengers per year and generating $15.4 billion for the local economy.

Now, the city’s tourist organizations are gearing up for greater growth in the coming years. “We are expecting substantial growth at the Independence Visitor Center. We managed our way through two and a half years of renovation, and we now hope that all the benefits we projected will come to fruition,” said Cuorato. “We are very proud of the reputation we have developed and visitor services will always be primary to us. The prospects are really good for us, and we are looking forward to more people coming to the center and having better experiences.”