New digs for Food Distribution Center

May 12, 2008

By Thomas J. Walsh
For PlanPhilly

South Philadelphia’s Food Distribution Center is preparing, once again, to move. And this time it looks like it will really happen, business owners at the center say.

In a quietly worked deal through the Pennsylvania Infrastructure Investment Authority (PENNVEST) and announced last month, an $11 million low-interest loan has been authorized to help clean up a 48.6-acre brownfield and pave the way for a new center, in addition to about $165 million in grants and subsidies from the state to develop and operate the site.

O’Neill Properties Group of King of Prussia will use those funds to develop the site of a former auto salvage, scrap yard and landfill into a $212.5 million project with a ready-and-waiting base of tenants. Members of the center’s produce market association have been trying for years to expand or move from the current location east of the stadium complex.

The announcement was tucked into an April press release from Gov. Ed Rendell and the PENNVEST board of directors, outlining $72 million in low-interest loans and grants approved for 19 projects to remediate brownfields and manage new water projects in 15 counties.

Dan Kane, O’Neill’s project manager for the development, said a “lengthy list” of developers expressed interested in the site, and that the commonwealth undertook “a very competitive selection process.” He said the company could not comment further at this stage.

Cold and new
The deal would help solve a problem that has been simmering along the waterfront for years now – how the city and state would be able to help the center, officially known as the Philadelphia Regional Produce Market, expand and stay on this side of the Delaware River. Monday morning, as buyers jammed the loading docks at 7 a.m., it was clear that space is at a premium. Suppliers totaled up orders while forklifts and motorized pallet jacks weaved up and down the narrow concrete docks.

“It’ll be a really nice facility,” said Jimmy Storey, owner of Quaker City Produce Co. and president of the distribution center. “The equipment we have here was not built for this facility. Everything will be under a roof. Nowadays, everything is based on food security. Everything will be refrigerated. The big chain stores, they just don’t want you to break the cold chain.”

At 64, Storey has been working at the produce market for 51 years, pre-dating the facility, coming into the family business before high school. “The modern facility will attract more people,” he said. The produce market’s board of directors meets Tuesday to vote on approval of plans, he said.

The produce market is now centered on Galloway Street, bordered by Packer and Pattison avenues, hemmed in by interstates 76 and 95. The new site will create 313 new jobs and maintain 1,250 others, according to PENNVEST. The Philadelphia Regional Produce Market opened in 1959.

The new location is slated for the area at 67th Street and Essington Avenue, just north of Philadelphia International Airport and across Essington from the Philadelphia Auto Mall. O’Neill, through a new entity called Essington Avenue Partners, will build a 686,000 square-foot distribution center after environmental remediation is complete, according to documents obtained from PENNVEST. It would be the second largest produce distribution terminal in the country when it is due to open, in 2010.

“This facility is really outdated,” said Felix Cori, a salesman for Klayman Produce Co. “Moving there is something that’s needed to stimulate business. It’ll be modern and enclosed. Right now I freeze my ass off in the winter and sweat my ass off in the summer.”

The deal
The incentive package, as outlined by PENNVEST, looks like this:

• Grants and guaranteed financing. A “tentative plan of finance” would include $150 million in grant funds authorized by the Commonwealth of Pennsylvania in its capital budget for fiscal year 2003-2004. The document also says the developer intends to secure a $46.5 million first mortgage, “which apparently will require the guarantee financing of the [commonwealth], and provide for a repayment term of up to 40 years.”
• Low interest loan. The $11 million loan through PENNVEST, considered a second mortgage, has a 20-year term and an interest rate of 1.12 percent for five years and 1.73 percent for the remaining 15-year period.
• HUD money. The U.S. Department of Housing and Urban Development will add a $3 million grant through its Brownfields Economic Development Initiative and a $2 million loan via the Section 108 Loan Guarantee Program.
• DCED funding. An operating subsidy of $1 million per year for 10 years will come from Pennsylvania’s Department of Community and Economic Development, intended to cover debt service on the senior bank loan and the PENNVEST and HUD loans.

Title to the land would be transferred to the Philadelphia Regional Port Authority. O’Neill Properties would lease the land for 40 years, and after construction, sublease the site to the Philadelphia Fresh Food Terminal Corp. (PFFTC). PFFTC would, in turn, lease space to food distributors.

The 35-member produce market association considered moving to Camden in 2004. In September 2005, Rendell and State Sen. Vince Fumo announced a plan for a $150 million public-private enterprise that would have created a 1 million square-foot Food Distribution Center at the east end of the former Philadelphia Naval Shipyard, with new access ramps and other infrastructure. The initiative was to be financed by Commonwealth Public Improvement Program bond funds, with an additional $50 million in PRPA bonds to be backed by lease payments from the merchants.

The ’05 plan was bogged down from the start and was officially killed more than a year ago after cost estimates skyrocketed to more than $400 million. A group of local maritime companies and longshoremen opposed the move, saying it would harm overall port operations and jobs.

“Some people think that business is not as good as it used to be,” said Joseph Elias, owner of Elias Farmers Market in Allentown. Elias has been a produce market regular everyday for 27 years. He and his son drive two large rigs from Allentown, spending at least three hours each day on the road. “A lot of people are buying straight from growers now. But [growth of the market] is good. If there is a lot, it’s cheap. It’s like the stock market.”

With the current proposed development, the departure of the produce center would presumably open up the port to long-needed expansion.

ON THE WEB
Philadelphia Regional Produce Market:  http://www.prpm.org, http://www.terminalmarkets.com/philadelphia.htm
O’Neill Properties Group: http://www.oneillproperties.com/company/AD.php
September 2005 Pa. Dept. of Agriculture press release: http://www.agriculture.state.pa.us/agriculture/cwp/view.asp?Q=136265&A=390

Contact the reporter at thomaswalsh1@gmail.com