Friday, June 23, 2017

Burlington Coat Factory Leases 43,091 SF in Red Rose Commons

Burlington Coat Factory signed a lease for 43,091 square feet in the office building at the Red Rose Commons Shopping Center at 1700 Fruitville Pike.

The shopping center in Lancaster, PA, totals 463,042 square feet. Goldenberg Development developed the property in 1998 and now provides leasing and property management for current owner Vereit, Inc. Other notable tenants include Barnes and Noble and Petsmart.

Wednesday, June 21, 2017

5 Cap Realty Planning $1 Billion in Multifamily Acquisitions

A new national investment venture of 5 Cap Realty LLC has acquired two multifamily complexes for $60 million as part of its strategy to launch a multi-year national investment venture that could top $1 billion in assets under management.

Plymouth Meeting, PA-based 5 Cap Realty LLC and its affiliate RREIC Advisors has teamed with a private equity fund vehicle managed by JMP Asset Management LLC, an affiliate of publicly traded JMP Group LLC (NYSE:JMP), to focus on acquiring and operating value-add multifamily assets.

This new partnership has closed on its first two acquisitions: an apartment community in the Philadelphia metro area and another in greater Atlanta, with a total of 446 units, for a total cost of just under $60 million.

“This is a great opportunity at a pivotal time,” said David Reiner, RREIC Advisors’ managing director. “There are a lot of undermanaged assets in the marketplace. Our team has demonstrated throughout its history that we can identify these assets and reposition them with better management, marketing, and capital improvements.”

“Our plan is to build a billion-dollar multifamily investment platform. Over the next five years, we are targeting the acquisition of 10 properties per year, each with 200-300 units, focusing on the nation’s top 50-60 markets,” Reiner said.

The Philadelphia area acquisition, Summer Chase, is about 28 miles from Center City in Limerick, PA. The property has 198 units. The property was acquired for $36.3 million ($183,333 per unit) from Capri Capital Partners, an institutional seller. The new ownership plans to invest $2.5 million in renovations including kitchens, bathroom fixtures, and HVAC systems. Freddie Mac provided the debt financing.

The Georgia acquisition, Grove Mountain Park, is about 18 miles from downtown Atlanta, and was acquired for $21.6 million ($81,000 per unit). The venture plans to invest $3.15 million in renovations to common areas and individual residences. Debt financing was provided by Fannie Mae.

5 Cap affiliate Forty Two LLC (Forty2), a multifamily property management, development, and consulting firm, will manage all of the JV’s acquisitions. Forty2 managed Grove Mountain Park prior to the acquisition and is taking over management of Summer Chase.

RREIC is the founder and sponsor of the Delaware Valley Real Estate Investment Fund and co-sponsor of Develop-DC LP. DVREIF is an open-end commingled fund whose investors include eight of the largest Philadelphia building trades union pension funds. Through DVREIF, RREIC targets major value-added, development and redevelopment and projects with top-tier sponsors located throughout the Philadelphia area.

Develop-DC is a closed-end fund that is jointly sponsored by RREIC and Real Estate Capital Partners of New York City. Develop-DC is focused on new development projects in the greater Washington, DC area.

Capri Capital Partners Sells Summer Chase Apts for $36.3 Million

A partnership between a Pennsylvania-based real estate investment firm and a private-equity fund managed by JMP Group, Inc. announced the purchase of the Summer Chase Apartments in Limerick, PA, for $36.3 million, or about $183,333 per unit.

The partnership of Plymouth Meeting, PA-based RREIC Advisors, LLC and JMP acquired the 198-unit property at 100 Hunsberger Dr. from Capri Capital Partners, LLC.

The community was built in 1999 on about 15 acres and includes 26 buildings totaling 216,254 square feet. The new owners plan to spend $2.5 million on renovations of the kitchens, bathroom fixtures and HVAC systems. Occupancy was 95% at the time of sale.

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Lehigh Valley Capitalizes On Drive Time Between Eastern Population Centers

by Steve Lubetkin,
The Lehigh Valley market wasn’t always a big focus for industrial developers. In the 1970s and 1980s, when target sizes of warehouse projects were 100-200,000 square-foot properties, developers and logistics companies focused mainly on northern and central New Jersey.

“The metrics have changed with e-commerce. It really is about the eight hour drive time, getting to Boston, getting down to Richmond. When you draw the big circle with the current freight driver rules, the big circle gets you to roughly one third of the US population in a one-day drive.  Now logistics companies are really putting circles on the map as to where they can hit the population within that drive time.”

The logistics companies that began selecting Pennsylvania sites in the late 1990s are finding a better tax and employment environment. “They’re getting a better-priced, better quality employee on the Pennsylvania side of the market."

One advantage the Lehigh Valley maintains over northern New Jersey is a mix of both greenfield and brownfield sites, where most of the development in submarkets like the Meadowlands is being done on brownfield properties that may need expensive environmental remediation before redevelopment.

However, the intense interest in Lehigh Valley locations is driving up costs and making land more difficult to find, he says.

“There was an abundance of land 20 years ago, that is becoming more pinched, so people are coming up with pieces of ground that are a little further afield, and the price of the land has definitely escalated significantly,” he says. “In 1988 we were doing land deals around $35,000 an acre for improved ground, and today we’re between $175,000 and $255,000 an acre. But we are still below the per-acre costs of New Jersey.”

Although much of the development activity in the Valley is focused on industrial “big box” warehouses because of proximity to highways like I-78 (serving North Jersey and New York), Route 33 (running north from the Lehigh Valley to the Poconos region) and Route 100, which provides access to I-78. Class A retail development is also faring well in the region.

“Well-located retail sites are still doing well,” he says, although large retailers are also going through some dislocation and retrenchment as in the rest of the country.  Class A retail sites are running at 95 percent occupancy, while class B assets “have had a little more challenge,” and are being converted to different uses like medical office product.

The office market has had a slight uptick in downtown Allentown, mainly because of some tax incentives encouraging office relocation there.

“We’re not seeing employers laying off people, but we’re not seeing them take a lot of office space, especially in the suburban office market. Our net absorption is flat for office.”

Lehigh Valley investors need to plan for the eventual slowing of the big-box industrial market, which has been robust for more than a decade in the region.

“The number of square feet being absorbed are going to slow precipitously, because you can only fit so much product with so much consumerism in the whole country,” he says. “The Valley had historically absorbed a million and a half square feet of warehouse, but the last five to seven years, we’ve been absorbing four to eight million feet a year. That growth is unprecedented, and you have to be a little cautious and realistic that that growth is going to slow.”

One sector that hasn’t grown for some time in the Lehigh Valley is flex. This is mainly because rental rates are not high enough to justify construction costs,  but that seems to be changing.

“We’re slowly beginning to see the rental rates escalate enough that it will become more cost-effective to go back to building some of the flex buildings,” he says. “Now we’re seeing the rental rates for flex space exceed $6, up to even $7 and $8 triple-net, for warehouse flex space, that will allow the developers to go back to putting up 50,000 or 100,000 foot flex buildings.”