PHILADELPHIA — Pennsylvania Real Estate Investment Trust (PREIT) (NYSE: PEI) and The Macerich Co. (NYSE: MAC) have reached a tentative agreement with the city of Philadelphia on a redevelopment and rebranding of The Gallery shopping mall and transit center in Philadelphia’s Center City district.
If approved by Philadelphia City Council, the Philadelphia School Reform Commission and the Philadelphia Redevelopment Authority, The Gallery will be rebranded as the Fashion Outlets of Philadelphia at Market East following a two-year renovation that will open the site to Market Street.
“We believe that the proposed redevelopment will position The Gallery as the next great urban marketplace in the United States, capitalizing on its central location where mass transit, tourism, the residential population and employment bases converge,” says Joseph Coradino, CEO of PREIT. “The redeveloped property will become the foundation of a new, vibrant Market East District, and we are excited to lead this effort.”
The project will offer a combination of outlet retail in the form of luxury and moderate brands, traditional mall retail, flagship retail, artisanal food experiences and entertainment offerings.
“The exciting plans for The Gallery are a strong strategic fit for Macerich’s proven redevelopment expertise, our leadership in the growing outlet sector and our sizable geographic concentration in the New York City to Washington, D.C. corridor,” says Art Coppola, chairman and CEO of Macerich. “Philadelphia is one of the great cities of the world, and this is a tremendous opportunity to create a highly successful, one-of-a-kind retail, dining and entertainment experience.”
The project aims to streamline The Gallery’s existing ownership structure to foster a renovation and rebranding of the facility. The tentative agreement calls for public investment from the Commonwealth of Pennsylvania and the city toward the project, which results in an estimated $235 million net investment by PREIT and Macerich to fund the redevelopment. The Philadelphia city council and school reform commission must approve the city funding, and the Philadelphia Redevelopment Authority must approve the transaction.
Under the proposed redevelopment plan, The Gallery will undergo a redesign that will reconfigure the 1.5 million-square-foot mixed-use facility as a space that features accessible storefronts, sidewalk cafes, a new streetscape, digital signage and graphics complementing the existing office space. Inside, the plan creates a three-block corridor of approximately 125 new stores, including dining and entertainment options.
The proposed project includes a two-year construction schedule and a grand reopening in spring 2017. PREIT and Macerich are prepared to begin construction immediately upon obtaining the necessary public approvals.
When completed, the project will add improved access to public transit. Much of the mall will be closed during the demolition and construction phase. Commuters will access mass transit during this period through street-level entrances at 8th and Market, 10th and Filbert, 11th and Filbert, and the Reading Terminal Headhouse at 12th and Market streets during the renovation.
“We have worked for more than a decade to reach this point, and we are excited to move forward with a project that will make Philadelphia proud,” says Coradino. “The time is right for Market East, and we can’t wait to get started.”
Macerich’s stock price closed at $81.12 per share Tuesday, up from $63.64 per share on April 14, 2014.
PREIT’s stock price closed at $22.48 per share Tuesday, up from $17.21 per share on April 14, 2014.
— Haisten Willis