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Maybe that’s just salesmanship from a man who built his first modest subdivision in 1987 while a junior at Bucknell University and, in the 21 years since, has grown his company into the largest active homebuilder in the city. On the other hand, maybe John Westrum knows something that other folks don’t.
“This is something that we don’t have anywhere else in the city of Philadelphia,” Westrum said during a recent tour of the job site, with a row of townhouses and a cluster of quads already up and awaiting interior and exterior finishing work.
What exactly makes it unique? Plenty, he says.
New market-rate housing of any variety within the city is rare, according to Westrum, whose company has built, or committed to build, some 3,000 units throughout the city and has invested more than $1.5 billion in city development since 2002. That’s the year Westrum shifted his business strategy from suburban developer to urban developer.
Unlike new housing developments outside Philadelphia, Eagle Pointe and Westrum’s other city projects benefit from the incentive of the local 10-year property-tax abatement. That is, buyers of new homes in the city don’t have to pay property taxes for the first 10 years.
Local demographics also figure to work in the Byberry development’s favor.
While toiling like most other regional developers in the suburbs in the late 1990s, finding open-space advocates and anti-urban sprawl activists at nearly every turn, Westrum developed an age-restricted community concept to capitalize on the burgeoning market of older adults. With baby boomers on the cusp of their golden years and both Pennsylvania and New Jersey ranked among the oldest populations in the nation, the strategy seemed like a slam-dunk then, and it still does.
Eagle Pointe will also be an age-restricted community. Residents must be age 55 or older. In addition, its components and appearance are very much like earlier Westrum developments in the suburbs, with 85 single homes, along with a relatively large amount of open space and landscape features.
Of course, the development is completely within the city. Westrum views that aspect as a major selling point. In fact, his belief in the attractiveness of city living was a main reason he sold off a series of suburban properties and their development rights, along with the Fox Run development in Fox Chase, to Pulte Homes in 2001. He wanted to invest in the city.
“I said, ‘I’m going where I think people want to be — population centers,’” he recalled. “So I formed a big fund and started buying up properties. Each community has a different vision and different types of homes.”
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His first city project was Spring Lane Meadows in Roxborough. Then, in South Philadelphia’s Packer Park, he converted former military barracks into a new townhome community.
In the distressed North Philadelphia neighborhood of Brewerytown, Westrum bought 16 acres and is in the process of building more than 500 units. An initial phase consisting of 144 townhouses already is complete.
“It was a strategic shift of going from suburban to urban,” Westrum said. “Our strategy is not (to target) core Center City. It’s (to target) stable and developing neighborhoods.”
Rising fuel prices have served only to reinforce Westrum’s logic, as commuting between the city and outlying suburbs is becoming costlier by the day, he notes.
Building in the city has its drawbacks, too. The lack of available open ground, a difficult permit process and exorbitant costs have scared many developers away over the years.
Westrum has overcome the lack of space by adopting a willingness to redevelop sites like Byberry and Brewerytown where demolition and environmental remediation may be required before new construction can begin.
Meanwhile, he has found that the bureaucracy has eased a bit because of cooperation by the Building Trades Association and the city administration on initiatives including the Zoning Code Commission, a body created through a May 2007 public referendum to modernize the city’s zoning code.
Costs remain a problem, according to Westrum, who counts union labor as a challenge for any company that wants to build in the city.
“The costs in the city are literally forty percent higher than across the line at the back of our property,” said Westrum, referring to the border that the Byberry site shares with Bensalem, Bucks County.
“I think the building trades are recognizing that (for) the status quo on a market-rate residential product for middle-class people, there has to be changes to make things work,” the developer said. “We’re just looking for fair competition.”
Westrum says he employs about 100 union workers on site, including carpenters, electricians, plumbers and sheet-metal workers. However, much of the home-fabrication process has been taken off-site and moved outside the city.
Individual wood-frame units are assembled in a so-called “controlled construction environment” and brought by truck to the Byberry site, where they are mounted onto the foundations.
“We finish the exteriors on-site,” said Mo Rushdy, general manager of the Eagle Pointe project. “The flooring is done on-site, and the finishing carpentry. We marriage the space between the boxes.”
The process is faster and more uniform in terms of building quality, Westrum claimed.
“The foundations have to be perfect dimensions,” Rushdy said.
The process also is cheaper than building everything on-site.
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Generally speaking, Westrum seems to be a natural at adapting to market conditions like that. Perhaps much of that savvy and intuition can be traced to his formative years in the industry.
Long before he was a rookie land developer in his college years, he got his first taste of the business from the ground floor of his father’s homebuilding company, E&W Corp. According to the Westrum Development Web site, by age 11, he was “pushing brooms and digging ditches” for his father’s firm.
The younger Westrum struck out on his own with the practical knowledge of his youth and a precocious ability to raise capital, an aptitude he has shown many times over.
“When I was a junior in college, I bought a piece of property in Upper Dublin Township. It was twenty-four units and I took it through the entire approval process.”
He parlayed that success and grew the company into a regional leader.
“It was all suburban through the late nineties,” Westrum said. “Then, based on environmental constraints and policies, I saw a change in the wind.”
Another factor that weighed on the decision to move his work into the city was that working-class folks had few or no options if they wanted to find a newly built home while staying in the city.
The Philadelphia Housing Authority was rehabbing and replacing subsidized housing for low-income people, while downtown developers built pricey condos for the affluent.
“But for the middle market, there was nobody there. And there was a mass exodus from the city to the suburbs,” Westrum said.
Considering today’s tenuous economic climate, convincing middle-class families to move anywhere seems to be a growing challenge for those within the industry.
On the national level, the U.S. Department of Commerce reported on March 26 that sales of new single-family houses in February reflected a seasonally adjusted annual rate of 590,000, the lowest figure in 13 years and a 30-percent decline from the February 2007 estimate.
Meanwhile, the median price of new homes sold in February was $244,100, an increase from January’s figure of $225,600 and a slight drop from the February 2007 figure of $250,800.
Also, inventories of unsold new homes remained well in excess of the supply at the same last year. The estimated 471,000 new homes for sale across the country at the end of February represented a supply of 9.8 months at the current sales rate. The government reported an 8.1-month supply in February 2007.
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The stagnant new-home market is not surprising, considering the nation’s credit crisis.
According to a March 9 article in USAToday, nearly 3 million homeowners were behind on their mortgages at the end of last year, and an additional 1 million or more borrowers were at risk of imminent foreclosure. The newspaper cited the Mortgage Bankers Association for those figures.
However, the struggles of the housing market and lending industry have been felt less in the Philadelphia region and the northeastern United States than elsewhere.
The National Association of Realtors reported recently that in February the seasonally adjusted annual sales rate for existing homes rose 2.9 percent nationally over the previous month, including an 11.3 percent spike in the country’s northeast.
Westrum, echoing the assessment of market analysts, notes that the Philadelphia region didn’t experience the same level of growth as other parts of the country during the housing boom. So the market decline also has been tempered.
“We never saw massive development or massive price appreciation,” Westrum said.
“Clearly the market has decreased. Our paces have gotten a lot slower in the last twelve months,” he said. “We maybe have a drop of five to ten percent, but not twenty-five to forty percent like other areas of the country.”
Builders in this area must fight public perception as much as real economic factors like home prices and interest rates, he claims.
“Most of the drop and reduction of buyers has been people being afraid to move,” Westrum said.
Despite the challenges, the Eagle Pointe project has not suffered from a lack of interest.
According to Nadine Grant, sales manager for the development, Westrum has compiled a list of 2,000 people who have expressed interest in buying there. About 300 folks showed up at a “soft” opening in September.
Grant and her staff welcome 25 to 30 people a week into the temporary sales office on-site. Visitors can take virtual tours of the finished community on a high-definition video screen, pick up colorful pamphlets detailing the floor plans and amenities of various home styles, and ask questions of the sales representatives.
“The 55-plus people, they stay a long time. They like all of the answers,” Grant said. “They’re here at least a half-hour or forty-five minutes.”
The initial two phases will feature what the company calls its villas and carriage homes. Carriage homes are its version of townhomes. Villas, also known as quads, are grouped four units per building. Each unit sits at ground level and shares common walls with two adjacent units.
Future phases will include more villas and carriage homes, six condominium buildings and the aforementioned singles.
Current prices range from about $350,000 to $380,000 for the carriage models, and about $390,000 for the villas. Current condominium prices are in the middle to high $200,000s, while the singles range from the high $400,000s to the middle $500,000s.
As completion dates get closer and demand increases, the developer will continue to raise prices.
“We have increased our prices from the grand-opening scale by four to five percent,” Westrum said. “And once the models open, we will increase another five to seven percent, and that’s because of demand — once (visitors) can walk through and touch things.” ••
Reporter William Kenny can be reached at 215-354-3031 or bkenny@phillynews.com