Why a NY investor loves Philly neighborhoods

Bruce Schanzer didn't grow up in a rowhouse, chasing hoagies down with Frank's sodas or Schmidt's beer. His dad is a North Jersey neurologist. He learned real estate as an investment banker at Goldman Sachs. But it would be hard to find a bigger fan of Philly's crowded working-peoples' neighborhoods than Schanzer, 45.

His company, Cedar Realty Trust Inc., owns shopping centers in Academy Park and Port Richmond, and along Columbus Ave. and Oregon Ave., the last of which he calls "my favorite street," with its mix of industry, homes, stores, parking, transit. In March, Cedar bought the sprawling Quartermaster Plaza from another New York outfit, developer Forest City Ratner Cos., for $92 million, including enough land to build another strip of big stores.

Why? "Philly isn't a moonshot town," Schanzer says as his driver speeds us down Grant Ave. between his properties. He points to the modest single-family homes on the avenue and the Airlite and Normandy rows on the streets beyond: "It's a solid town, with impressive people who like living here and conduct themselves with honor and inegrity. Look at the way people mow their lawns. There's pride of ownership. That working-class component." (The driver, who lives in the neighborhood, speaks up at this point, complaining that the shutdown of Budd Co. and other local industrial employers has forced people to commute farther and farther.)

On close contact, Schanzer seems to find his stores' customers a bit bemusing. At a Slack's Hoagie Shack in one of his centers, a very large man he saw ordering a fat sandwich "appears to lack self awareness." A bald man heading toward the restroom in a bright orange jersey with a Flyers tattoo on each side of his skull "must really be a fan."

He is especially impressed by Philadelphians who have succeeded in retailing, that mature, low-margin business, where every store chains seem to go bankrupt, eventually, and success means spreading your properties so no one chain can drive you down. And making sure there's a grocery in every center. And charging independent stores more, because they need you.

ShopRite operator Jeff Brown, with murals on the walls of his inner-city stores and his state matching funds, "is a superstar of a guy. He does a good thing by the ecommmunity. He makes money by contduting himself with integrity. I'm a big fan." And a Brown landlord.

Bart Blatstein's Piazza at Schmidt's "is the coolest. To buy up a huge piece of the town and move it along into something new, he deserves big credit for that. I love Bart. When people say they want to go into real estate development, they want to be Bart." Schanzer's company owns Blatstein's original South Philly center, including the picturesque vacant ex-firehouse Schanzer offered to demolish for a tenant recently, sparking a community outcry.

Joe Coradino, boss of PREIT, which owns the Gallery, the CHerry Hill Mall and other mostly suburban centers, "has a skill set we don't have," says Schanzer. Malls are an incredibly sophisticated, difficult business. Not like our shopping centers."

So what is the interest in shopping centers? Philadelphia is like the Bronx or Queesns, but real estate is a lot cheaper here, because big New York real estate people discount it, Schanzer says.

Steve Gartner, president of Metro Commercial Real Estate, whose agent Paul Rumley sold Quartermaster to Cedar, warns that Philly centers "might be a bargain from a raw price per pound perspective, but it's always about return on investment," and Philly returns can be correspondingly lower than New York. (Gartner also sold Schanzer's Cedar predecessors the Columbus Crossing and Riverview Plaza centers in South Philly.

Cedar traded at a deep discount to other retail property stocks when Schanzer took over in 2011. It's done well since -- nearly triple the stock performance of Bloomberg's retail real estate investment trust index -- since Schanzer began selling suburban centers like Harbor Place in Atlantic County to concentrate on more urban areas.

What's the attraction? And what happens to these places as more and more retail business moves online?

"I don't know. We're trying to figure that out," Schanzer admits. But, he adds, he'd rather own real estate in places like Northeast and South Philly, "these incredibly dense neighborhoods" packed with people who will be buying food and eating in local joints for years to come, than isolated out in what used to be America's growth suburban neighborhoods. (A shorter version of this item ran in today's Philadelphia Inquirer here.)