While Kensington is known as the epicenter for the Philadelphia opioid epidemic, the neighborhood has become a hotbed of residential development that has resulted in land prices spiking to levels that were not only unheard of just a few years ago but unthinkable.
Riverwards Group, a development company that has been active in Kensington, recently paid $6.5 million for a 1.86-acre parcel bounded by Cecil B. Moore and Germantown avenues and North 5th Street. Another vacant piece of land bought by Riverwards in the 1600 block of North 5th traded for $3 million, according to Arthur Deussing, a broker with Prestige Realty who helped arrange the sale and was also involved in the Cecil B. Moore transaction.
Then there’s 2621 Frankford Ave., where a former lumberyard once sat on a little over two acres. “It’s drawing a lot of attention,” said Mark Duszak, a broker with Rittenhouse Realty Advisors. The asking price is $31 million.
If that seems like a jaw-dropping amount to pay for two acres anywhere let alone in Kensington it is, but Duszak believes it’s justified. The site sits in a Federal Opportunity Zone and, by right, 525 residential units can be built.
While 2621 Frankford may or may not be an anomaly depending if it sells at that price, it’s common for land in the neighborhood to trade for as much as $80 a square foot. “That is an even crazier number,” Deussing said. “That’s double what warehouses were trading for a few years back.”
Mo Rushdy and Larry McKnight of Riverwards have had a front-row seat to the attention Kensington has been getting. They have been building for-sale houses in the neighborhood over the last five years and broke ground recently on Kensington Courts., a $40 million development of 155 single-family townhouses and condominiums along with 12,000 square feet of retail, a jogging trail, dog park and an acre of open space.
Riverwards’ next project, called Avenue V, is a $35 million development that will rise beginning in April on the nearly two acres it bought at Cecil B. Moore and North 5th. It will have 147 units.
“Our business plan has always been the real first-time home buyer who has been renting for six to 10 years and is now ready to buy and move into a house,” Rushdy said. A single-family home that Riverwards builds in Kensington typically sells for around $350,000.
The opioid crisis plaguing the neighborhood doesn’t deter the real estate company but motivates it in some ways. “We don’t run from it,” McKnight said. “We’re here and we’re going to change it and make people come back and live in the neighborhood. We want to rejuvenate what has been urban decay and urban blight.”
In the years it has been building in Kensington, Riverwards has seen land prices increase “dramatically,” Rushdy said. “Land prices today in many cases are really overpriced. We don’t bite. We are disciplined and try not to contribute to an overheated land price issue. That is why we don’t sign many land deals.”
Location influences price. For example, Rushdy believes land in East and South Kensington should not trade for more than $50 to $70 a square foot.
The more common $80 a square foot that raw land in Kensington sells for is a reflection of the rents apartments are getting and how much houses are trading for, but prices much higher than that aren’t achievable, said Ryan McManus of Agent PHL, a Philadelphia real estate firm involved in transactions in the neighborhood. “We’re seeing a lot of cases at the other end of the spectrum where land is being completely exaggerated for its value,” he said. “We’re talking ridiculous sums of money. It’s a false market.”
The property where Riverwards plans to build Avenue V was initially listed at $10 million and didn’t sell. McManus, who was also involved in the transaction, helped negotiate it down to $6.5 million. “Right at $80 a square foot,” he said.