Region's Business January 30, 2014

A VISION FOR AVENUE OF THE ARTS WASHINGTON SQUARE ENDORSES MARKET8 PLANS

CHARMING CHESTNUT HILL COLONIAL

REGION’S BUSINESS

PHILADELPHIA EDITION

A JOURNAL OF BUSINESS AND POLITICS

Philadelphia’s

Real Estate Boom

Land bank legislation, revised property tax rules and a swell of development plans have the potential to change the city’s skyline forever. But what will that mean for residents and business owners?

EXPLORING KEYSTONE OPPORTUNITY ZONES IRS REVISES PROPERTY RULES ARTKICK PAINTS DIGITIAL PICTURE

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CONTENTS

“I saw that skyline, not just as a representation of steel and concrete and glass, but as really the substance of the American Dream.” -Daniel Libeskind

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Region’s Business Spotlight: Real Estate Development 18

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s 1900 Arch Street

Up to 16,000 SF Retail Space Outdoor Seating Spring 2014 Delivery

Philly Development’s Upward Momentum

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Weekly Briefing

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Q&A: William Glazier, Keystone Property Group

Avenue of The Arts on The Rise Fine Homes

PRESIDENT AND PUBLISHER James D. McDonald BUSINESS EDITOR Michelle Boyles CONTRIBUTORS Eric Boehm, Charlie Gerow, Don Lee, Scott Staruch, Tim Holwick, Sandy Smith, Judy Weightman, Juliana Reyes, Brandon Baker, Christopher Wink PROOFREADER Denise Gerstenfield ADVERTISING DIRECTOR Larry Smallacombe

Independence Media Corp.

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Region’s Business is published weekly on Thursdays and online at www.regionsbusiness.com.

The publisher makes no representations or warranties regarding the advertising appearing in its pages or its websites.

866-Walnut 4 Precision Realty Group 1429 Walnut Street, Suite 1200 Philadelphia, PA 19102 866-Walnut 4 www.precisionrg.com

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DEALBOOK

GAMING

City Sees New Gaming License Bid Market8 (see related story, right) has some competition for the city’s second gaming license. Plans for Provence, the Euro-inspired hotel and casino by Tower Investments’ Bart Blatstein, were presented to the Pennsylvania Gaming Control Board on Tuesday, January 28.

The project plans include a hotel, casino, concert hall, spa, fitness center, rooftop pool, botanical garden, jazz club, comedy club and nightclub. At the presentation, architect Paul Steelman (responsible for Harrah’s Atlantic City and several Las Vegas casinos) emphasized that not all gamblers are alike and that the Provence plans cater to five different subsets of gamblers.

(More details on this story on page 18.)

Washington Square Assoc.

Kmart To Endorses Development Close Two Area Stores RETAIL

The Washington Square West Civic Association’s Board of Directors has unanimously endorsed Market8 Investment Group’s plans to develop an urban entertainment complex, which includes a Mohegan Sunoperated casino, myriad restaurants and bars, concert hall/banquet facility and hotel space.

The Washington Square West neighborhood is home to a diverse group of retailers and restaurants including Jeweler’s Row and Midtown Village, as well as two major hospitals and many city residents. The group cited Market8’s revitalization strategy for the East Market Street Corridor and offer to extend the casino’s rewards program to area businesses as deciding factors. Typically used to increase non-gaming related

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casino business, the management team will use its Rewards program to funnel shoppers to neighborhood retailers. Market8 has also made a commitment to invest $1 million each year to help promote small businesses in the East Market St. area.

Area shoppers will soon have fewer blue-light specials to choose from with the closing of two Philadelphia Kmart stores; one in center city at the Gallery Mall and another Northeast Philadelphia at Orthodox St. and Castor Ave. The stores will close following liquidation in April and impact 289 employees, 120 at the Gallery alone, according to a Philadelphia Business Journal report.

Pennsylvania Real Estate Investment Trust, which owns the Gallery is reportedly interested in upgrading the mall’s list of retailers.

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WEEKLY BRIEFING

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NLNA Turns Down Myrtle St. Subdivision “This is one of the worst projects I’ve seen in some time. I’m surprised to see this coming from Ed.” That was the response out of the gate from one member of the Northern Liberties Neighbors Association(NLNA) Zoning Committee to a proposal from NoLibs architect Ed Fink to redraw lot lines in order to turn two large horizontal lots at 869-71 N. 5th Street into three smaller, square lots, each of which would contain a three-story townhome with roof deck and two-car garage.

Fink presented preliminary models and site plans to the committee at its meeting on Jan. 27.

NLNA Zoning Committee Chair Larry Freedman told Fink that if the petition to redraw the lines were granted, Licenses and Inspections would still refuse the project on the grounds that the lots were too small.

The zoning code requires a minimum lot size of 1,440 square feet per lot for residential structures in almost all of the single-family-attached categories. The three lots resulting from the redrawing would be about 1,260 square feet each, give or take a few.

But the committee members were actually less concerned about the lots – as one member noted, 1,440-square-foot lots don’t turn up that often for residential projects in Northern Liberties – than they were about how Fink planned to fill them.

His proposal had townhomes taking up virtually

all of each lot. In place of a rear yard that met the code’s open space requirements was a sliver of land and a second-story rear deck. One home had a five-foot-wide side yard in addition to the rear sliver.

Another committee member expressed concern that cars would not be able to enter or exit the garages from narrow Myrtle Street, on which the houses would front.

The lack of open space was one of the chief reasons the committee voted unanimously to oppose Fink’s proposal; the size of the lots was another, though some committee members pointed out that 1,260-square-foot lots were not unreasonably small. Still, the question was, as committee member Tim McDonald put it, “Is this the best subdivision for the site?”

The committee concluded it wasn’t.

This story originally appeared in Philadelphia Real Estate Blog at http://blog.philadelphiarealestate.com/

Cost-Saving Tips for Start-up Entrepreneurs

By Rosella LaFevre Many entrepreneurs find that in the earliest stages, their money is the company’s money. That comes with a lot of pressure. “Not only are startup CEOs pressured to moderate their personal finances, knowing how to strategically spend the company’s money without jeopardizing quality is complex,” said Sarah Sullivan and Jamie Pennington, co-founders and CEOs of Atlantabased tech startup SeeItFit.com.

So how can you cut down on company costs? Region’s Business reached out to entrepreneurs throughout the region and across the country to gather the best tips for saving money to do better business.

There’s just one question What is absolutely necessary? Some things are just fluff – things that look good or make you feel good but aren’t necessarily useful. “When you first start a business, you don’t need to have everything right away. As you reach different financial milestones, you can add more bells and whistles,” said Rebekah Epstein, owner of Fifteen Media, a firm serving other PR agencies based in Austin, Texas. The owner of Philadelphia-based Red Flag Media , which publishes Grid magazine, phrases the question another way. Alex Mulcahy says, “Before

spending any money, ask yourself: Is this essential to the product or service I’m offering?”

Start at the bottom Consider the example of LinkedIn. You can sign up for a free account with a limited number of services Ignore the urgency or a more costly subscription with more services. Use “When you’re running a start-up, there’s always a free accounts and scale up as needed. Colahan said heightened sense of urgency,” said SeeItFit’s Sullivan. If Here’s My Chance used Base, the customer relationship you need to make a decision that impacts your bottom management tool, for free to start and moved up the line, breathe deeply for a moment before you consider “freemium” chain. Basecamp and Asana are two project the options, weighing that one important question: or task management tools using the freemium model.

What is absolutely necessary?

Do favors to get favors. If you can help someone else, Share a subscription don’t hesitate. Build a reputation for being helpful and Is there a database that you really can’t do business when you need help, people should jump at the chance. without? Find other start-ups that need to use the same service and share the cost. That’s what Epstein does. “I Skip the fancy office have gotten together with about 10 small PR firms, and Kevin Colahan and Dave Gloss, co-founders of we all split the cost of a program called, Cision,” she said.

Philadelphia-based creative agency Here’s My Chance, “This has saved me thousands of dollars a year!” worked out of the basement in Gloss’ parents’ house for the first several months. They also held meetings Save money on social media at the homes and offices of their mentors, which not Avoid hiring a freelancer or agency to handle your only saved on operating costs, but helped them gather social media at first. “It’s very easy to fall prey to overinvaluable advice, Colahan said. promising and under-delivering,” said Sullivan. “Right Other ways to avoid a lengthy and costly lease agree- off the bat, it might be useful to have a Twitter account, ment include splitting rent with other organizations, but you don’t need to hire a fancy social media firm to bartering services for space and joining a co-working manage it,” said Epstein. If you do hire someone, tie space. compensation to results achieved, Sullivan advises.

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WEEKLY BRIEFING MUST-HAVE APP

EXECUTIVE BOOKSHELF

The Big Reset: War on Gold and the Financial Endgame Exploring gold’s traditional role as the anchor of financial systems, Willem Middelkoop traces the secret war against it to the 1960s, when central banks across the US and Europe agreed to pool their gold reserves in the London Gold Pool.

He then outlines the history of gold-backed currencies and today’s state-issued money that has no value in terms of an objective fixed standard. These fiat currencies have allowed many governments to print huge numbers of bonds to finance their budgets.

But Middelkoop warns that piling debt on to balance sheets is not a sustainable way to revive the world’s economy: ultimately, he argues, it will lead to a collapse and a subsequent reset of our global financial system.

Shopbop Just in time for Valentine’s Day, Shopbop, one of the most trafficked e-tailers launched a free iPhone app that allows users to peruse and shop over 500 brands.

The app also provides push notifications to alert customers when the items on their musthave lists go on sale or are running low in inventory.

Shoppers can also easily log-in and order from their Amazon.com accounts.

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RESTAURANT ROUNDUP

Philly Area Chefs Go Kosher for A Cause Some of the area’s top chefs are preparing for the Second Annual Bubby’s Cook-Off, a kosher cooking competition that supports the Philadelphia North chapter of The Friendship Circle and Lubavitch of Bucks County charities.

More than ten of the city’s most talented culinary minds will take on the intricate process of preparing an traditional kosher meal, with a twist of their own design.

Guests will be invited to vote for their favorite dish via realtime text ballot.

Bubby’s Cook-Off will take place on Feb 26, at Vie and feature cocktails, chef sampling, wine pairing and entertainment.

Tickets are available at www. bubbyscookoff. com for $145.00 per person.

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EVENTS

Technically Philly Job Fair Date: February 4, 2014 Location: Union Transfer, 1026 Spring Garden St. More than 35 technology companies that are currently hiring technologists and webready professionals will be on hand for this industry specific job fair.

Bootstrappers Philadelphia Breakfast Date: February 5, 2014 Location: Elephant & Castle Restaurant, 1800 Market St. Discussions about growing a business based on internal cashflow and organic profit, held the fourth Tuesday of each month.

Philly Tech Meetup Date: February 5, 2014 Location: Quorum Science Center, 3711 Market St., Floor 8 Join fellow technologists for an evening of live demos from companies developing great technology in and around Philadelphia.

PACT: Healthcare IT Event Date: February 20, 2014 Location: Philadelphia Marriott West, 111 Crawford Ave., Conshohocken A panel of investors and buyers in the health care IT space to comment on hot trends and technologies in the space.

Philadelphia Chamber of Commerce: State of the Airport Date: February 4, 2014 Location: Crowne Plaza, 4010 City Ave. Discuss what the expansion plan means for local economy, and gain insight into the recent merger between American Airlines and US Airways.

INNOVATION

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Artkick Brings (Digital) Art to the Masses

By Erin Kane A new Silicon Valley start-up, Artkick.com, is bringing timeless images -- and a whole lot else -- to the screens of the masses.

The concept is pretty simple. Artkick wants art to move beyond its static, wall-centric confines and find a new home on your TV or tablet. It organizes and formats thousands of images, culled from museums around the globe and other sources, like NASA and the Library of Congress, which it then makes accessible for your selection.

Artkick is available as an App on an Android or iOS device, or can alternatively be streamed onto an Internet-ready TV. For now, the service is free.

“I never really came up with a good idea until six months ago,” said Sheldon Laube, the chief executive at Artkick. A serial entrepreneur and lifelong art lover, Laube spent his childhood traipsing through museums in New York City.

“One of the things that struck me as I was older was that I was amazingly fortunate to have that experience,” he reflected.

“There’s so many people who can never have that.”

On a whim, Laube was thinking about the way millennials consume music and had an epiphany, he says, which changed everything. “Kids today, who don’t even know what CDs are, they’re going to expect to get art digitally,” he said. Soon afterward, Artkick was born.

Introduced in early January, Artkick has caught on quickly.

Thousands of people are already using the service, because it makes good sense, Laube says. “It’s sort of an idea that everyone can relate to. Everybody goes, ‘I get it.’ The notion of decorating one’s space is core to the human experience,” he added.

Most people have a flat-panel TVs in their homes that are “black and ugly half the day. We have a mechanism to change those TVs into something beautiful,” Laube said. “We can bring into your home literally tens of thousands of images.

We want to bring beauty into the lives of millions of people.”

Much of the startup’s library of 45,000 images - the art, anyway - is part of the public domain, meaning users can access Van Gogh’s “Starry Night” or Monet’s “Water Lilies,” but the works of more contemporary artists, like Andy Warhol, are not yet available.

Those options may come in time. Later this year, Artkick plans to introduce a version of its service that will allow users to include their own images and bypass ads, similar to models used by Pandora and Spotify.

Laube estimates that a premium subscription will cost users between $5 and $9 dollars per month. Artkick is also looking into licensing contemporary works of art that would be available for a separate fee.

While the idea of digitizing art is not new - Bill Gates toyed rather unsuccessfully with the concept in the early 1990s - technology now makes it widely available and relatively inexpensive. Laube noted the similar intentions behind Gates’ vision and Artkick. “I reinvented [Gates’] wheel,” he said. “It’s an idea whose time has come. Who doesn’t want to turn their black TV into something beautiful?”

Diary of a Start-Up: Building Blocks When Region’s Business first checked in with e-commerce platform CoLabination in December, we touched upon the company’s dedication to reshaping how brands – local and otherwise – demonstrate their products. Here, Scott Latham joins the ranks of our “Diary of a Start-Up” contributors, and details the process of growing from local to large-scale.

more because of this uncontrollable curiosity to keep thinking, problem-solving and evolving.

Being a start-up entrepreneur is very difficult and requires the most dedicated self-control of any job. When you’re a leader, the bus stops at you. You must have enough confidence that when you don’t know all the answers, you’ll still have the ability to figure them out. There is no rulebook or manual to In his words: follow, except for your heart and what you believe to be right.

It’s tough to pinpoint any type of “Aha!” moment when This may require sacrificing everything normal in your life to you just know this is what you’re meant to do. I describe an define your own path, step by step. entrepreneur as a person willing to surmount day-to-day fears.

In a start-up, we all have goals and aspirations to change the It’s about looking the status quo in the face (and your family, world in a way that most deeply affects us. Great ideas are a friends, teachers, mentors), and saying, “I’m not afraid; I can dime a dozen, but having the mindset to take that idea from do this.” And trust me, once you start, you can’t stop. Some thought to tangible reality is the most triumphant thing the people glamorize this lifestyle, but it’s not quite the walk in a human race has the ability to do. That’s why I - and everyone park outsiders may imagine. It is hard work, dedication and, at CoLabination - have chosen to do this every day of my/our for most of us, very late nights in the lab. Typical work weeks life. Never stop searching for that something that ignites the run well into the 100-plus hours range, and sometimes I go flame in your mind. Challenge yourself, connect with those days without sleep. Not always because there’s work to do, but around you and never stop learning.

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INNOVATION

Rittenhouse Coffee Shop Brewed from Recession

By Brandon Baker Pre-recession, 27-year-old Gary Viteri (right), alongside his father, had become something of an expert at flipping houses on the market. Then the roof caved in on the economy, and he rethought his plan, sustaining by working as a bike messenger and embarking on a career as a touring musician.

But then one day in 2012, back in Philadelphia, he got a nudge from a real estate agent from his neighborhood about a fixer-upper on the corner of Wharton and 18th streets.

“She said, ‘You know, there’s this place right next to where you live – you should check it out,’ and the whole area was abandoned at the time, so it was the kind of place you’d probably passed a bunch of times but never really noticed it,” Mr. Viteri said. “So, we went in and she showed me and basically the deal was, at the time, too good of a deal to pass up. She said, ‘If you don’t’ buy it, I will.’”

And though he intended to look for a new space to flip, he instead decided – after having just won a sum from an accident settlement – to use the massive 6,000-square-feet space to launch a coffee shop, titled The Pharmacy.

Officially open as of Jan. 17, the shop was named after a doctor whose practice once used the house’s

garage as a pharmacy in the 1970s, Mr. Viteri’s space eschews the ritzy décor of some of Rittenhouse’s finest, and the cute-and-cozy vibes of most neighborhood coffee joints in favor of an open space with repurposed furniture – including two booths that would fit snuggly in any standard diner. Located a block away from LPMG Companies’ John Longacre’s American Sardine Bar in the burgeoning Newbold neighborhood, The Pharmacy – with its four employees -- serves Fishtown-roasted ReAnimator Coffee in addition to an assortment of vegan goods.

To boot, it defies the norm by using the space as both an art gallery – by having showcases and hanging paintings on the walls -- and live-music venue on weekends.

“It’s a huge project to take on for a first-timer, that’s for sure,” Mr. Viteri said.

“And we thought we’d have a slower start, but people have been pouring in here. …

These things get so viral. And that’s the other side as well: As soon as one or two people say, ‘I was there, it’s open,’ five or 10 more people show up.”

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EXPLORING PHILLY’S

DEVELOPMENT BOOM 11

SEEING PHILLY’S SCHOOLS THROUGH LAND BANK LEGISLATION

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IRS REVISES PROPERTY TAX RULES AND REGULATIONS

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THE IMPACT OF PHILLY’S UPWARD MOMENTUM

COMMERCIAL REAL ESTATE

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COMMERCIAL REAL ESTATE

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SEEING PHILADELPHIA’S REAL ESTATE THROUGH LAND BANK LEGISLATION Historic land bank legislation was passed in part to help solve the city’s blighted building epidemic, including many shuttered schools. But how and who will make the final decisions on these properties?

Story By Alaina Mabaso Illustration By Don Lee There’s no going back: 2014 may be the biggest year in Philadelphia real estate since William Penn surveyed the land between the Schuylkill and Delaware rivers. The appraisal and sale of 24 school buildings, closed last summer to help plug the Philadelphia School District’s soaring budget gap, as well as a breakthrough Land Bank bill, ensure that business and real estate experts from across the country will be watching.

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COMMERCIAL REAL ESTATE

Inventory vs. equity GPAR president Allan Domb, a key City Council advisor on the impending sales, has been working on his own solution. “If I show you a picture of University [City] High School the way it is right now, graffiti all over the place, is anyone going to buy that property?” he asked. “Or [if ] I show you a picture of a 40-story modern glass building designed by Robert Stern: what do you think makes that property more valuable?”

Asked to testify on a way forward for the school sales

by City Council President Darrell Clarke, Mr. Domb launched his own survey, driving to each school site.

“I parked my car, walked around the schools, [and] checked out the neighborhoods so I could understand from a real estate standpoint what I was dealing with,” he says.

Mr. Domb decided that lumping all the empty buildings together would be a mistake. Instead, he believes separating the schools into three different categories would maximize the potential payoff. Eight schools, including East Hunting Street’s Stephen Douglas, Moyamensing Avenue’s Abigail Vare, and North Broad’s William Penn, make up the tier-one

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category. Mr. Domb places the most saleable properties here.

For the most part, it is the location of these schools — some of them abutting the campuses of higher educational institutions like Temple, Drexel, Penn and Misher College of Arts and Sciences (next to the former Alexander Wilson school) — that makes for a good financial prognosis, with development opportunities abounding.

For these top-tier properties, Mr. Domb warns against a hasty disposal, recommending a threemonth appraisal process to maximize the selling price — and urges the City to acknowledge that this isn’t a job for the School District to do alone.

No company “with a portfolio of $100 million worth of schools would just sell them to a bulk buyer without knowing what they’re selling,” he said. “You would want to maximize your value rather than giving it away.”

To Mr. Domb, that means hiring two outside commercial appraisal firms to evaluate each of the eight top buildings, and come up with realistic plans for the maximum development zoning would allow, in

addition to enlisting a pair of architects for each property to help communicate the possibilities to potential buyers.

Mr. Domb would slate a second tier of schools, including George Pepper on South 84th Street, Robert Vaux on West Master Street, and South 9th Street’s Edward Bok, as good sites for “potential re-use” that will not net as much money as the top category of schools. This could mean transforming them into town-homes, senior living, rental properties, or office or classroom facilities.

The third tier group of schools presents the biggest challenge. Or as Mr. Domb put it speaking with Region’s Business in January, “I don’t know what you do with it, but you got to come up with something creative.” The poor condition of these buildings, combined with locations plagued by unemployment and low housing values, mean they won’t net a high price.

Sites like West Clearfield Street’s John Whittier, Germantown High School, and Frankford Avenue’s Sheridan West Academy make up tier-three. But with long-term vision, Mr. Domb said, even buildings in the most challenged areas could present a big opportunity if nearby manufacturing or technology companies, or a local university, could be tempted to the site with the enactment of a tax-abating Keystone Opportunity Zone designation (read more on these in a related sotory on page 14).

“Most people view the [issue] as let’s sell the school and get the money,” Mr. Domb finished. Instead, “let’s sell the best schools and get the most money, let’s take the second tier and make that residential, let’s take the third tier and turn that whole ball game around.”

A collaborative effort Finding viable owners for lots and properties in economically-disadvantaged areas is the major goal of the Land Bank as well.

“The mission of the Land Bank is to return vacant and underutilized property to productive use through a unified, predictable, and transparent process,” the bill reads, “thereby to assist in revitalizing neighborhoods, creating socially and economically diverse communities, and strengthening the City’s tax base.”

According to the new bill, championed by 7th District Councilwoman Maria Quiñones-Sánchez, Philadelphia’s Land Bank will have an 11-member Board of Directors: five appointed by the Mayor, five chosen by a majority City Council vote, and one elected by a majority vote of the other ten members. Qualifications will include expertise in areas like real estate development and architecture and a primary residence or office within the City, and at least four Board members will be affiliated with relevant non-profit or advocacy groups.

“GPAR looks at the Land Bank as more of a lifestyle issue than a revenue issue,” Mr. Domb said, citing over $1.5 billion in delinquent taxes over the last 25 years, as a bigger financial concern for the City than crumbling properties.

But for homeowners, reducing blight is a boon to housing values as well as safety and quality-of-life.

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Mr. Domb pointed to an estimate from Councilwoman Sanchez that each blighted home on a block drags the value of all the other homes down by about $8,000 — so on a block with three blighted buildings, a $100,000 house would be worth only $76,000.

Philadelphia, despite the nationally unprecedented scale of its new Land Bank, is just the latest of about 75 U.S. governments to enact one, and it’s worth noting the factors in others’ successes and failures: knowledge Ms. Black brought to her own leadership of the cause in our region.

“Some first-generation land banks only allowed land to go to CDCs and not the private market,” she said, on the premise that non-profits would make more trustworthy buyers.

Others learned that “there’s a role for private markets.” Another early mistake was limiting land bank properties to those without structures due to liability fears, but “you can’t just leave the structures, which actually do the most damage to neighborhoods,” she explained.

A third blunder is injecting politics into the land transfers, Ms. Black continued, pointing to St. Louis, where she said the city council oversaw every property transfer, as an example of this problem. That meant “people with the capacity, resources and record…weren’t getting land unless they were in the good graces of the political elected officials.”

Ms. Black did note that a controversial final measure to Philadelphia’s bill mandates a Vacant Property Review Committee (VPRC) to vet all Land Bank acquisitions and sales. The VPRC will be comprised of representatives from 13 City agencies, including the Department of Public Property, the Redevelopment Authority and the Department of Commerce, along with City Council President Clarke himself.

“The Council doesn’t trust the administration to do it well,” Ms. Black said. “My hope is the Council will get out of the business … and allow an objective process like there is on the private market.” She’s optimistic that in three to four years, updates to the process will scale back City Council’s role in Land Bank sales.

From vacant school buildings to the Land Bank, issues of realistic appraisal, transparency and objectivity, minimized liability and maintenance costs, and maximized revenue will be an ongoing conversation in the region. But whatever happens, the nation will be keeping an eye on Philadelphia’s real estate revolution.

“Everyone’s watching us,” said Ms. Black, “and boy are we hoping it’s a success.”

COMMERCIAL REAL ESTATE

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Community Opportunity “It’s not always about the money,” Greater Philadelphia Association of REALTORS (GPAR) CEO Diane Lucidi said of managing vacant lots through the new Land Bank legislation. “The goal is not only to restore the marketable properties back to the tax roll, but to eliminate blight in neighborhoods.”

In areas where homes are worth $50,000-$60,000, it’s unlikely anyone will turn a profit by spending $200,000 to build there. But that doesn’t mean the land is unwanted.

“Give it to the community,” said GPAR president Allan Domb. He believes the City could shed the liability of the vacant spaces and millions in maintenance costs, while community groups invested in clean-up or gardening could make excellent use of the blighted sites.

Take an empty side-lot in Kensington or Port Richmond worth perhaps $10,000, Mr. Domb suggested. For as little as $1,000, it could be sold to a neighbor who would gain a highly desirable parking space, garden, or yard for the kids.

“It brings value to the community,” Ms. Lucidi adds. Private homeowners could take responsibility for the lots instead of letting them molder on the City’s dime, and within a few years, a nice side-yard and parking space could increase the value of the home by a third, from $60,000 to $90,000, Mr. Domb said. And this boost in property values benefits everyone when it helps repair the City’s tax rolls.

“It’s not just about greed” or ambitious developers, Ms. Lucidi said.

“That’s not what makes the city…You have to have a little of everything to make it work.”

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Explaining Keystone Opportunity Zones

By Alaina Mabaso

within the first year. They also must apply to renew their status annually.

In his vision for schools-turned-KOZ’s, Mr. Domb had a few ideas for City When Greater Philadelphia Association of REALTORS president Allan Domb Council: offer KOZ sites to local universities who would turn them into gradusays it’s time to get creative with vacant school sites the City will be hard-pressed ate-run “technology incubators,” with two additional requirements. First, if the to sell, one option is turning the problem properties into Keystone Opportunity university subsequently sold the site, the city would be due 10% of the profits.

Zones (KOZ’s). But what does that mean?

Second, 10% of all jobs created on the site would be filled by people living within Vincent Dougherty of the Philadelphia Department of Commerce, the city’s a 10-block radius.

KOZ coordinator since the state program’s inception in 1999, explains.

But as Mr. Dougherty pointed out, the question of turning former School KOZ’s are parcels of land designated by state and local government for special District sites into KOZ’s may be “moot” if the Pennsylvania legislature doesn’t tax breaks, but as Mr. Dougherty noted, “you don’t want to put these benefits open a new KOZ cycle, the last of which expired at the end of 2013. While Pennon a property that’s going to be developed anyway.” KOZ status is reserved for sylvania’s Department of Community and Economic Development administers areas “where little to no economic development is happening presently,” and it’s the zones as partnerships between state and local governments, a state legislator a powerful incentive for companies or organizations to bring crucial jobs into must introduce the bill to begin the process. disadvantaged neighborhoods.

Could the situation with Philadelphia’s vacant schools spur a new KOZ cycle?

For the length of the KOZ designation (typically about 10 years), successful Mr. Dougherty isn’t optimistic. “Never say never,” he said, but “since we just applicants enjoy a range of tax breaks. On the state level, these can include the finished the last cycle, I wouldn’t expect the legislation to be re-opened for waiving of the Corporate Net Income Tax, the Personal Income Tax, the Sales another two or three years.” & Use Tax, and more. At the local level, KOZ businesses or buyers can see payMr. Domb disagrees. Noting that KOZ’s do not waive the local wage tax, he ments like the Business Privilege Tax, the Net Profits Tax and Real Estate Taxes said that the prospect of turning Philadelphia’s empty schools into job-creators waived for a decade. that could revitalize whole neighborhoods is too good for the state government Businesses relocating into a KOZ must meet certain qualifications, like a capi- to ignore. Not only would the sites help keep Philadelphia graduates in town, tal investment in the property that is equivalent to 10% of the previous year’s he says, “we’re employing areas that need employment most. That means more gross revenues, Mr. Dougherty said, and a 20% expansion in their workforce people back on wage tax rolls.”

Temple Maps On Philadelphia Inventors

By Rosella LaFevre Over 35 years, Philadelphia’s contributions to the national production of knowledge have decreased, according to researchers. Philadelphia has seen a decline of approximately 50 percent in its share of all U.S. innovative activity between 1975 and 2010.

Philadelphia inventors produced 4.8 percent of U.S. patents in 1975, and by 2010, that percentage dropped to 2.1. And yet, despite this bad news, there is good. Philadelphia inventors are more globally connected than inventors in any other area in the U.S. These are some of the findings of Temple Knowledge Maps Project, an ongoing research effort work-

ing to prove that global connectivity is the foundation of innovation. The research team is led by Ram Mudambi, professor of strategic management at Temple University’s Fox School of Business. Mudambi’s team studied data from more than 7 million observations extracted from patents issued between 1975 and 2010 in search of larger innovation trends in the U.S. They mapped their data across the 197 geographical areas that make up all of the U.S., as defined by the U.S. Office of Management and Budget.

“Mapping the innovative connections of inventor networks gives us a picture of the dependence and linkages of a location in terms of other locations, industries and individuals,” Mudambi said in a

release from the Fox School.

Other good news coming from the Temple Knowledge Maps Project: Philadelphia inventors work with inventors across the globe, but especially in the following locations: the United Kingdom, Germany, Canada, France, Japan and China. Philadelphiabased innovations contribute to advances in several industries, including chemicals, computers, communications, electronics, mechanics, medicine and pharmaceutics.

Researchers found increased engagement with inventors in China. Between 1975 and 2010, the number of Chinese inventors sharing patents with Philadelphia inventors has jumped from 18 to 130.

This increase can be explained by the work of one Chinese company, said researchers. That company, Metrologic Instruments, is based in Blackwood, N.J. (identified as part of the Philadelphia region for the researchers’ purposes) and produces barcodes used in a variety of industry verticals, including retail and healthcare. Metrologic represents 70 percent of Philadelphia’s connections to China and holds 446 patents.

Unfortunately, the number of inventors from the United Kingdom working with Philadelphia inventors has fallen from approximately 125 to just 40, and engagement with Japanese and German inventors has more than halved. Additionally, researchers found Philadelphia to have the second slowest growth in number of inventors.

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IRS Revises Property Rules, Regulations After a false start in 2011, the IRS has issued final “repair” regulations that help taxpayers determine when they can deduct and when they must capitalize expenses incurred in maintaining, repairing and acquiring tangible property. These regulations, which became effective January 1, 2014, affect nearly every business owner, particularly those in real estate.

Michael J. Kline is a Certified Public Accountant. A partner in Citrin Cooperman’s Philadelphia office Kline is responsible for client service and quality control, and consults with clients on issues including ownership structure, entity decisions, audits, and multi-state tax and succession planning.

Repairs and maintenance The tax treatment of a “repair” is much more beneficial than an “improvement.” An expenditure treated as a repair is deductible in full and helps to reduce income for the current year. In contrast, an expenditure treated as an improvement must be depreciated over a length of time that varies between five and 39 years.

The new regulations further define materials and supplies, as well as a new safe harbor. Materials and supplies are considered deductible if the expenditure is consumed within 12 months, is not considered inventory, and was acquired to maintain, repair or improve property owned or leased by the taxpayer. If the amount is under $200, it will be considered a currently deductible expense, under the safe harbor rules.

Routine maintenance is considered a deductible expense paid to keep the property in normal operating condition. The regulations now further define routine maintenance as an expenditure that the taxpayer expects to perform on the property more than once during the life of the property.

Restoration and adaptation Improvements to tangible property dominate most of the new regulations, which outline three tests to determine whether amounts paid to improve property should be capitalized and depreciated or expensed in the current year. Those tests are betterments, restorations and adaptions. If an expenditure meets the criteria of any of these three tests, it must be capitalized: An expenditure is defined as a betterment only if it eliminates a material defect or condition, creates a material addition to the property, or increases the capacity, productivity, or efficiency of the unit of property.

A restoration expense is defined as an expenditure to replace or repair property damaged in a casualty. Restoration expenditures must be capitalized if they are used to replace or repair the property damaged or destroyed. However, if the amount spent to replace the damaged property exceeds its

cost, the excess can be deducted currently, provided it is considered a deductible repair.

Adaptions are considered capital expenditures if the expenses are incurred to adapt the property to a different use or change the original intended use of the property when initially placed in service.

are planning on rehabilitating their current working space. In many instances, a study on the original purchase of the property can value the units of property separately, which can help quantify any partial dispositions.

These studies are commonly referred to as cost segregation studies.

Exceptions to the rule Next steps The IRS does allow for a de minimus As a result of the issuance of these regulaamount to be immediately expensed. Tax- tions, many taxpayers are unsure of what to payers with audited financial statements may do. First, taxpayers should assess whether deduct up to $5,000 of the cost of an item their current policies and procedures are in of property per invoice. They must also have conformity with the new regulations, includa written accounting policy in place by the ing capitalization policies, minimum capibeginning of their fiscal year citing this rule. talization thresholds, partial dispositions, For taxpayers without applicable statements, routine maintenance expenditures, as well as the amount is limited to $500 per item, per internal challenges to tracking and capturing invoice. necessary information. Where the policies The IRS has also included a small business conflict with the new regulations, taxpayexception to these regulations. Taxpayers are ers should assess the tax effects. Taxpayers eligible for the exception if they own or lease should also determine what steps to take in buildings with a cost of $1 million or less per terms of business processes, technology and building and have average gross receipts of information tracking to ensure compliance $10 million or less over the three preceding with the new regulations. years. If they meet the criteria, they are not The issuance of these regulations reprerequired to capitalize the amounts paid for sents a significant change in IRS position repairs or improvements performed on the with respect to repair and maintenance building if the total expenditures do not expenditures. However, the law also expands exceed the lesser of $10,000 or 2 percent of and clarifies capitalization rules. Taxpayers the cost of the building. who purchase, improve or construct real The regulations also significantly change estate property should carefully review this the rules surrounding the disposition of new law and consider the effects on their property. Prior to the issuance of the regula- businesses. While some taxpayers may be tions, a taxpayer was not allowed to claim a forced to capitalize more expenditures, there “partial disposition.” Thus, taxpayers often are opportunities to accelerate losses on discapitalized and depreciated multiples of positions. the same items when, in reality, only one item actually existed, such as multiple roof upgrades being capital- For the past year, Region’s Business has been proud to lend a portion ized over time. of its margins to four up-and-comers in Philadelphia’s burgeoning startThe regula- up space — including companies like AboutOne and SpeSo Health, and tions now allow newcomers like AutoAlpha that, as “Diary” entrant VenturePact might say, taxpayers to learned to “fail fast.”

Here, we allow these ambitious founders and CEOs to express the daywrite-off the old by-day goings-on of their startup experience without filter, providing component if them an outlet to vent and, for readers, a colorful insight into the curious replaced with a 21st-century world of startup life. capital improveBut with a new year, comes a new batch of start-ups: we’ll embark on a ment.

This six-month journey with our third round of “Diary of a Start-up” entrants. will provide a We welcome submissions from startups of all sizes launched (or about tremendous to launch) in the past two years; submissions are printed once a month. opportunity Currently seeking: three startups. to accelerate To inquire about this opportunity, please contact Michelle Boyles at tax losses for mboyles@regionsbusiness.com. taxpayers who

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The Impact of Philly’s Upward Momentum

By Rosella LaFevre A slew of proposed and planned projects throughout Philadelphia’s Center City, University City and Callowhill sections are on the horizon. Most of these large projects are mixed-use, focusing on providing existing retail spaces and restaurants in close proximity to hotels and residences. A few plans may hinge on who receives Philadelphia’s second casino license.

Some of these projects have clear projections for their fiscal contribution to their neighborhoods and the City of Philadelphia, while others haven’t released that information.

These plans beg a few questions: Who will live in all of these apartments? Will those hotel rooms sit empty and unused? Will there be enough parking?

Will retailers really get the necessary foot traffic to make up for what could be astronomical leases?

Here, we break down a few of the biggest projects planned throughout the city.

Cira Centre South Cira Centre South (below), a multi-parcel, mixeduse development inspired by Cira Centre, is planned for the land between 30th Street and Schuylkill Avenue, and Chestnut and Walnut streets. The plans, designed by Massachusetts-based firm Sasaki Associates, feature a taller Walnut Street tower, Chestnut Street tower and a parking garage wedged between.

Much of the Walnut Street tower will be comprised of office space.

The Chestnut Street tower will also be known as EVO and features 850 beds for graduate and professional students, with 28 distinct floor plans that range

from studio to four bedroom spaces. Rental prices for the units, which should be available beginning fall 2014, will range from $1,350 to nearly $2,000, including all utilities. Units will come fully furnished; residents will only need to bring housewares and a TV. Cira Centre, a Cesar Pelli-designed office building with 29 floors, opened in January 2006. The tower was developed by Brandywine Realty Trust, which owns several other properties in Philadelphia, including 1900 Market Street and 3020 Market Street.

Brandywine is also responsible for the $350 million rehabilitation of the 862,000-square-foot Post Office building on the southeast corner of 30th and Market streets, where 5,000 federal employees now work.

A promotional video for Cira Centre South from Brandywine Realty Trust says that the plans for Cira Centre South are suited for a swell of development happening in University City, citing $4.5 billion and 10 million square feet of commercial and residential development “at play in University City.”

Hanover North Broad Two parking lots owned by Parkway Corporation located at Broad and Callowhill Streets could see new life if plans for two six-story, mixed-use buildings are approved by the Philadelphia City Planning Commission. In partnership with the Hanover Company Design Collective, Parkway Corporation would like to build on the southwest and southeast corners of Broad and Callowhill (right).

A larger tower on the southwest corner would contain 11,024 square-feet of retail space, 229 (studio,

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(studio, one- and two-bedroom) apartments, 130 parking spaces for residents, 126 parking spaces for non-residents and 77 bicycle parking spaces. The second structure would contain 6,112 square-feet of retail space, 110 apartments, 58 residential parking spaces, 56 non-residential parking spaces and 38 bicycle parking spaces.

These plans provide for a total of 17,136-square-feet for retail, 339 rental units, 188 parking spaces for residents, 182 parking spaces for non-residents and 115 bicycle parking spots.

The plans are scheduled for a review hearing on February 4 in the Planning Commission room at 1515 Arch Street. If approved, the two properties, sharing the name Hanover North Broad, would play a role in reshaping the historically neglected Callowhill neighborhood. There’s also some question as to how these plans would sit with the Provence casino, hotel and retail space planned for the former Inquirer building on the northwest corner of Broad and Callowhill Streets (more on that below).

Market8 The partners behind plans for the redevelopment of land between 8th and 9th streets on the south side of Market Street (below) are adamant that the area is the true center of the city. Its access to public transportation and major thoroughfares make it a prime location for the planned hotel and casino known as Market8. The proposed project would incorporate eight restaurants, 168 hotel rooms, a concert hall, 1,340 parking spaces and a casino with 2,400 slots

and 82 table games operated by Mohegan Sun, the corporation responsible for the Pocono.

Showing signs that they’re already committed to their neighbors, the developing partners have created a $1 million neighborhood fund. But what happens if they don’t get the city’s second gambling license (for which they’re battling four other contenders)? That hasn’t been said, though developing partner Ken Goldenberg told Region’s Business in October 2013, “that you could never do a project like this without the gaming license.”

Additionally, the potential failure of Pennsylvania Real Estate Investment Trust to invigorate The Gallery, which it now owns, could also impact Market8, especially if it doesn’t get the gaming license.

One Riverside Park Developer Carl Dranoff has presented plans for a 21-story, 167,000-square-foot apartment tower on a triangular plot at 25th and Locust Streets (above). The building sits north of Fitler Square community garden and east of the Schuylkill River on a property zoned for high rises since 1975. Plans for the building include 167 apartments and 86 parking spots. Its ground floor cannot become home to retail and restaurants because One Riverside Park sits in a

flood zone. For the design of One Riverside Park, Mr. Dranoff enlisted the Philadelphia-based architecture firm of Cecil Baker + Partners, responsible for the renovation of Locust Walk at Washington Square featuring 26 condominiums.

Neighbors fear that One Riverside Park will lead to increased congestion on nearby streets due to the difference between the number of units and parking spaces. It’s worth noting that the plans for One Riverside Park would not have been possible if it weren’t for the Center City Residents Association’s lifting of the covenant that would have forced Dranoff to turn the triangular lot into parking spaces for Locust on the Park, an adjacent rental property owned by Dranoff.

The Inquirer’s architecture critic, Inga Saffron, has her own set of problems with the building’s design. In an August 2013 article, she listed six design changes she’d like to see made to the plans for One Riverside Park. These included reducing the number of curb cuts along 25th Street, which she said would reduce friction between pedestrians and vehicular traffic, and moving the tower from the south side of the lot to the north side, which would reduce its footprint and lead to a sleeker building.

Provence One of Market8’s fellow contenders for the city’s second gaming license is Provence (photo on page 29), the Euro-inspired hotel and casino planned by Tower Investments’ Bart Blatstein. Plans for Provence were presented to the Pennsylvania Gaming Control Board on Tuesday, January 28. The project plans include a hotel, casino, concert hall, spa, fitness center, rooftop pool, botanical garden, jazz club, comedy club and nightclub. At the presentation, architect Paul Steelman (responsible for Harrah’s Atlantic City and several Las Vegas casinos) emphasized that not all gamblers are alike and that the Provence plans cater to five different subsets of gamblers.

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Projected annual income for Provence is $439 million by its second year of operation, $100 million more than any other casino license applicant, according to Philly.com’s Alex Wigglesworth. Provence is predicted to produce approximately $900 million in activity and $750 million in ancillary spending. Its projected fiscal impact has been compared to the value that Blatstein’s Piazza at Schmidt’s brought to the Northern Liberties neighborhood, where neighboring real estate values jumped by $1 billion. The Piazza also produced an additional $12 million each year in the form of new tax revenue.

SLS International The other big project coming out of the offices of Dranoff Properties is SLS International (right), a 47-story, 562-feet-high hotel and luxury condominium tower planned for Broad and Spruce Streets.

The building is the work of a partnership with SBE Entertainment Group and designed by Kohn Pederson Fox (responsible for the world’s tallest hotel, the Ritz-Carlton Hong Kong). If built, it would feature 162 hotel rooms, 125 condominiums, a double-height ballroom on the fifth floor and 220 parking spaces.

The 422,838-square-foot tower is projected to cost $200 million.

Its construction would require the demolition of three properties, including 309 South Broad. That’s where Philadelphia International Records’ legendary music producers Kenny Gamble and Leon Huff recorded artists like the Intruders, Teddy Pendergrass and Lou Rawls, among many others.

The building of SLS International would also require the demolition of 311 South Broad and 313 South Broad, the latter of which the University of Arts has already vacated.

The Mayor’s presence at a December 2013 press conference about the proposed tower has helped solidify the plan’s legitimacy.

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Q&A

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What’s driving your recent investments in suburban space?

Keystone’s core business is reinventing real estate. We reimagine well-located commercial properties to create exciting places to work and play. The office buildings we have invested in are situated in key sub-markets across the Tri -tate area, and are excellent candidates for investment. We believe there is a significant opportunity to unlock value in these properties through the creation of urban-inspired work environments within the context of suburban office campuses, where employees have direct access to amenities and services that are not available in traditional suburban office properties. Our approach is comprehensive in addressing all aspects of the properties, from curb appeal and common area enhancements to amenities programming and building systems.

We are actively strengthening our presence in the Tri-State area, and our recent acquisitions have created economies of scale for our portfolio in the greater Philadelphia market, where we have been active since our inception.

Where do you see lease prices moving over the next five years in the city?

And in the suburbs?

Jobs drive demand; perceived demand drives supply; and both drive pricing.

With very little construction having been delivered to the market over the past several years, we are seeing stabilization of rents, both in the urban markets as well as in the suburban markets. While the job market is moving in a positive direction, we have not yet experienced the levels of job growth needed to have a significant impact on absorption, which is a big driver of rental rates.

Simultaneously, companies are increasingly looking to create efficiencies in their office space usage -- a trend that we expect will continue and is a key aspect of our repositioning strategies for our portfolio. Ultimately, I anticipate relatively stable rental rates for the next five years, with some moderate growth in line with improvements in employment levels.

Keystone recently made a deal on its first property in the city. Is that a new direction in your overall strategy?

Our acquisition of 100 Independence Mall West at 6th and Market was both an opportunistic purchase and a strategic partnership. By partnering with Parkway Corporation and Mack-Cali Realty Corp, we were able to create a winning mixed-use project that should be the cornerstone of the Market Street East Corridor. Our plans include a new parking garage which accesses off 6th street across from the Liberty Bell, and a new pedestrian experience with a strong retail presence.

As our first downtown Philadelphia office acquisition, this deal was a key step in our strategy to grow our regional footprint. We believe that companies today are looking for dynamic workplaces that afford employees direct access to amenities. To that end, we will continue to seek out opportunities -- both in key urban markets such as Philadelphia, as well as strategic suburban locations -- where we believe we can enhance or create dynamic business environments that offer the accessibility tenants today demand.

What would you like to see, from a public policy perspective, that would accelerate growth in the Philadelphia region?

Having the right zoning in place to foster commercial development in appropriate areas is critical to ensuring sustainable, responsible growth. Communities need to identify areas where higher density development can occur to generate ratables and create opportunities for high-quality commercial construction that will attract top businesses and jobs to the region. An ideal case study can be found along City Avenue in Bala Cynwyd, under the leadership of Terry Foley.

Bala got it right.

What impact do you expect from the Comcast Innovation Center tower?

Brilliant vision: The design of the building – “a vertical urban campus” as it has been called -- reflects where we see the market heading – Silicon Valley standing upright. It has all the ingredients of place-making : companies want to be in office locations with open, efficient workspace layouts that feature a variety

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Keystone Property Group has seen an increased demand for property inside the city limits and is acting accordingly.

Region’s Business spoke with the President about the company’s plans. of on-site amenities that appeal to the next generation workforce. I see this project as having a very significant impact on the market, both from an economic perspective in generating thousands of construction and permanent jobs, and in terms of elevating Philadelphia’s reputation as a world-class business destination, particularly among the growing technology and communications sectors.

Do you see conversions to mixed-use retail and office space as a more attractive utilization of some of your current portfolio?

We are constantly reimagining our portfolio, and we are actively reinventing our properties to expand their uses. One of our largest projects is a mixed-use development in downtown Conshohocken, which is planned to include office, hotel, retail and residential components to address the demand for walkable, accessible live-work-play environments. At 100 Independence Mall West, we have plans to optimize the on-site retail to include an indoor/outdoor restaurant that will serve as an amenity for both employees that work in the building, as well as the surrounding neighborhood. Several of the properties in the office portfolio we recently acquired in partnership with Mack-Cali will also be targeted for repositioning into mixed-use developments to potentially include retail and residential components, in addition to the existing office space. To me, this thinking and vision creates all the excitement.

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South Broad Street’s Place in The Skyline At the heart of America’s most successful cities, you can almost always find a strong arts and entertainment community. For instance, New York City is home to the Lincoln Center, Tribeca Performing Arts Center and countless theaters, both On- and Off-Broadway.

The core of Philadelphia’s rich art scene is on South Broad Street, affectionately known as the Avenue of the Arts. As the city’s signature street, the Avenue of the Arts is where the Carl Dranoff, CEO, Dranoff region gathers to enjoy music, opera, dance and theater as well as celebrate the New Year Properties with The Mummers and, while not as frequently as we may like, sports championships.

It’s a corridor that has made incredible strides since it was identified as an opportunity for growth in 1993. My personal vision for the Avenue of the Arts is that more developers, businesses and citizens will support South Broad Street so that its powerful momentum can continue to infuse the growth of Center City and the diverse neighborhoods surrounding it.

Philadelphia has seen an influx of worldrenowned chefs, businesses and community leaders who have recognized the Avenue as the epicenter of Philadelphia’s changing cultural footprint. South Broad Street features a restaurant from Top Chef Kevin Sbraga and will soon welcome Iron Chef Jose Garces to The Kimmel Center. These restaurants, when paired with the lure of entertainment just a few steps away, encourage residents and tourists alike to venture to Center City.

In addition to The Kimmel, South Broad Street also boasts The Academy of Music, Merriam Theater and The Wilma Theater – all producing a wide variety of exciting live entertainment. The Avenue of the Arts, Inc., the non-profit created in 1993 to coordinate and oversee the development of the corridor, has lead avenue beautification efforts, helping Philadelphia to maintain a flawless appearance through the installation of planters and lights and the upkeep of the “Walk of Fame.”

And based on all of this growth, I made the decision to move my corporate headquarters to South Broad Street just last year.

Changing perceptions The economic influence of South Broad Street should not be underestimated. The Avenue of the Arts has made a $3.3 billion impression on the region, translating into 44,000 full time jobs and $1 billion in household income. By the end of this decade, the Avenue of the Arts will tout the kind of luxury residential properties, eclectic restaurants and entertainment venues that others cities

long to have. Despite these signs of rapid progress, South Broad Street has yet to reach its full potential.

This past December, my company announced a partnership with SBE, an industry-leading hospitality, lifestyle and real estate development company, to create a game-changing project on the Avenue of the Arts. Together, we plan to build Pennsylvania’s tallest residentially-focused building, a 47-story tower – the SLS International Hotel & Residences. Sam Nazarian, award-winning hotelier and SBE Chairman and CEO, was drawn to Philadelphia as the next location for one of SBE’s five-star hotels, as he immediately identified South Broad as a vibrant and attractive place to live, work, shop, play and learn.

At our official announcement, Mr., Nazarian expressed his feeling that this project has the ability to “drive support and engagement for this mecca of arts and culture.” For an outside developer to refer to the Avenue of the Arts as a “mecca” speaks to its advancement in the last 20 years. This idea was unimaginable even just a few years ago and, today, we are confident in a project that will not only transform Philadelphia’s nightlife and culture, but also, its skyline.

The SLS International will mark Dranoff Properties’ fourth major project on the Avenue of the Arts. The rich history and culture of the Avenue’s neighborhoods were chief among the reasons why Dranoff Properties made its initial investment on South Broad – and why we continue to do so today.

We aim to construct ‘community connectors’ on South Broad – joining all neighborhoods, from Center City to South Philadelphia’s famed Italian Market to the diverse neighborhoods of Point Breeze and South Street.

The Symphony House and 777 South Broad St. properties both provide luxury mixeduse condos and apartments as residential options for those wishing to live on South Broad. Southstar Lofts(above), set to open in April 2014, will provide luxury, loft-style apartments to this corridor and will be the second LEED-certified Dranoff property on the Avenue.

Continued prosperity I am proud to be a part of South Broad Street’s past and present and I hope to continue to positively influence its future. As landmark projects, such as the SLS International, come to fruition, and as more developers and business owners invest in the Avenue of the Arts, Philadelphia will benefit. South Broad Street has the potential to be known as one of the most influential corridors of art, culture, culinary excellence and commerce in the nation. This is impressive as just twenty years ago, South Broad Street was lifeless. Thanks to the hard work of many in this region, this is no longer true. The ever-growing ability to live, dine, shop and enjoy first-rate entertainment makes South Broad Street the premier street in Philadelphia, unlike any other place in the country. With continued investment – old and new – the possibilities for what Avenue of the Arts can become are endless.

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Just How Informative Is The State of The Union Address?

Charlie Gerow is CEO of Quantum Communications, a Harrisburg-based public relations and issue advocacy firm.

CONTRIBUTE Send comments, letters and essays to feedback@ regionsbusiness.com.

Opinions expressed by guest writers do not necessarily reflect those of Region’s Business.

Article II, Section 3 of the United States Constitution mandates that “He [The President of the United States ] shall from time to time give to the Congress information of the state of the union, and recommend to their consideration such measures as he shall deem necessary and expedient.”

For more than two centuries the State of the Union message has been an annual fixture. Not always an oral address, it was for most of our history a written report delivered to Congress at the beginning of a new session.

The modern media age transformed the State of the Union message into the spectacle it has become. Franklin Roosevelt developed the modern practice of delivering the report personally, although he did his through radio summaries of the written report he gave to Congress. But in the television age it is a sight for all America to behold and for the media to fixate on for a few days.

The chatter about who’s sitting with whom is reminiscent of a Junior High prom.

Grown men and women, elected to the greatest democratic institution in the history of the world, crowd the President’s entrance to the hall of the House like teenage groupies at a rock concert, hoping to have their constituents catch a glimpse of them on the national news.

But there’s a serious side to the annual event. On a stage perfect for any President, with all the trappings of official Washington in full display and the Congress, Cabinet, Supreme Court and top military brass as the audience, the President gets his chance to speak directly to the American people through the lens of the television cameras.

His speech is punctuated by numerous ovations, standing and otherwise, which the media carefully count and chronicle.

Not much of what Presidents say in their State of the Union message is long remembered. State of the Union messages generally aren’t filled with the soaring rhetoric of Inaugural Addresses. There are some quotes that linger: Richard Nixon declaring that “One year of Watergate is enough,” George

W. Bush referring to our adversaries with nuclear ambitions as “an axis of evil” and Bill Clinton promising that “The era of big government is over.” (Oh, that it were true.)

More often the visual medium of television carries the memorable moments: Justice Samuel Allito mouthing “not true” as Barack Obama hammered away at the Citizens United case, Ronald Reagan slapping down on the rostrum the massive volume known as the Tax Code and the citizens sitting in the gallery whose noble actions are lauded and used to make political points.

The 2014 version of the State of the Union is not likely to go down in the annals of history. Barack Obama blazed few if any new trails. Instead he used the occasion to raise themes he has talked about previously.

What was notable was the fact that his tone and temperment were far less bellicose and belligerent than some of his aides had led us to believe. He sounded relatively conciliatory and said he wanted to reach out to Republicans to get things done in the new year.

Not much of what President Obama called for in 2013 got accomplished. So it’s not unexpected that he would return to his agenda. His political goal in 2014 is to protect the Democratic majority in the U.S. Senate while attempting to win back the House.

Unfortunately for the President, his political agenda runs into both historical and policy problems. Mid-term elections, especially those in the second term of a Presidency, are not good to the incumbent’s party. Almost without exception the party that controls the White House loses seats in Congress in the second mid-term election of an Administration. Adding to that is the fact that many of the Democratic Senators are from states that didn’t vote for Obama two years ago.

Obamacare continues to be a political disaster for these Senators. They and Members of Congress who voted for Obamacare are going to have a tough time defending the debacle it has be shown to be.

So the President used his State of the Union address to change both the tone and

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the subject. There was no waving of the pen he has promised to use to circumvent the legislative process. Instead he pivoted back to old messages and policies that he believes poll well politically.

He hammered again at “income inequality” and talked about raising the minimum wage.

He began by suggesting that employers give lower income workers a raise--not necessarily a bad idea. But he didn’t resist the urge to plunge into the “we will make you” water. A mandatory minimum wage, however, is bad for business, bad for the economy and bad for workers. It will ultimately hurt those it is ostensibly designed to help.

The President opened with his standard declarations about energy policy. Interestingly, he also left Energy Secretary Ernest Munoz behind as the “designated survivor,” a practice from the Cold War era where one person in the line of presidential succession is whisked off to an “undisclosed location” just prior to his or her colleagues going to Capitol Hill “just in case.” Last year it was also the Energy Secretary, outgoing Steven Chu who had the honor.

Despite praise for America’s safe and responsible development of oil and natural gas, the President fell back to subsidizing “green energy” at the expense of oil and natural gas, suggesting that additional tax breaks for one and tax increases for the other would work. Yet oil and natural gas already pay a higher effective rate than any other sector of the S&P, it supports more than 10 million jobs, accounts for 8% of the nation’s GDP and invests tens of billions of dollars back into the economy each year--more than any other sector.

If the President is serious about getting bipartisan cooperation on more than immigration policy, hollow rhetoric, inaccurate numbers and failed policy proposals are not the answer. While the tone was better, the next few weeks will tell us how serious it really is about promoting American energy, creating new opportunities for all Americans and getting our still sluggish economy rolling.

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First Stage of PA Turnpike Extension Approved

By Scott Staruch, Quantum Communications The state Senate and House returned to Harrisburg for voting session days this week on January 27, 28 and 29. They both return to Harrisburg next week for voting session days on Feb. 3, 4 and 5.

Energy & Environment On Tuesday, Governor Tom Corbett announced that Pennsylvania is expanding its commitment to advance clean and alternative energy sources with the investment of more than $4.5 million in grants through the Commonwealth Financing Authority. The governor picked up on his state energy plan released last week saying, “Energy equals jobs, and today’s investments continue my commitment to grow Pennsylvania’s diverse energy industries.”

Flood Insurance On Tuesday, the Senate Banking and Insurance and Senate Environmental Resources and Energy Committees held a joint public hearing on flood insurance costs and the federal Biggert-Waters Act. Testifiers included Vince Matteo, President and CEO of the Williamsport/ Lycoming Chamber of Commerce. Matteo stressed the impact of the Biggert-Watters Act on businesses and

jobs. He called for the General Assembly to pass a joint Bill 1507, which prohibits the Commonwealth from resolution, signed by the Governor, calling on the presi- collecting and remitting labor union dues and political dent and Congress to repeal the Biggert-Waters Act. contributions from Commonwealth employees. Cutler explains, “My legislation makes no attempt to limit the Transportation power of unions; it only asks that they collect dues and On Friday, Governor Tom Corbett joined state, local political money directly from their own members, and and transportation officials to detail construction and not by paycheck deduction.” improvement plans for SEPTA’s Secane train station On Tuesday, Democratic House and Senate members along SEPTA’s Media/Elwyn line and serves nearly joined state labor groups at a Capitol rally to oppose this 11,000 riders daily. legislation. PA AFL-CIO President Rick Bloomingdale Last Thursday the Philadelphia Inquirer reported, said it is “nothing more than an attempt to silence work“The long-awaited, $420 million direct connection ers, defund the labor movement, and make sure all of us between I-95 and the Pennsylvania Turnpike moved do not have the right to speak up on our jobs.” closer to reality with the approval of a $155 million section of the work.” The first stage of the project is to be Election 2014 completed in 2018.

Lt. Governor Jim Cawley has set Tuesday, March 18 as the date for a special election to fill the vacancy of the Economy & Jobs 28th Senatorial District in York County.

The Pennsylvania Chamber’s Government Affairs On Monday, State Rep. Nick Micozzie (R-Delaware), Director Alex Harper is featured on a recent Comcast a veteran legislator and chairman of the House TransNewsmakers segment explaining how“government- portation Committee, announced he will retire from the mandated wage increases”can have serious economic House following the completion of his current term. impacts on small businesses, and result in workers’ And, last Thursday, State Rep. Paul Clymer (R-Bucks) hours being reduced or their jobs eliminated. announced he will not seek re-election at the end of his On Monday, House colleagues and supporters joined current legislative term. He has been a member of the Rep. Bryan Cutler (R-Lancaster) to advocate for House state House since 1981.

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Unions Miss Irony of Own Harrisburg Protest By eric boehm

services that potential members and clients are willing to pay, voluntarily, to receive. Political nonprofits A collection of politically powerful labor unions have to seek out donors and secure funding for their brought their force to bear on the state Capitol this operations. week, bussing in hundreds of protesters – some of Public-sector labor unions simply get an automatic whom were turned away at the door when the building slice of all their members’ paychecks every two weeks. reached its capacity – to yell, chant and scream about The unions, as one might expect, don’t want this the so-called “paycheck protection” legislation being automatic revenue stream to go away. They claim pushed by conservative Republicans. that the dues payments are only used for activities It seems they missed the irony of the event. that directly benefit the workers, and that they keep Here’s the background: The paycheck protection bill their political activity separate and only use voluntarily would prevent the state from automatically deduct- contributed dollars for those efforts. ing union dues from the paychecks of state workers, But the unions have a bit of an odd idea of what public school teachers and others who get paid by the counts as “political activity.” And there’s the irony in state government. this week’s mass protest in Harrisburg.

The idea is that union members should have to pay That, according to the unions, was not a political their dues voluntarily, the same way that people have activity. It was, however, funded with dollars taken to voluntarily pay their dues to just about any other directly from members’ paychecks. association of groups that they might be a part of for Any casual observer – who might have heard the any reason – regardless of whether it is political, social unions’ leaders speaking in the Capitol rotunda about or academic. the importance of electing a Democratic governor this The conservatives pushing the bill see the unions as year and leading chants of “Corbett sucks” directed at having an unfairly powerful position in state politics the incumbent governor – probably would call this because they believe they have a never-ending stream rally exactly what it was - a political event. of revenue.

The unions also know the kind of existential threat Trade associations and lobbying firms have to offer that the paycheck protection bill could represent to

their operations.

In Wisconsin, where Republicans successfully passed a series of reforms that curbed the unions’ abilities to collect dues automatically from members, membership in some unions has fallen by as much as 80 percent.

The reforms in the state of Wisconsin were broader and more sweeping than what is proposed in Pennsylvania, but the unions are right to see the writing on the wall.

But they are wrong to defend the theft of dollars from their members’ paychecks.

If the unions continue to offer services their members desire, they should have no trouble getting people to voluntarily contribute to support those efforts.

Everyone else does it.

And claiming that political efforts like Tuesday’s rally are non-political – and therefore can be funded with dues taken without the consent of their members – is just silly.

Boehm is a reporter for PA Independent and can be reached at Eric@PAIndependent.com. Follow @ PAIndependent on Twitter for more.

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CHERRY HILL/LUCERNE 4/5 BR, 2.5 bath contemp w/2 car garage.

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BY THE NUMBERS

1 in 5

Number of workers employed in Philadelphia food/ beverage manufacturing, according to a report released by Mayor Nutter’s Manufacturing Task Force

21%

Amount of manufacturing jobs in food production in Philadelphia vs. 12% nationally

13%

Amount of all Philadelphia manufacturing revenues made up by the food and beverage industry, or about $2,000,000,000

$23,600,000

1 in 10

Anticipated economic impact Philadelphia will see from the upcoming American Library Association (ALA) Midwinter Meeting, says the Philadelphia Convention and Visitors Bureau

10,000 Number of attendees expected for the ALA meeting

2,400 Number of meetings, programs, discussion groups and networking opportunities the meeting will provide

Number of jobs in food production in the areas surrounding Philadelphia

8.7%

Amount of annual food production revenues in the areas surrounding Philadelphia, equal to $6,900,000,000

Credit:R. Kennedy for Visit Philadelphia

100,000

50% Portion of millennials surveyed who said they would most likely leave Philly in the next five to ten years due to work, education and crime concerns

Increase in the number of 20- to 34-year-olds city residents between 2006 and 2012, according to the millenials in Philadelphia: A Promising but Fragile Boom report released by The Pew Charitable Trust

450

56%

Number of exhibitors that will participate in the meeting

Number of millennials who would not recommend the city as a place to raise children, compared with 36% who would

Credit: Wikimedia Commons

26%

Percentage of the city’s population made up by millenials in 2012 vs. 20% in 2006

54%

Number of millennials who consider Philadelphia an excellent or good place to live, vs. 62% across other age groups surveyed

Credit: J. Fusco for Visit Philadelphia

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