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4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021

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Commercial Real Estate

Philly undoes deal with developer Peebles to

revamp historic Family Court building into luxury
hotel
The move underscores the feeling of uncertainty surrounding the hotel industry and other
categories of commercial real estate as the long-term impacts of the pandemic take hold.

The old Family Court building at 1801 Vine St. in Center City.
Philadelphia officials have terminated developer Peebles Corp.’s deal to
revamp the historic Family Court building.
ALEJANDRO A. ALVAREZ / Staff Photographer

by Jacob Adelman
Published Nov 24, 2020

Philadelphia officials have broken off an agreement to

sell the historic Family Court building on the Benjamin
Franklin Parkway to Peebles Corp. for the developer to
revamp into a 203-room luxury hotel, as the
coronavirus pandemic clouds the demand outlook for
visitor accommodations in the city.

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021
The Philadelphia Industrial Development Corp. said
that it had “coordinated with the city and concluded
that we will formally terminate the agreement” to
purchase and redevelop building at 1801 Vine St.,
across from Logan Square, according to an email the
agency sent last week to Christopher Leng Smith,
Peebles’ managing director for the northeast U.S.

The decision was made “in consideration of the impact

of COVID on the hospitality market,” Sam Rhoads, a
PIDC executive vice president, wrote to Smith in the
email, which was provided to The Inquirer.

The move underscores the uncertainty surrounding

the hotel industry and other categories of commercial
real estate, with the long-term impact of the pandemic
on everything from office use to convention
businesses yet to play out.

“Nobody really knows what the landscape is going to

look like post-pandemic,” said Christophe Terlizzi, who
heads KeyBank’s commercial real estate practice in
the region. “It’s unknown and it’s unknowable.”

Although hotel performance has ticked up since the

early days of the pandemic, when business travel and
tourism came to a virtual halt, the sector continues to
struggle.

Occupancy at hotels in Philadelphia and the

surrounding Pennsylvania and South Jersey counties
remained depressed at 46% during the week ended
Nov. 14, down from 74% during the same week a year
ago, according to the hospitality-industry tracker STR
Inc.

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Revenue per available room, a standard metric used in

the hospitality industry to gauge hotel performance,

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021
fell 61%, from $110.53 to $42.75, during that time.

With vaccinations against the coronavirus expected to

reach the market in the months to come, some see a
resumption of more commercial activity on the city’s
horizon. Yet, it’s uncertain how long some sectors,
such as hospitality, will take to return to pre-pandemic
levels, if they ever do.

Workers who have gotten used to discussing business

with associates around the world using
teleconferencing software such as Zoom may be less
likely than before to take expensive and time-
consuming business trips or attend costly
conventions, some have speculated.

And Center City may become less of a destination for

whatever business travel remains if companies
continue allowing employees to work from home, or if
a new demand for less densely filled offices prompts a
move to the suburbs where space is cheaper, others
fear.

“In 2020, the immense adverse impact to the

hospitality industry caused by the COVID-19 novel
coronavirus created significant changes in market
dynamics that impacted viability of hospitality
development across the nation,” PIDC president Anne
Bovaird Nevins said in an email Monday.

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021
George Norcross

Peebles chief executive R. Donahue Peebles said in a

statement that the company was “surprised and
disappointed by the action taken by PIDC and the City
of Philadelphia today to terminate our efforts to build
Philadelphia’s first Black-owned hotel.”

“We are puzzled by the motives underlining the rush to

terminate now when there are no viable, alternative
uses for the structure,” Peebles said. “We are not
aware of any major city of Philadelphia contract that
has been terminated during this health crisis, begging
the question: Why us?”

PIDC’s decision appears to cap Peebles’ troubled

years-long effort to redevelop the 79-year-old Beaux-
Arts Family Court building, which stands across the
street from the Free Library of Philadelphia’s Parkway
Central Library, into upscale accommodations with a
roof deck and a lavish ballroom for meetings and
parties.

City officials awarded the project to Coral Gables, Fla.-

based Peebles, one of the largest black-owned real
estate development firms in the country, after a
competitive bidding process in 2014.

PIDC, a nonprofit partnership between the city

government and the Chamber of Commerce of Greater
Philadelphia, was tasked with overseeing the

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021
redevelopment, which was described at the time as a
vital step toward further enlivening the Parkway area.

Peebles faced its first major hurdle about two years

later, when National Park Service officials ruled that
building alterations the company was proposing would
disqualify it from a historic-preservation tax credit
that it planned to use to help finance the project.

A revised version of the plan was eventually accepted

by the Park Service, but it involved structural
adjustments that made the project more expensive
and a reduction in the number of revenue-generating
guest rooms that the project could accommodate.

The proposal sustained another financial hit from

federal tax law changes in 2017 that diminished the
value of the preservation credit by an estimated 20%.

By then, the cost to build the project had also

ballooned from an anticipated $85 million in 2014 to
about $105 million, R. Donahue Peebles has said.

Nevins, in her email, identified the setbacks as

additional reasons why “sale of 1801 Vine Street will
not move forward at this time.”

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021
She said Peebles’ most recent agreement to buy and
redevelop the building had expired in early spring,
around the time that the city’s first business
restrictions aimed at stemming the spread of the
coronavirus went into effect. PIDC had been “in a
‘pause’” concerning decisions on the project since
then, she said.

Peebles, however, said his company does not believe

the city had the right to terminate the agreement and
was “evaluating our options.” He also hoped Mayor Jim
Kenney would intervene, he said.

“We have stuck by the city and this project despite its
challenges because of the potential for social and
economic transformation,” Peebles said. “This project
is regarded as a symbol to the Black community, at a
time when our country has been divided, often along
racial lines.”

Nevins said PIDC and the city will now devise a

process to solicit and vet a new round of proposals,
with a focus on plans that involve minority and female
ownership and workforce participation and ones “that
provide benefit to the existing residents and include
amenities available to the public.”

“While this is not the outcome all parties had hoped

for, we have learned a lot in this process and remain
confident that the building is a valuable asset for the
city,” she said. “We look forward to re-evaluating the
highest and best use for the property and adopting a
new plan for future redevelopment.”

Published Nov. 24, 2020

Jacob Adelman
I cover commercial real estate, economic development,
and other financial news topics, with a focus on data and
accountability.

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FILED: NEW YORK COUNTY CLERK 04/27/2021 04:48 PM INDEX NO. 652178/2021
4/6/2021 Philly undoes deal with developer Peebles to revamp historic Family Court building into luxury hotel
NYSCEF DOC. NO. 44 RECEIVED NYSCEF: 04/27/2021

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