“It cost just as much to build in Northern Liberties as it cost in Rittenhouse Square,” but rents and values fall as you leave Center City; so urban projects need extra sweeteners, says Philadelphia developer Bart Blatstein.
For 25 years the Center City-based Reinvestment Fund has arranged tax credits, bank- and charity-sponsored grants and loans, targeted federal programs, and other subsidies and incentives for projects in Philadelphia’s aging industrial and rowhouse neighborhoods – developments like Blatstein’s Piazza at Schmidts in Northern Liberties or Avenue North near the Temple University campus.
“I was eligible, they believed in the projects, and we made the numbers work,” Blatstein says.
The fund – TRF for short – has outlasted most of the Philadelphia-area banks it used to work with when it was set up byJeremy Nowak 25 years ago.
Nowak has moved on – he’s the new head of the $1 billion William Penn Foundation, a longtime TRF investor controlled by the heirs to the Rohm & Haas fortune. He’s also the new board chairman of the Federal Reserve Bank of Philadelphia, succeeding ex-Tasty Baking Co. boss Charles Pizzi.
The TRF board, after a search to replace Nowak, has promoted his veteran lending chief, Don Hinkle-Brown, to Nowak’s former job. John Summers, partner at Philadelphia law firm Hangley Aronchick Segal Pudlin & Schillerand a member of a scholarly Main Line family (one of his brothers is ex-Treasury Secretary Larry Summers), succeedsT/L Ventures chief Robert Keith as TRF board chairman.
The fund has grown from helping community-based small businesses and rowhouse owners to financing charter schools, preschools, urban supermarkets. Lately “we’re thinking about health centers,” Summers told me.
TRF doesn’t just lend money – $159 million in gross loans receivable on the books at Dec. 31, up from $154 million a year earlier and $92 million in 2007. It also crunches demographic, property valuation, and transaction data to locate and target neighborhoods where it says investment could make the most difference.
Why should Philadelphia need TRF, instead of letting the private property market match supply and demand?
“There are lots of costs in repurposing pre-built space in urban environments,” Hinkle-Brown said. “It’s appropriate for the public sector to assist in repurposing. You want to get a project at the end that is a positive contributor to the community, with taxes, with jobs.”
For many of its investors, TRF is a real estate play: “We’ve made quite a lot of hay out of the fact that over the last 10 years an investment here did better than the S&P 500,” Hinkle-Brown said.
Doesn’t subsidized neighborhood rehab put pressure on old-time corner bodegas, church-run schools and other local institutions, and “gentrify” poor people away?
“Philadelphia was locked in amber for way too many decades,” Hinkle-Brown told me. “There’s been a romanticization of blight among some folks. But cities are alive. Cities, before 50 years ago, were dynamic, they changed all the time. Populations moved through neighborhoods.”
In Philadelphia, after World War II, “that just stopped,” he added. Then the 1990s property boom spread from Center City into nearby neighborhoods. TRF wants to guide and fuel that expansion.
“It can be scary to see change come back,” Hinkle-Brown added. “We make sure there’s a strategy for the whole population.” If TRF funds projects by ShopRite developer Jeff Brown, it also “worked with the Food Trust to reach dozens of corner stores and give them grants to buy refrigerator tubs, so they’re selling fruit salad next to the Snickers,” he said.
“In Brewerytown, we didn’t just invest in [developer John] Westrum‘s homes. We worked with the city” replacing roofs and electric systems in neighborhood rowhouses. “There’s less you can do for the renters who get forced out. So we reserved a piece of the old Acme warehouse for affordable housing. Middle income [construction] plus affordable long-term rentals.”
Something for the whole neighborhood? “We think we put a good package together.”