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SIMON PULLS THE PLUG ON PENN’S LANDING PROJECT

By Debra Hazel

A plaza and an amphitheater were built on the 15-acre waterfront site in the mid-1980s, but a proposed mixed-use development, to include retail, hasn’t materialized.

Despite the best efforts of various developers over several decades, what should be one of the most attractive locations in the Northeast, Philadelphia’s Penn’s Landing, remains largely vacant.

Even as shopping center and entertainment projects are being built throughout the city, the 15-acre wharf area along the Delaware River between Market and Walnut streets has resisted development for some 30 years because of politics, economics and geography. Ultimately, Penn’s Landing will be developed, according to city officials and others, and several developers have expressed interest. But prospects for the construction of retail there look increasingly doubtful.

The latest attempt to develop the location, by Simon Property Group, collapsed in August. After five years of wrangling, Simon pulled out of its plans to build a $329 million, 600,000-square-foot entertainment-retail complex there. The company cited economic and site issues for the withdrawal, which took place two weeks before its rights to develop the location would have expired. (Simon officials declined to comment further for this story.)

“[Penn’s Landing] is not very big, and it does have a lot of drawbacks,” acknowledged Indira Scott, special projects manager for Penn’s Landing Corp., a quasi-public nonprofit entity responsible for developing the site. “It does have pluses, but it has minuses that people have tried to fix in different ways that didn’t work.”

The Simon project is not the first plan for Penn’s Landing to fall through. Though a plaza and amphitheater were built in the mid-1980s, a proposed development of housing, offices and retail never came about.

Simon’s plan, unveiled in 1997, called for the construction of an enclosed retail-entertainment complex to include AMC Theaters, Barnes & Noble, FAO Schwarz and Versace, as well as restaurants Cheesecake Factory, Circa and Jimmy Buffet’s Margaritaville. Initially, 2001 was set as an opening date, but was then rolled back to 2005. Simon scuttled the project when it could get only AMC and Circa to confirm their intentions to become tenants, according to My Linh Nguyen, a spokeswoman for the Delaware River Port Authority (DRPA), a bistate agency that has presided over the Philadelphia and Southern New Jersey waterfront area since 1919.

The post-Sept. 11 economy made leasing difficult around the United States, and Philadelphia has been particularly hard hit.

“The economy has changed so much in the past year that Simon’s optimistic goals couldn’t be reached,” Nguyen said. The DRPA was to have been a financial backer of the Simon project.

Another problem, ironically, is that though Interstate 95 runs directly alongside Penn’s Landing, it has no off-ramp leading directly into the site — a political concession made to area residents decades ago.

“You can’t drive to Penn’s Landing, and people who live nearby can’t get there,” said Norman M. Kranzdorf, chairman of the Conshohocken, Pa.-based Kramont Realty Trust retail development company, who knows the site.

Had the interchange been built, the site would have been developed long ago, said Ronald Rubin, president of Pennsylvania Real Estate Investment Trust, Philadelphia, another person familiar with Penn’s Landing and its history. “Everybody who has attempted to lay out a project has had difficulty,” he said.

But not everyone agrees that it is an irredeemably difficult site to develop. I-95 has been there for decades, observed Scott, disputing that the interstate is the problem at all. The highway recently added signage specifically for Penn’s Landing, and both pedestrian bridges and public transportation across the highway negate the road’s impact.

The real problem, Scott said, is geography. Penn’s Landing sits 32 feet below the rest of the city, making the location difficult to reach. A series of scissor ramps were built to allow access to the plaza and amphitheater, but they would have to be taken down and rebuilt to accommodate further development.

Yet the city’s impressive demographics are tantalizing to developers. Center City, the hub of Philadelphia that includes the waterfront, boasts more than 125,000 residents, the third-largest downtown population among U.S. cities (after New York and Chicago). Some 8.2 million people visit yearly, according to city officials. Retail sales in Center City exceed $2.6 billion annually, and 64 percent of the region’s residents dine regularly in the downtown district.

Even so, Penn’s Landing is not the only Philadelphia location to see development stall. Most recently, DisneyQuest, which was to have been a high-tech entertainment complex at Eighth and Market streets, was canceled by the mayor shortly after construction began in 2000.

Though retail development has stalled at Penn’s Landing, work on its infrastructure continues. A $33 million aerial tram to link Penn’s Landing with Camden, N.J., directly across the river, is under way, and Penn’s Landing Corp. is feeling pressure to build something before the tram’s spring 2005 completion. Towers have been erected on both sides of the river, with not much surrounding them on the Philadelphia side.

“It looks like Stonehenge,” Nguyen quipped.

The far smaller Camden, on the other hand, is seeing massive waterfront redevelopment, including a minor-league baseball park, a garden, a performing arts center and the New Jersey State Aquarium. Restaurants, an aquarium expansion and a recording museum will probably be completed by 2006. Camden has more available land and easier infrastructure, explained Barry Rosenberg, a vice president of Columbus, Ohio-based developer Steiner + Associates, which is developing the aquarium expansion. (Steiner had also been in talks with Simon about being a partner in its Penn’s Landing project.)

“Whether you’re building a $10 million project or a $100 million project, you’ll still need $30 million or $40 million for infrastructure work at Penn’s Landing,” Rosenberg said. “Camden, frankly, also has a better view.”

Penn’s Landing Corp. has cleared the site for the tram terminal, leading some to speculate that Penn’s Landing could become little more than a parking lot for Camden, an idea that, understandably, doesn’t sit well with Philadelphia.

“We certainly don’t want a parking lot,” Scott said. “It’s certainly in us to get a development done.”

One factor that has speeded development on the Camden side is that the city is less dependent on public money and is under the sole control of DRPA, Scott noted. Any development of Penn’s Landing, on the other hand, must get approvals from the state and the city, which slows decision making. Still, the DRPA is working toward branding both sides of the river as a tourist attraction, using the working name of Independence Harbor.

“We’re trying to make this so the river is not the boundary,” Nguyen said.

But Penn’s Landing Corp. still has to figure out what to put there. Whatever it is, retail will likely not be part of the mix. The agency has retained local architecture firm Granary Associates to draw a plan for the site, which will include the existing plaza, the aerial tram and garage and, perhaps, the Please Touch Museum that had been set to move from Center City to the proposed Simon mall. Meanwhile, local developer Bart Blatstein of Tower Investments, which has redeveloped portions of South Philadelphia, has also prepared a plan for the site, and Daniel J. Keating III, owner of the Hyatt Hotel at Penn’s Landing, says he might want to do something there as well. And Steiner, too, if approached, might be interested in Penn’s Landing, Rosenberg said. But things are in limbo for now.

“We are rethinking the site,” Scott said. “There will probably be minimal retail — restaurants if anything. We felt that if Simon, one of the best retail developers around, can’t do it, why should we?”

Retail developers agree, with Rubin suggesting that multifamily or mixed use would be the best for Penn’s Landing. “It’s going to make a great site,” Kranzdorf said. “But it will not support massive retail.”

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