Friday, October 19, 2018

Capitol Investment CEO: Opportunity zone (Video)

Capitol Investment CEO: Opportunity zone investments could transform low-income communities from CNBC.

Treasury proposes rules meant to spur investment in low-income areas from CNBC.

Techni-Tool Renews Industrial Lease in Norristown, Pennsylvania

Techni-Tool, a local distributor of equipment for electronic production, assembly and repair, renewed its 120,000-square-foot lease at T-Squared Realty’s single-tenant warehouse in Norristown, Pennsylvania.

The two-story building at 1547 N. Trooper Road comprises six loading docks, 40- by 40-foot column spacing and a 25-foot clear ceiling height. Built in 2000, the Class B building spans nearly 26 acres less than 25 miles from downtown Philadelphia.

WuXi AppTec Getting Third Build-to-Suit Lab at Philadelphia Navy Yard

by Steve Lubetkin,
Liberty Property Trust and Synterra Partners will begin construction early next month on a 95,000 square foot build-­‐to-­‐suit office and laboratory building for WuXi AppTec’s Advanced Therapies Business Unit at the Navy Yard. The new facility, at 400 Rouse Boulevard, designed to achieve LEED® certification, will be WuXi ATU’s fourth building at the Navy Yard and the third build-­‐to-­‐suit developed by Liberty for the company. When the new building is completed in late 2019, WuXi ATU will become Liberty’s largest tenant in the campus, occupying more than 380,000 square feet of space.

“WuXi was one of the first companies to locate to the Navy Yard more than fourteen years ago and throughout that time, our strong partnership will have produced four cutting-­‐edge facilities,” says Brian Cohen, vice president and market officer for Liberty Property Trust. “Their continued success has helped to pave the way for creating one of the most highly concentrated clusters of privately leased life science space in Philadelphia. With their fourth building soon to be underway, WuXi ATU’s growth offers an excellent example of the Navy Yard’s appeal to leading-­‐edge companies and its unique ability to attract and retain knowledgeable workers as well as accommodate long-­‐term business expansion.”
“The market demands for testing are increasing very quickly in advanced therapies. WuXi will more than double our testing capacity to support our cell and gene therapy clients,” says Felix Hsu, senior vice president and global head of advanced therapies. “WuXi’s facility in the Navy Yard has grown from one to a campus of four buildings, and employment here has increased from 150 people to more than 600 people and growing.”

The new building at 400 Rouse Boulevard, designed by DIGSAU, anchors the central intersection of Rouse and League Island Boulevards. Spanning longer than a city block, it will feature ripples of concrete and glass, creating a vibrant, animated urban façade. Expertly crafted wood elements will adorn vital points of entry creating a warmth and detail that contrasts the solidity and scale of the 95,000 square-­‐ foot structure. WuXi Advanced Therapies was represented in the transaction by Kyle Greiert and Greg Soffian from Savills Studley.
“WuXi’s continued growth in Philadelphia at the Navy Yard reinforces the city’s standing as one of the nation’s leading innovation hubs,” says Philadelphia Mayor Jim Kenney. “We congratulate WuXi on this announcement of its fourth cutting-­‐edge facility at the Navy Yard, and look forward to the creation of additional highly-­‐skilled, high-­‐paying jobs in Philadelphia.”

In addition to the new facility, WuXi Advanced Therapies occupies three other Liberty buildings at the Navy Yard, 82,000 square feet housing its early phase clinical manufacturing and testing operations at 4751 League Island Boulevard, occupied in 2004. In 2014, WuXi ATU expanded into 55,000 square feet at 4000 S. 26th Street to accommodate the growing demand for non-­‐viral cell therapy manufacturing. Two years later, Liberty finished its second build-­‐to-­‐suit for the company, a 150,000 square foot facility located at 4701 League Island Boulevard, one of the largest facilities in the world for the GMP manufacturing of viral vectors, which provides late phase/commercial capacity.

“Philadelphia is one of the most dynamic life sciences and healthcare industry centers in the nation. As one of the first tenants within the Navy Yard’s community of R&D enterprises, WuXi AppTec has long been at the forefront of innovation in Philadelphia,” says John Grady, president of PIDC. “The Navy Yard offers WuXi a unique environment to support the growth its company, and is a place where their employees thrive. We are thrilled to celebrate WuXi’s success with the groundbreaking of this new building.”

The Navy Yard is home to one of the highest concentration of privately leased life science space in the city of Philadelphia with more than 800,000 square feet. The tenants span a wide variety of specialties including a large cluster of leading-­‐edge companies like WuXi Advanced Therapies, devoted to cell and gene therapy. As a result, the Navy Yard is a hub for attracting top talent in the life sciences fields with more than 2,500 employees in this sector working on the campus. The diversity among these companies encompasses large corporate offices (Glaxo Smith Kline), established and emerging companies (WuXi AppTec, Iroko Pharmaceuticals, Adaptimmune and Coriell Life Sciences), educational institutions (Vincera Institute, Thomas Jefferson University Hospitals), and related capital ventures (Phoenix IP Ventures and Ben Franklin Technology Partners) among others.

The Navy Yard is considered the most successful redevelopment of a former military facility in the country. A thriving riverfront neighborhood, the Navy Yard currently features more than 7.5 million square feet of buildings housing more than 13,500 employees working at over 150 companies. Home to historic structures and new high-­‐performance and LEED certified development, the Navy Yard offers diverse, flexible building choices with varying heights, vintages, and floorplates, all powered by a nationally-­‐recognized microgrid and oriented around miles of riverfront access and world-­‐class open space. Future growth will support up to 10 million square feet of commercial and residential development. PIDC, Philadelphia’s public-­‐private economic development corporation, is the master developeroftheNavyYard.

Liberty is the master private developer at the Navy Yard and currently owns fifteen buildings totaling   more than 1.4 million square feet. Most of its properties reside in the Navy Yard Corporate Center, a master planned section of the urban campus featuring state-­‐of-­‐the-­‐art, sustainable multi-­‐ tenant and build-­‐to-­‐suit office and commercial space owned and developed by Liberty Property/Synterra, a joint venture between Liberty Property Trust and Synterra Partners. During the last fifteen years, Liberty has developed twelve properties in the Navy Yard Corporate Center for an investment of approximately $273 million. Liberty also has developed five other buildings outside the Corporate Center representing an additional investment of $119 million.

Retail Real Estate Opportunities and Strategies (Video)

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Wednesday, October 17, 2018

Liberty Property Trust Breaks Ground on 441,380 SF Industrial Facility in New Jersey

Liberty Property Trust has broken ground on a 441,380-square-foot industrial facility in Burlington. Located at 160-180 Dulty’s Lane, the project will feature 36-foot clear heights, 54-foot by 55-foot column spacing, 88 dock doors, space for 105 trailers and 330 parking spaces. The facility, which Dishner Architects is designing, is slated for completion in the first quarter of 2019. The general contractor is Blue Rock Construction.

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Retail Real Estate Sector Technology Update (Video)

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Monthly Economic Outlook — October 2018 (Video)

Wednesday, October 10, 2018

Local Investment Firm Sells 129,000-SF Suburban Philadelphia Shopping Center

Context Capital Partners, a local investment firm, sold a 128,544-square-foot shopping center in Warminster, Pennsylvania, to a private investor. Warminster Plaza sold for an undisclosed price.

The 4-Star center at 606 York Road was built in 1979 and renovated in 2004, spanning nearly 13 acres less than 12 miles from Northeast Philadelphia Airport. The property is leased to SMG SportsPlex at Warminster, AAA, Lee’s Hoagie House, YMCA of Buck’s County, Kid’s First Swim Schools, Pearle Vision Center and Grand Buffett.

“Investor demand for infill community and neighborhood shopping centers such as Warminster Plaza remains strong. Retail assets offer competitive risk-adjusted returns in today’s commercial real estate climate, and more capital is entering the space as we continue to see improving retail fundamentals in occupancy levels, rental rates and tenant demand,” said Chris Munley, a managing director at HFF, in a statement.

Equus Acquires 300K SF Class A Malvern Office Building

by Steve Lubetkin,
An affiliate of Equus Capital Partners has acquired 1400 Atwater Drive, a 299,809 square foot class A office building in Malvern, PA. The acquisition was made on behalf of Equus Investment Partnership XI, a targeted $350 million discretionary equity fund managed by Equus that opened for investment in July 2018.
The sale price was not disclosed. The property last changed hands in February 2013, when Chambers Street Properties acquired it from Trammell Crow Co. for $84.8 million, according to Real Capital Analytics, a proprietary research database that follows commercial real estate transactions.

“We are excited to add 1400 Atwater to our growing presence in Philadelphia’s dynamic Western Suburban marketplace,” says George Haines, vice president of Equus Capital Partners who, along with Tim Feron and Joe Felici, oversaw the acquisition for the firm. “The Route 29 corridor has transformed over the past few years and is now an active live-work-play environment. The acquisition of this trophy quality property provides us with strong cash flow in a submarket poised for further growth.”
1400 Atwater is one of the most accessible office complexes in Philadelphia’s western suburbs, located at the interchange of Route 29 and the Pennsylvania Turnpike. The property was developed in 2013 as a build-to-suit for Endo Pharmaceuticals, a $3.5 billion multi-national pharmaceutical company.  Situated on 24.84 acres, the LEED Silver trophy asset features a granite and concrete façade, 10-foot finished ceiling heights, on-site structured parking at a ratio of four per 1,000 square-feet, expansive lakefront views, efficient floor plates, and numerous on-site amenities including a full-service cafeteria, fitness center, coffee bar, training rooms, and a data center.

Malvern, which is home to a growing number of large corporate users, has seen vacancy decline drastically since 2012 due in part to organic growth within the market, and the attractive mixed-use environment that has developed there recently. The property is adjacent to the newly-delivered Atwater Village, a 300-acre master-planned development that includes 30,000 square-feet of retail and 875 new rental and for-sale residential units. Additionally, the Route 29 corridor has experienced a wave of newly delivered amenities, including Charlestown Village, the Wegmans-anchored Uptown at Worthington, new hotels, and a mix of new restaurants.

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Tuesday, October 9, 2018

Rockefeller/PCCP JV Building 1.3M SF Distribution Hub in Allen Township, PA

by Steve Lubetkin,
Rockefeller Group and joint venture partner PCCP are building the first of a two-building, 1.3-million-square foot distribution center in Allen Township, PA. Construction has commenced on a one-million-square-foot building at Rockefeller Group Logistics Park, with construction for a second 290,788-square-foot building expected to begin later this year.  Both buildings are expected to completed by summer 2019.
”Rockefeller Group is excited to begin construction on Rockefeller Group Logistics Park as we expand our industrial development portfolio to Pennsylvania,” says Brandi Hanback, executive vice president and head of industrial development for Rockefeller Group. “The Lehigh Valley has emerged as a new source for companies with large space requirements that also benefit from proximity to the region’s major consumer bases.”

Rockefeller Group Logistics Park is two miles from Lehigh Valley International Airport, which offers both air cargo and passenger service, and is three miles from Route 22, offering toll-free access to Port Newark/Elizabeth via Interstate 78. The site is located within a day’s drive to one-third of all US consumers and one-half of all Canadian consumers. One of the largest logistics hubs in the US is adjacent to the property.
“In addition to its exceptional location, Rockefeller Group Logistics Park will comprise next-generation industrial product that is being built to accommodate the advanced needs and rapid growth of today’s users,” says Johanna Chervak, director of real estate development for Rockefeller Group’s NJ/PA Region.  “We expect these speculative distribution buildings to attract e-commerce companies looking to reach consumers in a timely manner and we are already beginning to see interest, even before walls are tilted.”

“Rockefeller Group Logistics Park sits within one of the fastest-growing areas of Pennsylvania, surrounded by a robust and diverse labor pool, as well as amenity-rich communities. For some industrial users, the New Jersey market is not as viable due to high pricing and limited space. The Lehigh Valley offers these companies an ideal alternative with a similar quality of development, location, and labor access.”

The first building will include a 40-foot clear height, 509 car parking spaces, 179 loading cross loading dock doors, and 349 trailer parking spaces. The 290,788-square-foot building features a 36-foot clear height, 241 car parking spaces 38 dock doors, and 55 trailer parking spaces.

Resmark Leading JV to Develop Manayunk Multifamily Project

by Steve Lubetkin,
The Resmark Companies is leading a joint venture development investment with The Concordia Group and D3 Real Estate Development to create a waterfront townhome community in the Manayunk neighborhood of Philadelphia.
Construction is currently underway at The Locks, a collection of 63 waterfront residences, each with views of the Manayunk Canal, the Schuylkill River or both.

“Resmark is excited to continue our partnership with Concordia and D3 on another dynamic project in the city,” says Alexandra Johns, senior vice president, investments, Resmark Land and Housing. “Like Southwark on Reed, our first investment together, The Locks interacts with the local architecture and land plan to create an exceptional sense of place, and an exciting homeownership opportunity.”
Located between the canal and river, The Locks’ 63 waterfront residences will have open floor plans, incomparable views and generous rooftop terraces. The homes will range in size from 2,100 square feet to 3,500 square feet and are sited in a landscaped setting with a new riverfront trail along the Schuylkill River.  The community’s industrial architectural design by the Philadelphia firm of Varenhorst Architects pays tribute to Manayunk’s rich heritage.
“We’re pleased to partner with D3 and Resmark to create a project that adds to the vibrant atmosphere of Main Street and Downtown Manayunk,” says Will Collins, managing principal of The Concordia Group.

“Our team is executing a compelling vision that combines exciting contemporary home designs with well-planned common spaces that enhance the authenticity and charm of one of Philadelphia’s most unique neighborhoods,” says Greg Hill, managing partner of D3.

The Locks residents will enjoy the small town feel of Manayunk while living only six miles from Center City.  Named a National Historic District in 1983, Manayunk’s classic Main Street offers gourmet restaurants, boutique upscale shops, and seasonal street fairs, creating a walkable environment within steps of The Locks.  The Locks provides an authentic urban experience that encourages walking and biking and is near the new Performing Arts and Recreation Center. It is a short walk to the SEPTA station with direct service to downtown Philadelphia or is easily accessible to I-76.

This is the second Philadelphia community developed by Resmark, D3 and Concordia. The trio came together in 2015 to develop Southwark on Reed, a community of 91 single family attached townhomes at 400 Reed Street, formerly the site of the Mt. Sinai Hospital, which was the fastest-selling luxury townhouse project in Philadelphia.

The Locks continues Resmark’s investment in infill residential developments in walkable neighborhoods that benefit from thriving employment centers, abundant public transportation and desirable retail, service and recreational offerings.

Monday, October 8, 2018

JPMorgan says to buy this REIT (Video)

Kensington's Inevitable Development Boom Is Beginning

Northern Liberties is well into the infill phase of its development, and Fishtown has grown from hipster enclave to white-hot commercial corridor with skyrocketing home prices. It is no surprise, then, that development is continuing farther north along the Market-Frankford Line.

For those outside the development community, Kensington is perhaps best known right now for its place at the center of Philadelphia's opioid crisis. The still-pervasive sights of addicts on the street and needles on the ground are not viewed as a danger on the level of violent crime, which is a key distinction for developers such as The Riverwards Group. “Most interested people know of [the opioid issue], they’re aware of what’s there,” said The Somers Team Realtor Julie Hankins, leasing agent for the Rivewards Group. "But they know that the more involvement they have with the community, and the more routine [new move-ins] become, it’ll move out."

The lure of the Frankford Avenue corridor and the scarcity of land in Fishtown has driven home and rental prices through the roof there and, at least in the case of rentals, Kensington as well. The combination of rising rents and the anticipation of long-term growth has led most developers in the area to focus on for-sale townhouses and condos in their developments. Riverwards Group principal Mo Rushdy noted that while rents have risen to the point where "you can’t get anything respectable for less than $1K/month," the available housing inventory in Philadelphia dropped by 26% in the 12-month period ending in this year's second quarter. Despite the constraint on supply, home prices have remained reasonable in Kensington thanks to the availability of land, Rushdy said.

 “A single-family home in Kensington can be $369K with a 3% or 4% interest rate, so the obstacle is the $25K at closing, which is a real obstacle," Rushdy said. "But the monthly mortgage is about $1,500 per month, since the abatement takes care of the taxes.” In South Kensington, the area that sits north of Girard Avenue and west of Frankford Avenue, the Riverwards Group has begun construction on N5 Square, a 57-unit development made up of single-family townhouses, townhouses split into multiple condos and condo units sitting atop ground-floor retail at Fifth Street and Cecil B. Moore Avenue. The cheapest units are selling for $250K, and they are selling — the first phase is 50% sold before construction is complete. Hankins and Rushdy both told Bisnow that incoming residents have targeted for-sale units as a safe way to build long-term value in a neighborhood that seems assured to grow for years to come. “Our buyer is on average 32 or 33 years old, making $85K per year with a household of 1.5 people, single-income or double-income with no kids,” Rushdy said. The relative lack of children is notable, according to Rushdy, because it makes new residents less alarmist about the persistent presence of opioid addicts rendered permanently or temporarily homeless in the area. The opioid crisis and related homelessness has gotten so bad that Mayor Jim Kenney declared a state of emergency in Kensington in the first week of October.

AREP Acquires Conshohocken's Eight Tower Bridge

Washington, DC-based American Real Estate Partners, which owns and operates class A office assets throughout the Mid-Atlantic region, including 1600 Market Street in Center City Philadelphia, is acquiring Eight Tower Bridge, a 16-story, 347,000 square-foot trophy office tower in Conshohocken, PA, west of Philadelphia.
“With assets located in what are arguably the best submarket in each of Center City and Philadelphia’s suburbs, AREP is excited by its expanding platform in the area and actively working on additional acquisitions to complement its growing portfolio in the market,” says Paul Schulman, AREP principal and chief operating officer.

According to Real Capital Analytics, a proprietary research database, the property is being acquired from a joint venture of Conshohocken-based Oliver Tyrone Pulver Corp. and Barings, a Charlotte, NC-based global asset management firm. AREP says the buyer is an affiliate of AREP’s Strategic Office Fund II, a fully discretionary vehicle, in a joint venture with a single institutional investor that it did not identify.
“In Eight Tower Bridge, we have acquired a best-in-class asset in the very healthy Conshohocken submarket,” says Michael Gribbon, AREP principal and executive managing director. “The supply and demand dynamics of Conshohocken continue to improve, and the tenant community continues to favor this market due to its great rail access, its walkable amenities and its proximity to Philadelphia’s most coveted bedroom communities.”

Eight Tower Bridge represents AREP’s second acquisition this year in the Philadelphia MSA, having previously acquired 1600 Market Street, an 826,000 square-foot high-rise at the epicenter of Center City’s desirable Market West submarket. These acquisitions represent a re-entry into Philadelphia for AREP, as the firm was a prior owner of Two Liberty Place, the iconic class AA 1.25 million square-foot office and condo tower located adjacent to its 1600 Market Street property.

Eight Tower Bridge’s location directly adjacent to the SEPTA Regional Rail line, as well as the key intersection of Interstates 76 and 476, offering swift connections to Center City Philadelphia, Philadelphia International Airport, and the affluent Main Line suburbs.
The property is surrounded by Conshohocken’s dynamic and thriving environment, which includes an abundance of institutionally owned office assets, retail amenities within easy walking distance, premier residential communities, and two hotels. Designed by world-renowned architect Skidmore, Owings & Merrill, Eight Tower Bridge stands as the tallest office building in suburban Philadelphia, boasting a high-quality physical infrastructure, superior views, and attractive finishes within a scenic setting on a premier 45-acre mixed-use development overlooking the Schuylkill River.

AREP has planned dynamic property enhancements designed to activate the lobby with curated food options, the addition of AREP’s branded social and tenant lounge spaces, and a significantly enhanced fitness center. Presently, Eight Tower Bridge is 86%-leased to a well-diversified tenant roster that represents a cross-section of industries.

Thursday, October 4, 2018

New Mt. Airy Nexus Coworking Site Opens Up

 By Roberto Torres Technically Philly
John Autin, a Mt. Airy resident, stepped away from teaching at Philly public schools and joined a new coworking spot  spot five minutes away from his house.

“I got tired of taking the grading home,” said Autin, a father of two. He’s not a member, though: Autin now spends his days as community manager at Mt. Airy Nexus, a 7,000-square-foot coworking space that opened in August.

The place was founded by the same team that runs Center City’s CityCoHo, at 2401 Walnut St. A 10-minute walk to the Carpenter stop on SEPTA’s Chestnut Hill West line, the sustainability-minded space says it has signed on about 10 members, including a few tech firms like Braintree, Gei Consultants and Amplify.

Ernesto Tagwerker, founder of Indy Hall-based software company Ombu Labs, said he’s based out of the new space once a week.

“I love the community of Indy Hall, but [Mt. Airy Nexus] is super close to me,” the founder said.
Full story:

Auto Lending Tech Firm Takes 26K SF Lease in King of Prussia Office

by Steve Lubetkin
Sagent Lending Technologies, which develops automotive, mortgage, and consumer loan servicing and origination technology, signed a new, 26,588-square-foot lease at 1000 Continental in King of Prussia, PA. The property is owned by KBS, a non-traded real estate investment trust based in Newport Beach, CA.

“1000 Continental is an ideal place for tenants to attract talent and customers from across the region. The East Swedesford Road Corridor has blossomed into a true live-work-play environment,” says Shannon Hill, senior vice president for KBS and asset manager for the property. “Sagent Lending Technologies is poised for success at the property, and we look forward to working with them.”

The office property is a class A, award-winning building that is Wired Certified through WiredScore for meeting the highest standards of technological superiority in connectivity and infrastructure. The structure provides 205,424 square feet of total rentable space and 45-foot column spacing. The property is also equipped with a fitness center, gourmet café, tenant lounge, on-site security and covered parking.

Located at the intersection of the Pennsylvania Turnpike and I-76 in King of Prussia, 1000 Continental provides direct access to and from both highways. The property is also convenient to the King of Prussia Town Center and Wegmans, and offers transportation through the SEPTA bus service.

Wednesday, October 3, 2018

REIT Market Minute (Video)

Is commercial real estate a good investment at this point in the cycle? (Video)

Chan and Chan USA Renovating, Expanding New Lehigh Valley Location

by Steve Lubetkin,
J.G. Petrucci has partnered with Chan and Chan (USA), a Brooklyn based manufacturer of frozen Chinese food, to complete significant renovations at the company’s newly purchased facility in Bethlehem, PA. The new facility will enable the firm to enhance its food production capabilities and increase its distribution radius.

“Chan and Chan USA is one of the many food manufacturing and distribution firms that are taking advantage of the fantastic resources the Lehigh Valley provides,” says Jim Petrucci, founder and president of J.G. Petrucci Co. “This new central location will allow them to access nearly 40% of the United States population within a day’s drive.”

Chan and Chan USA will revitalize two vacant buildings located at 2320 Avenue A in Bethlehem. The first building, which is slated to be operational by October 2018, will be constructed to USDA and GFSI processing standards. It will feature 8,000 square feet of new freezer and cooler storage for Chan & Chan’s products. The renovations include installing new insulated metal panels, refrigeration equipment, new freezer slab and more.

Phase 2 of the project, which is currently in design, will include the renovation of a 72,000 square foot building, which will serve as Chan & Chan’s processing facility. J.G. Petrucci is working closely with Chan and Chan (USA) to design a facility that will accommodate the company’s current real estate need and strategically plan for its future growth.

“J.G. Petrucci brought a unique blend of experience to this project and we value the insight they provided when designing this facility,” says Albert Chan. “They utilized their experience in designing and building USDA compliant facilities to create plans for a flexible plant that will allow us to grow our business in the Lehigh Valley.”

Chan & Chan says the new operation will create approximately 75 new jobs upon completion.

Tuesday, October 2, 2018

Black Creek Group Breaks Ground on 514,000-SF Logistics Facility in Bethlehem, PA

Denver-based Black Creek Group, an investment management and development firm, broke ground on Brodhead Road, a 514,000-square-foot speculative logistics facility in Bethlehem, Pennsylvania.

Plans for the single-story structure at 2858 Brodhead Road call for 55 loading docks, four drive-in bays, 50- by 56-foot column spacing and a 36-foot clear ceiling height.

“The Lehigh Valley industrial market is a key logistics area within easy reach of the heavily populated Mid-Atlantic, New York Metropolitan and New England regions. The Brodhead development not only offers an excellent location with visibility from Routes 22 and 191, it will also benefit from the area’s well-educated labor force,” said David Fazekas, managing director of Black Creek Group, in a statement.

Black Creek Group has bought or built approximately $18 billion of investments over its 25-year history, according to its website.

The project, which spans north of 37 acres, is slated to deliver by the second quarter of 2019.

Ryder Logistics Leases and UPS Renews in Gloucester County, NJ

by Steve Lubetkin
Ryder Logistics signed 80,750-square-foot lease at 395 Pedricktown Road in Logan Township, while  UPS renewed 251,044-square-foot lease at 200 Birch Creek Road in Swedesboro.
The recent transactions exemplify the continued demand for distribution and logistics space in Southern New Jersey’s rapidly growing industrial market.

“The Gloucester County submarket has certainly emerged as a regional distribution hub, which has benefitted from both the overall growth of Philadelphia as well as the recent expansion of the PhilaPort,” Gartland says.  ”This submarket also has a tremendous labor pool to pull from, which continues to be a topic at the forefront of our business.”
 Deutsche Asset & Wealth Management – US, a large institutional owner, in the Ryder Logistics transaction. Deutsche AWM has known interests in 1,223 assets that have an estimated property value of $34.5 billion.

Strategically located at Exit 10 off Interstate 295 and Exit 2 of the New Jersey Turnpike, 395 Pedricktown Road is a 481,758-square-foot, class A warehouse built in 2017. Deutsche AWM acquired the property from Dermody Properties in April 2018 for $53.8 million, or $112 per square foot, according to Real Capital Analytics.

Situated at the mid-point between New York City and Washington, DC, the building provides exceptional access to the entire Northeast transportation corridor and is within a one-day drive of 40 percent of the total US population.
“Like many regional distribution markets, Southern New Jersey continues to see growth in the third-party logistics vertical. This deal is yet another example of this ongoing trend. The UPS lease renewal is a strong indication of its commitment to this market. As markets to the North continue to tighten, we now are starting to see a lot of that pent-up demand funnel south down the Turnpike and Route 295 into Southern New Jersey.”

The 597,232-square-foot warehouse/distribution facility is located at Exit 10 at Interstate-295, in the heart of the country’s richest consumer demographic and with easy accessibility to the region’s deep-water ports and transportation infrastructure. PEI acquired the property in November 2015 from a joint venture of Hillwood and Brookfield Asset Management for $34.2 million, says Real Capital Analytics.

Preferred Apartment Communities Sells Glenmoore, PA MF for $42.5M

by Steve Lubetkin,
Atlanta-based Preferred Apartment Communities has sold Stone Rise, a class A multifamily community built in 2008, and located at 900 Selwyn Place, Glenmoore, PA, about 40 miles west of Philadelphia, PA.
Stone Rise consists of one and two bedroom garden apartment homes, a resort-style pool, 24 hour internet café and fitness center. The property also has a car-care center and a “bark park” for pets.

PAC sold Stone Rise for gross proceeds of approximately $42.5 million, the net proceeds of which will be used for working capital purposes including reducing the outstanding balance under its revolving line of credit facility, acquisitions, real estate loan investments and general corporate purposes. 
The property achieved an average annualized return of approximately 23% and generated a gain on sale of approximately $12.4 million.

“The financial results generated from the sale of Stone Rise, a property purchased by PAC in 2011, demonstrates our ability to execute and deliver outstanding returns to our stockholders,” says John A. Isakson, executive vice president and chief financial officer for PAC. “We remain committed to a disciplined strategy of carefully allocating capital to accretive investments, optimizing the operations of our owned assets and, when appropriate, opportunistically divesting certain assets in an effort to produce the best possible returns for our stockholders.”

Should I enter into an exclusive Tenant rep agreement with a commercial real estate broker? (Video)

Monday, October 1, 2018

Clark Hill signs lease at Two Commerce Square

By Natalie Kostelni  – Reporter, Philadelphia Business Journal
When Clark Hill entered Philadelphia five years ago with the acquisition of Thorp Reed & Armstrong, it inherited the law firm’s 21,000-square-offices at One Commerce Square, and it wasn't long after that it found the space would not accommodate its plans for future growth.

Thorp Reed had 12 attorneys in its Center City office at the time of the merger and now Clark Hill has grown 21 lawyers in an office that can accommodate 25. The firm wants to have up to 50 attorneys within five years. With that in mind and its lease expiring in September 2019, the firm started nine months ago to look for new office space. 

“We looked everywhere,” said Lauri Kavulich, who is in charge of Clark Hill’s Philadelphia office.

The firm was focused on Philadelphia and looked at 15 spaces along the West Market Street corridor.

It also considered three locations in University City –– Schuylkill Yards, but it wouldn’t be built in time; FMC Tower at Cira Centre South, which was full; and Cira Centre, which didn’t have enough space. The option to stay in its existing space and expand didn't work either since two adjacent tenants were going to be remaining in their space for some time. 

Along with having room to grow, the firm wanted to find a space that would be close to the courthouses and City Hal,l as well as have it designed more efficiently. In the end, it didn’t have to look far for what it wanted. The firm signed a lease on 34,000 square feet on a floor and a half of Two Commerce Square.

“Once of the reasons we chose Commerce Square is it is close to Amtrak as well,” Kavulich said. “We have clients up and down the corridor. We also have Washington, D.C., office.”
Full story:

Philadelphia's Independence Hall Office Market Heating Up

Early signs may be surfacing of a resurgence in Independence Hall’s office market in Philadelphia.

Throughout 2015 and 2017 Independence Hall was an outlier with noticeably higher vacancies than other submarkets in and around Philadelphia’s central business district (CBD) such as Market Street West and University City. These higher vacancies were caused by move outs by both government and private sector tenants including the U.S. Navy, the GSA and Dow Chemical.

Independence Hall’s concentration of older office buildings and its distance from key center city regional rail stations are potential drawbacks from many office tenants’ perspective. However, a slew of office renovations, restaurant/bar openings and high-end residential construction are now coalescing in what was once a relatively sleepy submarket.

Since 2014, Keystone Property Group has re-energized the ground floor of 100 Independence by bringing Independence Beer Garden -- which includes outdoor seating and a gaming area -- and modernist café La Colombe. One block away, MRP Realty’s newly-renovated Bourse -- previously home to the nation’s first commodity exchange -- is reopening this fall with an impressive array of new dining and drinking options on the ground floor. Coworking operator MakeOffices also recently leased 35,000 square feet on the property’s 5th floor.

More than 850 new, high-end apartment units have either completed or broken ground in the Independence Hall submarket over the past five years. Parkway Corporation recently completed its Civic Design review for a proposed 278-unit apartment tower at 709 Chestnut. Toll Brothers is also planning an 85-unit condo development on the 700 block of Sansom Street.

These improvements to Independence Hall’s ambience and amenity offerings are beginning to bear fruit for office owners. A handful of large leases including Macquaire Investment Management, FiveBelow and a few coworking operators have been signed in recent years. These leases, combined with conversions of older office space into apartments, have helped bring Independence Hall’s office space availability rate -- the percentage of space being marketed for lease -- back in line with other Center City submarkets in 2018.

Given Independence Hall’s complete lack of new office construction, the submarket’s availability rate has nowhere to go but further down as long as tenants’ interest in the area continues to rebound. It will be interesting to see just how much more tenant interest Independence Hall can garner in the years ahead.

Maguire Hayden Real Estate Paying $32 Million for Collegeville, PA Office Portfolio

by Steve Lubetkin
Maguire Hayden Real Estate Company is acquiring Highview I & II (200 and 400 Campus Drive) in Collegeville, PA, from TA Realty. Maguire Hayden paid $32 million for the 183,363-square-foot, class A office portfolio.

“The portfolio represented an excellent opportunity to acquire class A, institutional-quality suburban office product offering stable, current yield and prominent credit tenancy in a superb, accessible location."

The two buildings, which are currently 93%-leased, are home to anchor tenants IQVIA, Fidelity Information Services and FirstService Residential. Highview I, located at 400 Campus Drive, totals 78,564 square feet and contains three floors. Highview II, located at 200 Campus Drive, totals 104,799 square feet over four floors.
The properties are near US Route 422, PA Route 29 and other regional roadways. Nearby arterial connections include I-76, the Pennsylvania Turnpike and US Route 202, providing accessibility to population centers within the Philadelphia MSA, including the Philadelphia CBD.

In addition, tenants benefit from a variety of amenities nearby, including Providence Town Center, King of Prussia Mall, Philadelphia Premium Outlets, as well as numerous hotels, restaurants, parks and entertainment facilities, such as the Valley Forge Casino Resort.

Thursday, September 20, 2018

Topgolf eyes locations in Philadelphia & King of Prussia

Natalie Kostelni Reporter Philadelphia Business Journal
As Topgolf Entertainment Group readies to open its 48th location in Mount Laurel, N.J., the company is exploring adding locations in the region and is already eyeing sites in King of Prussia and Philadelphia, according to several sources.

The King of Prussia location would be on a property that has been used for years for the American Baptist Churches USA headquarters at 588 N. Gulph Road, according to people familiar with the plans. The site totals 48.5 acres and is well located at Gulph Road and First Avenue with nearby access to Route 422 and other major roadways. 

The other location under consideration is the former Nabisco and Mondelēz International factory at 12000 Roosevelt Blvd. in Northeast Philadelphia. The 27-acre property is owned by a joint venture involving Provco Group of Villanova, Pa., Goodman Properties of Jenkintown, Pa., and MCB Real Estate of Baltimore, Md. They have plans for a multi-phased mixed-use development with the first phase set to include a Wawa convenience store and gas station.

The King of Prussia project is also being pursued by Provco Group and a representative from the real estate company declined to comment.

The Dallas-based company opened what it called its largest location in the world at the Ocean Resort Casino in Atlantic City earlier this year. Topgolf, which is in expansion mode, isn’t divulging much information about its future locations.

“As for Topgolf’s plans for King of Prussia, we are in the very early stages and I don’t have any info I can share at this time,” said Morgan Schaaf, a company spokeswoman. She also declined to comment on any other plans the company may have in the Philadelphia region.

Topgolf is part of a growing sports entertainment sector that is replacing parts of traditional retail.

In this case, Topgolf combines golfing, such as indoor driving ranges, with dining. It provides golf lessons as well as games, competitions as well as a venue for parties and events. Most of its facilities are 3-stories and total between 60,000 square feet and 65,000 square feet and employ several hundred people. The Mount Laurel Topgolf will employ 500 people whereas a facility in Pharr, Texas, will have 350 employees.
Full story:

Wednesday, September 19, 2018

Ownership shuffle in Conshohocken as 2 office buildings sell

Natalie Kostelni Reporter Philadelphia Business Journal

Conshohocken is on the verge of seeing several large office buildings trade hands, shaking up the ownership of a little more than a million square feet of space in the submarket.

Equus Capital Partners of Newtown Square is buying Five Tower Bridge, an 8-story, 223,736-square-foot office building at 300 Barr Harbor Drive, according to sources close to the deal. The building is being sold by MIM-Hayden Real Estate Fund I, which is a partnership comprised of Hayden Real Estate Investments and Miller Investment Management that bought the building at the end of 2011 for around $70 million.

The Five Tower property also includes an adjacent developable site that could accommodate a new 220,782-square-foot office building that would front the Schuylkill River.

In another pending deal, American Real Estate Partners of Herndon, Va., is nearing an acquisition of Eight Tower Bridge, a 16-story, 345,000-square-foot building at 161 Washington St., according to a person with knowledge of this transaction. This would be the second office acquisition for American Real Estate in the region. The company bought 1600 Market St. in Center City earlier this year.

Full story:

Federal Opportunity Zones - New Tax Provisions Open Gates to $250 Billion in Property Investments

One of the least publicized provisions of the federal Tax Cuts and Jobs Act signed into law last December will be getting a lot more attention in coming weeks. The provision has the potential to stimulate a new round of investment in commercial real estate, mostly in struggling urban, suburban, and rural communities across the United States.

A provision of the law offers tax benefits to investments in so-called Opportunity Zones, economically distressed communities defined by state and federal officials. The Department of Treasury this summer officially designated more than 8,760 such zones eligible for the benefits based on recommendations from each state.

The flow of money coming into deals in those areas could be staggering. In its analysis of the tax law, the U.S. Joint Committee on Taxation implied $86 billion of investments in qualified opportunity zones. Real estate investors organizing funds to take advantage of the tax benefits estimate the total could hit $250 billion.

What's more, to take full advantage of the tax benefits that money would have to be deployed by the end of next year. That is a short time window to invest such hefty amounts. The window is growing ever tighter by the day, too, because the Internal Revenue Service and Office of Management & Budget have yet to issue final guidelines to investors for how the program will work.

"This is going to be a big part of my business over the next two years," said Rick Barnes, principal of Massachusetts-based CIC Realty.

The brokerage firm is seeking to list $200 million in qualifying properties to market to its national database of investors and fund managers. In the 138 zones in Massachusetts, Barnes said the most likely properties to benefit would be investment-ready opportunities in zones along Massachusetts' transit-oriented corridors going into Boston.

"For investors, this is a unique opportunity to capture a generous break on capital gains taxes, while investing in real estate that stands to benefit from a broader government mandate for growth," Barnes said.

The provision also stands to benefit under-served and oft-overlooked investment markets across the country.

"More sophisticated money is sorely needed in rural areas," said Robert Dunn, an industrial broker with The Stump Corp. in North Carolina. "In a rural market there is a finite amount of money available, and it tends to be controlling, not risk taking. The concept of sophisticated money seeking deals in opportunity zones has the potential of doing significant good in otherwise ignored places."

Barnes and Dunn are not alone in their instincts that the provision could be a game changer. Brokers across the country at the very least are revising listings to tag properties included in opportunity zones. Many are basing their entire pitch around the opportunity.

Opportunity zones are designed to spur economic development by allowing investors to defer tax on any prior gains through 2026, so long as the gain is reinvested in a "Qualified Opportunity Fund." In addition, if the investor holds the investment in an opportunity fund for at least 10 years, there would be no tax on any new gain from the investment in the opportunity fund.

States are starting to tack on additional incentives. Legislation proposed in Ohio would provide a 10 percent state tax credit on investments greater than $250,000 in qualified Ohio opportunity funds. In fact, a third of U.S. states are actively considering opportunity zone incentives.

[ Click here for details on the opportunity zone program. ]

Such tax benefit incentives have investment fund managers and equity funds poring through their pipeline of certified deals searching for properties in opportunity zones suitable for new opportunity funds, said James Hanson, president and chief executive of New Jersey-based Hampshire Real Estate Cos. Hanson oversees the operation and investment activities of the Hampshire companies and its funds. The firm is actively exploring the creation of qualified opportunity funds.

Under the law, funds could be set up as single-purpose entities or general funds to invest in several properties in several markets.

Hanson estimates Hampshire currently has a pipeline of potential of eligible deals with an all-in cost of about $250 million.

The deferral of a 15 percent capital tax is welcome, even better though, is the fact that there would be no tax on the new gain, Hanson said. However, the catch is that the deal has to make sense regardless of the tax benefit. History is littered with failed property deals undertaken primarily for a tax break, he said. If history repeats itself, the same could happen again in some of the deals that arising from the new opportunity.

Virtua Partners, a private-equity real estate investment firm based in Phoenix, was one of the first out of the gate this summer with a fund that seeks to take advantage of the newly created program. The investment firm is seeking to raise $200 million from investors.

"The first deals to get done will be those with the lowest risk, highest returns," said Derek Uldricks, president of Virtua Capital Management. "You don't make an investment just for the tax benefit. You have got to like the deal."

Virtua Partners is also one of the first out of the gate to undertake an opportunity zone fund project. It has completed a rezoning in Tempe, Arizona, for a 90-unit apartment project. Tempe City Council unanimously approved the 3.6-acre rezoning for multifamily development. The 16-month construction of the 90-unit apartment complex is scheduled to break ground in the first quarter of 2019.

That time frame also fits into another aspect of the tax law provision. As enacted, the law specifies the investment be used for a new development or, in the case of an existing property, the asset must be "substantially improved" within any 30-month period following acquisition of the property. To be treated as "substantially improved," the additions or improvements to the property must be equal to or greater than the acquisition cost.

The "substantially improved" provision is one of the many parts of the provision that have yet to be clearly defined. Unknowns of the program have firms such as Hampshire, Virtua and others still approaching the starting gate in what could be a sprint to the 2019 finish line. It also is currently holding back investors from signing over their money to such funds.

So while the first opportunity zone deals are starting to show up, the bulk of the flow will probably come in a surge starting late this year and peak throughout next year. If the estimates of how much money could be pumped into opportunity zones hold true, it would amount to anywhere from 16 percent to 46 percent more in commercial property sales than the $542 billion spent in 2017.

[Editor's Note: This the first of five parts on new Opportunity Zone tax benefits designed to boost investment in economically distressed communities. 
Part I, Investment Overview 
Part II, Potential Roadblocks 
Part III, Emerging Projects 
Part IV, Unintended Consequences 
Part V, A Successful Effort -- So Far]

Tuesday, September 18, 2018

Monthly Economic Outlook — September 2018 (Video)

Nasdaq Spotlight: Kenneth Weissenberg from EisnerAmper discussing all things REITs (Video)

How can tenants reduce personal guarantee risks on my lease? (Video)

Foreign Investor Closes On Its Biggest U.S. Industrial Deal to Date Including Philadelphia Area

A Bahrain-based global investor with $22 billion in assets closed on its biggest U.S. industrial portfolio yet, giving the firm another 4.5 million square feet spanning 56 properties throughout seven major markets including Chicago and Dallas.

Investcorp, which now owns 14 million square feet of U.S. industrial properties, has been gobbling up industrial portfolios here, with this latest $300 million deal marking the ninth such acquisition in the last 36 months.

The purchase is a sign U.S. industrial properties have become the darling of the global investment world, with demand increasing for e-commerce facilities, warehouses and distribution hubs that deliver stable returns. Historically, overseas investors were lured by the U.S. office and hospitality markets.

Foreign investment in U.S. industrial real estate has already hit $6.6 billion in the first five months of 2018, surpassing the $5.8 billion spent for the entire year in 2017, according to Avison Young's 2018 Mid-Year Foreign Investment Spotlight report. Brokers say there is a significant amount of overseas capital on the sidelines seeking high-quality real estate, which is getting harder to find.

The Investcorp deal is the largest U.S. warehouse portfolio acquisition since the inception of the business, said Mohammed Alardhi, an executive chairman of Investcorp who is helping to oversee the firm's expansion in industrial real estate.

"This investment further reflects our commitment to growing Investcorp's footprint in the United States, which is a key driver of the firm's overall growth strategy and an area in which we will look to continue expanding as opportunities arise," Alardhi said in announcing the acquisition.

At the time of the deal, the portfolio of Class A and B warehouse, light manufacturing and flex properties was 90 percent leased to companies in the e-commerce, food services, wholesaling and manufacturing industries. The property addresses were not immediately disclosed, but the portfolio includes the following:

  • 16 multi-tenant Class B industrial building in the Dallas area.
  • 14 single- and multi-tenant Class B industrial buildings in Chicago.
  • Nine multi-tenant Class A and B warehouses in Minneapolis.
  • Nine multi-tenant Class A and B industrial buildings in the Philadelphia/Delaware area.
  • Five multi-tenant Class A and Class B industrial warehouse/manufacturing buildings in Phoenix.
  • Two multi-tenant Class B industrial buildings in Houston.
  • One multi-tenant Class B warehouse building in San Antonio.

About 60 percent of the portfolio is located in top-tier industrial markets.

The properties are also in supply-constrained infill areas needing proximity to major population centers to deliver "last mile" services in the supply chain, said Rishi Kapoor, Investcorp's co-chief executive officer.

Kapoor said the investment helps the firm's clients gain and increase exposure in the highly relevant industrial sector that will benefit from some of the trends shaping the retailing industry.

Along with U.S. industrial real estate, Investcorp's New York team is also shopping for existing office, retail, industrial, multifamily and hospitality properties in the 30 largest U.S. markets. The team is seeking to acquire mid-market core and core-plus investments to add to its holdings, which now total about 550 properties.

Monday, September 17, 2018

Nasdaq Spotlight: Jeff Lenobel from Schulte Roth & Zabel w/Global REITs Summit (Video)

Nasdaq Spotlight: Ail Tunbi from Global REIT w/Global REITs Summit (Video)

Philly's Multifamily Market Is Showing Worrying Signs

Matthew Rothstein, Bisnow East Coast
It is exceedingly difficult to build multifamily in Philadelphia right now, while competition for investment has never been more fierce. In other words, it is a dangerous time in the cycle.

Slowing absorption numbers for newer apartment buildings and prohibitive construction costs have contributed to the near-total shutoff of the multifamily development pipeline, a situation exacerbated by the difficult real estate tax system in the city. Southern Land Co.'s new project, The Laurel, is an outlier due to the unique advantage of being in Rittenhouse Square, allowing it to charge well-above-average rents and condo prices.

"With construction prices, we can’t underwrite any new deals at all," Southern Land Senior Vice President Dustin Downey said. “You can’t make the numbers work, even if you get the land for free. So we’re looking at the suburbs where the land prices are lower, construction costs are lower, but it’s still a challenge to make the numbers work.”

The Laurel broke ground at 1911 Walnut St. Sept. 13, the same day Downey joined other notables in the multifamily market for Bisnow's Philadelphia Multifamily event at the Philadelphia 201 Hotel. Downey cautioned that projects valued at anything less than the top of the market have been rendered all but impossible, especially with the city's property assessments rising quickly and unpredictably.

"In Philadelphia, we’re underwriting no discount whatsoever, meaning that what we think the building is worth, that’s the taxes we’re anticipating paying,” Downey said. “That’s killing us right now. It’s killing us.” The investment market is singing a happier tune than the development side, as 2018 has seen a significant increase in deal velocity over 2017, CoStar Commercial Real Estate Philadelphia Market Economist Adrian Ponsen said. Even though absorption has been slow in the wake of a surge in deliveries, rents have climbed faster than they did last year after a dip in the winter months. “Household incomes are rising at a faster rate, which allows families to pay higher rent,” Ponsen said.

A deeper and broader pool of investors is looking at Philadelphia, and a lot of new faces have been foreign capital and institutional funds. They tend to look for safe investments, and are willing to pay a premium for them. Coupled with the fierce competition that has defined the value-add space for years, that has created an environment wherein new or recently renovated assets have grown in popularity in the city.

 “People might not have expected this, but what we’re hearing from clients is that with interest rates rising, core properties are a higher percentage of what’s getting traded,” Ponsen said. Of all the multifamily transactions that have closed so far this year at over $10M, half of them were sold by the initial developer and the other half had been held for five years or less by landlords that had added significant value. Among the highest-profile of those deals was Southern Land's disposition of 3601 Market St., which it completed in 2016 and sold in July.

HFF recently closed on the sale of a new-construction multifamily project in the Philly suburbs right after it stabilized for $100M. Though he could not disclose details due to some tax issues that are still being ironed out, he said the buyer was a core investment fund. “That sort of flies in the face of Philly’s inferiority complex, where people think that core funds don’t see here as a gateway market,” Thomson said.

But as more capital attempts to find deals in the city and fewer are available, aggression has increased on the financing side to fund acquisitions. Construction loans have remained cautious, but otherwise warning signs are flashing. “I don’t want to be Chicken Little, but we’re nine years into a cycle right now, and cycles are inevitable," KeyBank Senior Vice President Christophe Terlizzi said.

"We don’t know how long this one’s going to last, but it’s one of the longest ones. In my experience, what we have on average is seven-year cycles and five-year memories, and we might be falling for that trap right now.” Walker & Dunlop Managing Director John Banas said among the more worrisome parts of the market are players who were not active during the Great Recession, and thus didn't learn its harsh lessons. "One of the main things we do with our younger developers who didn’t go through the 2007 and 2008 is to protect them from their own worst enemy — themselves. We’re taking deals away from ourselves by giving five-year fixed rates just to protect these developers in the market.” On the capital side, debt funds have become the most dangerous element to the health of Philadelphia real estate. While banks remain cautious and prefer not to overleverage properties, they are losing out on deals to private sources that are indulging some potentially self-destructive investors and developers. Downey went so far as to call debt funds "the last of the dumb money out there."

The Federal Reserve has indicated that interest rates will continue to rise, and although Thomson said such hikes have not affected dealmaking so far, Terlizzi warned that future spikes could lead to developments failing to hit their pro forma agreements, preventing borrowers from being able to pay off those aggressive loans. “That could precipitate a liquidity issue, which has happened in the past," Terlizzi said. "So if you see that happen, that will affect prices and values across the board.” Downey speculated that some debt funds are structuring deals aggressively with full knowledge that they may not be paid back, saying such capital sources "[are] loan-to-own, and they’re happy to own.” Although the capitalization rates for multifamily transactions this year have dipped below 5%, panelists agreed that the individual deals themselves caused the dip rather than overarching market conditions.  Since most of the growth that has created these conditions has been in Center City, most of the concerns have been focused there. But one response to the shifting landscape has been looking farther away from the heart of the city for new development. According to CoStar data provided by Ponsen, the vast majority of multifamily completions between 2015 and 2017 were focused between western Center City and University City. A much higher portion of completions this year and developments still under construction have been in the North Broad Street corridor, South Philly, West Philly and into Northern Liberties.

Full story:

Friday, September 14, 2018

PhD's on CRE -Commercial Real Estate (Video)

Lands' End, Warby Parker Brick-and-Mortar Expansion Extends to NJ

Lands’ End and Warby Parker, two companies that didn’t start off as traditional retailers, are marking their expansion with brick-and-mortar locations across the nation by opening their first outlets in New Jersey this weekend.

Lands’ End, whose roots are in hawking classic American apparel through catalogs, is holding a grand opening event on Saturday at its new store at Chimney Rock Crossing in Bridgewater, New Jersey.

And Warby Parker, which got its start selling eyeglasses online that appeal to hipsters, on Saturday is also opening its first store in New Jersey, at the Garden State Plaza mall in Paramus.

The two companies' dive into brick-and-mortar may seem counterintuitive because the industry has seen such upheaval. But it is part of their effort to reinvent themselves and create an omnichannel experience for consumers, allowing them to shop easily via whatever platform they choose.

In Warby Parker's case, the opening of stores is a "clicks to bricks," or e-commerce companies recognizing that they need physical stores to maintain or increase their market share.

"Retail is reinventing itself, whether it be stores that are downsizing or in this case, stores that for years were catalog and eventually online, are also seeing the value of bricks and mortar. What it really says is that retailers are recognizing that probably the future of retail is not one or the other, but both," said Chuck Lanyard, president of The Goldstein Group, a retail broker based in Paramus. "More and more we’re going to see retailers who might have smaller versions of their stores are still going to want bricks and mortar. It means people still want to be able to walk in and walk out with the products for instant gratification."

In the case of Lands’ End, creating its own chain of standalone stores is filling the gap it faces because of the dire straits of Sears. That legacy retailer, which acquired Lands’ End in 2002 and then spun it off in 2014, still sells the clothing brand at locations within its stores. But Sears has been shutting its own stores, thereby diminishing Lands’ End’s footprint in brick-and-mortar.

By ramping up their store expansions, Lands’ End and Warby Parker represent the new breed of retailers that are filling up space vacated by defunct or downsizing companies such as Toys R Us and a long list of other failed retail chains.

That was one of the conclusions of a retail outlook report, "Out With the Old: Store Closures Present Opportunities for New Retail and New Uses."

"Just as some retailers are struggling and shuttering their stores, others are flourishing and expanding. Formerly pure-play online retailers are moving to bricks and mortar to more effectively reach consumers."

Including Bridgewater, Lands’ End has opened four stores so far this year, for a total of 15 U.S. locations. Earlier this year, the company debuted new stores in Staten Island, New York; Kildeer, Illinois; and Burlington, Massachusetts.

In addition to Paramus, Manhattan-based Warby Parker said that it plans to open two additional stores in New Jersey, in Westfield and Hoboken. The eyeglass retailer opened its first store in 2013 on Greene Street in Manhattan and now has more than 75 in the United States and Canada, with plans to bring that number to 90 by the end of the year, according to a company spokeswoman.

"Warby Parker started as a pure-play e-commerce retailer, and today they make more revenue from their physical stores than they do from selling online. They realized people want to buy glasses in the stores. They thought they could earn and maintain market share purely through e-commerce, but they quickly realized they could only go so far without having physical stores."

Lands’ End, which is based in Dodgeville, Wisconsin, has chosen a new shopping center, Chimney Rock Crossing, for its entrance into the Garden State.

"The combination of a completely new shopping center with convenient parking, easy access and restaurant options make this a great location for our new store concept," Claudia Mazo, senior vice president of retail at Lands' End, said in a statement.

At the new Lands’ End standalone sites, patrons can check out merchandise anywhere in the store. And at a digital kiosk, they can order goods at the company’s website. Those store orders come with free shipping and can be returned free of charge.

Warby Parker, for its Garden State Plaza location, has commissioned murals from artist Ping Zhu to decorate the premises. The shop’s design has elements of a classic library, with a 'reference desk' for frame adjustments and order pickups.

"New York City has been our home for years, so expanding right across the George Washington Bridge is a big milestone for us," David Gilboa, Warby Parker co-founder and co-chief executive, said in a statement. "Here in Garden State Plaza, we’re not only a part of some of the best shopping in the area, but we’re also surrounded by great community parks and green spaces."

The eyewear firm said that it has even designed sunglasses, "in whiskey tortoise with flash-mirrored Pacific blue lenses," that will be available at the mall for a limited time.

New Jersey is a popular location for retailers like Lands’ End and Warby Parker because of its population density and the household income of residents, according to Lanyard.

Tuesday, September 11, 2018

Super-Rich Families Are The New Real Estate Lending Class

Cameron Sperance, Bisnow
Fiscal caution and tighter regulations following the last recession have made it harder for real estate developers to get capital from traditional lenders this late in the economic cycle. But it is not impossible to find capital if you know the right family.

“It’s a new world in terms of being able to structure deals,” Harbor Group International Chairman and CEO Jordan Slone said Thursday at Bisnow’s National Real Estate Finance Summit. “After we saw the last downturn, things snapped back pretty quickly, but I really think the biggest difference today in ways deals are structured is there are so many ways to put deals together in terms of debt and equity.” The U.S. economy has been growing since June 2009, the second-longest period of economic expansion in U.S. history, after the one that followed the recession of the early 1990s. Mature economic cycles can lead to industry players seeking capital in different ways, as traditional financing sources tighten lending. For some in commercial real estate, the high net worth individual or family office investor is a capital source on the rise.  “We have a different investor model,” Post Brothers Apartments President Matthew Pestronk said. “It’s not institutional money, but ultra high net worth family money, which is institutional in size and in its ability to invest.”

Pestronk’s fellow panelist and Wrightwood Financial CEO Bruce Cohen described a food chain of capital every developer experiences as they start to build out a company. It often starts with help from friends and family before progressing to high net worth family offices to private equity and finally reaching direct relationships with a primary provider of capital. After maxing out at the entry level with friends and family capital, Pestronk said his company has found a sweet spot with the ultra high net worth family investor.  “That type of money is looking to get out of the stock market,” he said. “They feel that it is topped out and are now looking for opportunistic-type returns.”

Pestronk describes his network of ultra high net worth family investors as about a dozen multibillion-dollar family offices that either made their money in this lifetime or are just one generation removed from the individual who did. Although Post Brothers Apartments doesn’t typically sell its projects, Pestronk said, with the backing of the family investors, his company develops its projects to be able to underwrite opportunistic returns if they did. Ultra high net worth individual wealth is hitting record numbers. Global high net worth individual wealth surpassed $70 trillion for the first time in 2017 and is expected to exceed $100 trillion by 2025, according to Capgemini’s World Wealth Report 2018. The 10.6% of growth in this sector is the second-fastest year of growth since 2011. Real estate accounted for nearly 17% of the group’s investment, up nearly 3% since 2016 when it invested $10.3B in CRE. This upper echelon may provide a steady source of capital, but getting to it is not necessarily easy.

“Getting the first meeting is 70% of it,” Cortland Partners Senior Managing Director Ned Stiker said. “People are typically receptive to those who built a better mousetrap.” Stiker, whose real estate investment firm includes a mix of high net worth family offices and large institutional fund investors, said there is always room for more developers in the arena of ultra high net worth family capital. The key in securing the investment is articulating to the person whose function it is to find partners and acquisition opportunities how your ideas are better than the competition's ideas. But once an individual has his or her foot in the door, a larger capital network can follow.

“It’s interesting the way people have a cognitive bias,” Pestronk said. “You might have a person who made money in Hollywood, private equity or elsewhere. If he or she invests with you, you must be smart. They’ll tell friends because you’re smart and they invested with you.” While these wealthy families are providing capital to developers at a late stage of economic growth, the funding stream can also come with eccentricities.  “It’s a fairly unique model and sometimes idiosyncratic,” Pestronk said before joking, “One could decide to not invest in Philadelphia because they once took a train there and lost their wallet, so Philly sucks.”

Big Retailers Shrink Stores to Boost Sales

Fast-food chain Taco Bell's plan to open 300 new small-format restaurants across the country in the next four years is the latest by a slew of major national brands experimenting with smaller stores to cut real estate costs and cater to urban millennials.

Taco Bell, Barnes & Noble Inc., Whole Foods Market, Kohl’s Corp., Nike Inc., Target Corp. and Nordstrom Inc. are just a handful of major brands looking to increase market share and wring out more dollars per square foot of space in expensive urban markets by opening smaller brick-and-mortar stores.

The decision is a reflection of a rapidly evolving retail environment that is forcing retailers nationwide to reevaluate their real estate footprints. That scramble for space offers property owners and developers new opportunities to reconfigure properties and reshape their tenant mix.

"It’s not much different from what a lot of office users are doing right now. Everyone is trying to be smarter with their space and realize the savings that comes from that."

Sales at small-format stores outgrew those at larger stores by almost 400 percent in 2016 and now constitute more than a $1 trillion market, according to a 2018 report. It added that 51 percent of millennials - those between the ages of 22 and 37 -- say a store’s location is the top factor in a purchase decision.

In other words, the success of small-format stores also relies on convenience.

That's a driver behind fast-food purveyor Taco Bell’s plan to open 125, mostly small-format restaurants in New York City in the next five years. The company said it was under-developed in New York and wanted to tap into the city’s thriving urban market.

The Irvine, California-based company’s small-format restaurants -- called Urban In-Line and Cantina -- are tailored for "highly walkable areas" and have no drive-through windows. The smallest are just 1,200 square feet. The company plans to open 1,000 new restaurants across the U.S. in the next four years. Thirty percent will be smaller-format concepts.

"Boutique users, big-box retailers, your traditional power center line-ups are all trying to be leaner," Parsons said. "It comes down to maximizing square footage and cost-efficiency."

Many companies opening smaller stores are using technology to capture customer data and personalize the shopping experience.

Nike this year unveiled Nike Live in Los Angeles, a small-format, 4,600-square-foot store that coincides with the release of the Nike app designed to gather customer information and which allows shoppers to reserve items online, scan barcodes for product information and book personal appointments with in-store experts.

Nordstrom last year launched Nordstrom Local, a 3,000-square-foot store in Los Angeles’ tony Melrose neighborhood with no inventory. Shoppers can pick up items there and even order a drink. It plans to open more.

Target is opening small format stores in urban areas across the country, with an average store size of 50,000 square feet, compared to 170,000 square feet in its larger stores.

In an earnings call this spring, bookseller Barnes & Noble said it would begin opening smaller stores with 14,000 square feet of space, slightly more than half the size of most of its stores. Some Barnes & Noble stores occupy only 3,000 square feet of space, former Chief Executive Demos Parneros said.

Even Swedish retailer Ikea, which has opened 27 big-box stores across the U.S. the past 15 years, halted expansion plans in three U.S. markets this spring as it pilots a small store concept in Moscow.

The small-store trend "shows no signs of slowing, which will inevitably lead to continued growth of small format in 2018 and beyond," the Koupon report said.

Apartment Developers Converging On Philadelphia's University City

University City’s apartment landlords have enjoyed little competition from newly delivered units in recent years. Massive apartment projects continue to complete in development hotspots such as Center City and the Main Line. However, no apartment projects with over 200 units have delivered in University City since late 2015.

This lack of competition from new projects in leaseup has allowed University City rents to outperform. Since the beginning of 2015, the submarket’s 4- and 5-Star apartment rents have averaged 4.6 percent annual growth. This pace more than doubled the rate of 4- and 5-Star rent growth in the Philadelphia metropolitan area as a whole.

The sales market for high-end apartment properties in University City has also been booming recently. Three high-rise projects that delivered in the submarket between 2014 and 2015 -- 3737 Chestnut Street, Evo at Cira Centre South and Arrive University City -- have all sold for over $100 million within the past three years.

University City’s strong rent growth and sales pricing have received developers’ attention. The largest apartment project nearing groundbreaking is Conshohocken-based Exeter Property Group’s 3720 Chestnut. Exeter plans to demolish the Newman Center student ministries, which will be relocated around the corner on 38th Street, and building 420 apartment units with street-level retail.

In addition to 3720 Chestnut, three other large apartment projects are moving quickly through the planning stages along Chestnut Street between 37th and 45th streets. Christopher Rahn of CRP Builders has two projects in the works. These include 130-units at the site of the former Cash Wash at 4125 Chestnut, and entitlements for up to 323 units a block away at 4233 Chestnut, the site of the Christ Memorial Reformed Episcopal Church. CRP Builders purchased 4233 Chestnut in June 2018, secured necessary permitting for the residential conversion and is actively marketing the site to interested developers.

Finally, University City-based Oren Brothers continues to move forward with plans for 165 units on the 4400 block of Chestnut. The project received little resistance from neighborhood residents at its meeting at the Spruce Hill Community Association in March 2018.

Most of these projects are still months away from starting construction, which would take a minimum of 18 to 24 months from start to finish. At 3720 Chestnut, demolition work cannot even begin until January 2019 when the Newman Center is scheduled to be vacated.

All of this means that a surge in new University apartment deliveries is unlikely to occur any earlier than the fall of 2020, giving nearby landlords at least another year or two of minimal competition from new deliveries. However, all of these projects may end up completing within the same one- or two-year period at the beginning of the next decade. In that case, competition between projects in leaseup would likely lead to a softening in University City rent growth and a significant uptick in concessions.

Wednesday, September 5, 2018

Conshohocken Based Exeter Picks Up $148M Industrial Portfolio

by Gail Kalinoski
Just weeks after making a big industrial purchase in North Carolina, Exeter Property Group has acquired a 20-building, Class A, light industrial portfolio from Adler Real Estate Partners. The $148 million deal expands Exeter’s North Carolina and Texas holdings.

The 1.3 million-square-foot portfolio consists of Cardinal Park in Dallas, Shopton Ridge in Charlotte, N.C., and three Houston properties—Bammel Business Park, Business Center at Park 10 and Legacy Park. All five assets are located in highly desirable, infill submarkets with strong tenant demand, according to HFF, which marketed the property on behalf of the seller.

The HFF investment advisory team representing Adler included Managing Directors Adam Herrin and Trent Agnew, Directors Stephen Bailey and Patrick Nally, along with Senior Managing Directors Rusty Tamlyn and Chris Norvell.

Adler, operating at the time as Adler Kawa Real Estate Advisors (AKREA), acquired the 422,400-square-foot Shopton Ridge industrial/office complex in Charlotte in April 2015. The property was purchased in partnership with a group of co-investors through the Adler Kawa Real Estate Fund II, which targeted office and industrial assets in high demographic and economic growth areas of the United States. Shopton Ridge was roughly 90 percent occupied when AKREA acquired it, with tenants including PinPoint, Scent Air, Cardinal Health and Rent-A-Center.

Also in 2015, AKREA purchased Cardinal Park in Dallas, a 545,000-square-foot Class A office and industrial park located in the city’s technology corridor in the Richmond/Plano submarket through the AKREA Fund II. The park was 88 percent occupied with tenants including Yahoo!, CVS/Caremark, Inogen and Simplex Grinnell (Tyco).

About two years earlier, AKREA had acquired a 200,000-square-foot-portfolio in Houston, which included the 110,400-square-foot Bammel Business Park—located at 4702-4802 N. Sam Houston Parkway W.—and the 91,451-square-foot Legacy Park. Those properties, which were 95 percent occupied at that time, were also purchased through the AKREA Fund II. Tenants included Malvern Instruments, the University of Texas Board of Regents, NWN Corp., Lincoln Electric Co. and Flowserve Corp.

Shopton Ridge has good access to the Charlotte Douglas International Airport as well as intestates 485, 85 and 77. In Texas, Bammel Business Park and Legacy Park are located in Houston’s popular northwest submarket, a short drive from Bush International Airport.

Exeter’s acquisition of the Adler portfolio follows the purchase in early August of RiverOaks Corporate Center, a Class A industrial park and three additional land sites in the Charlotte submarket of Concord for $49.2 million. That deal brought Exeter’s holdings to more than 8 million square feet in the Carolinas and 3 million square feet in the Charlotte area. HFF also represented the seller, Beacon Partners, in that transaction, which included two buildings totaling 452,206 square feet and the development sites totaling 892,997 square feet. The 119-acre site is near interstates 85 and 485, and 23 miles from Charlotte Douglas International Airport.

In June, Exeter also purchased a 130,250-square-foot industrial property in Kennesaw, Ga., for $9 million.

$300M development underway in Quakertown

Natalie Kostelni Reporter Philadelphia Business Journal
A $300 million real estate project is rising just off the Quakertown interchange of the Northeast Extension that is attempting something novel. Called Milford Village, the multiphased development was designed to be a mixed-use, intergenerational community and not a place to simply “warehouse the elderly.”

The master planned, multiphased development will sit on 216 acres off Route 663, the main route connecting the turnpike interchange to Quakertown. Milford Village looks to create a community for the very young and the very old as well as those in between. While that sounds a lot like a typical town or pockets of a city, this is more deliberate. Plans for Milford Village intentionally places the young with the old to create intergenerational social dynamics that can benefit all ages.

“What you get out of this is an answer to a lot of social need,” said Roger Hiser, president and CEO of LifeQuest, a nonprofit senior and childcare service provider that is an integral partner on the project and owner of the 167 of the 216 acres that are being developed. “Everything I have managed or developed has evolved because of a need,” he said.

Both Hisder and Del Markward of Caracor Development, a real estate development arm of Markward Group and master developer of Milford Village, believe the project will solve an unmet need in the real estate market.

The first phase will involve the Village of Life Quest and expanding an existing nursing center operated by LifeQuest. The addition will have 123 assisted living units and 40 memory care units. A new child care center will also be developed as part of the first phase and an existing child care facility will be converted into corporate offices for LifeQuest.

That initial phase is underway and expected to be completed next year, the same time that St. Luke’s University Health Network will complete a new $100 million, 132,000-square-foot hospital, cancer center and office building on 30 adjacent acres fronting Route 663. That land had been part of the original Milford Village property but sold to St. Luke's eight years ago. The hospital system is under agreement to buy another 8.5 acres.

The second phase of Milford Village will entail developing 335 market-rate apartments and a 498-unit, 55-plus congregate care facility. Subsequent phases will include the development of: two office and retail centers of which one will total 43,200 square feet and the other 50,200 square feet; 13,000 square feet of space for business center and banquet hall; 74 townhouses and cottages; a restaurant totaling 6,000 square feet; and potentially another 30,000 square feet of retail or office space. A hundred acres will be preserved as open space.

It’s been a long road to reach this point. LifeQuest bought and assembled several contiguous properties surrounding its existing facility over the last 30 years. Markward spent 16 years figuring out what to do with the 216-acre property. At one point, a retail outlet center was planned for the site but when the financial crisis and declining retail environment hit in 2008, those plans were shelved. 

“This has been a 16-year journey of unpaid love,” Markward said.

LifeQuest spent 10 years securing zoning for a master plan for the property. It received approvals in 2010 for a mixed-use development anchored by its medical and senior care facility. Late that same year, St. Luke’s bought its parcel with an eye toward eventually building a hospital.
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Tuesday, September 4, 2018

1M SF Spec Industrial Under Construction in Northeastern PA

by Steve Lubetkin,

Mericle Commercial Real Estate Services is constructing a 1,023,000 square-foot speculative industrial building at 200 Technology Drive in CenterPoint Commerce & Trade Park East, Jenkins Township, PA.
The building is scheduled to be completed before the end of the year and will be the largest industrial facility ever constructed on speculation in Northeastern Pennsylvania.

Mericle president Robert K. Mericle says he decided to construct the building because of how popular CenterPoint and Northeastern Pennsylvania have become with companies seeking a strategic location for a new distribution center., Home Depot, Lowe’s, Neiman Marcus, Corning, Kimberly Clark, Isuzu, Tailored Brands, Benco Dental, Jerry’s Sports Center, and FedEx SmartPost are among firms that have opened large distribution centers in the park, Mericle says. Altogether, there are 51 tenants and 6,000 employees in nine million square feet in CenterPoint.

“CenterPoint is less than one mile from I-81 and I-476 and is immediately adjacent to major facilities for FedEx Ground, FedEx Express, and UPS,” says Mericle.  “The Wilkes-Barre/Scranton Airport is just three miles away and many major trucking firms are within a 15-minute drive.”

More than 51 million people live within 200 miles of CenterPoint. Philadelphia, Harrisburg, New York City, and Port Elizabeth can each be reached in about two hours.
“We have designed the building to accommodate mid-size to large bulk industrial tenants that have very high trailer parking requirements, and e-commerce fulfillment operations that need huge areas for employee parking,” Mericle says.

Mericle also says the project site has room for close to 1,000 trailers and more than 1,000 employee parking spaces.

All major utilities serve the site including fiber and there is strong water pressure.

Key features of the cross-docked building include:

  • 36-foot ceiling clear heights
  • 7-inch reinforced concrete floors
  • 198 9-foot x 10-foot insulated steel loading doors with 35,000-pound Rite Hite mechanical levelers and bumpers
  • 50-foot x 50-foot column spacing with 60 feet at the loading bays
  • Up to four, 4,000 amps services
  • LED lighting fixtures
  • clerestory windows
  • high-efficiency, gas-fired Cambridge unit heaters.

More than 700,000 people live within 30 miles of 200 Technology Drive.  “There are several excellent training grants programs available to help companies staff their operations,” says Mericle.

Because the park is located immediately off of two interstates just 10 minutes from Scranton and Wilkes-Barre – the region’s two largest cities – tenants are able to maximize labor draw.

200 Technology Drive began as a ReadyToGo!™ Site.  For each ReadyToGo! Site, Mericle clears, grades, and compacts the property, installs all utilities, and obtains all permits and approvals necessary to begin work on footers and foundations immediately upon the signing of a lease agreement.

Wednesday, August 29, 2018

Philadelphia-based Rubenstein Partners has sold CenterPoint Office Complex for $86M

by John Jordan
Philadelphia-based Rubenstein Partners has sold the 440,000-square-foot CenterPoint office complex in this Boston suburb for $86 million to Hilco Real Estate of Northbrook, IL.

Totaling more than 440,000 square feet, CenterPoint comprises two buildings – 41 Seyon St. and 43 Foundry Ave. The property formerly served as an R&D and manufacturing hub for Raytheon, but has been transformed into a modern multi-tenant campus via substantial capital investment throughout the past 10 years. The property is presently anchored by Repligen, EDC (Education Development Center) and Simpson Gumpertz & Heger.
After acquiring the complex in 2013 as a “uniquely positioned creative class office asset in an emerging urban infill mixed-use neighborhood,” Deke Schultze, principal and regional director of New England at Rubenstein Partners, notes that the firm’s initial investment strategy was to add value via property renovations in the hopes of sparking future office demand.

“That is exactly what has happened at CenterPoint during our ownership and we believe this successful exit supports our initial investment thesis,” he says. “We are also pleased that our valued joint venture partner, Saracen Properties, will be able to continue to be a part of the new ownership group and the asset’s success in the future.”

CenterPoint is situated within the Charles River Mill District, which comprises 2.6 million square feet of synergistic office, technology, manufacturing and industrial space in addition to a wealth of amenities and approximately 1,000 newly-constructed residential units at the convergence of Newton, Watertown and Waltham. The property also benefits from swift connections to Interstates 95 (Route 128) and 90 (Massachusetts Turnpike).

“CenterPoint represents an exceptional creative office retrofit with first-class tenant build outs, state-of-the-art building systems, high ceilings and efficient floor plates.The complex also boasts an attractive infill location within a thriving suburban Boston innovation cluster.”

In other sale/disposition activity, Rubenstein Partners reports it has acquired the 227,000-square-foot Research Plaza office complex here for $38 million, increasing its office portfolio in the Washington, DC market.