Philly paper importer owes state agency almost $1 million in back rent as forest product cargoes drop off

The state agency that owns Philadelphia’s seaport facilities on the Delaware River has taken steps toward reducing a tenant’s rent amid a drop-off in lumber and other forest products.

Penn City Investments Inc., a paper importer that operates piers and warehouses in South Philadelphia, owed the Philadelphia Regional Port Authority about $942,000 in outstanding rent as of June 30, records show.

The company’s cargo volumes fell from 481,757 metric tons of forest products in 2022 to 315,947 metric tons last year, a 34% decline, according to the port authority, known as PhilaPort. Penn City has handled 279,961 metric tons so far this year, according to PhilaPort.

Cargoes include wood pulp, paper rolls, and lumber, mostly from Sweden. Penn City is an affiliate of Penn Warehousing & Distribution Inc. and J.H. Stevedoring, companies that also operate port facilities. They are run by waterfront businessman John Brown Jr., who didn’t return messages seeking comment.

Under a proposal approved in September by PhilaPort’s board, the agency would cut Penn City’s annual base rent by $300,000 to about $3 million, adjusted for inflation — a 9% decrease. Penn City would also pay a variable fee if it hits certain cargo metrics, as well as an additional $25,000 a month until its outstanding rent is covered.

Penn City has operated Pier 80 South, Pier 78 Annex, and Pier 74 Annex — which comprise PhilaPort’s Forest Products Center — since 1998, according to records filed with the Federal Maritime Commission. The port authority owns marine terminals and warehouses from Port Richmond to South Philly and leases them to tenants. Its operating budget is funded by rental income.

“Being a good tenant that’s an important part of our portfolio, we made a business decision to grant them some relief,” said Ryan Mulvey, a PhilaPort spokesperson. He added that the agreement hasn’t been finalized and that only three years are remaining on the lease.

Mulvey said he wasn’t sure what factors might be driving the decline in cargoes. One possibility — that Penn City lost business to competitor ports in Baltimore and Wilmington, Del. — isn’t supported by import data at those ports, Mulvey said.

Overall, across PhilaPort’s facilities, break-bulk cargoes — those that are shipped on pallets and bags, rather than containers — were down 6% through October compared to the same period last year, at 912,220 metric tons.

The decline has largely been driven by a 32% drop in imports of precut lumber, Sean Mahoney, PhilaPort’s marketing director, said during the authority’s November board meeting.

U.S. imports of forest products grew in 2021 after pandemic-related shutdowns amid rising demand, higher prices, and a strong housing market, according to the U.S. International Trade Commission. But residential construction moderated when the Federal Reserve started raising interest rates in 2022.

U.S. single-family home building has rebounded lately as the Fed started cutting rates, but persistently high mortgage rates have kept some prospective buyers on the sidelines.

The port authority is bullish on growth in forest-product cargoes in the long term — specifically paper and pulp products. In a 15-year strategic plan unveiled this fall, PhilaPort cited “global trends to reduce plastics in consumer packaging and utilize more sustainable solutions like paper and pulp products.”

Even as the port has seen a dip in break-bulk cargoes, it is on pace for record imports of containers and automobiles. The port handled about 703,000 container units through October, up 13% over the prior year, and is on track to hit 840,000 by the end of the year, Mahoney said, compared to 743,000 in all of 2023.

The giant metal boxes carry products such as South American fruit and meat from New Zealand.

Mahoney added that the port — a major import and distribution center for Hyundai Motor Co. and Kia Motors Corp. in the Northeastern U.S. — handled 241,000 cars from South Korea through October, up 10% over the previous year.

In other recent action, PhilaPort in November took a step toward pursuing a warehouse development in Port Richmond.

Since 2012 the port authority has leased 11.4 acres of waterfront property there to Camden Iron & Metal, but the “site is currently idle and has contributed to short dumping in the area,” according to a memo prepared for the board.

PhilaPort’s board voted to authorize its staff to terminate the lease and sell a portion of the land — 2.2 acres — to Tioga Real Estate LLC, an affiliate of Camden Iron, for $1 million. The authority aims to use the remaining land “to include open storage and potentially warehouse development to support the Tioga Marine Terminal,” Edward G. Henderson, PhilaPort’s senior director of business development and planning, said during the meeting.