Yesterday, I said that I was deferring opinion of the Plaza lawsuit, the deferral is over. The building was purchased by New York investors with what I call a New York City frame of reference. At the time of purchase, they had no idea that Reilly/Brown would be scheming up the NIZ. They paid top dollar for a premiere building, with a blue chip Fortune 500 tenant. Because they didn't pay NYC prices, although an associate referred to it as a Philadelphia price, they thought it was indeed a solid investment. It is a unique building, which was custom designed to accentuate PPL's promotion of energy efficiency. Although the center atrium facilitated natural daylight, it wastes an enormous amount of space. The grass on the roof and other high tech energy concepts of that moment, bring no added value for other tenants.
The KOZ was originally conceived to help cities draw businesses to brownfields. That concept was bastardized over the years to regular parcels, including the former prime address of Lehigh Valley, 9th and Hamilton. With the KOZ expired, PPL having spun off Talen Energy, and Reilly and Jaindl competing for their tenant, their investment does indeed look like a white elephant.
The NIZ certainly does create an uneven playing field, but so did the previous KOZ's, to a much less extent. If class A space like the Plaza cannot compete, older office buildings have no future what so ever. If we had anything more than moral and mental midgets in Harrisburg, perhaps they would have thought through the NIZ, in regard to the consequences to the greater marketplace.
reprinted from December of 2015
UPDATE JUNE 6, 2019: The Plaza building has been purchased at sheriff sale by another NYC investment firm. The Plaza cost $60 million to build. It was purchased by the first NYC firm for $90 million. They unsuccessfully sued after losing Talen Energy, claiming they could not compete with Reilly's NIZ. After the first NYC firm defaulted on their loan, the latest NYC firm paid $16 million at sheriff sale. They now have refiled the same suit against the NIZ, on the same basis.
I'm glad the new owners are appealing.
ReplyDeleteI hope they also raise the issue that the presiding judge in the original case (Reichley) was (I believe) also a state legislator when the NIZ legislation was passed.
I'm not sure if that came up when the case was originally assigned, but from the outside it seems like a conflict that someone could make a judgement on the effects of legislation he previously voted on (before becoming judge).