Source Article by BizJournals
Alterra Property Group secured a loan to move forward with a $180 million, 410-apartment project at Broad and Spring Garden streets in Philadelphia.
The $120 million loan with the Bank of the Ozarks paves the way for Alterra to break ground next week on the development called LVL North, which is pronounced as Level North and borrows from another project Alterra completed called LVL 4125 at 4125 Chestnut St. in University City.
The Philadelphia company bought a surface lot where LVL North will rise for $28 million from Parkway Corp. in February. The parking lot operator in 2017 had planned to construct an apartment building as well as an office building on the site but those developments never materialized.
Alterra originated the construction financing in January and February and, in spite of the pandemic, the transaction got done. “Bank of the Ozarks honored the deal through Covid and closed the loan earlier this week,” said Leo Addimando, managing partner at Alterra, in an interview Friday.
The 9-story project will have two stories below grade for 288 parking spaces, 110,000 square feet of commercial space over the first and second floors, and the apartments will be housed on floors three through seven.
A grocer has leased 50,000 square feet of the ground floor retail space, said Addimando, declining to disclose the name. The remaining 60,000 square feet of commercial space will be marketed to retailers, such as a gym, as well as office tenants. On that front, it seeks to capture some of the momentum Arts & Craft Holdings started in the nearby area referred to as Spring Arts, which has emerged as an emerging office submarket in the city.
Alterra has completed several projects in Center City and University City. Its venture to North Broad Street is a first for the company and not unlike its decision to plant a flag on South Broad Street with Lincoln Square, Addimando said.
“Similar to how Broad and Washington connected South Philadelphia to Center City, Broad and Spring Garden connects Temple down to Center City,” he said. “There is demand from Center City and the university and is at the crossroads of several different neighborhoods that are going through their own transformations.”
North Broad is undergoing a renaissance. Development activity has steadily increased along the corridor in recent years and could accelerate since a large area of it is designated as a federal opportunity zone. At the end of 2018, North Broad Renaissance tallied 34 development projects in various stages. Some completed over the last couple of years that have had an impact on the area include the Divine Lorraine, Hanover North, Mural Arts and the Met. The projects range from mixed-use and institutional to residential and recreational.
LVL North sits in an opportunity zone and those tax benefits are part of a component of the project and helps it but weren’t one of the main drivers for it, Addimando said.
“There are a whole lot of different factors that make this viable,” he said, citing the location, the need for more grocery stores in that area, and onsite access to mass transit.
The development is also being built using modular construction, the third such project Alterra has used that approach. The parking and ground floors will be constructed using steel and concrete and then modular components will be stacked on top of that podium.
Modular construction, sometime referred to as pre-fabrication, has been gaining popularity in Philadelphia and elsewhere across the U.S. Universities are using it for student housing and dorms and the hospitality industry is starting to embrace it for hotels where every room and lobby has a standardized design.
There are several advantages to using modular units to create a new apartment complex. While quality control is among the leading reasons since everything is built in a climate controlled environment, timing is the biggest. While completing a development sooner than later has its benefits, time also translates into savings when it comes to interest payments on a construction loan.
Addimando estimates that using modular construction at Broad and Spring Garden will take six to eight months less time to complete than traditional construction.
Alterra anticipates that apartments at LVL North will rent for less than $2,000 a unit. Clemens Construction is the general contractor and JKRP Architects designed the project. It is expected to be completed by the second quarter of 2022.