Upgraded, market-rate rentals are also in the works.

With a $40,000 improvement, the legal vacancy rent would be $2,080, more than enough to qualify for deregulation, and market-rate rental.

The activity is being stoked by demand for market-rate rentals.

"The buildings will be a combination of market-rate rentals and condos."

Builders say conventional financing for market-rate rentals is unavailable.

The surplus was attributed to high occupancy rates, market-rate rentals and good management.

In Center City alone, 100 commercial buildings have been or will be converted to produce about 5,000 market-rate rental and condominium apartments.

Some will revert to market-rate rentals in compliance with 25-year-old development agreements.

Of the total state investment, $9.2 million will be for property acquisition, loans to the developer and permanent financing for the market-rate rentals.

It is planned for market-rate rentals, the architect said, with perhaps some condominiums for sale in the tower.