A new electricity
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Philadelphia Inquirer                                                                         May 15, 2004

A new electricity at Chester site

By Henry J. Holcomb, Inquirer Staff Writer

            Skeptics laughed when Michael O’Neill announced in 1999 that his real estate firm had bought an old electricity generating station in Chester and would turn it into a modern office center.

O’Neill’s company, Preferred Real Estate Investments Inc., of Conshohocken, had won praise for conversions of industrial space – for example the Lee Tire factory in Conshohocken and the Simpson Paper Co. plant in nearby Miquon.

            But this building, vacant since 1984, was in economically depressed Chester, surrounded by derelict buildings and piles of debris.  The structure itself had a grand, columned exterior.  But inside, it was so contaminated that O’Neill’s team had to don protective clothing and masks for inspection tours.

            Broker-developer Tim Mahoney recalls the party at which O’Neill announced the purchase.  “I thought, this is going to be the project that takes them down,” he said yesterday.

            But the 400,000-square-foot renovation project, still months from completion, is already 80 percent leased.  I’ve learned not to second-guess Michael,” Mahoney said upon hearing the news.

            Preferred signed another big tenant this week:  Wells Fargo Financial Acceptance, a unit of San Francisco-based Wells Fargo & Co.

            Wells Fargo will occupy a major portion of a building built inside the walls that once surrounded the huge, coal-fired boilers.  This will be the automobile unit’s headquarters, with executive, technical, sale and clerical personnel.

            This summer, it will move 350 employees from Lester, in Delaware County near Philadelphia International Airport, to 110,000 square feet in what O’Neill is now calling the Wharf at Rivertown.  Within a year, Wells Fargo will expand to 450 people, Judy Corcoran, its spokeswoman said.

            Chester has been a hard sell.  “Considering what was around it, I didn’t have a lot of optimism, even with Mike O’Neill’s legendary skill at adaptive reuse of buildings,” said Walter D’Alessio, chief executive of the North-Marq Advisors real estate firm.

            “But they’ve pulled it off.  What they’ve done borders on the miraculous,” D’Alessio said.

            Michael Balitsaris, an executive with O’Neill’s firm, said “People laughed or smirked when we asked them to look at a site in Chester.”

            Many prospects came.  Some decided to lease space in the landmark, next to the Commodore Barry Bridge, that long ago belched black smoke, powering shipyards and other industries that employed tens of thousands along the river in Delaware County.

            By fall the building will house 1,600 office jobs, including Wells Fargo’s.  This, say those who support it, will help power the recovery of Chester.

            “Within the next year, it should be booming up here again.  I’m hoping it will be,” said Mae Gilmore.  Her Mae’s Place Soul Food, 1000 W. Second St., which she opened in 1979, has become popular with O’Neill’s staff.  Balitsaris touts her fried chicken as a good reason to move to Chester.

            O’Neill’s firm has invested $60 in the project, including 90 acres of surrounding land for future development, which could include more office buildings, apartments, a marina, and, possibly a horse-racing track.

            The state and federal governments and the Delaware River Port Authority have added at least $11 million for environmental clean-up, new roads, and other improvements in the area.

            Access to the site is now from the Highland Avenue exit of Interstate 95.  But the engineering work, funded by the Port Authority, has been done for new ramps off the approach to the Commodore Barry Bridge.  This would give direct access without going through Chester.

            An undisclosed amount of government money also has gone to companies that have rented space, including grants and loans for equipment, walls, and worker training.

            O’Neill approached Peco Energy Co. about buying the building in 1999.  “Michael loved it from the start,” said Erik Kolar, O’Neill’s partner, who describes himself as the finance and operations side of the partnership.

            “Beyond the romance of a structure that it would be a crime to tear down” were financial realities, Kolar said.  “Is there a market?  Could we hold the cost of renovation down?”

            As with all such projects, “behind every wall there was a surprise,” Kolar said.  At one point, for example, O’Neill’s team had to scramble to brace the outer shell of the former boiler room against possible hurricane winds.  The original structure had been carved out, and the new office building, now in place, was not yet built.

            “For all the feel-good qualities of what we were trying to do, we had to make it stand on economics,” he added.

            He said they have, and the location midway between Center City andWilmington helped do that.

            The building has achieved the target rental rate of $20 per square foot annually, excluding utilities, he said.  The area is in a Keystone Opportunity Zone.  So while Chester will reap wage-tax payments from workers, business and property taxes will be waived until 2015.

            The enormous structure captures the attention of passengers taking off from the airport.  The great hall, which resembles 30th Street Station’s and once show-cased turbine-driven generators, will house Synygy Inc. beginning in the fall.  Now in Conshohocken, the firm provides software  and services that help companies manage sales commissions, executive bonuses, and employee incentive payments.

            The turbine hall’s limestone rosette leaded-glass skylights, blocked during fears of a World War II air raids, and decorative lamps have been restored.

            Electricity was still new when the building was built at a cost of $77 million, said Kolar, who has researched its history.  He said its massive columns and the grandeur of its great hall were created to persuade the public that electricity was here to stay.

            The renovation, Kolar said, is designed to do the same for Chester.



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