Why cash-strapped Philly schools can't afford to leave their 10-year-old, too-big HQ
440 N. Broad St. is underwater
Headcount at the School District of Philadelphia headquarters at 440 N. Broad St., onetime home of TV Guide when it was the most-popular magazine in America, is down to 590. The place has room for 2,000 staff -- was home to more than 1,500 when it opened in 2005 -- but, after years of cuts, much of the space echoes empty.
Why not move out? Because the district owns the property -- and has to pay off what it owes before it can afford to leave, school spokeswoman Raven Hill told me.
The state-sponsored School Reform Commission that oversees city schools, headed then by investor James Nevels (current chairman of the Federal Reserve Bank of Philadelphia, and Hershey Co.), bought the building from a Goldman Sachs affiliate in 2003 for $45 million. The school system spent $90 million more renovating it as offices in 2005, the Inquirer reported at that time. Today, the district still owes $110.7 million for the underused site, Hill told me. It will have to cover that debt, plus moving expenses, before it can afford to move, she said.
I ran that number by developer Bart Blatstein, who bought the two neighboring buildings -- he paid almost $23 million for the ex-Inquirer complex at 400 N. Broad, and $21 million for the former state office building at 1400 Spring Garden, where he spent another $70 million building apartments. Both deals closed in 2011. Blatstein thought the School District's debt on the property was so high, he laughed, and asked me to repeat it, and laughed again.
It doesn't look like the School District is likely to find a buyer willing to pay what it owes, let along relocation costs, anytime soon.
The School District appears to be in the position of a homeowner who bought a McMansion way back in the fat days of the mid-2000s -- realizes now that it no longer needs the big house -- but can't get rid of it because the mortgage is so far underwater -- so it has to keep making the big payments anyway.