Nearly one year ago, the University helped form an alliance to preserve and develop moderate-cost rental housing opportunities for students and community members.
Dubbed the "Partnership for Quality Housing Choices in University City," its mission was simple in concept -- purchase poorly managed and deteriorated apartment buildings, renovate them and install new management. A $60 million purse funded by Penn, the University of the Sciences, mortgage giant Fannie Mae, Wachovia Bank and Trammell Crow Company, which manages many of the University's real estate and construction projects, would make this project possible.
The partnership has amassed just over 200 apartment units in five buildings during its inaugural year, and the intended results are beginning to show. But these numbers are smaller than expected.
"The target was definitely higher," said Penn Executive Vice President John Fry, who declined to give specific numbers. "We'll have to do better."
Fry attributed the partnership's shortcoming to a steep learning curve and a hot real estate market in the group's target area. Large properties -- about 20 units and higher -- between 40th and 50th streets, and between Market Street and Woodland Avenue, are ripe for acquisition.
However, the partnership's size and bureaucracy have meant a slow reaction time during the purchase process of several key properties, allowing others to beat the alliance to the dotted line.
Fry does not see such near misses as a problem.
"To the extent that people are going to buy these properties and upgrade them, we think that's fine," he said. "But to the extent that people are doing nothing but speculating and holding, we have a real problem with that."
Russ Gallagher, a partner with New Horizons Housing, which owns 600 rentals in University City, said he believes that such speculators could drag apartment buildings into disrepair. Knowing that the University has historically paid top dollar for its purchases, he said that some property owners are waiting for the Penn-led team to make them an offer.
"It's just a mentality that if you believe you're going to sell your property, there's that much less money that's going to be spent on it," Gallagher said.
The partnership's largest acquisition to date has been The Pines, a 113-unit apartment complex at 48th and Pine streets that came under the group's ownership in July. As part of a $300,000 renovation, improvements have been made to the safety and mechanical systems, as well as to the landscaping.
As is the case with all the partnership's properties, the prices at The Pines, which range from $575 for an efficiency to $930 for a three-bedroom unit, have risen slightly to cover improvement costs. Although the rent increase varies according to unit, $50 was a typical increase, according to several residents. This equates to just over an 8 percent increase for an efficiency unit.
Other landlords have reported yearly increases varying between 3 and 5 percent. But the partnership believes it is giving tenants adequate "bang for their buck."
"Our experience to date has been that we haven't lost many people, if any," due to the rent increases, Fry said. "They appreciate the fact the we're upgrading the quality of the building, and if they see a little bit of an increase of rent, at least they see the commensurate value in return."
However, some property owners feel that the partnership's prices are out of line for University City.
"If Penn and its cohorts are going to raise the standard for what you can rent apartments around here, then the rest of us are just going to raise our rents too," said Al Krigman, president of KRF Corporation, which holds 45 rental units in University City. KRF rents two bedroom apartments for up to $650, versus $775 at The Pines.
University real estate official Tom Lussenhop maintained that the partnership's prices are affordable, saying that a person on a $20,000 yearly income could afford a Pines efficiency. But Gallagher said that his group can do better.
"They have so much overhead and so many people walking around in suits... representing the University and all these organizations," Gallagher said. "We do things for a third of what it costs them. There's no way that they could ever compete with us."
According to a study released in April by Penn's Office of Off-Campus Living, median rents for University City apartments no larger than four bedrooms shot up 52 percent between 1999 and 2001. While a variety of factors have made University City a more desirable residential location during that time, further housing stock upgrades will only boost the value of the neighborhood -- and property taxes -- even higher.
Betty Reavis, president of the Walnut Hill Community Association and a 47-year area resident, said she and her neighbors are worried about being forced to move.
"We consider ourselves to be paying quite a bit of taxes as seniors who are retired -- and our income is not going to go up," Reavis said. "Does that mean eventually that real estate taxes will force us out of our homes?"
City Councilwoman Jannie Blackwell contended that housing prices are driven by market forces, making them largely beyond the government's control.
"Certainly, we do not want the price of housing to go up... because we want people to have an opportunity to move into this area," said Blackwell, who represents West Philadelphia. "But we have to welcome [the partnership's] involvement because otherwise we wouldn't get improved housing stock."
For University City's apartment buildings, some of which are about 90 years old, enhancements of any sort are welcomed, according to Alex Chamberlin, a broker with AARCO Realty World Properties, which has about 150 rentals in the area. He said that the investments made by the group would encourage others to do the same.
"When your neighbors are fixing up their properties, you don't want to be the ugly duckling on the block," Chamberlin said.
Seven-year resident of The Pines Michael Robinson agreed that the new presence is beneficial.
"They put together a whole lot in the time period that they've had," Robinson said.
But Verlecia White, a resident of The Pines for nearly a year, said that the building's new management has been less then helpful when problems have been brought to their attention.
"You're taking over a building, at least take on the responsibility of the building," White said.
Building operations are handled by Trammell Crow, which is also responsible for the nearly 1,200 units held by the University's apartment arm, University City Associates. According to an area housing official, Trammel Crow's performance has been only average in this capacity.
Fry admitted that changes to the partnership's property management structure are needed.
"It's fair to say that we need to raise the bar in terms of the quality of management, and we're working on that," Fry said. He added that Trammel Crow will remain part of the team, but that "to the extent we feel that it is not doing what they need to do, we'll ratchet up the demands and pressure."
Even with such challenges, some feel that the diverse combination of organizations brought together in the partnership will make it a winner over its projected 10-year duration. In that time, Lussenhop said that the coalition has the "capacity" to procure about 1,000 rental units.
"If anybody's going to take properties and keep them on the market, this has the best chance of succeeding," said Eugenie Birch, chairwoman of Penn's Department of City and Regional Planning and an expert on urban housing. "There are huge amounts of resources going into it, and a lot of know how."
Community leaders also said that having a large organization buying up even more of University City's property is not a problem per se, as long as the area's quality of life is not diminished.
"I don't care who owns them if they make those apartments affordable, if they market them to whoever wants them and if they maintain the diverse character of the neighborhood -- I think that's the bottom line," said state Rep. James Roebuck, whose district includes University City.
