Natalie Kostelni, Staff Writer, Philadelphia Business Journal
American Manufacturing Corp., the holding company of Philadelphia Gear Corp., has purchased a majority stake in Delancy Realty Services, marking the first time the century-old company is delving directly into the real estate business. The new real estate company will go under the name AMC Delancy Group Inc. and will be an adviser in developing one of the most coveted sites remaining in the western suburbs -- 27 acres that Philadelphia Gear sits on off South Gulph Road in King of Prussia.
During the next four to five years, AMC Delancy "conservatively" expects to invest between $50 million and $60 million in real estate deals.
Kenneth P. Balin formed Philadelphia-based Delancy Realty Services eight years ago after spending several years with Amerimar Enterprises Realty Co., also a Philadelphia company. While overseeing Delancy, Balin and several partners had invested and developed retail, multifamily, office, hotel and other properties mainly in the Northeastern United States. Some of Delancy's projects include the Cast Iron Building at 718 Arch St. in Philadelphia, The Awnings apartment complex off Front Street in Philadelphia, and Gettysburg Village Factory Stores in Gettysburg. It also owns Franklin Square Center, the 220,000-square-foot, round, vacant former medical building off Race Street.
Balin said it wasn't a difficult decision to sell a majority interest of Delancy.
American Manufacturing, which now goes under the umbrella name of AMC Group LLC, had been an investor in two of Delancy's projects, the Gettysburg outlet development and the acquisition of One Montgomery Plaza, a 225,000-square-foot office building in the heart of Norristown, Montgomery County. The deals provided both parties with a working foundation that enabled them to take it to the next level, Balin said.
"This is a classic example of where one and one makes five and not one and one makes one," he said.
Russ Ball, chief executive officer of AMC Group, said he and Balin prefer to invest for the long-term, and aren't influenced by outside interests. Balin referred to traditional real estate opportunity funds as an example he dislikes. Such funds often mature after a designated period and the fund manager is then forced to unload its assets.
"That's not our agenda," Balin said. "(Selling) may not be the right thing to do for a real estate asset. Let the market determine when to sell or refinance."
With the new arrangement, AMC Delancy will become one of the eight operating companies under the AMC Group umbrella. Balin will remain president and CEO of the real estate company, and Michael C. Wachs will serve as vice president. They will be the point men to scout out deals while AMC will fund investments. The structure enables Balin to have ready access to cash as opposed to lining up several investors for a deal, as he had previously done.
"Now I have no pressure to put out money," he said. "If the deal is compelling and it makes sense to do, we'll do the deal. We know exactly what our mission is."
While Delancy focused on the Northeast, the new real estate company will expand its geographic coverage, looking for investments along the East Coast. It will, however, concentrate regionally at first. The company will consider investing in all property types, including parking, retail, hotel, office, industrial and multifamily. The company will also look for joint ventures and partners in its projects.
AMC Group, a diversified investment and operating company in King of Prussia, oversees a variety of operating companies ranging from insurance to helicopters for medical transportation. While it has invested in local real estate opportunity funds, it has never before been directly involved in real estate acquisitions or development.
"When we took a look at our portfolio, one of the things that became apparent to me is that we wanted to have more exposure to real estate," Ball said. "What we want to have, as opposed to being in the fund format, is be involved in the owning and operating format."
One of its more ambitious plans will be the development of the Philadelphia Gear site.
Philadelphia Gear, an AMC Group company that makes gears for large vessels, said last November that it would close its manufacturing plant in King of Prussia after having gone through a restructuring and job elimination program. Even before the company made that announcement, real estate brokers and developers had often eyed the property as a potentially ideal spot for office or mixed-used development.
It lies close to the King of Prussia Mall and in the midst of other office and retail developments. It also is at the crossroads of the area's major arteries, including the Pennsylvania Turnpike, Route 202 and the Schuylkill Expressway.
"I've been looking at that site for office development since 1979, when I entered the business," said Jeff Mack of Smith Mack/Oncor. "I always felt that it was a site that would lend itself to Class A office development. Those buildings were always in my eye for office development."
Mack said that in the past he had inquired about the property as a potential corporate headquarters to no avail.
The property is considered an infill site, one whose original purpose has segued into a new use. Most infill sites often offer better access to labor and transportation, Mack said, citing another reason the property is viewed as prime for office development.
"It's such a terrific site," Ball said. "Our intent is to develop it at a very high level of Class A office."
Ball won't say yet how much space will be built or when construction might begin. Keating Building Corp. of Bala Cynwyd has been retained as contractors for the site.
Natalie Kostelni can be reached at firstname.lastname@example.org.