Wednesday, May 24, 2017

Developers seize on Philadelphia where inventory is tight

Natalie Kostelni Reporter Philadelphia Business Journal
While there’s an increasing weariness that the multifamily rental market in Philadelphia is becoming overbuilt, developers such as David Perlman are finding a lack of inventory has made their bets on new for-sale projects less of a risk.

Perlman is moving forward with a new 43-unit residential development at 600 N. 5th St. in Northern Liberties and he’s confident the townhouses will sell. “We just completed 25 units across the street,” he said. “That took us two years to sell and that’s about a fair pace.”

Real estate agents have been bemoaning about the lack of inventory throughout the city and suburbs. In Philadelphia, the first quarter proved to be unusually strong despite what is typically viewed as a slow time of year because of the weather.

“Home sales volume in the first quarter was also both exceptionally and unusually strong,” according to a report by Drexel Unviersity’s Lindy Institute for Urban Innovation. The report later said that the activity was “exceptional because it was the strongest first quarter since 2007 and unusual because home sales activity typically declines from the fourth to the first quarter, due to the holidays and winter weathe … A likely driver of this seasonally uncharacteristic price appreciation is the very low level of current inventories.” Nationally, inventory has become an issue as well. Single-family housing starts rose to 835,000 in April, which is half a previous peak of 1.72 million in 2005.

“We’ve hit a point where there is so little inventory real estate agents are throwing out ridiculous numbers and getting them,” said Ori Feibush of OCF Realty, which builds houses in several Philadelphia neighborhoods including Point Breeze, Graduate Hospital and Old City. “You have two-and-a-half months of inventory, which is an incredibly unhealthy supply. I foresee that will continue.”

There are several factors influencing the lack of supply. A nearly 10-year focus on the multifamily rental market, what can be a lengthy approval process and an increased desire to live in Philadelphia have contributed to limiting how much new housing has hit the market. There are also signs that millennials, who have all but shunned buying a house over renting, are starting to come into the market to buy.

Full story:

3601 Market Street Apts Hits the Market

Southern Land Company, a residential developer, has put to market for sale its 363-unit apartment building at 3601 Market St. in Philadelphia, PA to prospective buyers.

The property is being listed without an asking price.

The 28-story, 443,000-square-foot multifamily property was built in August 2015 on nine-tenths of an acre in the University City MF submarket of Philadelphia County.

The LEED Silver-certified tower features 26,000 square feet of ground-floor retail space home to Jimmy Johns and Dunking Donuts beneath a mix of studios, efficiencies, one- and two-bedroom apartments and penthouses, seven elevators, concierge, business center, game room, fitness center, swimming pool, 200-stall parking garage and on-site management. The asset was 32 percent vacant at the time of sale, and asking rents range between $1,800 and $4,700 per month for apartments averaging between 427 and 1,543 square feet each.

Frank Theatres Cinebowl & Grille Preleases 68,000-SF at Granite Run

Frank Theatres Cinebowl & Grille has signed a lease deal to anchor the in-development Promenade at Granite Run shopping center expansion at 1067 W. Baltimore Pike in Media, PA.

The theater experience will open a new 68,115-square-foot location, its fourth in the state. The retailer, with locations along the southeast, provides a host of attractions ranging from movies, bowling, arcade games, and a bar and grill.

The Promenade at Granite Run lifestyle center originally delivered on 56 acres in 1974 and is currently undergoing an expansion which broke ground earlier this year and will total 886,585 square feet when it delivers to the Delaware County submarket of Philadelphia in the first quarter of 2018.

Tuesday, May 23, 2017

PREIT Puts Two More Malls Up for Sale

Philadelphia-based PREIT (NYSE: PEI) announced plans to sell two more of its regional malls after receiving unsolicited inquiries from potential buyers.

PREIT said it will pursue the sale of its 900,000-square-foot Logan Valley Mall in Altoona, PA, and the 600,000-square-foot Valley View Mall in LaCrosse, WI.

The REIT did not reveal the identities of the potential buyers or an expected sales timeline, but said any proceeds from the dispositions would be used to fund its redevelopment pipeline.

"PREIT has a demonstrated record of transforming and revitalizing the traditional mall model to capitalize on new opportunities and evolving trends in the market," said Joseph F. Coradino, CEO of PREIT. "To date, we have successfully sold 16 lower-productivity malls as part of our non-core property disposition program. With these additional dispositions, we are taking further action to strengthen our portfolio amid a challenging retail climate."

PREIT recently announced that midwest department store Herberger's would be relocating and expanding at Valley View Mall to fill Macy's former location. Owned by The Bon-Ton Stores Inc., Herberger's will move from its current 42,000-square-foot to the 100,000-square-foot space formerly occupied by Macy's. The move is expected in October 2017.

However, Logan Valley is PREIT's worst-performing property and Valley View ranks as its eighth-worst among the REIT's 22 remaining malls on a sales-per-square-foot basis, according to PRET's most recent quarterly financial disclosure. PREIT said selling the malls is expected to boost its portfolio’s sales by $10 per square foot.

Since initiating a major disposition strategy to prune low-sales properties and focus on its best-performing centers beginning in 2013, PREIT has netted about $730 million from selling 16 of its properties.

PREIT has also focused on revamping its tenant mix, adding more dining, exercise and entertainment options to appeal to changing shopper patterns.

"The historic view of the mall, heavily reliant on apparel and traditional retail, has expired and a new model is rising," said CEO Coradino. "Dining, entertainment and experiential concepts represent the mall of the future."

In recent leasing activity, PREIT leased 28,000 square feet to Dave & Buster's in its Capital City Mall in Harrisburg, PA. At Plymouth Meeting Mall near Philadelphia, PREIT signed a new tenant called 5 Wits, which offers live-action entertainment experience that immerses guests in realistic situations that includes hands-on challenges and requires teamwork," according to a description. The 14,000-square-foot space will be across from the mall's Legoland Discovery Center. PREIT also recently signed indoor cycling firm Cyclebar at its Plymouth Meeting center, offering what it describes as "high-energy workouts in a concert-like atmosphere."

"As the retail format lines continue to blur, we are capitalizing on owning quality properties in the best locations in their markets, capturing a wide variety of tenant interest," Coradino added. "At the same time, we are systematically reducing exposure to select department stores, driving increased net operating income and enhancing the consumer experience, thereby creating long term shareholder value and driving NAV."

Coradino said the REIT will also continue to engage in discussions with third parties as its looks to optimize its mall portfolio and increase shareholder value.

Private Equity Firms Sell Fort Washington Hilton Garden Inn

by Steve Lubetkin,
Ethika Investments, a real estate private equity firm says one of its investment funds has sold its interest in the Hilton Garden Inn Philadelphia/Ft. Washington hotel for $22.5 million. The buyer was not disclosed.

Acquired by Ethika in 2013 with fund sponsor Laurus Corp., the investors say they spent $2.5 million targeted renovation to public spaces and guest rooms, selection of a new management company, focused efforts to raise RevPAR, and strategic marketing bringing up guest satisfaction – winning Trip Advisor’s Certificate of Excellence 2013, 2014, 2015 and Aimbridge Hospitality’s Presidential Award for RevPAR Growth 2013, 2014, 2015. Laurus says the property achieved a 20.1 percent gross IRR and 1.9x gross equity multiple in under four years.

“This successful disposition underscores our strategy of investing in ideally located value-add assets in dynamic and flourishing markets around the US,” says Austin Khan, chief investment officer of Ethika Investments. “Through a diligent application of the value-add strategy by our affiliate, Laurus Corp., this hotel moved from an opportunistic investment to stabilization and sale to a core investor.”

Ethika and Laurus acquired the 146-key property in 2013 for a reported $16.4 million, according to Real Capital Analytics, a proprietary research database.

“The successful sale of this hotel, the second disposition for Laurus-sponsored assets within the past two weeks, continues to highlight our consistent ability to source, execute and monetize on opportunistic and value added real estate investments,” says Andres Szita, Laurus chairman.  “As always, we carefully evaluate each project and define a custom strategy for each property, aiming at delivering the best possible risk-adjusted outcomes.”

Weakening demand in commercial real estate? (Video)

Monday, May 22, 2017

Pharmaceutical Research Company Renews 28,000-SF Lease in DE

Incyte, a pharmaceutical research company, has renewed its lease for 28,460 square feet at the 2200 Concord Pike building at 2200 Concord Pike in Wilmington, DE.

Incyte occupies space on the ninth and 10th floors in the building it has called home since 2014. Founded in 2002, Incyte now employs more than 900 people across the U.S. and Europe.