North Philadelphia may be the next frontier for commercial real estate investing in the city. According to The Pew Charitable Trusts, Philadelphia is ranked as America’s most poverty-stricken large city, with 26% of the population struggling with poverty and unemployment, and most of this financial hardship is concentrated outside the city center in areas such as North and West Philadelphia. Taking this into account (in addition to the city’s infamously high tax rates), it’s no surprise that many investors aren’t rushing to invest in the Northern parts of the City of Brotherly Love. Despite these apparent drawbacks, investors might want to step back and reevaluate. North Philadelphia is a potential “gold mine” of both present and future investment opportunities. It is, for lack of better words, a true diamond in the rust.

Here Lies the Golden Opportunity

On October 4th, 2018, five parcels of vacant industrial, distribution and warehouse space in North Philadelphia will be auctioned under the oversight of Robert Dann, an auctioneer at Max Spann Real Estate & Auction Company. Buyers have the opportunity to bid on one property or create their own unique bundle package at the auction. According to Dann, “You don’t get that much property in the city anymore.” Hence, it’s worth explaining why North Philly may be the diamond in the rust every savvy investor yearns to find.

These properties, ranging from half an acre to 10.5 acres, were previously owned and constructed by The Budd Company, a metal fabrication firm with deep Philadelphia roots. Initially, the company was founded in 1912 at Aramingo Avenue and Tioga Street, but an increase in demand for their heavy industrial products led to a move into a larger facility on 24th Street & Hunting Park Avenue. When plant operations ceased at their original location in 2003, an investment group associated with Trump Entertainment Resorts Inc. proposed a $350 million casino called “Trump Street.” This project came to a halt when it was denied a state gambling license.

Even though the five buildings up for auction are currently vacant, it’s safe to assume that they won’t remain that way. The Salvation Army Ray and Joan Kroc Corps Community Center of Philadelphia, along with Temple Health, are neighboring the 25 acres up for auction. Both organizations play a key role in the well-being of the community and bringing new residents and visitors into the area, providing incentive for further investment.

North Philadelphia provides a promising opportunity for investors looking to expand their portfolio outside of investment “hotbeds” such as Center City Philadelphia, Manhattan, or other top-tier markets. Furthermore, as the city of Philadelphia continues to grow and expand its global footprint, the most valuable investment opportunities lie in underserved markets such as North Philly.

 

Why Now?

Dean Cafiero, who is well-known for starting CarVision Mitsubishi dealerships in Montgomery County, is the current owner of all five parcels. He purchased the properties back in 2011 and decided that it’s time to sell. With this decision, the next lucky investor will have the opportunity to reap the rewards of investing in an underserved submarket of a quickly growing city.

Much like everything in this world, however, the 25 acres has its drawbacks. In 2013, the property owner paid $200,000 in remediation when scrapping activity caused a 25,000 gallon oil tank to leak onto the nearby CSZ railbed. This is something to consider when looking at the property as an investment opportunity.

In spite of potential environmental issues, it’s important that investors keep in mind the future of North Philadelphia is bright and quickly becoming brighter. With the 25-acre auction quickly approaching, let’s not forget about the $162 million multiphase project seeking to revamp areas surrounding Amtrak’s North Philadelphia station. With continuous infrastructure investments and an increasingly appealing Philadelphia at large, this part of the city won’t always offer the massive opportunity that it does today. The auctioneer of the five parcels states, “We’re the last piece of the redevelopment.” In other words, opportunity is in the air.


The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.