Thursday, April 26, 2018

Apartment REIT IRET Focused on Operations Following MOB Sales (Video)

Crux Fitness Leases Space in Lansdale

Crux Fitness has signed a 10-year lease for 25,000 square feet in the Lansdale Pavilion shopping center at 611 S. Broad St. in Lansdale, PA.

The 140,881-square-foot shopping center was constructed in 1940 and renovated in 1990. Crux Fitness would anchor the center in its own building within the center, which is also home to Dollar Tree, Hair Cuttery, Mattress Firm, Quest Diagnostics and Pets Plus Lansdale.

Wednesday, April 25, 2018

CSL Behring leases 500 N. Gulph in King of Prussia

Natalie Kostelni Reporter Philadelphia Business Journal
Brandywine Realty Trust has leased 500 N. Gulph Road in King of Prussia to CSL Behring.

The biopharmaceutical company leased the 100,820-square-foot building because it needed room for expansion. CSL Behring is an existing tenant of Brandywine and occupies 257,000 square feet of space at 1020 First Ave., which is about a mile away from the Gulph Road building. 

In February, Brandywine initiated a $29.7 million redevelopment of 500 N. Gulph. The five-story building has essentially been vacant for years and ripe for redevelopment.

Full story:

Barry Sternlicht: US real estate is my favorite asset class right now (Video)

Barry Sternlicht: US real estate is my favorite asset class right now from CNBC.

Wilder Cos. Acquire Cumberland County Grocery-Anchored Center

by Steve Lubetkin,

Boston-based The Wilder Companies, in partnership with an institutional real estate fund, have re-entered the Pennsylvania market, acquiring Silver Spring Square, a 342,600 square-foot dominant grocery anchored community center on Route 11 in Mechanicsburg, Cumberland County, PA.

“Silver Spring Square fits perfectly into our acquisition platform targeting dominant grocer-anchored centers throughout the East Coast,” says Shelley Anderson, director of new business development at Wilder. “We are excited to reestablish our expertise in the Pennsylvania market.” Wilder is a Boston-based real estate development, management, and leasing firm specializing in the positioning of retail properties. Privately held and owner managed, Wilder has developed, managed, and leased more than 20 million square feet of retail properties throughout the United States and Puerto Rico.

The seller was DDR Corp., and buyer came direct.

Built in 2007, the shopping center includes as tenants industry leaders and national brands, anchored by a 126,240-square foot Wegmans Supermarket. This is Wegmans only store serving the greater Harrisburg MSA.

The property is shadow-anchored by a 139,377-square foot Target and an 87,000 square foot Kohl’s, bringing the contiguous square footage to 568,977 square feet.

The grocer and anchor tenants are complemented by major national retailers including Best Buy, Ross, Bed Bath & Beyond, Petco, Lane Bryant and Ulta, along with seven additional pads sites leased to Advance Auto Parts, Longhorn Steakhouse, Chilis, PNC, Chick-Fil-A, Panera Bread and Wells Fargo Bank, making Silver Spring Square a one-stop shopping destination for the customer base that lives and works on the Western Shore of Harrisburg. The property is 98-percent occupied as of closing, including a recent new lease with Old Navy, which is taking 12,295 square feet in a former Office Max space.

Silver Spring Square is located along Carlisle Pike (Route 11), approximately 10 miles west of the Pennsylvania state capital of Harrisburg. This submarket has seen significant growth in retailer distribution centers / industrial warehousing because of its location in the I-78/I-81 corridor, which allows easy movement avoiding I-95 between major metropolitan areas like New York City, Baltimore, and Washington DC.

PNC Wealth Management Leases Space in Cherry Hill

PNC Wealth Management, a financial services company, has signed a lease for 28,095 square feet in the office building at 200 Lake Dr. E in Cherry Hill, NJ.

The three-story building totals 76,352 square feet in the Woodland Falls Corporate Center office park. Prentiss Properties developed the property in 1989, and it is currently owned by Crown Properties, Inc.

PNC’s lease includes the entire third floor. Other tenants in the building include Maxim Health Services and Brandywine Realty Trust.

Monday, April 23, 2018

SEC Working to Modernize and Streamline Real Estate-Related Disclosures (Video)

FASB Reconsidering Capitalization of REIT Acquisition Transaction Costs (Video)

North and West Philly among Pa. areas nominated for new-investment tax break

by Jacob Adelman, Staff Writer Philadelphia Inquirer
Investors with ventures along much of Market Street in West Philadelphia and Broad Street in North Philadelphia, as well as neighborhoods such as Mantua, Point Breeze, and Brewerytown, may be in for new tax breaks under a federal program designed to promote development in rural and low-income urban communities nationwide.

Gov. Wolf included the census tracts covering those areas in his list of nominees Friday to become so-called Qualified Opportunity Zones, which would make them eligible for incentives enacted as part of the tax-cut legislation signed into law in December.

The incentives offer deferral, reduction, and potential elimination of some federal taxes for capital gains from investing in businesses, real estate, and other ventures in low-income communities.

Also identified were tracts covering parts of Lansdowne in Delaware County, Norristown in Montgomery County, and Croydon in Bucks County, according to a map posted to the website of the Pennsylvania Department of Community and Economic Development.

The Philadelphia-area tracts are among 300 statewide that Wolf sent to the U.S. Treasury Department for consideration on Friday, the deadline to submit nominations for the program. The federal agency has 30 days to designate which tracts ultimately qualify.

Pennsylvania had 1,197 census tracts eligible for Qualified Opportunity Zone status and was given the opportunity to designate 25 percent, or a maximum 300 low-income community tracts as zones, the governor’s office said in a release.

Wolf said in the release that his nominations were submitted “after gathering input from individuals and organizations throughout the state and examining where the areas of need intersect with potential investment.”

“We are hopeful this new incentive will bring much-needed investment to many distressed areas across the commonwealth,” he said.

The Treasury Department has already designated areas of Delaware around Wilmington and parts of Camden in South Jersey as opportunity zones, according to online mapping service PolicyMap, which has been tracking the program. Officials from those states, and others, sent their tract nominations ahead of Wolf.

Full story:

Brandywine moves forward with land acquisitions for Schuylkill Yards plan

by Jacob Adelman, Staff Writer Philadelphia Inquirer
Brandywine Realty Trust is on track to acquire control of land totalling two acres currently used as parking behind 30th Street Station for its first phase of ground-up construction as part of its Schuylkill Yards development plan in University City.

The company paid $24.6 million on March 22 for a 99-year lease to an acre of land at 3001 and 3003 John F. Kennedy Blvd., with plans to acquire another long-term lease for second one-acre parcel adjacent to the west at 3025 J.F.K. Blvd. for $20.5 million before the end of June, it said in a financial report this week.

Brandywine chief executive Jerry Sweeney said in a conference call with analysts Friday that the acquisitions will allow the company to complete design work for the tract, but won’t begin construction until tenants are secured for much of what’s expected to be a 700,000-square-foot tower planned.

The building is expected to be one-half occupied with offices, with the other half being used for residential units or life-science labs, Sweeney said.

The $3.5 billion Schuylkill Yards plan is slated to eventually involve 8 million square feet of development over 14 acres. Much of the land, including the J.F.K. Boulevard parcels now being acquired, is owned by Drexel University.

Brandywine began work last late last year on its first stage of the project, a1.3-acre landscaped park at 30th and Market Streets, between the train station and the former Bulletin newspaper building. The former Bulletin building, now known as One Drexel Plaza, is also to be developed during the early phase.

Schuylkill Yards is one of three sites in central Philadelphia mentioned as a potential location for Inc.’s planned second headquarters in the city’s proposal to the e-commerce giant.
Full story:

Duke Realty Completes 33 Logistics Park in Easton

Duke Realty Corp. has completed its third, and final, distribution building at 33 Logistics Park at Chrin in Easton, PA.

Duke Realty broke ground on the single-story, 1,015,740-square-foot structure at 1620 Van Buren Rd. in August 2017. The single-tenant building comprises 120 manual overhead doors, four automatic drive-in doors, 54x50-foot column spacing, a 36-foot clear ceiling height and parking for 245 trailers and 472 automobiles.

33 Logistics Park is occupied by Amazon, at a 1.1 million-square-foot building at 1610 Van Buren Rd., and XPO Logistics, which signed a 628,475-square-foot lease at an adjacent warehouse last year.

The industrial park is adjacent to PA-33, near I-78, and located within an 800-acre center which will include a mix of office, retail and industrial development.

Philly’s Outer Suburbs Leading in Apartment Rent Growth

by Adrian Ponsen, Costar market economist covering Philadelphia Metro Area.

Just three or four years ago, most investors never would have expected that submarkets such as Upper Montgomery County, Upper Bucks County and Lower Chester County were positioned to surge ahead of Center City, University City and the Main Line in apartment rent growth. However, that is exactly the scenario that has played out in late 2017 and early 2018.

With apartment construction at the highest level in more than three decades, the supply of 4 & 5 Star apartment units has more than doubled over the past five years in prime Philadelphia-area submarkets including Center City, University City and the Main Line.

As newly delivered apartments compete for lease-up, asking rent growth has slowed to less than 2.5 percent year-over-year in all of these locations.

Meanwhile, apartment development has been restrained in submarkets more than 25 miles from Center City, and after more than eight years of uninterrupted rent growth in the market as a whole, most renters are competing for the most affordable units available.

Apartment communities in Upper Bucks County, Upper Montgomery County and Lower Chester County are reaping the benefits. All of these submarkets have hosted year-over-year rent growth of over four percent.

It is still up for debate whether these submarkets’ impressive rent growth is a temporary statistical blip or part of a more lasting trend. But with the massive millennial cohort now aging into their late 20s and early 30s and increasingly starting families, renter demand for large, affordable apartments in suburban communities with high-performing public schools could certainly continue to surprise on the upside in the coming years.

Friday, April 20, 2018

Charter School Leases Space in Egg Harbor Twp - Repurposing Shopping Centers

International Academy of Atlantic City Charter School has signed a five-year lease for 27,000 square feet in the Cardiff Shopping Center at 6718 Black Horse Pike in Egg Harbor Township, NJ.

The 351,466-square-foot shopping center was originally built in the 1970s on almost 30 acres in the Atlantic City / Hammonton submarket of South Jersey. It is currently owned and managed by Pagano Real Estate. Other tenants in the center include Big Lots, 99-cent Store and Bank of America.

What is a REIT - How Interest Rates Affect REITs (Video)

Wednesday, April 18, 2018

2018 Outlook for Commercial/Multifamily Real Estate Finance (Video)

Dranoff Exits Philadelphia Rentals With Sale To Aimco

by Steve Lubetkin,

Dranoff Properties is exiting its Philadelphia multifamily rental properties, selling them to Denver-based Apartment and Investment Management Company for $445 million in cash and equity. According to local news site, the equity will make Dranoff Properties founder and CEO Carl Dranoff the largest non-institutional shareholder in Aimco.

The portfolio includes six properties, totaling 1,006 existing apartment homes, 110 apartment homes under construction, and 185,000 square feet of office and retail space.

The Dranoff portfolio includes Locust on the Park in the Fitler Square neighborhood, 777 South Broad and Southstar Lofts on the Avenue of the Arts, The Left Bank in University City, The Victor in Camden, NJ, and One Ardmore Place in Lower Merion Township.

“Over the past twenty years, we’ve developed and assembled a portfolio of rental properties that has redefined luxury living in the Philadelphia region,” says Carl Dranoff, founder and CEO of Dranoff Properties. “With a pipeline of new and exciting projects on the horizon, the timing is right to sell six of our premier properties to Aimco and become a major investor in the company. Aimco’s expansion and commitment to Philadelphia make them ideal stewards of these trophy assets that we carefully built, owned and managed. I am incredibly enthusiastic about the future of Dranoff Properties as we begin our third decade. Propelled by a strong capital base, powerful brand and deep talent pool, we look forward to delivering a fresh new generation of transformative projects in the Philadelphia region and beyond.”

“We are thrilled to acquire these well-located communities in Philadelphia, a market we know and like,” says Aimco chairman/CEO Terry Considine. “I appreciate the significant investment in Aimco made by highly regarded local developer Carl Dranoff and the faith he has in our ability to manage these assets, guarding their quality and providing excellent service to their residents. Carl and his talented team have transformed residential living in Philadelphia. I wish them continued success.”

The acquisitions from Dranoff Properties are expected to close in the second quarter, except for the purchase of One Ardmore Place, which is expected to close in first quarter 2019, after completion of construction.

“We continue to be bullish on Philadelphia whose stable and diversified economy is enjoying a growth spurt,” says Aimco executive vice president Wes Powell, who led the Aimco acquisition team. “Center City and University City’s ‘eds and meds’ rival Cambridge and Palo Alto with their highly educated workforces and the city provides a cost-effective alternative to the other Northeastern hubs of Washington D.C., New York, and Boston.”

Earlier this year, in an exclusive interview with, Dranoff also expressed optimism about Philadelphia’s prospects.

“Things are booming in Philadelphia,” Dranoff told at the time. “The rental market is good, there are new skyscrapers, millennials are graduating from our universities and staying, Comcast is adding thousands of jobs, office users are coming into Center City because it’s where the workers are, and we have baby boomers too, that are moving back to the city.”

Dranoff is turning his focus to his luxury apartment and condo developments, including the nearly completed One Theater Square apartments adjacent to the New Jersey Performing Arts Center in Newark, NJ.

Correction, 4/17/2018, 4:37 p.m.: Because of editing errors, a headline on an earlier version of this article suggested that Dranoff Properties was exiting completely from Philadelphia. The portfolio sale only includes multifamily rental properties in the market. Also, an earlier version of the article incorrectly described the project in Newark, NJ as the “Theater Lofts.” The property is actually called One Theater Square, and is a rental property, not condominiums.

Tuesday, April 17, 2018

Wells Fargo Monthly Economic Outlook — April 2018 (Video)

Office Availability Rates in Philadelphia Suburbs Among the Lowest in Northeastern U.S.

The vacancy rate for high-end office properties located along the stretch of the Pennsylvania Turnpike and 202 from Malvern to Exton rose to almost 25 percent in the wake of the Great Recession, with pharmaceutical firms including Pfizer and Endo Health Solutions downsizing their footprints and putting large blocks on space on the market for lease.

But these same office properties have seen average vacancy rates decline steadily since 2011, and are down below five percent to start the second quarter of 2018 – the lowest level in more than 15 years.

Another way to gauge the tightness of Malvern and Exton’s high-end office market is by comparing its availability rate (the percentage of office space listed as available for lease on CoStar), with availability rates in major office markets nearby. By this measure, Malvern / Exton is one of the tightest suburban office nodes throughout the entire Northeast region.

What explains the dramatic recovery in occupancies in these office properties located more than 25 miles from Philadelphia’s CBD?

For starters, recent infrastructure improvements have played a key role. In 2016, the Pennsylvania Department of Transportation completed a three-year project widening Route 202 to six lanes between Conestoga Road and Route 30. This project, combined with an earlier installation of a new interchange between the Pennsylvania Turnpike and Route 29, have made Malvern and Exton more accessible to commuters coming in from nearby areas such as King of Prussia, Downingtown and Phoenixville.

By locating in Malvern or Exton, office tenants can also remain close to highly-educated workers in and around the Upper Main Line, while paying lower office rents than tenants in competing suburban submarkets closer to Philadelphia.

For example, at the start of the second quarter, the average listed rent for 4 & 5 Star office space in Malvern and Exton was about $24.00 per square foot, 20 percent below listed 4 & 5 Star rents in King of Prussia and 30 percent below listed 4 & 5 Star rents in Conshohocken.

All of these selling points have helped coax firms in information technology, pharmaceuticals and finance to either move into Malvern or Exton, or to expand their existing offices within the area, in recent years.

Vacancy rates would likely need to tighten significantly in nearby competing suburban submarkets before Malvern and Exton’s year-over-year rent gains could sustain four- to five-percent growth for more than just a few quarters. However, by offering lower rents than most suburban office nodes in Philadelphia in recent years, Malvern and Exton office properties have clearly been standouts within the region for their ability to garner tenant interest and high occupancy rates.

Monday, April 16, 2018

Southern NJ And Philly CRE Markets See Moderate Gains In 1Q2018

by Steve Lubetkin,
The Southern New Jersey market is, for the most part, in good shape, with moderate gains in leasing activity and strong fundamentals. The Burlington County firm believes the market may be poised to take off as benefits of the new tax law begin to reverberate in personal and corporate checkbooks.

“Our market appears to have picked up steam, with a healthy pace of business growth and continuing new investment. Despite corrections ending a long winning streak in the financial markets, the benefits of the new tax law should shore up commercial real estate, especially industrial and office demand.”

There were approximately 272,550 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was a gain of 23 percent over the previous quarter. Leasing picked up, and the sales market stayed active, with about 1.63 million square feet on the market or under agreement, and an additional 320,691 square feet trading hands. The sales figure is a 36 percent increase over the previous quarter.

New leasing activity accounted for approximately 77.2 percent of all deals. Overall, net absorption for the quarter was in the range of approximately 105,250 square feet. Both figures represent large increases over the fourth quarter.

Other office market highlights from the report:

  • Overall vacancy in the market is now approximately 2 percent, which is more than a full point higher than the previous quarter. This may be attributed to large blocks of space returning to the market.
  • Average rents for class A and B product continue to show strong support in the range of $10.00-$14.50 per square foot triple net or $20.00-$24.50 per square foot gross for the deals completed during the quarter. These averages have stayed within this range for most of this year.
  • Vacancy in Camden County improved steadily last year but jumped nearly a point to 12.5 percent for the
  • Burlington County vacancy was at 9 percent, which was also higher than the fourth quarter.

Since expanding into southeastern Pennsylvania, rates, and news from Philadelphia and the suburbs.

Highlights from the first quarter in Pennsylvania include:

  • Philadelphia’s office market saw a decrease in vacancy in the Central Business District during 2017 and Q1 2018, as demand for office space continues to be Still, the firm says it sees increasing employment and new construction, both of which bode well for continued strength.
  • Comcast’s second office tower, the Comcast Innovation and Technology Center, is a 59-story (1,121 feet), LEED Platinum certified skyscraper developed by Liberty Property Trust. The development, positioned in the heart of the CBD, will also include a Four Seasons Hotel. The project is estimated to cost $1.2 billion, is expected to be the tallest building in the United States outside of New York and Chicago and will be the largest private development project in the history of Net of the hotel, the property is planned for 1,336,682 square feet of office space. (As previously reported by, David Cohen, senior executive vice president of Comcast, has joked that despite the massive amount of office space, the building will have no “offices,” as the space will be designed for open, collaborative workgroups.) Comcast has signed a 20-year lease for 98 percent of the building, with the remainder available for lease. However, Comcast may fill the remaining space themselves.
  • At 2400 Market Street, the new Aramark Headquarters is utilizing the former Philadelphia Market Design Center and will comprise the entirety of floors 5-9 on a long-term lease. Thus, the expansion (new inventory) is effectively 100 percent pre-leased. Estimated delivery is early
  • The Philadelphia Planning Commission has approved zoning changes to an area west of 30th Street Station, where Brandywine Realty Trust and Drexel University plan their Schuylkill Yards redevelopment project, a 14-acre district of labs, offices, residences and There is not a definitive timeline for the project. According to Brandywine, the master plan will comprise a total buildout of 2.8 million square feet of office, 1.6 million square feet of residential, a 247,000 square-foot hotel, a one million square-foot of lab, and 132,000 square feet of retail space. This reflects the bulk of proposed inventory in the Center City submarket.
  • Developer Oliver Tyrone Pulver Corp. is proposing a 38-story office tower on a long-empty lot east of City Hall at 1301 Market Street. It will include 841,750 square feet if developed, once a lead tenant is secured. The tower would tentatively open in
  • Demand for multi-family product is demonstrating significant growth, with nearly 2,800 units recently completed, 1,250 units under construction, and 3,200 units proposed in the Pennsylvania Within the Center City market, there are 2,200 units under construction with an additional 6,300 units proposed. Market participants are questioning whether these units will continue to be absorbed. Many high-end apartment complexes are facing concessions and compression in rental rates.
  • Quarter-over-quarter, industrial vacancy in Southeastern Pennsylvania was flat at 6.8 percent. The market’s largest yearly occupancy gains were recorded in Bucks County, where positive absorption totaled 709,530 square feet, and Delaware County, where 233,633 square feet was absorbed. The year’s largest moves were Almo and Amazon occupying 300,000 and 104,000 square feet of warehouse space along Cabot Boulevard in Bucks County in the second
  • Philadelphia County recorded 169,134 square feet in negative yearly absorption. The increased demand for warehouse and distribution space from e-commerce firms has focused on larger scale properties and newer buildings, both of which are in low supply. E-commerce and logistics warehouses may require anywhere between a few hundred thousand square feet to more than a million square feet, but the tightness of Philadelphia’s industrial market means that many companies are starting to look outside the city to fulfill their space

Apollo Partner Warns Of US Asset-Price Deflation

by Steve Lubetkin,

Asia presents better risk-adjusted returns than the US right now, and asset-price deflation is likely in the US, a partner with Apollo Global Management told members gathered in Philadelphia earlier this month for the firm’s annual leadership summit and a global look at the economic factors driving the market around the world.

“In all candor, we see more opportunity in Asia for risk-adjusted returns than we do here,” says keynote speaker Philip Mintz, partner and CIO with Apollo Global Management’s US and Asia real estate equity business, based in New York. “I just see a correction coming with asset-price deflation as part of that trend in the US.”

Mintz compared the outlook for the US economy with Japan’s, during that country’s dive into deflation in the 1990s. Mintz, an Asia investment expert, lived in Japan while working for Asia Pacific Land as the chief investment officer and earlier as a partner with Warburg Pincus focused on Asian real estate investing, and before that as the chief executive officer of General Electric Real Estate Asia.

Mintz predicted a significant correction in U.S. asset prices of both commercial and especially residential real estate prices.

Some of his bullish position on Asia comes from the fact that there are very few firms in Asia that do the type of business the real estate arm of Apollo does—structured credit with $275 billion in assets under management.

When one of the moderators suggested that there is an abundance of capital on the sideline to be deployed in a variety of asset classes, including commercial real estate, Mintz responded with a warning that “when the markets compress, that dry powder will get scarce.”

Wealth inequality in the US will affect business in the future, Mintz says.

“The inequality of wealth in the US is going to be destabilizing for a long time,” he says.

While Apollo is currently a net seller of industrial property in the US—the firm recently sold industrial assets in Atlanta and is in the process of doing the same in other markets, Apollo is not sour on all aspects of the global economy, or real estate investing. The firm recently acquired a manufactured home community in Morgantown, West Virginia, and Mintz says that Europe is in the best shape that it has been in years, particularly Germany.

“Money is made in markets where people have extreme informational value and granular expertise,” he says.

The recently passed tax reform legislation is the most significant in more than two decades, says guest speaker Bill Burns, tax office managing partner with BDO United States. Burns provided an overview of the recent tax code changes in the US and what it means to commercial real estate investors and operators.

The Trump administration’s mandate to federal agencies that they eliminate two regulations for every new regulation is delaying the IRS from issuing guidance on the new tax code. “Essentially, the IRS is working to identify which regulations in the tax code to release as new regulations are added.”

Andy McCulloch, managing partner with Newport Beach, CA-based Green Street Advisors, was the other keynote speaker during the Global Market Outlook session of the conference. He, too, was a bit bearish and thinks asset values will fall but not by much. He said the growth in jobs has not yet translated into meaningful income growth, but it will, and be fueled by the tax reform, which “is good news for the economy, individuals and real estate.”

Approximately 80-90 percent of individuals will get a tax cut.

In terms of asset values, over the last year the winners have been:

  • Industrial property +11 percent
  • Manufactured homes +10 percent
  • Apartments + 4 percent

And the losers were:

  • Storage – 1 percent
  • Office -1 percent
  • Strip malls -5 percent
  • Malls -11 percent

Speaking of malls, McCulloch says that the e-commerce disrupter and its impact on real estate is only in the “3rd or 4th inning and that we have too much retail real estate, some of which needs to go away.” He believes about half of the 1,200 malls in the US will be shuttered or substantially repurposed in the next 20 years.

McCulloch also observed that “low supply has been one of the defining positive characteristics of this cycle.” He says supply has mostly been concentrated in high-barrier, gateway cities, but is making its way to secondary and tertiary markets.

By asset class, new industrial developments tend to be absorbed quickly while multifamily may have reached a point in which it is getting over-built in select markets, he says.

How Long Should I Sign a Commercial Property Lease for? (Video)

Friday, April 13, 2018

Granite Pays $34.8M for 432,000-SF Greencastle Warehouse

Toronto-based Granite REIT (NYSE: GRP.U) acquired a 432,000-square-foot warehouse in Greencastle, PA from a joint venture between Chesapeake Real Estate Group and Atapco Properties. The complex traded for $34.8 million, or about $81 per square foot.

Located within the Antrim Commons Business Park at 181 Antrim Commons Dr., the industrial building was constructed in 2017 and is fully leased to Eldorado Stone for 15 years. The facility also has direct access to the Norfolk Southern rail line and boasts 36-foot clear heights, according to CoStar data.

Recently, Granite also acquired a 597,000-square-foot warehouse in the Indianapolis suburbs for $39.3 million, or about $66 per square foot. Similar to the Greencastle warehouse, the Plainfield, IN facility was built last year and is fully occupied by a single tenant, Geodis.

Granite’s international portfolio consists of more than 30 million square feet of warehouse and logistics space in North American and Europe, according to the REIT’s website.

Thursday, April 12, 2018

Role of Appraisals in Commercial Real Estate via Appraisal Institute (Video)

Modus Hotels Secures Financing for Pod Hotel Concept Philadelphia

Meridian Capital Group Arranges $53.5M in Senior, Mezzanine Financing on Hospitality Concept
Modus Hotels secured a $53.5 million loan for construction of its proposed pod hotel in Philadelphia, PA, at 31 S. 19th St.

The new pod hotel will have 252 rooms across 11 stories. It will be located in Center City, next to Rittenhouse Square.

Chelsea & Village Associates Pays $31.5M for Philadelphia High-Rise

Chelsea & Village Associates acquired the office building at 1760 Market St. in Philadelphia, PA from Stockton Real Estate Advisors and Alterra Property Group LLC for $31.5 million, or about $249 per square foot.

The 14-story, 126,309-square-foot office building delivered in 1980 to the Market Street West submarket. It is home to Spring, Philadelphia Trust Company and Security Risk Advisors, among others.

Mobius Pays $31.4M for 4-Bldg New Jersey Office Portfolio

Somerset Properties, a Philadelphia-based, full-service real estate firm, sold an office portfolio comprised of Marlton Executive Park I and II in Marlton, NJ, as well as the two-building Horizon Corporate Center in Mount Laurel, NJ.

Mobius, an owner and developer of multifamily properties, acquired the portfolio for $31.4 million, or about $103 per square foot.

Marlton Executive Park is located at 701A and 701C Route 73 in Marlton. Horizon Corporate Center is located only four miles away at 3000 Atrium Way and 2000 Crawford Pl. in Mount Laurel. The deal totals 304,763 square feet, with individual buildings ranging between 27,813 and 108,416 square feet. The portfolio features access to Route 70, I-295 and the New Jersey Turnpike.

The buyer financed the acquisition in-part with a new $24.28 million mortgage from Wells Fargo Bank. Ryan Ade and Neil Campbell with Holliday Fenoglio Fowler (HFF) LP's debt placement team arranged the financing on behalf of the borrower.

Realtor Land Institute (RLI) Highlights 2018 (Video)

Monday, April 9, 2018

Economy, Jobs and International Affairs via Dr. Mark Dotzour (Video)

Aging U.S. Industrial Space Can't Meet Booming Demand For E-Commerce Facilities

Taylor Jacoby
Senior Research Analyst, CBRE
An aging U.S. warehouse inventory that does not meet the needs of today’s logistics tenants is creating new development opportunities nationwide. Although 1 billion sq. ft. of modern warehouse space was built over the past 10 years, it accounts for only 11% of the country’s total warehouse inventory (9.1 billion sq. ft.), which is becoming increasingly obsolete at an average age of 34 years. Nearly 1 billion sq. ft. of total warehouse inventory is more than 50 years old and has clear heights of less than 20 feet—well below logistics tenant requirements. Warehouses built since 2008 are generally three times larger than older ones and account for only 4% of the nation’s total number of buildings.

Markets with the newest warehouses tend to have ample developable land and are near major population centers, while markets with the oldest warehouses tend to serve heavy industrial and shipping centers. Given the low share of modern warehouse space and the rise of e-commerce, there’s ample opportunity to develop new warehouses and rebuild physically obsolete ones in the best infill locations.

CBRE Research: Old Storage: Warehouse Modernization in Early Stages | U.S. MarketFlash
CBRE Research: Old Storage: Warehouse Modernization in Early Stages | U.S. MarketFlash

Full story:

Could Industrial Real Estate Get Caught in Trade War Crossfire?

Larry Callahan heads one of the largest developers of industrial real estate in the Southeast, with projects located from Tennessee to Florida.

As the chief executive of Patillo Industrial Real Estate in Georgia, Callahan leads his family-owned business in developing and managing warehouse-distribution projects for businesses as varied as compressor creator Bitzer U.S. Inc. to King’s Hawaiian Bakery.

Like the rest of what is known as the industrial real estate market, the hottest asset class in all of commercial real estate for the past two years, Callahan’s business has been booming.

Right now, he’s not too worried about the impact of President Donald Trump’s posturing on trade.

"I do not believe that the first impact of tariffs (and retaliatory tariffs) has been fully priced into assets like industrial real estate," he said. "And I would argue that the impact of a first round of tariffs on the pricing of industrial real estate is minimal."

But late yesterday, President Trump escalated the risk of a trade war by further increasing proposed tariffs by $100 billion on a number of Chinese products as the two countries continue to exchange threats. The change from campaign rhetoric to trade policy has caught some by surprise.

This morning, Chinese officials threatened further retaliation if the U.S. moves forward with new tariffs.

If fears of a full-scale trade war come to fruition, Callahan sees a different story unfolding. He said the risk to industrial real estate becomes worrisome if a full-scale trade war erupts and slows down the overall economy.

"A no-growth economy hurts everyone," said Callahan.

Callahan echoes what many in the industrial real estate market are saying now about how rising protectionism and a threat of trade war are affecting the U.S. industrial real estate market.

"It would have to be a pretty massive trade war for it to impact industrial real estate directly," said Rene Circ, director of U.S. industrial research for CoStar, adding that anything that impacts the entire economy would certainly affect industrial real estate.

Conditions in the industrial real estate market remain strong - with vacancy at historically low numbers across the nation - but the threats have prompted fears of an all-out trade war between the U.S. and China have left some industrial real estate stakeholders watching events unfold with anticipation.

"If these tariffs become real, they would have an enormous impact," said Richard Green, director and chairman at the USC Lusk Center for Real Estate at the University of Southern California. "If consumer goods become more expensive, people will buy them less and that’s not good for industrial real estate and the warehouses that hold [those goods.]"

Last month, President Trump authorized increases on tariffs on steel and aluminum imports and is considering more in response to China's industrial and technology policies. China retaliated this week by proposing a 25 percent increase on 106 U.S. goods including on such items as soybeans, automobiles, aircraft and orange juice.

The tariffs on steel and aluminum imports prompted dire warnings from architects, contractors, REITs and real estate lobbying groups who said the tariffs could put more pressure on already rising building costs and cause developers and investors to postpone, cancel or steer clear of new projects.

This week, Real Estate Roundtable President and CEO Jeffrey DeBoer said the new proposed tariffs, coupled with the earlier tariffs on steel and aluminum and the ongoing dispute with China, could have "unfortunate and unintended effects on the U.S. economy by raising construction costs and reducing jobs in real estate development."

Everything from consumer goods to physical container traffic could be hit by the tariffs and that could have a domino effect.

"It has been on investors’ minds since Trump took office because there has been discussion about trade wars and what happens if," said Mike Kendall, Western region executive managing director of Investment Services for Colliers International in Irvine, California. "There should be an impact eventually in industrial, but it hasn’t happened yet. The real estate market is not like the stock market. The stock market is real time. In real estate, it takes a lot longer to find its way into the process and pricing. Since it [threat of trade war] is so new, we haven't seen it yet."

A more immediate concern is rising construction materials and development costs, since most of our steel and aluminum is imported from Canada, Mexico and South Korea.

Jeff Givens, senior vice president at Los Angeles office and industrial developer and owner Kearny Real Estate Co., said he has colleagues who already are hitting pause on new development projects.

"I’ve heard from others who are in the bidding process [for a new project], with their different subcontractors involved in steel and other commodities that are being discussed [for increased tariffs]," he said. "They have pulled their current bids and are reevaluating, I have a colleague who was ready to go forward on a big-box warehouse and the steel providers said the bid we gave you six months ago is no longer valid; we’ll get back to you."

That kind of uncertainty has an effect beyond just proposed projects. Bret Hardy, who focuses on institutional industrial investment sales as executive managing director of the Western region capital markets team at Newmark Knight Frank, said while it’s still too early to fully understand the result of the steel tariffs, he's heard estimates that steel costs could increase by as much as 30 percent.

"When you are looking at the infill industrial real estate market in Los Angeles metro that is priced to perfection, any incremental cost of construction could have an equal impact on the value of the land and the value of the projects," he said. "So steel costs are a concern right now."

To be sure, industrial construction doesn’t appear to be slowing down. More than 2.3 million square feet are under construction in the Los Angeles metropolitan area alone, the largest industrial market in the country, according to CoStar Group data. In the industrial market around the Ports of L.A. and Long Beach, the vacancy rate is below 1 percent - and brokers report few signs of pullback.

In neighboring Inland Empire, one of the nation's largest industrial and logistics markets, two deans of the industrial real estate brokerage market agreed that the current atmosphere of protectionism and the prospects of a trade war haven’t been a factor among logistics occupiers, owners and developers. At least not yet.

"There has been no real chatter among warehouse developers or investors out here," said Paul Earnhart, senior vice president with Lee & Associates, who has completed over 1,000 transactions for a combined $4 billion in deal value over more than 30 years in the Inland Empire.

A prolonged conflict with China or worse, a collapse of the current NAFTA treaty affecting two of America's strongest trade partners, Mexico and Canada, could change that over the next year.

"The possibility of a long trade war has been on the mind of most of these logisticians to some extent," acknowledged Chuck Belden, executive vice president with Cushman & Wakefield's Ontario office since 1984.

Late last year, the possibility of a tariff on appliances, combined with fears of the demise of Sears and JCPenney during the holiday shopping season, actually created a temporary bump in demand for Inland Empire warehouse space. LG, Samsung and other appliance makers stockpiled inventory and scooped up space where they could find it in anticipation of the tariff, combined with their reluctance to ship product without prepayment to the two financially ailing department store chains, Belden said.

But recently, the prospect of new tariffs has not had the same effect.

"I haven't seen any pullback in the number of property tours or interested parties," Belden said, adding that most logistics companies and distributors are more concerned about finding available labor, especially drivers. "I've seen a slight pullback in consummated transactions, but that may be a function of a lack of available inventory."

"But if Trump blows up NAFTA, everything I just said goes out the door," Belden said.

Should a proper trade war break out, the impact among industrial real estate may vary by city.

"Population markets have insulation versus a market that is more about serving the population elsewhere," Kendall said. "Some of these markets like Memphis that are big hubs for UPS and FedEx that service national distribution, they may feel more of an impact than primary markets."

Take Southern California, the country’s largest industrial market, for example.

Earnhart noted that one local client, a well-known car windshield installation company, told him late last year that its Chinese supplier, which had previously shipped windshields from China to Southern California, had recently purchased a former auto manufacturing plant in his hometown of Dayton, OH.

Now, 60 percent of the local company's windshields come to its Inland Empire distribution center from Dayton.

"No matter where those windshields are made, they're being warehoused here because this is where all the people live," Earnhart said.

Not everyone is worried about tariffs. Some are optimistic that domestic production picks up where foreign production drops off. Others are betting that the threat of tariffs is just a negotiation strategy that won’t become reality.

For now, Kendall agrees, most industrial real estate stakeholders will take a measured approach, as he recalled discussion of a trade war that never came to fruition last year.

"We have seen this enough before where there’s an overreaction to what happens," he said. "People are almost getting jaded by all this news and are thinking I just need to focus on what actually happens. Until we see an impact, we aren’t going to change our business plans."

As for Callahan, he agrees: "There are always issues to deal with, but we are optimistic about the future."

Neumann Finance Company Leases Space on Philadelphia's Broad Street

Neumann Finance Company has signed a 10-year lease for 21,695 square feet in the office building at 123 S. Broad St. in Philadelphia, PA.

The 30-story building totals 892,282 square feet in the Market Street East submarket. The property delivered in 1927, with a renovation completed in 1989.

Neumann’s lease includes the 17th floor. Other tenants in the tower include Wells Fargo, SSH Real Estate and Hill & Associates.

Sly Fox Brewing to open new Berks County location

By Donna Rovins, The Mercury
 Sly Fox Brewing Co. is expanding again — this time into Berks County.

The company announced Wednesday that it will be opening a third location in Wyomissing, in a renovated building that was formerly part of the VF Outlets.

The newest Sly Fox outpost will be located at 801 Hill Ave. in a building that most recently housed a Dooney & Bourke retail store.

“It’s very exciting. We think it’s going to be a great set-up,” John Giannopoulos, Sly Fox Brewing Co. president said in an interview Wednesday. “We want to further enhance our brand and get people more familiar with it. We look forward to immersing ourselves in the community. I feel really good about the area.” He added that Sly Fox plans to work with local charities and will create activities at the new location.

Philadelphia-based Equus Capital Partners purchased the 24-acre center from Vanity Fair Corporation at the end of 2016 with the intention of redeveloping it as a mixed-use campus. Equus has committed more than $70M into Phase I of the Knitting Mills, and Phase II, a 20-acre site north of the main campus, has already attracted corporate tenants interested in new construction build-to-suit offices, according to a press release.

In addition to retaining the retail outlets and McDonald’s, the campus will be anchored by a new Wawa and corporate office users such as UGI Services’ regional headquarters and Tower Health’s corporate offices.
Full story:

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3 NJ Industrial Buildings Recently Trade for $7.6M

by Steve Lubetkin,

  • 9240 Commerce Highway, Pennsauken, NJ was sold for $3.25 million to a private investor. The building is a 67,600 square foot multi-tenant warehouse.
  •  6995 Airport Highway Lane, Pennsauken, NJ, a 60,800 square-foot manufacturing facility, was sold for $2.74 million to Heat Makers Sense, a Brooklyn, NY, hair care products distributor
  • 9265 Commerce Highway, Pennsauken, NJ, a 33,500 square-foot single tenant warehouse purchased for $1.69 million by Draco Broadcast. Draco Broadcast, based in Silicon Valley, CA, is expanding and wanted an East Coast Operation. They provide professional-grade equipment for the video and broadcast industry. The building features 5 loading docks, 3 drive-in doors and 18’-20’ ceilings.

Wednesday, April 4, 2018

NJ Industrial Vacancies At Historic Lows

by Steve Lubetkin,

The Northern and Central New Jersey industrial market started red hot once again in 2018, with continued robust demand, healthy development activity, and further occupancy gains.

“As the New Jersey industrial market lies within the largest consumer base and one of the busiest ports of entry in the United States, market fundamentals should remain strong throughout the year. We anticipate that leasing totals will remain on pace with previous recent quarters, as some large deals are expected to close in the coming months, helping to further bolster absorption. And while some geopolitical issues are evident, demand for space is so robust that the local industrial market may see even more growth in 2018.”

Due to strong leasing activity throughout most of the key submarkets, overall vacancy in Northern and Central New Jersey fell another 20 basis points to 3.6 percent. For warehouse space, vacancy reached another historic low of 3.5 percent, down 90 basis points year-over-year. Many of the primary Turnpike submarkets south of Exit 13 experienced quarterly declines in vacancy, while Exit 8A’s vacancy for warehouse and development (W/D) space ticked lower by 40 basis points to 1.5 percent, with the Lower 287 Corridor’s vacancy rate falling 140 basis points since the end of 2017. And the Upper 287 Corridor now boasts a vacancy rate 0.7 percent for warehouse space, the lowest in the Garden State (down 610 basis points over the last two years).

The industrial market posted another 3.9 million square feet of net absorption during the Q1, marking the fourth straight quarter in which New Jersey has experienced more than 3.8 million square feet of net occupancy gains.

The robust absorption totals for Q1 stem not just from healthy demand within existing product, but also the deliveries of leased up new construction, with much of the positive quarterly absorption concentrated in Central New Jersey. The Lower 287, Exit 8A, and Upper 287 markets accounted for 3.2 million square feet of the total.

Price says that another 2.5 million square feet of industrial product was delivered in Q1 — predominantly in Central New Jersey — with 68 percent of the new product already leased. The largest project was a 305,020-square foot warehouse in Exit 8A by Adler Development. Meanwhile in Northern New Jersey, Snow Joe recently committed to a full-building lease of the newly constructed 271,195-square foot warehouse at 100 Performance Drive in Mahwah.

Even with these new deliveries, another 8.5 million square feet of industrial product is under construction, of which 54 percent has already been leased up. The bulk of the new developments (4.7 million square feet) are in traditional industrial corridors — Exit 8A or Upper 287 — but with space being gobbled up in those areas, two large developments have now broken ground further west. More than 515,000 square feet is under construction in Totowa at 150 Totowa Road, while more than 510,000 square feet is being built in Hillsborough at the Midpoint Logistics Center. Both projects are being built on spec.

Approximately 6.4 million square feet of new transactions were completed in the first three months of the year, with Exit 8A and the Lower 287 Corridor (exits 10-12) both recording sharp quarterly increases in tenant demand (at 1.2 million square feet and 1.4 million square feet, respectively). Interest in the Upper 287 submarket remained healthy as another 646,000 square feet of industrial space was leased up, bringing its total for the last year to almost 3.0 million square feet.

Meanwhile, the Meadowlands submarket remained a premier destination due mainly to its proximity to New York City, having recorded 760,000 square feet of transactions during Q1, on par with the previous few quarters.

Eight new leases greater than 200,000 square feet were signed throughout New Jersey this quarter, much of which occurred between Exit 8A and Exit 14. Logistics companies represented many of the larger transactions, as they expand in the area to help support the growing eCommerce boom.

The largest deals inked during Q1 included:

  • TJ Maxx’s 459,000-square foot at 50 Bryla Street in Carteret
  • Asian eCommerce solutions provider 4PX Logistics’ 354,302-square foot lease at 1000 High Street in Perth Amboy
  • US E Logistics’ 340,000-square foot lease at 100 Cranbury South River Road in South Brunswick
  • XPO Logistics’ 8A expansion, leasing 296,000 square feet and 175,453 square feet at Buildings 1 and 3 at Park 130
  • Hall’s Warehouse’s full-building 278,000-square foot lease on Access Road in Piscataway

Because of robust demand and dwindling supply, asking rents once again ticked even higher. New Jersey experienced a 9.2 percent increase in average asking rents for industrial space over the last year, ending Q1 at $8.21 per square foot, another historical high. For warehouse space, the annual increase was even more notable, at 14.3 percent, bringing rents to $7.93 per square foot, new heights for W/D space. In addition, the Meadowlands rents ticked nominally higher to $10.41 per square foot since the close of 2017, while the Port Region, Upper 287 Corridor, Lower 287, and Morris County all experienced quarterly rises in average asking rents for warehouse space.

Barring unforeseen events, the overall Northern and Central New Jersey industrial market is poised for another banner year, although the rate of growth may temper slightly.

“Despite some large blocks of space potentially becoming vacant later in the year, demand should offset much of the new availabilities and speculative development,” he says. “And while asking rents in the core submarkets are projected to rise further, they could begin to grow at a more moderate pace due to the lack of available, modern, class A space. Finally, developments will persist along the NJ Turnpike and a little further west. The strong appetite for modern warehouse space will likely continue to keep occupancy rates high in newly built facilities.”

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Friday, March 30, 2018

Keystone Property has plans to expand offices near PHL

By Natalie Kostelni  – Reporter, Philadelphia Business Journal
Keystone Property Group is seeking to expand the Airport Business Center, a three-building office complex it owns in Tinicum, Pa.

The developer wants to construct a 428,734-square-foot addition to one of the existing buildings on the property at the intersection of Stevens Drive and Governor Printz Boulevard. The expansion would go on 44.75 acres adjacent to 200 Stevens Drive and next to the existing building. That building is leased to AmeriHealth Caritas, the region’s largest Medicaid managed care organization.

Sources have said the addition would accommodate expansion of the company and enable it to grow to around a total of 700,000 square feet over time. Jawanza Keita, a spokesman for the company, said it doesn’t comment on lease agreements or related matters.

AmeriHealth Caritas already occupies 300,000 square feet at the Airport Business Center. It also occupies another 150,000 square feet at International Plaza, a nearby office complex.

AmeriHealth Caritas is growing. Last October, the Delaware Department of Health indicated that Social Services had awarded one of two Medicaid provider contracts to the Philadelphia-based company. It is owned by Independence Health Group in partnership with Blue Cross Blue Shield of Michigan. The company has more than 5.7 million Medicaid, Medicare and Children’s Health Insurance Program, or CHIP, members in 17 states and the District of Columbia.

Full story:

O'Neill Properties to close soon on $50M+ deal for GSK property

By Natalie Kostelni  – Reporter, Philadelphia Business Journal

GlaxoSmithKline has officially entered into an agreement to sell its West Campus in Upper Merion to O’Neill Properties Group in a deal worth about $50 million.

GSK wouldn’t disclose the sale price, but sources familiar with the transaction indicate the property at 709 Swedeland Road is trading in excess of $50 million. It consists of 43 buildings totaling about 2.2 million square feet of office, lab and warehouse space.

The sale is expected to close early in the second quarter, said Frances DeFranco, a GSK spokeswoman.

The sale means that GSK employees working out of the west campus will be moved to the pharmaceutical company's other local facilities. GSK operates properties in Upper Providence as well as what is referred to as its Upper Merion East Campus, which is next door to the West Campus. The company also has an office at the Philadelphia Navy Yard.

“GSK will continue to occupy the Upper Merion West Campus after the transaction closes, and will be relocating a majority of employees to either Upper Providence or Upper Merion East over the next year,” DeFranco said.

The company will also keep its sterile manufacturing facility on the Upper Merion West Campus to support early phase development and clinical sterile drug product manufacturing, DeFranco said.

GSK has been evaluating and realigning its real estate for the last 10 years. In early 2011, the company announced it would relocate from Franklin Plaza in Philadelphia to the Navy Yard. In 2013, it informed employees that it would rearrange significant portions of its real estate in the western suburbs.

Those efforts would involve consolidating, closing and expanding some facilities over the next several years. Those plans have been or are now being realized. They entailed: 

Closing its Upper Merion West Campus and leasing back a portion for its pilot plant;
Not renewing a 200,000-square-foot lease at 2301 Renaissance Blvd. in Upper Merion;
Retaining and keeping operational Upper Merion East, which totals 760,000 square feet at 893 River Road. It also has plans for a 100,363-square-foot expansion to one of its buildings at the River Road plant; and
Investing $245 million at its Upper Providence facilities. It is reconfiguring its research and other spaces in Upper Providence to make them more efficient with an eye toward making it one of two global research centers. The company will conduct research for HIV and infectious diseases, oncology, cardiovascular and other areas from there.

Full story:

Kimberton Whole Foods opens in Collegeville

By Natalie Kostelni  – Reporter, Philadelphia Business Journal

In spite of a nor’easter bearing down on the Philadelphia region last Wednesday, Kimberton Whole Foods went forward with a scheduled opening of a new store in Collegeville, Pa., its first in just over three years. 

To the surprise of Terry Brett, who established the grocery chain 32 years ago with his wife, and other employees, shoppers actually showed up and in a good number.

That seemed to be a harbinger for the store at 222 E. Main St. as the following days proved there must be pent-up demand for the organic grocer or at the least, a desire for more shopping options.

Brett had to bring more carts on Friday from his flagship store in Kimberton, Pa., since they were running out at Collegeville. By Saturday, wall-to-wall shoppers were milling through the aisles and lines were deep with shoppers patiently waiting to get checked out.

“Our sales have been way beyond expectations,” Brett said.

The new store, the grocer's sixth, is the result of Kimberton backfilling a portion of a former Acme. Though it had plans to open last fall, the date got pushed into March because of design and construction delays. The store employs 60 full- and part-time workers.

Ron Williams, who has been shopping at the grocery store since it fist opened in Kimberton in 1986, was impressed with the Collegeville location. “It’s very well organized and the layout is a huge plus,” he said.

The store in Collegeville totals 15,000 square feet and Kimberton is 8,000 square feet with aisles so narrow that two modestly-sized shopping carts can’t maneuver through together.

Full story:

Brandywine Realty's Sweeney: Amazon or not, Philly can grow more jobs

by Erin Arvedlund, Inquirer Staff Writer

Will Amazon make the difference in bringing jobs to Philadelphia? Gerard “Jerry” Sweeney says maybe — but Philadelphia could create even more jobs just by changing its tax structure and doing more to boost business in the city.

The president and CEO of Brandywine Realty Trust addressed the Greater Philadelphia Chamber of Commerce on Thursday morning to a packed house, and said that whether or not Amazon picks the city for its next headquarters,  Philadelphia needs to generate more jobs.

Currently, Philadelphia lags in job growth, at just 1.3 percent annually over the last six years, compared with the national average of 2.1 percent over the same period, he said.

The average job growth rate of the top 25 cities is 2.8 percent annually. “We have an anemic job growth track record,”  he said. “Amazon has done a great job disrupting procurement. I love that they broke the bounds of traditional site selection processes. What they wind up doing, who knows? I was delighted we put together a great proposal in Philadelphia. We’ll see what happens.”

Amazon promised to bring 50,000 jobs to the city, which now has 600,000 jobs.

But more important, Sweeney said, “if Philadelphia grew at just the national average growth rate, we could generate 90,000 jobs over 10 years. That’s the important thing. It’s not ‘Amazon, please pick us.’ We’ve got to look inward to drive that growth.”

Full story:

Wilmington-Based Real Estate Firm Acquires Sheraton Society Hill For $96M

by Steve Lubetkin,
PHILADELPHIA, PA—Bethesda, MD-based RLJ Lodging Trust has sold the 364-room Sheraton Philadelphia Society Hill in Philadelphia, PA for $95.5 million or approximately $262,000 per key to The Buccini/Pollin Group, a Wilmington, DE-based real estate acquisition, development, and management firm. BPG says PM Hotel Group, a hotel management company based in Washington, DC, will manage the hotel.

“The Sheraton Society Hill is a remarkable asset in an unmatched location surrounded by numerous business and leisure demand generators, from the Liberty Bell and Independence Hall to Fortune 500 companies like Comcast and Aramark,” says Dave Pollin, co-founder, BPG. “We are in the advanced planning stages of a complete makeover of the hotel to upgrade the guest experience. In addition to improving both guest rooms and public spaces, we intend to change brand affiliations to better match and serve the surrounding community.”

BPG also owns The Franklin at Independence Park, 401 Chestnut Street, Philadelphia; the Fairfield Inn King of Prussia; and the Crowne Plaza King of Prussia, at 258 and 260 Mall Blvd., King of Prussia, respectively.

The hotel also provides 20,000 square feet of meeting and event space, including the 7,800 square-foot Society Hill Ballroom capable of hosting up to 900 guests.

Buccini/Pollin has developed and acquired hotel, office, residential, retail, and parking properties throughout the United States, valued at more than $4 billion. Investments include more than 40 hotels, six million square feet of office and retail space, 10 major residential communities and multiple entertainment venues, such as Talen Energy Stadium, home of the Philadelphia Union Major League Soccer team.

“The sale of another non-core asset at a highly accretive valuation highlights the meaningful progress we have achieved in realizing the embedded value from the FelCor merger,” says Ross H. Bierkan, president and chief executive officer of RLJ. “Not only is this disposition highly accretive on a valuation basis, but it is also accretive to our portfolio RevPAR and EBITDA margin. With this transaction, we have accomplished our initial goal of generating approximately $300 million from asset sales at an attractive aggregate multiple. We remain laser-focused on unlocking the embedded value within our portfolio through executing on our strategic initiatives. We continue to expect to execute on a second round of asset sales that will generate an additional $200 million to $400 million in proceeds this year.”

The transaction sale price represents a 14.7-times multiple on the hotel’s 2017 EBITDA and approximately a 5.6 percent capitalization rate on the hotel’s 2017 net operating income, which excludes planned capital expenditures. The hotel EBITDA margin for the Sheraton Philadelphia was 28.0 percent in 2017, below the Company’s reported 33.1 percent EBITDA margin for the year. The hotel’s 2017 RevPAR was $119.12 compared with the portfolio average of $135.82.

The Company intends to apply the net proceeds from the sale to pay down its credit facility and for general corporate purposes.

RLJ Lodging Trust is a self-advised, publicly traded real estate investment trust that owns 155 hotels with approximately 30,200 rooms in 26 states and the District of Columbia and an ownership interest in one unconsolidated hotel with 171 rooms.

Monday, March 26, 2018

Realterm Pays $15.4M for Linwood Industrial Bldg

Realterm U.S., Inc., a real estate owner and developer, acquired the industrial building at 1500 Blueball Ave. in Linwood, PA from Kendall Associates for $15.4 million, or about $103 per square foot.

The 150,000-square-foot warehouse building is located within the Chichester Business Park. FedEx is the current tenant in the building.

Pennsylvania Steel Renews 75,000-SF Lease in Whitehall

Pennsylvania Steel, a metal and alloy provider, has renewed its lease for 75,000 square feet in the industrial building at 1139 Lehigh Ave. in Whitehall, PA.

The industrial warehouse totals 508,000 square feet in the Riverside Business Center. The property was developed in 1910, with a renovation completed in 2008. Other tenants include Bell Nursery, Lehigh Fabrication and Power Line Supply, among others.

ACE Insurance Group Renews Lease in Malvern

ACE Insurance Group has renewed its lease for 23,333 square feet in the office building at 3 Country View Rd. in Malvern, PA.

The three-story building totals 70,000 square feet in the Great Valley Corporate Center. Rouse & Associates developed the property in 1998, and it is currently owned by Safanad Limited and Workspace Property Trust.

ACE occupies the entire third floor. Sungard Higher Education also occupies space in the building.

Tuesday, March 20, 2018

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Geisinger Health System Sells Bloomsburg, Mountain View Medical Facilities

Geisinger Health System sold two of it’s medical facilities in Pennsylvania to Skyline Healthcare for $27 million, or about $241 per square foot.

The deal totals 111,957 square feet and includes the Mountain View Care Center at 2309 Stafford Ave. in Scranton, PA and the Bloomsburg Healthcare Center at 211 E. 1st St. in Bloomsburg, PA.

Monday, March 19, 2018

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Tryko Partners acquired ManorCare Health Services

Tryko Partners acquired ManorCare Health Services at Mercy Fitzgerald Hospital in Yeadon, PA. Marquis Health Services, the company’s healthcare affiliate and a third-generation nursing home operator, will orchestrate a more than $2.5 million renovation of the property, which has been renamed Providence Rehabilitation and Healthcare Center at Mercy Fitzgerald. Built in 1995, Providence Rehabilitation and Healthcare Center at Mercy Fitzgerald is adjacent to Mercy Fitzgerald Hospital, which is part of the Mercy Health System. The two-story, 129-bed facility provides post-hospital care, short-term rehab and long-term residential care. Tryko/Marquis purchased the facility from a ManorCare Health Services/Mercy Fitzgerald Hospital joint venture. The hospital will retain ownership of the land.

US Storage Centers has expanded into Philadelphia

US Storage Centers has expanded into Pennsylvania with acquisition of a facility in Philadelphia from Philly Self Storage. The facility will be re-branded as a US Storage Centers self storage facility. US Storage Centers acquired the 1,545 unit, 107,606-square-foot self storage facility located at 1910 S. Christopher Columbus Boulevard. It features climate-controlled units, electronic gated access carts and dollies and RV Parking.

Saturday, March 17, 2018

United Furniture Style Leases Folsom Retail Space

United Furniture Style, a furniture retailer, has signed a lease for 15,800 square feet in the retail building at 199 Kedron Ave. in Folsom, PA.

The building totals approximately 24,200 square feet in the Delaware County submarket. United Furniture Style’s lease includes most of the building, with Marburn leasing the remaining portion.

Harbortouch Renews Lease in Allentown

United Bank Card, Inc. Harbortouch has renewed its full-building lease for 27,750 square feet in the office building at 2202 N. Irving St. in Allentown, PA.

The two-story building was developed in 1987 by Valley Forge Equities in the Lehigh Valley Executive Campus.

Ta Chen Leases Industrial Space in Burlington

Ta Chen, a manufacturer and distributer of steel, aluminum and alloy, has signed a lease for 96,529 square feet in the brand new industrial building at 1651 River Rd. in Burlington, NJ.

The building totals 192,402 square feet and was delivered by MRP Realty in December 2017. The remainder of the building, totaling 95,873 square feet, remains available for lease

The Cordish Cos Buys Philadelphia Holiday Inn

The Cordish Companies acquired the 238-room Holiday Inn at 900 Packer Ave. in Philadelphia, PA from an investment group led by Barry Sussman of Lilly Street Capital and Stadium Hospitality Group LLC for $37 million, or about $155,000 per room.

The 11-story, 159,624-square-foot, 4-Star hospitality building was originally constructed in 1973 on nine acres in the South Philadelphia submarket. It was renovated in 2004, flies the Inter-Continental Hotel Group Flag, and last year averaged 64 percent occupancy.

Cordish Companies plans to redevelop the property into a hotel and casino.

Friday, March 16, 2018

Equus snaps up seven suburban office buildings from Liberty Property Trust for $92M

by Jacob Adelman Philadelphia Inquirer
Equus Capital Partners Ltd. has acquired a portfolio of seven office buildings along U.S. Route 202 in Montgomery, Delaware and Chester counties in Philadelphia’s western suburbs from Liberty Property Trust.

Equus, based in Yardley, paid $92 million for the properties that encompass 593,000 square feet, it said in a statement Thursday.

The portfolio consists of 440-460 E. Swedesford Rd. in Wayne; 300, 400, and 500 Chesterfield Pkwy. and 45 Liberty Blvd. in Malvern; and 2100 and 2201 Renaissance Blvd. in King of Prussia.

The properties are among the suburban assets that Malvern-based Liberty said last month that it planned to sell to focus on its core industrial and city-center office holdings.

The purchase follows Equus’s 2015 acquisition of the 247,294-square-foot Bay Colony Executive Park office complex, also along Route 202 in Wayne, from Brandywine Realty Trust.

Tuesday, March 13, 2018

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Blackstone REIT Expands 'Last-Mile' Warehouse Holdings with $1.8 Billion Portfolio Purchase

Blackstone Real Estate Income Trust, Inc. (BREIT) announced it has successfully closed on a $1.8 billion transaction to acquire a 22 million-square-foot portfolio consisting of 146 infill warehouse and distribution properties across the country.

Known as the Canyon Industrial Portfolio, the properties were sold by a pair of funds sponsored by Boston-based Cabot Properties: Cabot Industrial Value Fund IV, L.P. and Cabot Industrial Value Fund IV Manager, LP. Blackstone had previously put the portfolio under contract in late December.

The acquired properties consists of 146 "last-mile" buildings, with the largest concentration in Chicago at 4 million square feet accounting for 18% of the portfolio's aggregate base rent; followed by Dallas (3.22 million SF, 12%), Baltimore and Washington D.C. (1.86 million SF, 12%), Los Angeles and Inland Empire, CA (1.12 million SF, 7%), South-Central Florida (1.12 million SF, 7%) and Denver (1.07 million SF, 6%).

The portfolio's 377 tenants include Amazon, Federal Express, DHL, Coca-Cola, Fiat Chrysler and the U.S. government, according to a securities filing.

BREIT noted that the industrial vacancy rates across the portfolio’s markets has continued to decline over the past seven years and is currently just 4.6%, while rents have increased 5.7% year-over-year.

"The continued market rent growth in the portfolio’s markets resulted in rents on new leases exceeding rents on expiring leases by 9% in the portfolio during the third quarter of 2017," Blackstone said, adding that the portfolio has some leasing upside as it's currently 90% occupied.

"BREIT’s portfolio, with its emphasis on stable, income-producing warehouse and apartment assets, is well positioned to benefit from continued tailwinds in these sectors," said A.J. Agarwal, Blackstone REIT president and head of U.S. core-plus real estate for the private-equity giant.

The Blackstone-sponsored non-traded REIT invests in stabilized U.S. commercial real estate properties, including multifamily, industrial, retail and hotel assets.

BREIT’s portfolio now totals $7 billion over 272 properties, including 33 million square feet of industrial space and 17,200 multifamily apartments, with some select-service hotels and grocery-anchored shopping centers.

Blackstone has re-entered the U.S. industrial market in a big way since last year, when it acquired a 38-property portfolio totaling 4.4 million square feet in Southern California from Principle Real Estate Investors for about $500 million.

In January, the private-equity company agreed to buy Canada-based Pure Industrial Real Estate Trust, which owns and operates industrial properties across North America, in an all-cash deal valued at about $2 billion.

Sunday, March 11, 2018

Impact on CRE from Tax Reform (Video)

REITs, Construction Industry React to Tariffs, Warn Rising Construction Costs Could Cancel Projects

President Donald Trump's plan to impose steep tariffs on steel and aluminum imports have sparked rising concern and dire warnings this week from architects, contractors, REITs and real estate lobbying groups who say tariffs could put more pressure on already rising building costs and cause developers and investors to postpone, cancel or steer clear of new development opportunities.

Despite a carve-out by the White House for North American trading partners Canada and Mexico, the proclamations signed today by President Trump formalize 25% and 10% tariffs on imported steel and aluminum that will take effect in 15 days. The president's plan has prompted mounting opposition over the course of the week from prominent congressional Republicans and business leaders worried about the potential impact on the economy, shaken global financial markets and prompted retaliation threats by the European Union, China and other U.S. trading partners. White House chief economic advisor Gary Cohn, who opposes the tariffs, resigned this week.

Real Estate Roundtable President and CEO Jeffrey DeBoer warned that "unintended consequences from such broad penalties targeting metals essential to construction" could jeopardize the current healthy state of the U.S. commercial property industry. DeBoer said higher construction costs could make many new projects "uneconomic and unviable" and hurt investment and job creation.

Construction firms and general contractors committed to fixed-price contracts may have to absorb the added costs, forcing them to cut back on investments in new equipment and personnel, AGC chief executive Stephen Sandherr said in a statement today issued in response to the proclamations.

Higher steel and aluminum costs could force infrastructure funding cutbacks by federal, state and local officials, while the ensuring trade war will dampen enthusiasm for both private-sector investment in roads, bridges and other infrastructure undermining one of Trump's key initiatives, Sandherr said.

"The bottom line is that any short-term gains for the domestic steel and aluminum industries will likely be offset by the lower demand that will come for their products as our economy suffers the impacts of these new tariffs and the trade war they encourage," Sandherr said.

U.S. Chamber President and CEO Thomas J. Donohue also issued a statement Wednesday saying the business organization "is very concerned about the increasing prospects of a trade war which would put at risk the economic momentum achieved through the administration’s tax and regulatory reforms."

"We urge the administration to take this risk seriously and specifically to refrain from imposing new worldwide tariffs," which would harm American manufacturers, provoke widespread retaliation from U.S. trading partners and leave the true problem of Chinese steel and aluminum overcapacity virtually untouched," Donohue said.

REIT Execs Lament Rising Cost of Steel, Labor
Tariffs and rising construction materials, land and labor costs were top of mind for analysts and senior REIT executives at the 2018 Citi Global Property CEO Conference in Hollywood, FL. Andrew M. Alexander, CEO with grocery anchored shopping center investor Weingarten Realty Investors (NYSE: WRI), said prices will likely continue to drift upward.

"How much, it's hard to say, but if there are aluminum tariffs, that's got to affect the prices," Alexander said, adding that Weingarten has already locked in the price of steel through most of its active pipeline. "When it comes to green-lighting new developments, I don't think we're going to do a lot of that, because there's so much uncertainty and not robust enough tenant demand to absorb. Everyone thinks there will be some amount of cost increases from materials and labor."

Multifamily developer Camden Property Trust (NYSE:CPT) has been able to acquire development deals at prices ranging from 7% to 15% below replacement cost depending upon the market, Camden Chairman and CEO Richard Campo told analysts. At one Broward County, FL, proposed development, for example, construction costs have increased 65% since 2013, "that doesn't include another $300,000 or $400,000 of steel after the steel tariff kicks in and the rents have gone up 26%," Campo said.

Joseph Margolis, chairman and CEO of Extra Space Storage Inc. (NYSE: EXR) told analysts that the self-storage REIT's development pipeline has slowed or shut down as yields compress, in part due to rising construction costs.

"Clearly there's pressure from the equity capital providers and the debt capital providers as development yields start to get squeezed," Margolis said. "Land costs are up, lumber had a big increase over the last couple of months, labor costs are up. Now, we're thinking steel costs may go up as well."

Asked by an analyst whether the appetite for banks to lend for new development is slowing, Public Storage CEO Ronald Havner voiced similar sentiments. The attractiveness of REITs buying so-called C/O (certificate of occupancy) deals -- newly built self-storage properties constructed by developers -- has dulled from a year to 18 months ago, Havner said.

"My expectation is that would have some impact on new development going forward," he said. "Labor is tight, labor costs are rising, [the price of] steel's gone up recently. The implicit replacement cost on everyone's properties is moving up because new construction is rising in cost."

Steel Prices on Rise as Foreign Suppliers Pull Back
Four of the Federal Reserve's 12 districts saw a marked increase in steel prices, due in part to a decline in foreign competition. Price growth for lumber and other building materials picked up due to an uptick in construction activity, according to the Fed's latest Beige Book survey released Wednesday. A combination of stronger demand, supply constraints and higher materials prices increased non-labor costs, especially in construction, manufacturing and transportation.

"[U.S.] steel producers reported raising selling prices because of a decline in market share for foreign steel and expectations about potential outcomes of pending trade cases," the Fed said. "Manufacturers further down the supply chain reported sizeable increases in the price of steel that they purchased."

Ken Simonson, chief economist of the Associated General Contractors (AGC), said the tariffs could be "damaging to the construction industry in multiple ways."

"Steel is nearly ubiquitous in construction," Simonson said. "Aluminum is used in all types of buildings for window frames and curtain walls, siding and other architectural elements. The price of both imported and domestic metals is likely to rise immediately. That will reduce or eliminate any profit for contractors who have already signed a fixed-price contract for a project, but who have not yet bought metal products."

The increases in materials will cause bidder to hike prices for future projects, causing governments and other public owners of property, who generally on fixed budgets, to reduce the number or scope of projects put out to bid such as schools, highways, bridges or other infrastructure. Some private projects will be shelved or canceled as construction cost increases make them uneconomic, Simonson said.

Simonson said price increase notices continue to hit contractors' inboxes, noting that he saw an announcement from the American Buildings Co. South division of Nucor Buildings Group of a 7% price increase on pre-engineered metal buildings effective March 20.

According to an estimate this week by Trade Partnership Worldwide, an international trade and economic consulting firm, while the plan would increase U.S. iron and steel, aluminum and other non-ferrous metals employment by about 33,450 jobs, the tariffs would eliminate 179,334 jobs throughout the rest of the economy for a net loss of nearly 146,000 jobs, including more than 28,000 construction positions.

The tariffs "threatens to drastically increase the prices of many building materials specified by architects," said Carl Elefante, president of the American Institute of Architects (AIA).

"Structural metal beams, window frames, mechanical systems and exterior cladding are largely derived from these important metals," Elefante said. “Inflating the cost of materials will limit the range of options they can use while adhering to budgetary constraints for a building." Elefante added that the administration’s proposed $1.7 trillion infrastructure program will not achieve the same value if critical materials become more expensive," and the potential for a trade war puts other building materials and products at risk.

"Any move that increases building costs will jeopardize domestic design and the construction industry, which is responsible for billions in U.S. gross domestic product, economic growth and job creation," Elefante said.

Thursday, March 8, 2018

North Gulph Road office building in King of Prussia getting a makeover

by Gary Puleo writer The Reporter News
 Not to be outclassed by the explosion of eye-catching development all around it, a King of Prussia office building built in the late ’70s will get a robust makeover in the near future.

Brandywine Realty Trust has a revitalization in mind for 500 N. Gulph Rd. that will transform it into “a thriving hub designed for corporate collaboration and innovation.”

Enhancements to the existing building, which is one of 18 owned or managed by the Radnor-based company, will include a loft-style space, energy-efficient modern design and finishes, suite-style restrooms, open exterior balconies overlooking Valley Forge National Historical Park and a sleek, updated exterior.

“The re-imagination of 500 N. Gulph Rd. is the first of its kind in Brandywine’s King of Prussia portfolio,” said Jerry Sweeney, president and CEO of Brandywine Realty Trust. “The new design will offer a modernized office layout and common amenity areas, creating a collaborative work environment and strategically aligning with today’s desirable workplace trends.”

Brandywine Realty Trust has entrusted ZGF Architects with reinventing the function and the aesthetics of the building, which is expected to be completed this fall, with the building’s new single-deck parking structure expected to be finished next winter.

Tenants will also have access to the adjacent Brandywine fitness, dining and conference facilities at Freedom Business Center, as well as several outdoor collaborative spaces.

“As we continue to invest in our suburban properties, we do so with a forward-thinking approach to the modern workplace,” Sweeney noted. “We understand that the workplace must act as a catalyst for engagement, innovation and collaboration, and we are proud to deliver a re-imagined product at 500 N. Gulph Rd. that will meet and exceed these needs for future tenants.”

The building is within walking distance of shopping, dining, fitness, health care and other amenities at the still growing Village at Valley Forge and King of Prussia Town Center, and is a short drive away from King of Prussia Mall.

It is also centrally located within a key corridor of the region, centrally at the intersection of routes I-76, 202 and 422. “The growth in this region is remarkable, and we’re thrilled to have companies like Brandywine investing in thoughtful redevelopment of existing infrastructure,” noted Eric Goldstein, executive director of the King of Prussia District (KOP-BID).

“With the possibility of SEPTA’s King of Prussia Rail on the horizon, King of Prussia is now widely recognized as a key hub of business and commerce, and Brandywine is building for a growing workforce of the future.”

Current CRE Strategies via CohnReznick (Video)

Tuesday, March 6, 2018

CRE Opportunities from the Tax Act via Moody's Analytics (Video)

US Builders Optimistic Amid Early Signs of Construction Slowdown

The value of new multifamily development starts jumped nearly 40% while nonresidential construction turned flat or declined in January as U.S. construction entered 2018 in a state of "decelerating expansion," according to recent data from Dodge Data & Analytics.

Total U.S. construction starts declined a modest 2% to a seasonally adjusted $725.9 billion in January following a 13% increase the prior month, largely due to an 18% pullback in public works, electric utility and gas plant construction.

The value of multifamily housing starts spiked 39% in January, with 11 projects valued at $100 million or more breaking ground as apartment and condominium construction showed fresh legs after three straight months of declines to close 2017. As a group, the commercial construction categories excluding multifamily - office, industrial, retail and hospitality projects - fell 15% in January. The value of new office construction starts declined 31% after a sharp 44% increase in December. Hotel construction dropped 13% in January after a modest 4% gain in December.

"January’s level of activity is consistent with the picture of a decelerating expansion," said Robert Murray, chief economist for Dodge Data & Analytics. "Some dampening may come from higher material prices and tight labor markets, yet while interest rates are rising, the increases are expected to stay moderate this year."

The supply wave has not crested in the U.S. multifamily sector, with CoStar’s forecast calling for delivery of approximately 500,000 units over the next two years, with much of the new development concentrated in large urban projects near CBD office buildings and retail. While office construction starts closed out 2017 below their historical average for the 10th consecutive year, office deliveries are expected to reach a cyclical high this year, with CoStar forecasting that the new supply will cause the U.S. office vacancy rate to begin ticking up as completed construction finally begins to outpace demand.

Over 225 million square feet of industrial properties delivered in 2017, the highest recorded in over 10 years, and of January 2018, over 230 million square of industrial space had broken ground in the last year, much of speculative development. The level of retail construction remained well below historical average, with just over 60 million square feet under construction as of December compared with last cycle’s peak of nearly 170 million square feet.

Despite slowing conditions in almost all sectors besides multifamily, optimism abounds in the construction and design industries. The "optimism quotient" in Wells Fargo's 2017 Construction Industry Forecast released this week was 133, a 10-point increase over last year and the highest reading for the index since the late 1990s.

Total nonresidential construction, including commercial, institutional and public works projects, remained flat, edging up 1% in January to $240.8 billion despite a 149% jump in entertainment-related projects, including the groundbreaking for the $1.3 billion domed stadium in Las Vegas that will be the new home for the Oakland Raiders, slated for occupancy prior to the 2020 NFL season.

Murray noted economic growth from this year's tax cuts may benefit commercial building and manufacturing construction starts, while the institutional portion of nonresidential building should stay close to last year’s historically elevated levels.

Construction of educational facilities, the largest nonresidential building category by dollar amount, slipped 1% while health-care facilities retreated 10% in January, despite the start of several large hospital projects such as the $254 million Hubbard Center for Children Medical Center in Omaha NE; and the $120 million replacement for the Memorial Hospital complex in York, PA.