Summary Neighborhood Site Market Analysis Design Financials Paramount Ann Brophy / Jason Noran / Daniel Sebaldt / Douglas Smith Development April 17, 2015 FIN565 WInter 2015 The Hart Light Masts Rodeph Inquirer Shalom Building City Hall LTV 80% | IRR 22% | Return on Assets 21% | Return on Cost 8% Summary Neighborhood Site Market Analysis Design Financials Mr. Peter Allen Stephen M. Ross School of Business University of Michigan 701 Tappan Street Paramount Ann Arbor, MI 48109 Development Dear Prospective Investors, We are very excited to introduce you to The Hart of Philadelphia. As its name suggests, The Hart will be one of Philadelphia’s most important developments as it pumps life back into the main artery of Philadelphia: North Broad. The Hart will bring high-end apartments and unique spaces for people to eat, drink and connect along this corridor. North Broad is cur- rently the home to many spectacular landmarks including the Divine Lorraine Hotel, Rodeph Shalom Synagogue, The Philly Inquirer, and the Metropolitan Opera House. Historically known as Automobile Row, North Broad was previously home to the design, production and sale of Cadillac, Buick, Oldsmobile, Studebaker cars in the 1920’s. Although many are since gone, there are still several inspiring and ornate buildings that remain along North Broad. North Broad St is one of the primary boulevards of Philadelphia, connecting the magnificent City Hall building with theTemple University campus. It is an avenue in transition, on the verge of renewal, that has been the focus of a lot of recent development. Eric Blumenfeld and Bart Blatstein, two of Philly’s most prominent developers, have a combined 5 projects on North Broad alone which will bring additional apartments, retail and restaurant space to the avenue. North Broad is primed for infill as it is ripe with magnificent architecture and several vacant lots. We want to help make North Broad a destination once again and we believe that starts with offering high end apartments and street level attractions for all hours of the day. To meet the current demands for this corridor our project includes a mix of residential and commercial space. We plan to revive the brick exterior and renovate the interior of this historic 1885 building. This will allow for rental units on the top two floors with the first floor being divided converted into a cafe + green market as well as a restaurant + “barcade” themed bar, both along our sidewalk. The rear of the building will serve as an art gallery which will share a front entrance with our tenants. North Broad is blossoming into a foodie corridor, already home to several renowned chefs including Marc Vetri and Stephen Starr. We hope to expand on that trend and offer residents some new and exciting options. Our residents can grab a coffee in the morning, pick up some produce in the afternoon, and grab a beer after enjoying dinner, all within one building. The Hart is located near the Spring Garden and Fairmount Stations of the Broad-Street Subway Line and surrounded by numerous SEPTA bus lines. In our financial model we assume an 80% LTV projecting a leveraged IRR of 22%. We plan on seeking a construction-to-permanent loan so that the construction financing converts to a permanent loan when construction is finished. With just one loan we expose ourselves to only one set of closing costs. To quote Billy Prodica, Eric Blumenfeld’s main investor, we invite you to “come to Philly. It’s twice as nice for half the price. It’s actually less than half the price”. We think this project satisfies a growing demand from millennials for high quality rental space along North Broad.The winds of change are finally starting to take shape and the future of North Broad is bright. We’d like you to be a part of its revival and it starts with The Hart. Sincerely, Paramount Development Ann Brophy Jason Noran Daniel Sebaldt Douglas Smith MBA, Ross School of MBA, Ross School of MArch, Taubman College of MUP, Taubman College of Business Business Architecture & Urban Planning Architecture & Urban Planning Summary Neighborhood Site Market Analysis Design Financials Historic & Valuable The Hart is not only about a neighborhood; it is also about Philadelphia. Located less EST 1682 than half mile from Center City, it is just far enough away to have been overlooked for decades. However, Philadelphia’s population has increased 7.3% 1.6 million since 1990, and the demand is growing out of Center City. Bordering Spring Garden Historically Significant and Poplar the neighborhoods, the blocks surrounding The Hart are diverse in age and income. It is also racially diverse with about 50% black, 25% white, 7% asian, and 18% 4th Largest U.S. GDP other races. Diversity creates resilience which creates success. Age Diverse & Young PA (Median Age is 31) 55+ Under 17 20% 15% 35-54 26% 39% 18-34 Economically Diverse $100k+ < $10k 13% 17% $75k-100k 23% 22% $10k-25k NJ 25% < $25k-50k Sources: Social Explorer, U.S. Census, ACS 2013 Summary Neighborhood Site Market Analysis Design Financials Restaurants/Cafes 1. Osteria 2. St. Stephen’s Green 3. Cafe L’Aube 19 4. LaScala’s Pronto 5. Bain’s Deli & Crepe Town Bars/Music 6. Prohibition Taproom 7. Union Transfer 21 Retail 8. Underground Furniture Market 23 3 Schools 9. Community College of Philadelphia 10. Parkway Center City High School 2 11. Folk-Arts Cultural Treasure 4 1 12. Benjamin Franklin High School Health 5 22 13. Hahnemann University Hospitalv 14. Drexel Neurology Center 24 15. Drexel Psychiatry - Vine St. Arts and Culture 12 10 18 16/ Dance Philadelphia 17. Pennsylvania Ballet 18. Philadelphia Masoleum of Art 9 1616166 7 Fitness 17 19. Francisville Recreation Center 20. Fight Firm Muay Thai 13 11 20 Family 15 8 21. Spring Garden Community Garden 22. Frankie’s Day Care Parks 14 23 Clemente Playground 24 Matthias Baldwin Park Philadelphia is creating SEPTA is a regional transit provider with trol- a robust network of parks5 40 bike lanes and bike leys, metros, and buses, bus lines infrastructure, and which all run along North Broad St is at the Broad Street, making crossroads of it all. The 9 our property one of the bike network is linked to acres most transit accessible high speed3 metros numerous parks and two places in the city. Living waterfronts: the Schuykill without a car can be ar and the Delaware River. eality at The Hart. See miles5 bike See map to right. map to right. 100transit stops Summary Neighborhood Site Market Analysis Design Financials Philadelphia was founded when the crossroads of Market St. and Broad St. The Hart is located on Broad St. The site is steeped in early American history. Established first as a livery by E. Hart, the namesake of our building, the property went on to live several more lives. The Hart was central to the early automotive industry when Broad St. became known as Automobile Row. The middle picture shows our building circa 1925 under ownership of Gurantee Automobile Exchange. The building transitioned to the drug industry in 1929 and eventualy to an upscale furniture warehouse. The diversity of uses proves the flexibilty and longevity of the structure. This building has had more than 9 lives and we intend to give it several more. Automobile Row Light Industry Post Industrial 1902 1907 1915 1929 1990 Banker Brothers White Falls Tire Sharpe & Dohme Lucky Circle Car Co. Sewing Co. Co. Pharmaceuticals Hosiery Co. 1875 1903 1913 1920 1954 Present E. Hart Prest-O-Lite White Motor Guarantee West Wholesale Calderwood Livery Gas Tanks Car Co. Automobile Drug Co. Gallery Exchange Sources: City of Philadephia Dept. of Records, Google Street View Summary Neighborhood Site Market Analysis Design Financials Union Transfer The Spring Gardens Loft 640 Operated by the most cutting edge Large enough for 180 neighborhood These luxury lofts are setting a new booking agencies in Philly (R5, The families to garden, The Spring Garden precedent for the neighborhood. Lofts 640 Bowery, and Four Corners), this is a sure serves as an outdoor education and is located directly across the street above destination for Millenials. It opened in 2011 community space that enhances the area the Osteria Restaurant, including a rooftop and has premiered artists such as Diplo, with trees, bamboo groves, and open pool and cyber loung. This is an excellent M83, and Frank Ocean. space for picnics and gathering. sign of growth for our neighborhood. Prohibition Taproom Osteria Alla Spina The Probhibtion Taproom plays up the Inspired by the cuisine of Northern This Italian gastropub, from the Vetri family 1920’s aesthetic and serves the best Italy, Osteria has become one of the of restaurants, serves up a large selection high class martinis. Come here for Old country’s most critically acclaimed Italian of local and Italian brews to compliment Fashions, Negronis, and Manhattans. This restaurants. It is operated by star chef their pub fare. Residents can simply cross is a bar that serves the growing young Marc Vetri. This is also located across the the street to enjoy house-made sausages, professionals population. street from The Hart! braised meats and oysters. Summary Neighborhood Site Market Analysis Design Financials · 10,042 sqft lot · 10,000 sqft per floor 16 ft ceilings · 30,096 sqft total · Major Corridor · Open Floor Plan 3 Stories The Hart has 75 ft of frontage with great Zoned CMX-4 potential to create a dynamic and exciting streetlife. It is also zoned CMX-4, which is a mixed commercial zoning designed for Broad Street 75 ft frontage maximum flexibility of uses and increased density. Furthermore, the historic building has spacious 16 foot ceilings that are Mt.