Trustees approve plan to develop GE building

The Executive Committee of the University Board of Trustees yesterday approved plans to convert the former General Electric building at 31st and Walnut streets into a $55 million luxury apartment complex. Dranoff Properties, a real estate development company, will lease the vacant warehouse building for 40 years and pay for the entire project. The resolution also called for the University to pay about $3 million in "transactional expenses" for the property. Penn officials expect to earn back the sum through rent payments once the building is operational. "The $55 million cost of developing the building is [Dranoff President Carl Dranoff's] cost, not ours," Vice President for Facilities Services Omar Blaik said. He explained that the deal is beneficial to Penn in that it will not have to "invest its own money" but will reap the benefits of the nearby upscale housing -- and will eventually regain control of the property. This resolution and four others were presented yesterday morning at a meeting of the Trustees' Budget and Finance Committee. All five were approved in the afternoon by the Executive Committee, a group comprised of the 10 Charter Trustees and heads of key Trustee committees. The Trustees will meet in full in three weeks. In February, as part of their continual effort to expand the campus eastward, Penn officials announced their plans to gut the warehouse and construct an apartment and retail complex. The new Westside Commons, slated for completion in the fall of 2001, will have 285 apartment units, a fitness center, 17,000 square feet of retail, one floor of office space and a 1/4-mile rooftop track. "It was a building that had remained vacant for many years," Executive Vice President John Fry told the Trustees yesterday, adding that it seemed like a logical -- and profitable -- decision to buy the building. Preliminary drawings of Westside Commons show two tall pillars outside the building which, administrators say, serve as literal and figurative "gateways" into Penn's campus. The long-term lease is contracted for 40 years, after which point Dranoff will have a 10-year renewal option. The University will maintain full ownership of the building and the land. "If anything, the lease is less in duration than anything you would see for a transaction of this size," said Tom Lussenhop, the University's top real estate official. The interior of the building will be gutted but the structure itself will be left standing. Officials say none of the renovations will affect the historical value of the warehouse, which was built in the 1920s. In order to orchestrate all the environmental remediation work needed for construction, Dranoff Properties will receive a $3 million loan from Progress Bank that it is expected to repay by December. The University will control the disbursement of the money and approve the company's expenditures. Penn is also mortgaging the building, providing what the resolution called "additional security." "We're such partners in this in that our objective is so aligned," Vice President for Finance Kathy Engebretson said. "We're really not concerned at all" that the company may not make good on its payment. Studio apartments in Westside Commons will start at $800, one-bedroom units at $1,000 and two-bedrooms at $1,500 per month. It is designed for graduate students and young faculty members. Dranoff also designed the recently opened Locust on the Park complex at 2400 Locust Street, which administrators say will serve as a model for the new building.

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