Redeveloping Reading

Redevelopment projects in Reading, PA - including the 5th & Penn area downtown - are discussed by Alan Shuman, President of Shuman Development Group, with Berks County Commissioner Christian Leinbach.

Transcript

SPEAKER_01 0:10

Welcome to another edition of County Connection. I'm your host, Burks County Commissioner Christian Leinbach, and we have a great guest today, Alan Schumann, president of the Schumann Development Group, and we're going to talk about redeveloping Reading. Welcome to the show, Alan.

SPEAKER_00 0:30

Thank you very much. It's a pleasure to be here.

SPEAKER_01 0:32

Well, recently the big news was a letter of intent was signed between Schumann Development Group and the City of Reading for the Fifth and Penn project. And we'll get to that.

SPEAKER_00 0:44

Okay.

SPEAKER_01 0:45

But let's first talk a little bit about you. Where did where did you grow up?

SPEAKER_00 0:50

So mostly I grew up in central Pennsylvania or north central Pennsylvania, Sealins Grove, Lewisburg area. Bucknell, I believe, is uh Yeah, I went to Buck. That was my senior uh, instead of going to high school my senior year, I went to Bucknell for a year.

SPEAKER_01 1:03

There you go. And so uh your your what was your earliest connection to Reading? I mean, Sealins Grove, I don't want to say it's that far. I've been there, I've been to Lewisburg. But what's your earliest connection to the city?

SPEAKER_00 1:15

So my earliest personal connection to the city was I married my wife uh when we both were went to Penn State, and she was from Berks County.

SPEAKER_01 1:23

Okay.

SPEAKER_00 1:23

That's my earliest direct connection. My earliest indirect connection was back in 1710. My my ancestors came over as indentured servants and worked on a farm in Oli. Oh wow. Uh and then in the 1850s they moved up to the Sealings Grove area. Uh and I didn't realize that until I moved back here in one of my 1710.

SPEAKER_01 1:44

1710. I thought line box were one of the earliest. We Oli as well, but 1723.

SPEAKER_00 1:50

Okay.

SPEAKER_01 1:51

So what was the family name in 1710? Schumann?

SPEAKER_00 1:54

Uh no. Uh it was Shrey.

SPEAKER_01 1:57

Shre. Yep. Have to look that up. That is that's pretty exciting.

SPEAKER_00 2:01

I don't know if you'll see it too many places as indentured servants, but.

SPEAKER_01 2:04

No. But you never know. You never know. What sparked your interest in real estate and development and when?

SPEAKER_00 2:13

So uh I always have loved historic buildings. Um not that I am an architect, but I love the historic buildings and I love putting the time in to restore the horse uh the historic buildings. So, really, the first time I came to Reading back in, oh, I think it was probably 91 when my wife and I got married, 1991, and saw the beautiful buildings in the downtown. And outside of, you know, outside of Philadelphia or Pittsburgh, there's no other city like Reading in the state that just has this beautiful architecture. And I loved it then. I drove very first time I'm driving through saying, wow, it'd be amazing to, you know, see the insides of some of these buildings. And now we've restored a significant number of.

SPEAKER_01 2:58

Abe Lincoln being one of the historics.

SPEAKER_00 2:59

Abein, the Burks Trust Building. Right? Yep.

SPEAKER_01 3:03

Absolutely. So when did you get involved in development and were there any influencers or mentors uh that impacted you uh as a young guy getting into development?

SPEAKER_00 3:18

So back when I was in high school and college, one of my summer jobs, uh one with my uncle was renovating apartment buildings. He owned some buildings next to Bucknell, and I would work on those with my cousin, uh painting them and and cleaning them out in the summer. And then when I was in college, one of my summer jobs was working with standard construction out of Pittsburgh, who was rent they were renovating some of the buildings at uh at Bucknell University. So I got into construction there. Didn't like, I mean, I I learned construction, but I didn't really like the construction. Um but that kind of helped me, and then honestly, uh my wife and I got married. I was in the military for a while, got out of the military, came down here at Reading, and I actually sold computers at Circuit City when I got out. Okay, I remember Circuit City. And was in the U.S. Army Reserves while I was doing that, and my wife's like, Alan, you always love buildings, and one Christmas she put in a bunch of extra hours at work and bought me uh some kind of how to get into real estate investing systems.

SPEAKER_01 4:24

It wasn't real estate investing for dummies, was it?

SPEAKER_00 4:26

Yeah, it was something like that. But before they came out, right. Um but the same kind of thing, uh I think it was Charles Gibbons, something like that. Um, and she got it for me, and she, you know, she put in all this extra time at work, and I went through the whole thing, and I'm like, you know what, I'm gonna give this a try. We bought So this was a course. This was a course. Okay. Um and in 1994 we bought our first building, a four-unit apartment building in 1327 Perky Oman Avenue here in the city, beautiful big Victorian that had been converted to four units. And we lived in one of those units uh and renovated the rest of it. And then a year later we bought another one down the street at 1500 Perky Oman Avenue, and a year later we bought another.

SPEAKER_01 5:07

And did you do this personally, or was this the beginning of Schumann Development?

SPEAKER_00 5:12

This was the beginning of Schumann Development Group.

SPEAKER_01 5:14

Uh and you know So the group at that point was you and your wife?

SPEAKER_00 5:18

Oh, yeah, and that's all it's ever been. Okay. Uh you know, we it sounds big, um, but it's always just been her and I. Okay. And every year we just did one more and one more and one more, and you know, they kept getting bigger and bigger. Uh in 2001 we bought the X side building at 645 Penn Street, which was our first big commercial building, and we've been doing all big commercial buildings since.

SPEAKER_01 5:42

And let's uh touch on the X side building, because I believe that was the first place I met you. And I'm I'm trying to think, I don't know if it had to do with running for commissioner or what it was, but I reached out to you and you were living on one of the floors.

SPEAKER_00 6:04

Yeah, so uh we lived in the executive suite there. Uh we had some uh you know uh real estate has its ups and downs. Sure. And we had a a terrible down there in that we bought the XI building and leased it back to XI Battery, uh four floors in the building. And December 23rd, 2003, they came up to my office and said they were filing for bankruptcy and weren't going to be paying rent anymore on 80 percent of the building. So that forced my wife and I to uh file for a chapter 11 restructuring bankruptcy and during the Which is different.

SPEAKER_01 6:44

Chapter 13 is you're out of business, right?

SPEAKER_00 6:47

11 restructure. So we restructured some debt and some financing, and as part of that to save on costs, we lived in the office suite there for two years. Um and my wife cleaned the bathroom. We couldn't afford at that time we couldn't afford the janitorial, so she cleaned the bathrooms, and I did 100% of the maintenance and leasing.

SPEAKER_01 7:06

So I think that's an important point. Uh so often, I think generally public and maybe even more so, uh younger people look at someone like you and say, wow, he's rich, uh, he's successful, man. And they don't understand the story of what it takes to get there. Uh you you're a small businessman. You've had a lot of successes, but I think it's important that people understand things can change on a dime. And I remember uh Xide was a big player. This was the world headquarters.

SPEAKER_00 7:46

So well we got bank financing. The bank was thrilled because here you got a New York stock exchange listed company worth billions of dollars. Uh and yeah, just like that. They filed for bankruptcy, they did a restructuring, kicked out the the lease. You know, that was everything we were.

SPEAKER_01 8:06

They left a lot of ugly stuff in their wake uh in the Reading, Lauraldale area. That's another story for another time. But what do you consider? You've s shared some of the projects, uh, how you started, uh, you know, residential, uh Xide, I believe, is your first really big building. You get blindsided. Uh what was the project that in your mind really changed the game for you and Marina?

SPEAKER_00 8:38

So Xide was the first big project that really changed things because we realized how fast things could change and how badly they could change. Um so we learned a lot from that. And then really Xide was bad, but it was also our really one of our best projects. Um because after the whole Chapter 11 restructuring, we couldn't get financing to refinance the building. So none of the banks would refinance it. So we ended up having to put up for sale. I remember. And it just happened to be as the market was skyrocketing up back in 2005 and 2006, and we right before the collapse. Yep, and we were flooded with buyers from New York and New Jersey. We ended up selling the building for three times what we couldn't get financing on it for. Um and then with the the proceeds we got from the sale of the building, we ended up dumping that into the Reading Outlet Center, buying pretty much that whole six-block area, ten buildings, and spending the next decade restoring that whole neighborhood.

SPEAKER_01 9:42

Yeah, I I mean some of your projects, I mentioned the Abe Lincoln. Uh you in since the 90s when it closed, uh, there was at least one other entity that had uh taken that on and tried to keep it as a hotel. Uh you took it on, and uh even there you learned some lessons. It wasn't going to survive long term as a hotel, uh, the MT building, uh the I call it the Meridian uh bank, First Trust. Uh there have been a lot of real, I think really important signature projects. You obviously believe in the city of Reading. Uh I think one thing that's important as we look at the history, and we'll touch on this in in just a minute. Uh I want to be cautious. I've I'm in my 19th year, uh I've served over the course of four different mayors, and every mayor, every council said economic development, we were going to develop here, and it just hasn't happened. I there have been some public projects, but really significant private uh development, it's just been very limited in what we've been able to see. Uh you stayed committed. Why and what's your long-term uh vision for human development in the city of Reading?

SPEAKER_00 11:13

So, well, let's start with why. Um two things with why. First of all, back when we sold the excite building, 645 Penn Street, uh, we had gone up and down the East Coast, as far south as Mobile, Alabama, uh, looked at Memphis, looked at buildings in Buffalo, New York, and there were some opportunities there, but really just as we were getting ready to move forward with some of those, the economy collapsed in 2008.

SPEAKER_01 11:40

October 2008, remember it well.

SPEAKER_00 11:43

And with the economy collapsing in 2008, all of a sudden that opened up the opportunity to s to refocus on projects in Reading, which is where we wanted to be all along, but the prices were just outrageous uh for a while there. Um so that's one reason. The other reason is I'm a firm believer in the grass is not greener on the other side of the hill. Uh what you got make the best of it. So it takes a whole lot to get me to go somewhere else. Um, you know, again, I'm a big believer in persistence, is 90% of your success in business. Yeah. Just keep working and working and working at it until things fall into place.

SPEAKER_01 12:23

One of the famous quotes from uh Teddy Roosevelt was do what you can with what you have where you are. And I think you're right. I I think so often people try something, it doesn't work, and they go someplace else, and then someplace else. You really stuck through uh this and it's paid off. And let's transition uh Mayor Moran, uh, Council, David Barr in planning, Jack Gumbok, uh work that works for the uh mayor, English Bradley. Uh this was a big, big announcement, uh, especially on the heels of having to demolish uh two of the buildings. As you look back from a historic standpoint, you and I before the show, uh some of these buildings have been basically vacant since the 1980s, in particular the two uh that were demolished. And uh the city acquired uh this uh stretch of buildings in 2013, but the city and mayors uh since the 90s have been talking about this area needs to be redeveloped, redeveloped. How many times have you put forward uh proposals on this specific uh piece of property? Well, this was the sixth. The sixth time. Why the failure in the prior and why success now?

SPEAKER_00 13:58

Oh uh failure of the prior times in moving forward, we had some some uh uh how do I say this? Some mayors and people in the the positions at City Hall that really wanted to work with anybody else but me. Um and some of those mayors specifically wanted to they thought that by attracting out-of-town investment that it would be better somehow than local investment. And usually that is not the case. Um I mean I get calls every week from mayors all over the you know, eastern Pennsylvania and Eastern Players. Come to our town. Exactly. Um but you know, up until the current group uh got into City Hall, um I I would never get a call from the City of Reading. I'd get a call from the mayor of Allentown or York or somewhere else before I'd ever get a call from the City of Reading. Um and now we finally uh, you know, the mayor has has finally put a group in that actually will listen to what you need to move forward. People don't understand a development project just doesn't fall on your lap. I mean, there are a thousand pieces and it's like a row of dominoes. If one of those is out of line, there is no moving forward with the development. And you see that at the county with some of your big projects that you guys try to fast track because they will never get where they're going and they'll never get completed if they don't get some help.

SPEAKER_01 15:32

And even this project early last year had a developer out of Philadelphia. Uh and uh I think it was shortly after the first two buildings were demolished, uh, that developer was out. Uh so the mayor uh came to you uh I soon and said, Hey, let's let's do a deal. So just to the extent that you can share what got this deal done.

SPEAKER_00 15:59

Uh really it was just um the city of Reading and the Mayor's office and the new CD director being willing to sit down and take the proposals I submitted before. Give me a call up and say, Hey Alan, you know, are you still willing to move forward with this? We know the buildings are in different conditions, we know two of them are already down. Um, can you still make this work? And if you can, what do you need from us? And honestly, it's the first time in 30 years of doing work in the city of Reading that that City Hall has actually called me and said, Hey, Alan, how can we help to make this work?

SPEAKER_01 16:38

And that's exciting. Uh I often talk to people about businesses in general. Uh a business in our community that is family-owned and the family lives there is much more influential and I think more reliable because they live here. I uh had a discussion earlier today about East Penn manufacturing, uh, our largest employer, but still family-owned. Uh the family lives in the area. It makes a big difference. And your commitment over a couple of decades now uh to the city of Reading uh it to me is a much safer bet, if we want to put it in those terms, than a developer who's never done anything in Berks County. So, with that, let's transition to the fifth and pen uh project. Okay. Uh the letter of intent. Why is that important?

SPEAKER_00 17:35

So the letter of intent just says that we're in broad strokes on the same page, and we're working through the intricacies now of putting together an agreement of sale. Um and what a lot of people don't realize on development is we're not talking about, oh, we need some subsidy or some some money. Uh you know, there might be some of that, but it is okay, how are we going to set it up so that it can be developed? There's there's different financing for different pieces. Certain pieces could get historic tax credits and need to be restored to a historic standard. Certain other pieces might be new construction on that site and would not qualify for the historic tax.

SPEAKER_01 18:18

But where the buildings are missing, that's new construction, no doubt about it.

SPEAKER_00 18:21

But it wasn't up until last year. Correct. So the requirement was that those had to be restored to the historic standard. So there's a lot of different pieces that all go into you know, pulling together a project like that.

SPEAKER_01 18:35

And the letter of attent just shows that this is the agreement, the points of agreement between human development and uh the city of Reading. Uh as you look at that, is this is this the essence of a public-private partnership?

SPEAKER_00 18:53

Uh I think so. Um the property is still owned by the City of Reading. So we're gonna end up dividing it up into four or five different parcels because over the years it's been merged. So the letter of intent says we're gonna redo, we're gonna do agreements of sale, we're gonna subdivide it into the parcels. We're gonna be certain parcels will need to probably have city support to have some zoning uh changes or some zoning variances for them. One of the parcels is going to be continue to be owned by the city with an easement back for us to have access through it. So, yeah, I'd say it's definitely a pub public-private partnership.

SPEAKER_01 19:34

What's the next step that moves you from the letter of intent to construction? And we'll talk a little bit then about the timeline.

SPEAKER_00 19:44

Uh well, we got a couple of things. And when you say construction, we're talking again about five different parcels now. Correct. And one of the reasons we want to break it up like that is because one of those parcels we will probably be able to be under construction. I am hoping by the end of March. Um March as in the four weeks from now, yes. Um we are working through getting that in place to start on that piece because we would like to finish the historic bank building there by the end of this year. Okay. We need to start on it now. And we have already engaged a historic tax credit consultant who is working away through the process for that and all the historic approvals by the city and the state Federal Government.

SPEAKER_01 20:29

The location of an inn where Washington visited.

SPEAKER_00 20:33

It is.

SPEAKER_01 20:33

That's what I thought.

SPEAKER_00 20:34

Yes. Um there's different pieces. Now, some of the pieces, you know, for example for example, the vacant piece where the buildings were taken down, we have got to go through zoning, we have to go through land development. You know, that's gonna take a good year and a half to get through all the approvals to rebuild there, um, and maybe longer. Um we're still dealing with some infrastructure issues and stuff there. But we've got a letter of intent. What the letter of intent says, we can go from that to full agreements of sale on each one of the parcels.

SPEAKER_01 21:04

So what are we looking at? And I don't know if they have uh some photos. Uh what are we looking at from a conceptual standpoint? We have a photo up now. Just tell us this is the corner, really. Explain what we're looking at and what the concept basically is.

SPEAKER_00 21:20

So you got the farmers, I believe it's the farmers bank uh building fully restored to its historic 1925 when it was put back in place, which uh most people don't realize that had a skylight in it, and the skylight alone is going to cost us half a million dollars to recreate and put back in. So and that is something when you mention local developers, that's something no one would ever do who's not local because if it there you're not getting a return on that. Um but I'm getting the personal return that we're saving local history. So we got that building, we've got the high rise to the right, the Colonial Trust Building, which is being restored.

SPEAKER_01 22:00

No, stick with the prior picture. Yep, stick with the prior picture.

SPEAKER_00 22:04

There you go. And that building is being restored to upscale apartments or converted to upscale apartments.

SPEAKER_01 22:12

And that was a bank on the back side most recently, and a clothing store, I think, called Archives or Archive in the front, and that closed some time ago.

SPEAKER_00 22:23

And we will be putting retail back in on the first floor, and then I, like I said, upscale apartments. Then on the left-hand side of that photo, you see a brand new building there. We're anticipating it five stories high. We might be able to go six, two floors of retail, and then three to four floors of residential units above that. One of the reasons we're pushing the retail there use is we expect to have 52,000 square feet of retail at this site, which is going to help with the CRIS financing to pay for the project.

SPEAKER_01 22:54

Fantastic. So uh, and this is really the only picture we want to look at, but that uh area on the left-hand side of the photo, right now there is uh a building still standing right next to the farmers trust. Yes. Are will you be trying to save at least the facade of that building, or is that too far gone?

SPEAKER_00 23:18

So that building's been condemned. It's mostly collapsed on the inside. Right. And if you it so a lot of people think that facade's original. The facade's not original. Okay. Um the facade has had numerous major changes to it. Uh you know, first uh you had the sh the brick and terracotta that you see there now, I believe that was put on about 1900, but it had all glass on the first floor. And then in the 1930s, the glass was taken out and it was enclosed like you see it now. So not only is it not original, but it's been modified several times. The structure behind it is bad. And we've already spoken to the National Park Service. There are no uh tax credits available because it's been modified so much.

SPEAKER_01 24:08

And that happens, but a lot of people may not realize that. Uh getting a little bit tight on time. So the timeline, you're hoping to start uh the the bank building in the middle, farmers bank or first trust, it's not first trust, farmers bank, uh, by the end of this month. Uh what do you think to get the whole area done? Is that a two to three year process?

SPEAKER_00 24:34

So the bank building we're hoping to finish up by the end of 2026. We want to start the nine-story building, um, convert that over to residential. The last quarter of this year, have that finished up probably third quarter of 2027, and then as we're finishing up that kick off the new construction and have that finished up by the end of 2028.

SPEAKER_01 24:58

That's fantastic. Very exciting. Uh, we have just a couple minutes left. What what's your vision for Reading and downtown? Obviously, knowing that you're working with Mayor Moran, uh working with his team, working with council codes, uh, et cetera. But what do you see, Alan Schumann and Marina Schumann, 20 years from now, your impact and vision for Reading?

SPEAKER_00 25:29

So downtown Reading has still not gotten to the point where it has the critical mass to move on its own. And, you know, one of the things we really learned when we did the Reading Outlet Center neighborhood was when we acquired all 10 buildings, 640,000 square feet over six city blocks with a thousand parking spaces, we could renovate that neighborhood, and it was a critical mass. Once you hit that, right now there is no additional subsidy needed for businesses to go in. You've got banks willing to do private financing there for new businesses. We're 100 percent occupied our shopping centers and the everything else. Very impressive. And we want to hit that in the downtown. We figure we probably need close to 80,000 to 90,000 square feet of quality retail in the downtown. And I say quality retail, you'll see some vacant storefronts in the downtown, but those buildings are typically owned by non-local people who, you know, the building will need sprinklers, it'll be need fire, it'll need hundreds of thousands of dollars worth of work to move a tenant in, and they're not willing. So we've got a big announcement we're gonna make next week with the mayor about another project in the downtown. I've got two great national retailers already talking to me about moving to that location. And, you know, all this is exciting stuff. We're hoping that very shortly we hit that 80,000 to 90,000 square feet.

SPEAKER_01 26:54

Well, I want to thank you for joining us for County Connection. Uh very exciting. I think in all the time I've been with the county, this is the most exciting economic development that I've seen uh here in anywhere in the city, but especially in downtown Reading. I want to thank you for joining us for another edition of County Connection. I hope you've enjoyed hearing from our guest, Alan Schumann, and about the Fifth and Penn Project and about the future economic development in Berks County. I'm your host, Berks County Commissioner Christian Leinbach, saying thank you for joining us and see you next time on County Connection.