MHN Interview: Philadelphia Freedom—An Interesting Opportunity for Multifamily
LCOR recently announced that Donald Tracy, the company’s new vice president, would be leading the Philadelphia development team. MHN talks with Tracy about his plans on expanding LCOR’s development pipeline in that market, as well as why he considers Philadelphia a unique area for the multifamily industry.
Berwyn, Pa.—LCOR recently announced that Donald Tracy, the company’s new vice president, would be leading the Philadelphia development team. MHN talks with Tracy about his plans on expanding LCOR’s development pipeline in that market, as well as why he considers Philadelphia a unique area for the multifamily industry.
MHN: Congratulations on your new role. What are your priorities in the position?
Tracy: The priorities are fairly simple in scope, but robust in plan. Obviously I’ve been engaged by LCOR to help get refocused on the Philadelphia market. I think it’s important to note that the key markets for LCOR over the past few years have been New York and metropolitan Washington, D.C., but in the past they have done several things in Philadelphia. I think this is part of a refocusing effort, and I will use our office here in Berwyn to expand the focus of development. The plan is to extend the markets between New York and Washington and to complete that role with activities in Philadelphia. The area of Philadelphia is really defined by certainly the city, but also the suburbs, and also parts of New Jersey and southeastern Pennsylvania.
MHN: How is the market right now in Philadelphia?
Tracy: I think this is an important time in Philadelphia real estate. There’s a lot of activity, but it’s a market that has seen moderate but steady growth over the years. It’s an economy and population that continues to see growth. I was reading an article the other day, and a part jumped out at me: The population of 18-34 year olds in Philadelphia continues to grow. And that is bolstered by the fact that so many of the college students that come here for their education stay here. There’s an opportunity to provide quality housing for that group in an institutionally financed way that perhaps was a slow process in the past few years, but has grown over the last two years. There is a significant pipeline in the next few years that will continue to grow.
MHN: Do you think that’s similar to the trends in the rest of the country, or is Philadelphia an anomaly?
Tracy: I don’t think Philly is an anomaly. I think what it is is a place that hasn’t been the core focus of a lot of attention over the past few years, and now is a terrific time to focus that attention. Whereas other markets in the country might be reaching a point of oversupply, or reaching a point where land values aren’t as advantageous to new development, Philadelphia represents a nice opportunity where you can still execute transactions in a very favorable way.
MHN: You mentioned earlier that Philly has a growing population of 18-34 year olds. Are you aiming for this young professional market with your acquisitions and developments, or is this just a bonus?
Tracy: I think it’s a bonus. You certainly don’t want to create any limiting factors to what your market can be, but I think it’s a primary component of the demographic pool that’s helpful for institutional development. It allows us to create a nice product at a very nice price point and enter a market where there is a very sincere demand.
MHN: What are some challenges you’re seeing?
Tracy: There are a lot of challenges. You have to be cautious, you have to exercise a lot of optimism, but be cautious. The pipeline is intense. I think there is somewhere in the neighborhood of 3,000 units in the pipeline to be delivered over the next several years, and while there’s fairly robust demand for that pipeline, you have to be careful to deliver the right product in extraordinary locations and create a product that meets demand. The other component of it is that when the economy gets better, the demographics get better and there’s more of a shift towards development in the region, I think there’s a fairly direct correlation in construction pricing. I think we need to continue to monitor that very closely to make sure the opportunities are affordable to execute.