PHILADELPHIA-When I first started in investment sales brokerage, my manager liked to say that there were two things that kill deals: time and attorneys. The adage suggests that the more time that lapses in communication between parties or with the passage of important deadlines, the less likely a deal is to close. Additionally, attorneys may slow down any deal momentum by adding mark-ups and redrafts of various agreements.

In Philadelphia, however, there seems to be myriad other things that can slow, if not kill a commercial real estate transaction or development. Three recent stories in the news are prime examples: The opening of the Sugarhouse Casino, The Family Court Building, and the forced bankruptcy sale of the Philadelphia Inquirer and Daily News--and their assets, including the iconic clock tower building at 400 North Broad St.

Philadelphia's economic history as an industrial giant has faded and been overtaken by the growth of the medical and educational fields. Yet, it has always been a city of neighborhoods. Loud neighborhoods. Never has this been more evident than with the fight between the city's attempt to bring slot revenues to the city's barren coffers through a casino or two. What was supposed to have happened years ago, has just happened last week: the opening of Philadelphia's first casino within city limits. Previous attempts for a Foxwoods casino, at multiple different locations, failed because of neighborhood resistance to housing a casino in their back yard. The city's inhabitants did not eschew the anti-development "not in my back yard" mantra typical of suburban enclaves, even though they should have been accustomed to more development, living in a vibrant city.

The delay of the Family Court Building has been another setback to urban development and the commercial real estate industry. Don Pulver, the originally chosen developer of the building, filed for bankruptcy protection on June 23 hoping to keep the architectural work out of the hands of the Philadelphia Parking Authority, which had initially handed Pulver's company the development rights to a downtown lot where the courthouse was to be built. Attorney Jeffrey Rotwitt, a co-developer of Pulver who was also working for the court system to identify a location for the new building, was accused as the cause of the turmoil, however Rotwitt has denied wrongdoing or conflict of interest. Another confounding variable is that Gov. Ed Rendell had promised $200 million in state funding for this project. As his time remaining in office winds down, Rendell must release the $200 million in state funds prior to January 1, 2011 or the project may not receive it at all. The prospects do not look great, as the case is currently in litigation with no immediate resolution in sight.

Finally, we have the city's failed newspapers. Last week, a new bid deadline was achieved for offers to acquire the fledgling newspapers from bankruptcy. One offer was from the senior lenders (Angelo Gordon & Co., Alden Global Capital and Credit Suisse) of the papers' parent company, Philadelphia Newspapers, LLC. The other offer was from Philadelphia businessman and philanthropist Raymond Perelman and the Carpenter's Union pension fund. The senior lenders were the winners of a previous auction in April of Philadelphia Newspapers; Their winning bid was $139 million, which included $105 million in cash. Their deal for the company fell apart several weeks ago when they failed to reach a contract agreement with the newspapers' unionized drivers. All of the company's other unions had ratified contracts with the new prospective owners, excepting the driver's union which is standing firm on its pay scale demands. Since the senior lenders won the most recent auction again, my guess is that they will have heard the driver's union's not so subtle demands loud and clear this time around.

Each of these examples squandered or delayed the positive economic growth that could have been for Philadelphia. New tax revenues via property taxes, gaming taxes, wage taxes and transfer taxes, not to mention a slew of potential new jobs (or in the case of newspapers, avoiding potential layoffs) could have been a financial boon for a cash starved city. Whether or not these deals eventually happen in the future is overshadowed by the always complaining and often litigious nature of this city, which is the real crux of the dilemma. Philadelphia was largely overlooked by foreign capital during the real estate boom of 2004-2007, and being perceived as a unionized, anti-business town was one of the many reasons that drove companies flush with cash to invest elsewhere. Here's to hoping the city can collectively put personal interests aside in order to realize the detriment being cause to the place we call home in the long run.

Instant Insights /

Slowing Down An Already Sluggish Local Real Estate Market

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