Wednesday, July 31, 2019

Amazon to Open 1 Million SF Fulfillment Center Near Pittsburgh

by John Jordan Globest.com
Amazon.com, Inc. has announced plans to build a more than 1-million-square-foot fulfillment center that will create more than 800 new full-time jobs in the Pittsburgh suburb of Findlay Township, PA.

“Pennsylvania is a great state for business and Amazon is excited to continue its growth and investment with our newest fulfillment center in Allegheny County,” said Alicia Boler Davis, vice president of global customer fulfillment for Seattle-based Amazon. “For nearly a decade, the Keystone state has been key to Amazon’s ability to serve our incredible customers and provide great selection and super-fast shipping speeds across the Northeast and Midwest regions of the U.S.”
Since 2010, the company has invested more than $8.5 billion in the state through its local fulfillment center and cloud infrastructure, research facilities and compensation to thousands of employees. The firm currently employs 10,000 workers across the state. The new fulfillment center will be Amazons 15th facility in the State of Pennsylvania.

“It’s a great win any time a business comes in and pledges to create 800 new jobs,” said Pennsylvania Gov. Tom Wolf. “This is a significant investment for Pennsylvania and I applaud Amazon for selecting our commonwealth as the location for this facility.”
The new facility will be constructed by the Hillwood Group of Dallas and Chapman Properties of Leetsdale, PA. Amazon has committed to investing more than $30 million into the project, state officials note.

Amazon received a funding proposal from the Department of Community and Economic Development for $1.6 million in Job Creation Tax Credits to be distributed after the creation of new jobs. The project was coordinated by the Governor’s Action Team, with additional coordination through the Pittsburgh Regional Alliance and Allegheny County.

“Today’s announcement underscores that Amazon has never taken its eyes off Pittsburgh. A new, from-the-ground-up fulfillment center will increase the count of several local Amazon facilities—including a growing engineering center—that provide, or will provide, thousands of well-paying jobs in the region,” says Pittsburgh Regional Alliance president Mark A. Thomas.
Allegheny County Executive Rich Fitzgerald adds. “Amazon’s decision also reflects their continued confidence in this county’s, this region’s and this state’s economy. The county, Port Authority and Airport Authority are proud to continue working with so many partners to show that this region is a good place to do business.”

Last week, Amazon announced plans to open two new robotics fulfillment centers in Ohio that will create more than 2,500 full-time jobs once operational and will total a combined 1.4 million square feet.
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Co-Working Sector Fueling Growth in Philadelphia Office Market

by John Jordan Globest.com
Source: CBRE Research
Thanks to continued strong leasing activity by co-working operators, this business segment now represents more than 1 million square feet of office space here.

In the second quarter 2019 office market report for Philadelphia, reported that the co-working segment eclipsed the 1-million-square-foot mark in the second quarter. The brokerage firm also reports that another lease deal with a co-working firm involving multiple floors of a City Center office building is currently pending.
“The co-working phenomenon continues its positive momentum both in Philadelphia and markets across the United States. This disruptive industry has firmly established itself as an office solution for many corporations and we anticipate its growth trajectory to continue.”

Downtown Philadelphia was home to the most significant leasing activity of the second quarter in the Greater Philadelphia/Southern New Jersey region.
The EPA signed a 173,000-square-foot lease at Four Penn Center, a move from its current location at 1650 Arch St. in the second quarter. In addition to WeWork and Industrious’ new co-working deals at 1100 Ludlow St and Two Liberty Place, respectively, Children’s Hospital of Philadelphia signed on to take more than 50,000 square feet at the historic Wanamaker Building. Notable leases outside the CBD included Kreischer Miller’s renewal at 100 Witmer Rd. in Horsham and FXI’s new lease at 5 Radnor Corporate Center.

The vacancy rate for the Philadelphia CBD stood at 14.9% at the end of the second quarter. The region’s overall asking rent stood at $26.96-per-square-foot at the mid-point of 2019. Net absorption in the market was  a negative 232,222 square feet.

During the second quarter, market fundamentals across the metropolitan area improved slightly.  Occupancy gains in the CBD and Camden, NJ helped dampen the effects of Bank of America’s l exit from the Bracebridge buildings in Wilmington, which left more than 500,000 square feet of Class A space available.
Strong rent growth persisted in the CBD, where landlords asked 5.3% more for Class A space than they did this time last year. The premium for Class A space in Market West approached $7-per-square-foot per year compared to Class B space.

Reports also show that rents grew slightly in the suburbs and the outer submarkets, except for the Wilmington CBD where rates dipped in response to occupancy losses there. The overall vacancy rate in the CBD tightened by 30 basis points, reverting nearly back to where it stood at the end of 2018.

Vacancy across the suburban Pennsylvania markets generally grew, except for in the Main Line, where a flurry of leasing in Radnor caused vacancy to tighten by 410 basis points to 4.5%. The most noteworthy jump in vacancy occurred in Wilmington, where the previously mentioned Bank of America departure moved the rate to 26.6% at the end of the second quarter.

In the Philadelphia CBD there is currently approximately 1.3 million square feet of new office product under construction. With the recent delivery of the nearly 400,000-square-foot Triad 1828 Centre in Camden, NJ, the next major office product to open its doors will be Five City Center in Allentown, PA. The 300,000-square-foot mixed-use building is nearly 85% pre-leased to payroll services firm ADP.

Two major developments in the Philadelphia suburbs are currently under construction—AmeriHealth’s Caritas’ build-to-suit in Newtown Square and Amerisource Bergen’s build-to-suit in Conshohocken.

In terms of the region’s capital markets, Philadelphia rounded out the first half of 2019 with a relatively quiet quarter in the office investment sales sector. There were a few notable trades, including Buccini/Pollin Group’s purchase of Glenhardie Corporate Center in Wayne for roughly $120-per-square-foot and Apex Financial Advisors’ purchase of Lippincott Centre in Marlton.

Liberty Property Trust continued to divest from the office market, selling four more properties in Malvern. Despite these deals, sales volume for the second quarter in Philadelphia was the lowest since 2012. The report notes, however, that the four-quarter aggregate figure for the area indicates that office spaces, in recent quarters, remained above the 10-year average.
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Tuesday, July 30, 2019

Phoenixville Apartment complex sells for $78M

By Natalie Kostelni  – Reporter, Philadelphia Business Journal
Pantzer Properties has paid $77.8 million for the Riverworks, a newly built 349-unit apartment complex in Phoenixville.

Toll Brothers Inc. (NYSE: TOL) developed the complex at 45 N. Main St. for around $66.5 million. Riverworks was one of the biggest apartment projects to get underway in Phoenixville in recent years and helped add to the vibrancy of the Chester County community that has experienced a resurgence. 

While there are a smattering of other multifamily developments in Phoenixville, the other project on the scale of Riverworks was Phoenix Village. DeMutis Group, in a joint venture with Fox Cos., developed that two-building complex at 131 Bridge St. with 275 apartments and 20,000 square feet of retail.

Riverworks consists of six buildings as well as an 11,000-square-foot clubhouse with a resort-style pool, climbing wall, kayak storage and other amenities. It was completed in 2016 and it was 96 percent occupied and 99 percent leased time of sale.
Fully story: https://tinyurl.com/y3wck62e
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STAG Industrial CEO Says REIT Wants to Demonstrate the “Positive Impact of Data” (Video)

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Investor's View of the Retail Sector (Video)

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Apartment Rent Growth in Philadelphia's Conshohocken Submarket Surpasses 4% As New Development Remains at Bay

The Conshohocken/Plymouth Meeting apartment submarket has been in a sweet spot for local landlords since 2016. The submarket’s modern office stock and location, squarely between Philadelphia and the metro area’s wealthy western suburbs, have attracted relocations and expansions by major employers including KeyBank, Cotiviti and the National Comprehensive Cancer Network.

While new companies are moving in, rental demand is increasing. But projects including Roseland’s 51 Washington St., and MLP Ventures’ 433 Washington St. have encountered delays, and no large apartment projects have delivered in the Conshohocken/Plymouth Meeting submarket in more than three years.

The influx of white-collar employers, combined with minimal growth in the local apartment stock has kept apartment rents climbing. Annualized rent growth averaged 3.7% over the past 36 months and year-over-year growth rose to 4.5% at the end of July 2019.

There is only one project currently under construction throughout the entire submarket: Korman Communities’ 275-unit AVE Blue Bell, which will include a luxury hotel-like set of amenities and a large share of extended stay units.

The project is targeting completion by the summer of 2020, putting it on track to deliver just a few months before AmeriSourceBergen expands into its new Conshohocken headquarters at SORA West.

Other projects could break ground in the months ahead. MLP Ventures is currently working with Whitemarsh Township officials to receive the necessary permitting and variances to break ground on a 270-unit project at 601 Washington St.

Late last year, Morgan Properties purchased Millennium Corporate Center, a 197,000-square-foot office portfolio. The firm may seek to convert part of the property into apartments after AmeriSourceBergen vacates 70,000 square feet in 2020, when its new headquarters completes just two blocks away.

However, these projects are both at least 16 months from completing since neither has broken ground. This means apartment demand is likely to continue running ahead of supply in Conshohocken well into 2020.

Brandywine to Build 100,000 SF Office Building in King of Prussia

by John Jordan Globest.com
Brandywine Realty Trust reports it demolition activities began this month on its project to redevelop 650 Park Ave. here into a new 100,000-square-foot office building.

The project is expected to be delivered in the fourth quarter of 2020. The development follows the highly successful ground up development of 933 1st Ave. for single tenant, GeoBlue, and the $29.7-million redevelopment of 500 N. Gulph, now home to CSL Behring.
The Philadelphia-based firm did not release development costs for the new project.

Brandywine Realty Trust has hired Coscia Moos Architecture, a Philadelphia-based architectural design firm, for the redevelopment of 650 Park Ave., which will transform the property into a four-story, versatile workplace with open floor plates and customizable layouts that can be tailored for single, or multi-tenant users.
“King of Prussia is among the most successful regional economic hubs in the nation,” says Jerry Sweeney, president and CEO of Brandywine Realty Trust. “650 Park Avenue boasts a premier location in the heart of King of Prussia, and to attract leading businesses and talent, we elected to reinvent the property to deliver a highly desirable asset that will rival the quality and appeal found in urban workplaces.”

Brandywine notes that four new corporate headquarters opened last year in King of Prussia, totaling 265,000 square feet of office space, while 3,000 new multifamily units have been delivered in the market between 2016-2018.

Among the planned amenities at the property include a number of open-air amenity spaces and communal work environments designed to promote team productivity, and individual wellness and leisure. A fourth-floor terrace will serve as a flexible activity space, ideal for a variety of events from morning yoga classes, to lunch meetings, and evening gatherings.
The second and third floors of the property will feature private balconies, while amenity space on the east side of the building will be designed to accommodate group lunches, meetings, and gatherings with easy access to a 2.6-mile First Avenue Linear Park and trail, a new public recreational amenity that Brandywine will help deliver in collaboration with Upper Merion Township and King of Prussia District. 650 Park Ave. will also be WELL and Fitwel certified.

“Brandywine’s new office building will be a wonderful addition of King of Prussia, and the design beautifully complements the First Avenue Linear Park project, which is transforming underutilized, private lawns into a cohesive, active and beautiful public amenity,” says Eric Goldstein, executive director of King of Prussia District. “Brandywine’s investments continue to foster substantial economic growth and elevate KOP’s prominence in this Philadelphia submarket.”

On July 22, Brandywine Realty Trust reported second quarter results that included its net operating income, excluding termination revenues and other income items decreased (1.7%) on a GAAP basis and increased 1.6% on a cash basis for its 75 same store properties, which were 93.0% and 92.8% occupied on June 30, 2019 and 2018, respectively.

The firm leased approximately 651,000 square feet and commenced occupancy on 316,000 square feet during the second quarter of 2019. The second quarter occupancy activity included 96,000 square feet of renewals, 140,000 square feet of new leases and 80,000 square feet of tenant expansions. The firm also reported it had an additional 482,000 square feet of executed new leasing scheduled to commence subsequent to June 30, 2019.

At June 30, 2019, the firm’s core portfolio of 92 properties comprising 16.4 million square feet was 93.0% occupied that were currently 95.9% leased (reflecting new leases commencing after June 30, 2019). Brandywine Realty Trust’s core focus is in the Philadelphia (New Jersey), Austin and Washington, D.C. markets.

“We have made excellent progress on our 2019 business plan,” Brandywine’s Sweeney stated when announcing the firm’s second quarter financials. “Market conditions remain strong and we are now 99% executed on our 2019 speculative revenue target. In addition, we are increasing several of our key leasing plan metrics, including our mark-to-market rents on both a GAAP and cash basis.”

He added that in Philadelphia the firm achieved a significant milestone by receiving zoning approval for its entire Schuylkill Yards development site in University City.

“With the Schuylkill Yards zoning approval, we can now move forward on our mixed-use development totaling more than 5 million square feet featuring office, resident and life science components.,” Sweeney noted.
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Westover Cos. Buys South Jersey MF Portfolio for $25M

by John Jordan Globest.com
The Westover Companies of King of Prussia, PA has acquired a three-property multifamily portfolio in Camden, Cumberland and Burlington counties in South Jersey for $24.5 million.

The off-market transactions that involved a total of 326 units were reported by brokerage firm. The seller was Mercer Management. Northfield Bank arranged financing for the purchaser.
The three properties that traded included the 195-unit Regency House at 304 Erial Road in Sicklerville, Camden County; Upper Deerfield Estates (67 units) at 23 McCormick Boulevard in Bridgeton, Cumberland County and Polo Ridge Apartments (64 units) at 1210 North Route 130 in Burlington Township, Burlington County.

“The sale of the portfolio is a clear demonstration of the continued demand for value-add multifamily opportunities in today’s market. Both parties had incentive to act and the transaction proceeded smoothly to closing.”
Regency House is a four-story brick, mid-rise apartment building located approximately 10 miles from Philadelphia. Amenities include elevator service to each floor, spacious units each with a private porch, patio or balcony, and central heating and air conditioning.

Upper Deerfield Estates is a single-story active adult apartment community approximately 15 miles from both Wilmington, DE and Atlantic City. Amenities include central air conditioning, in-unit washer and dryer, and private entrances.

Polo Ridge Apartments is a two-story brick garden apartment complex located approximately 10 miles from Philadelphia. Amenities a patio or balcony, individually controlled heating and cooling units, and ample closet space.
“The location of the properties provided the purchaser with an opportunity to acquire a value-add portfolio that fits strategically within their business model in a multitude of ways. The purchaser intends to invest significant capital into the properties in order to enhance them. “

He says that Mercer Management’s focus has shifted to new developments at the Jersey Shore, including the recently completed Hotel LBI on Long Beach Island.
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Harrisburg Rentals Trade for $50 Million

A local investment shop plunked down $50 million for an apartment portfolio in Harrisburg, the Pennsylvania capital city.

The transaction is the biggest multifamily deal in Harrisburg this year.

Park Run Management, of Pottstown, Pennsylvania, acquired the five-property, 825-unit portfolio in an off-market deal with Loketch Group of New York City. The price translates into a value of $60,000 a unit, but several of the properties include ground-floor retail space. The deal also includes four cell phone towers.

All five properties are mid-tier assets built between 1939 and 1956. They're all located close to one another on the east bank of the Susquehanna River. The new owners are looking to boost rents at the properties after a campaign of property renovations and upgrades.

The properties include: River Plaza, with 269 units and two commercial spaces at 2311 N. Front St.; Riverfront Park, with 216 units at 2600 Green St.; Bellevue Towers, with 118 units and six commercial spaces at 2400 Market St.; Magnolia Gardens, with 114 units at 210 Hale Ave.; and Magnolia Hills, with 108 units at 35 Thomas St.
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Wednesday, July 24, 2019

Amazon to Convert Another Dead Mall Into a Fulfillment Center

Online retailer Amazon has spent the past two decades luring shoppers out of stores and onto the internet, leading a retail transformation that has left dead malls in its wake. Now the Seattle-based company is buying more of those empty shopping centers, converting them into warehouses for processing deliveries to consumer doorsteps.

The company plans to open two more Ohio warehouses, including one at the site of a closed mall in Akron, the third shopping center in the northeastern part of the Buckeye State the company has bought and converted into a fulfillment center. But it isn't limited to Ohio.

Around the country, this year there were identified 24 projects where developers have turned closed malls and shopping centers into logistics properties since 2016, with almost 8 million square feet of retail either converted to or replaced with 10.9 million square feet of new industrial space.

Among the advantages of converting malls to logistics facilities are their locations near population centers. That makes it easier to provide next-day or same-day delivery to customers, with easy access to highways and mass transit and water, sewer and parking systems already in place.

"This trend will continue to grow as the balance between brick-and-mortar retail and e-commerce shifts to necessitate more logistics space and less physical retail space. Trading Places: Retail Properties Converted to Industrial Use."

Three years ago, CoStar analysts predicted that owners would need to upgrade, repurpose or demolish 1 billion square feet of dead malls and other U.S. shopping space to reduce vacancies and return retail property to normal levels of productivity.

With online shopping increasing at roughly four times the rate of total retail sales and cutting deeper into spending at physical stores, owners are stepping up the sale or conversion of dead malls and distressed shopping centers, particularly in suburbs and rural areas most vulnerable to the effects of e-commerce and store closings.

And opportunistic buyers are scooping up sites that are ripe for turning into apartments, warehouses and other uses.

"We’re seeing a blurred line between industrial and retail, along with their increased need for integration." Plans for Amazon and other retailers for same-day delivery are driving up demand for distribution facilities closer to residential centers.

For its most recent plans, Amazon said it will build a 700,000-square-foot distribution hub at the northeast corner of Crossroads Parkway and South Compass Drive in Rossford, five miles southwest of Toledo, Andre Woodson, who manages Amazon public relations and communications in Ohio, said in an e-mail.

The company also intends to build a 700,000-square-foot fulfillment center at the site of the former Rolling Acres Mall at 2400 Romig Road, which was built in 1975 and had as many as 140 stores totaling 570,000 square feet before spiraling into decline in the 1990s and early 2000s. The mall's ruins, decimated by water damage, graffiti and vandalism, were documented in pictures and video made between 2012 to 2016 and posted on deadmalls.com and other sites dedicated to abandoned malls.

Construction schedules for the Akron and Rossford projects, which are expected to bring a total of 2,500 jobs to the state, are still being determined, Woodson said.

No Bidders

Rolling Acres Mall was scheduled to be auctioned off in May 2009, but California-based investor Premier Ventures acquired the property in 2010 after no bids were received, according to CoStar data.

J.C. Penney, the mall’s last department store, closed in 2013 and Premier Ventures filed for Chapter 11 bankruptcy protection in 2014. After a series of sales failed, Summit County foreclosed on the mall and J.C. Penney gave its building to the city of Akron in 2016, and the mall and department store sites demolished between 2016 and 2018, according to Akron and Summit County documents.

As aging malls and brick-and-mortar retailers close, Amazon has been looking more and more to snap up the real estate of the retailers they helped to put out of business as shoppers shift their preferences to e-commerce and in-store pick up. Amazon has already redeveloped two former mall sites near Cleveland into fulfillment centers, opening a facility on the site of the former Randall Park Mall, a vintage-1976 shopping center in North Randall, Ohio, that closed in 2009.

The internet retailer is preparing to open another center at the site of the Euclid Square Mall in Euclid, which was built in 1977 and demolished in 2017 and 2018 after efforts to re-position it failed.

Ohio Gov. Mike DeWine said in a statement that the Akron and Rossford roll out shows that "Amazon continues to demonstrate confidence in the great workforce and e-commerce business climate we have in Ohio."

Amazon Vice President of Global Customer Fulfillment Alicia Boler Davis said in the statement that the company now has more than 8,500 employees in the Buckeye State, not including the 2,500 expected new hires in Akron and Rossford at facilities used to pack and ship books, electronics, toys and other small items to Amazon customers.

The converted malls and big-box retail stores favored by Amazon and other logistics developers are mostly in areas with lower median household incomes than the national average where industrial space is also in short supply, which makes the properties more valuable as industrial space than retail.
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Cowork Space Provider CommonGrounds Continues Eastward Expansion in Philadelphia

Growing West Coast cowork space provider CommonGrounds Workplace has added another leg to its Eastern U.S. expansion, with plans for a Philadelphia location following the announcements of pending openings in Atlanta and Washington, D.C.

Company officials said the lease for the 62,461-square-foot space at 1700 Market St., in Philadelphia’s central business district, is CommonGrounds’ sixth lease signed this year as part of the company’s expansion tied to a recent $100 million Series A funding infusion.

This year, CommonGrounds has announced long-term leases totaling more than 263,000 square feet, for cowork operations planned in Midtown Atlanta, downtown Los Angeles’ financial district, Seattle’s South Lake Union area and two Washington, D.C., locations – in downtown and the Capitol Riverfront area.

Officials said in a statement that CommonGrounds, based in the San Diego area, has established an Eastern regional headquarters in Philadelphia and currently has 15 employees at the Market Street location with active new hiring underway.

Financial terms were not disclosed for the lease in Philadelphia, where the company will build out a two-floor space set to open in late January next year. CoStar data indicates the 32-story 1700 Market location was built in 1969 and renovated in 2018, after being acquired by Shorenstein Company for $195 million in January 2016.

Chief Executive Jacob Bates, a former Philadelphia resident, said the Philadelphia location was chosen based on factors including its proximity to City Hall and the nearby Rittenhouse Square, and it would provide an alternative to other nearby traditional offices housing corporate tenants.

Started in 2015 and headquartered in the San Diego suburb of Carlsbad, California, CommonGrounds is among several growing operators of shared workspaces used on a flexible basis for short periods, with access to shared amenities like kitchens and conference rooms for users who pay a monthly fee.

The company recently opened new spaces in Minneapolis, Portland and Salt Lake City, following earlier openings in San Diego, Denver, San Jose and Long Beach, California.
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Hessam Nadji on U.S. Commercial & Multifamily Real Estate (Video)

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Commercial real estate may benefit from interest rate cuts and big tech (Video)

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Tuesday, July 23, 2019

Center City’s Largest New Apartment Tower Surpasses 95% Occupancy

When PMC completed the last of its 549 luxury apartment units at Franklin Tower during the first half of 2019, the project became the largest new apartment tower to deliver in Greater Center City Philadelphia in more than 40 years.

Franklin Tower began as a gut renovation and redevelopment of the 24-story office property, One Franklin Plaza, which was vacated by GlaxoSmithKline when the pharmaceutical giant moved to the Navy Yard in 2013. PMC’s initial version of the redevelopment delivered in late 2017 and included 382 apartment units along with 200,000 square feet of office space, an indoor basketball court and an expansive rooftop terrace.

But after the office portion of Franklin Tower sat unleased for months while its apartment units continued to fill at a steady clip, PMC decided to change course in late 2018, taking the project’s 200,000 square feet of office space off the market and reconfiguring it into another 167 apartments.

The change in strategy appears to be paying off. At the end of the last quarter, the property’s total occupancy rate surpassed 95%, a milestone for Center City which has recently seen its new apartment deliveries rise to the highest levels in more than 100 years.

At various points during lease-up, Franklin Tower has offered tenants one month’s free rent on a 13 month lease, although in more recent months, this discount has been reduced to a $1,000 move-in credit, waived application and amenities fees, and a reduced deposit of $500.

Franklin Tower also has a unique advantage in that the project was a redevelopment of an existing high-rise structure, which carried lower construction costs than new ground-up developments nearby. Lower construction costs also mean the project can afford to charge more competitive rents, with one-bedroom asking rents currently averaging about $2.79 per square foot, compared to a range of new Center City deliveries that list rents between $3 to $4 per square foot.

PREIT Reduces Anchor Department Store Vacancies to Zero in Core Portfolio

by John Jordan Globest.com
PREIT reports it has successfully replaced all of its anchor department store vacancies in its core portfolio.

In the turbulent bricks and mortar retail sector, PREIT has replaced 13 department stores in three years in its core portfolio of 18 properties.
In these 13 stores, PREIT signed lease deals with more than 30 new tenants that run the gamut of consumer categories, including off-price, sports and leisure, fitness, arts and crafts, dining and entertainment, home décor, as well as traditional department stores.

“PREIT has been steadfast and deliberate in delivering results through its anchor replacement initiatives and is proud of its track record, having no un-leased department stores in its core portfolio,” says Joseph F. Coradino, CEO of PREIT. “With no anticipated JC Penney closings on the horizon and among the lowest exposure to Sears in the sector, we are uniquely positioned to execute on our strategy and capitalize on the opportunity to strengthen our earnings growth as material projects come on line this fall.”
Year to date through June 30, 2019, a number of recently re-merchandised properties saw increases in foot traffic compared to the six months ended June 30, 2018, including the Capital City Mall: +9.4%; Moorestown Mall: +5.7%; Mall at Prince George’s: +2.3% and the Valley Mall: +2.1%

Comparable sales in the company’s core portfolio were up 5.3% to $530 per square foot for the rolling 12-month period ended May 31, 2019, the retail REIT states.

Last month, PREIT reported that it had secured Burlington as the lead replacement for Sears at Dartmouth Mall in North Dartmouth, MA following the company’s proactive recapture of the store.
PREIT stated at the time that it was in discussions with other large format retailers to complement Burlington.
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Monday, July 22, 2019

Investing in Office 2019 (Video)

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The Fed's pivot on policy has turned into a boon for the real estate market (Video)

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NYC-Based Argent Ventures Acquires Trophy Office Asset in Princeton

by John Jordan Globest.com
Argent Ventures of New York City has acquired the University Square office building here from RXR Realty and The Blackstone Group.

The deal for the nearly 330,000-square-foot five-story office building at 1 University Square Drive was reported by brokerage firm JLL, which represented the seller and procured the buyer. The transaction also included 115 Campus Drive, an adjacent one-story 33,600-square-foot building.
No financial terms of the transaction were disclosed.

The JLL Capital Markets team representing the seller included senior managing directors Jose Cruz, Andrew Scandalios and Kevin O’Hearn and senior directors Stephen Simonelli and Michael Oliver and associate J.B. Bruno.
University Square, which was completed in 2008, is currently 85% leased. The building features a two-story cherry and granite atrium lobby, gourmet cafeteria, large media/conference room and fitness center with locker rooms.

“The quality of University Square along with its location and tenant line up brought investors from all over the country."

Some of the major tenants at the property include BlackRock, Axis Reinsurance and Mercer. Located on 18.5 acres, the property is positioned equidistant between Philadelphia and New York City along Princeton’s Route 1 Corridor. The property is located less than two miles from Downtown Princeton as well as the Princeton Junction train station with AMTRAK/NJ Transit/Conrail serving the Northeast corridor from Washington, DC to Boston.
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Fame House Signs 23K Lease at 123 South Broad St. Office Tower

by John Jordan Globest.com
The ownership of the iconic 123 South Broad St. office building here reports it has closed more than a dozen lease deals totaling 66,371 square feet at the property.

The largest of the 13 lease transactions was with University Music Group’s entertainment e-commerce marketing firm Fame House, which signed a multi-year lease for the entire 26th floor of the property, totaling 22,730 square feet.
The lease was negotiated by Universal Music Group’s Kevin Garabedian, SVP of facilities and administration, and Sheryl Gold, SVP of business & legal affairs.

“We are excited to move our headquarters to this incredible location and building with top-notch management,” says Fame House CEO Mike Fiebach. “We see our new office as a symbol of Fame House’s innovation, creativity, talent, and growth. We love Philadelphia and we are proud to call the iconic Broad Street our new home.”
Other new tenants at the property as of 2019 include Brian Communications, Instructure, PromptWorks , Health Federation of Philadelphia, Armor, DLC Solutions, Wick Capital Partners and others. This year’s leasing activity builds on a strong 2018 when 70,660 square feet of office space was leased.

Brian Communications will move its main headquarters into the north wing of the 27th floor in November, while also maintaining a presence in Conshohocken in the Four Falls building.

“The signing of more than a dozen new long-term leases this year is evidence of the incredible momentum we’ve experienced since we completed lobby and common area renovations to make 123 South Broad the hub for many of the city’s top creative firms. Attracting industry powerhouses like Universal Music Group’s Fame House and Brian Tierney’s communications agency serves to validate 123 South Broad as one of Philadelphia’s most desirable office locations.”


 Young Capital, in partnership with Quilvest Private Equity, recently completed renovations to the lobby and other common areas at 123 South Broad including a large, ground floor bike room providing easy access directly from the street. In addition, the ownership states that new best-in-class tenant amenities will be announced this fall, enhancing the building’s current amenity program, which consists of a fitness center, conference centers, bike room, lobby shop and more.

To propel these renovations, 123 South Broad recently rebranded, introducing a new logo and soon-to-be-unveiled website.

Constructed in 1927, when it was the ninth largest building in the world, the 800,000 square foot building boasts a 405-foot Beaux-Arts style limestone façade, a three-story marble lobby and a unique “H” floor plan that provides up to eight corner offices per floor.
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Friday, July 19, 2019

Philadelphia, Newark Score Well in Creating, Attracting Tech

by John Jordan Globest.com
While still not cracking the top 10 in the nation, Philadelphia and Newark have improved their respective standing in creating and attracting tech talent.

The annual “Scoring Tech Talent” report ranked Philadelphia number 22 in the US and Canada for technology talent. This year, Philadelphia moved up from number 24 in the rankings last year.
The top five markets for tech talent in 2019 were the San Francisco Bay Area, Seattle, Toronto, Washington, DC and New York, all large markets with a tech labor pool of more than 150,000. Rounding out the top 10 in this category were Austin, TX; Boston; Denver, Atlanta and Raleigh-Durham, NC.

The report notes that among the more notable trends in the technology sector in Philadelphia has been that in the last five years the Philadelphia market produced 7,905 more tech graduates than the market could employ in tech occupations. The region produced more than 4,800 new tech grads in 2017, up 32% in the past five years.
“There is so much well-earned tech buzz in Philadelphia right now and it is no surprise that we are moving up the tech talent rankings. Not only is Philadelphia growing organically, but it’s poised to attract out-of-market companies seeking that combination sweet spot of tech talent and a proper city with renowned culture and accessibility.”

The rent-to-tech wage ratio is relatively low at 17.0%. The average apartment rent for a year in 2019 is $16,438 ($1,370/month), and the average annual tech wage is $96,706. In the most expensive market, New York City, those numbers are $49,445 ($4,120/month) and $113,500, (a rent-to-wage ratio of 43.6 percent) respectively.

Another notable demographic for Philadelphia is that it ranks as the fourth most diverse market for gender diversity in tech occupations with 71.5% male and 28.5% female.
Newark, NJ is also emerging as a technology hub. Total tech occupations grew 9.7% from 2013 to 2018 in the City of Newark.

The report ranks Newark as a top East Coast market with more than 53,000 tech jobs, mostly concentrated in software development, computer programming and database system management.

In the last five years the Newark metro produced 6,153 more tech graduates than the market could employ. The region produced more than 2,750 new tech grads in 2017, up 57.3 percent in the past five years.

“Newark has the ideal combination of a highly educated and talented workforce, and is conveniently located in proximity to Manhattan. As one of the top east coast tech hubs and the largest port on the East Coast, second only to the West Coast’s Port of Los Angeles, Newark’s technology sector is well positioned for growth in both technology and logistics.”

The rent-to-tech wage ratio in Newark is relatively low at 18.6%. The average apartment rent for a year in 2019 is $20,597 ($1,716/month), and the average annual tech wage is $110,772.

The Greater New York area is the most gender diverse market for tech occupations with 71.7% male and 28.3% female.
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Study explores how the wealthy might be abusing 'opportunity funds' (Video)

Study explores how the wealthy might be abusing 'opportunity funds' from CNBC.

Watch experts debate the merit of 'opportunity zones' from CNBC.

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Real Estate is in favor again, here's why (Video)

Real Estate is in favor again, here's why from CNBC.

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Wednesday, July 17, 2019

Net Lease Market Rebounds in PA, NJ

by John Jordan Globest.com
The net lease market in the Philadelphia-New Jersey region began rather slowly this year, but picked up in the second quarter.

“It was a slow start to the year with interest rates on the rise through the end of 2018. The tide turned in our direction, which boosted our activity substantially and resulted in a successful first half of the year.”

The completed transactions, most of which were classified as “net lease,” were a mix of restaurants, convenience stores/gas stations, discount stores, veterinary clinics, fitness centers and drug stores, spanning across 12 states, including seven in Pennsylvania and five in New Jersey.
Noteworthy transactions during the first half of 2019 included the $24-million sale of a two-tenant retail condo property in Philadelphia; a national gym located in Fort Washington, PA, which traded for more than $9 million; four Wawa and Sheetz gas station/convenience stores totaling more than $22.9 million; and eight discount stores (Family Dollar and Dollar General) totaling more than $9.8 million.

“As real estate valuations in product types such as apartments, office and industrial made a comeback, the number of 1031exchange buyers and capital chasing our product type increased."

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Everest Reinsurance Signs Major HQ Lease at Warren Corporate Center in NJ

By John Jordan Globest.com
Everest Reinsurance Co. in a significant expansion of its U.S. corporate headquarters, has signed a major lease that will involve its relocation to approximately 315,000 square feet of space to the Warren Corporate Center here.

In relocating to Warren Corporate Center, Everest, which is headquartered in Bermuda, is expanding the footprint of the corporate headquarters of its U.S. operations by more than 80,000 square feet. The company will occupy 100 and 200 Warren Corporate Center Drive, soon to be renamed Everest Way, within the next 18 months. The company’s current U.S. headquarters operations are housed at 77 Martinsville Road in Liberty Corner, NJ.
The long-term lease with building ownership—a joint venture partnership between affiliates of Vision Real Estate Partners of Mountain Lakes, NJ  and Philadelphia-based Rubenstein Partners, L.P.—comes on the heels of the completion of Warren Hill, an indoor-outdoor standalone amenities hub that has mobilized Warren Corporate Center’s transformation into a modern, hospitality-inspired work environment.

Prior to Everest’s occupancy of its new space, Rubenstein and Vision will construct a new four-story glass atrium to connect buildings 100 and 200, with a drop-off lane at the front entry. Interior walkways will be accessible on all four floors with a reception area and security at the main entrance.

Originally built as a headquarters for Lucent Technologies, Warren Corporate Center comprises more than 820,000 square feet of office space across five buildings surrounded by walking trails and a richly landscaped pond with amphitheater seating, and four covered parking structures. Warren Corporate Center currently offers 510,000 square feet of availability, which Vision and Rubenstein are actively marketing.

“After a comprehensive analysis and selection process, the Warren Corporate Center was clearly the best option for Everest. We believe our new home will prove to be both an extraordinary work environment and a strategic business hub for our valued colleagues,” says Everest CEO Dominic Addesso.
Since acquiring the 176-acre, five-building campus in 2016 for $136 million, Vision and Rubenstein have set out to position Warren Corporate Center as a unique opportunity in the market, with headquarters-quality office space that integrates purposeful amenities and communal areas within a central location.

This led to the development of Warren Hill, the campus’ 20,000-square-foot lifestyle center, which features an outdoor amphitheater; indoor and outdoor patio dining; multi-function conference areas; a full-service cafe with coffee bar; a state-of-the-art fitness center with locker rooms; and a full-size indoor basketball court. The amenities hub sits at the center of the campus, providing an easily accessible outdoor roof deck for employees to meet and collaborate with colleagues.

“Our modern workforce demands high-quality office space, which includes exceptional amenities in an environment that activates and echoes their dynamic lifestyles. Our goal is to provide them with an abundant setting where they can learn, grow, and achieve their full potential,” says Sam Morreale, founding and managing partner of Vision Real Estate Partners. “When thoughtfully programmed, suburban campuses like Warren Corporate Center can provide tenants and their talent with the ideal mix of full-service amenities and desirable outdoor spaces a balance that is difficult to achieve in a more urban location.”

Rubenstein and Vision have collaborated on Warren Hill and the other elements of their business plan for the property while Citibank has continued to occupy a majority of the campus. Multiple published reports state that Citibank has opted not to renew its lease at the property and is working through a phased relocation.

“We believe we’ve created a fully-amenitized and differentiated product that the suburban New Jersey office market is embracing,” says Stephen Card, principal at Rubenstein. “Along with Vision, we have a track record of acquiring high-quality, well-located campuses that we further enhance to fit the needs of major tenants, like Everest, who are using hospitality-enriched workplaces to recruit and retain top talent.”

The Vision-Rubenstein joint venture partnership have also embarked on a multi-million-dollar renovation that transformed The Crossings at Jefferson Park in Whippany, N.J., into a Class-A office campus featuring The Powerhouse, an 11,000-square-foot, standalone amenities center. A testament to the partnership’s success in rebranding the property, The Crossings at Jefferson Park was acquired by Barclays Capital in June 2017. Vision and Rubenstein are currently collaborating on Latitude, a 30-acre, two-building office complex located in Parsippany. The complex offers 700,000 square feet of premier corporate office, health and lifestyle-focused work space.
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Tuesday, July 16, 2019

Ever Changing Retail Commercial Uses (Video)

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Monthly Economic Outlook — July 2019 (Video)

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Counter Capital Buys Mixed-Use Property for $19.1 Million

Counter Capital Management, a joint venture between Christian Dalzell's Dalzell Capital Partners and Mukang Cho's Morning Calm Management, purchased a mixed-use property in Philadelphia's Rittenhouse Square neighborhood from local full service investment firm Pearl Properties for $19.1 million.

The Class B property at 1501 Locust St. includes 29 multifamily units and ground floor retail. Built in 1947, the 10-story property was converted into a luxury mulitfamily property in 2010.

Barclays Capital provided a $14.1 million loan in the off-market transaction, and the deal marks Counter Capital's first acquisition since its launch in March.

"[1501 Locust Street] is so different from anything else we own; it’s a different caliber. So, this was a very exciting closing," Dalzell said in a statement. "We’re now starting to envision the expansion of what we’re doing here in Philly into multiple markets. We have the capacity and the expertise level."
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New Jersey Office Asking Rent Sets New Record Again


The New Jersey office market is showing continued improvement and in the second quarter set a new record high for asking rents, according to a report released today.

The statewide average asking rent reached an all-time high for the second time in the past three quarters. The New Jersey office market recorded its fifth consecutive quarter of positive net absorption, driving the state’s average asking rent to a historical peak of $27.22-per-square-foot, which marked the first time the average has ever exceeded $27-per-square-foot.

Multiple submarkets throughout the state are experiencing higher than 5% year-over-year growth in rents including Woodbridge/Metropark, Edison South, Parsippany Region, Hudson Waterfront, Wayne/Paterson and Somerset/Interstate 78 East.
Of the state’s 21 submarkets, 15 are posting higher rents year-over-year and compared to the previous quarter. In addition, 13 of the 21 submarkets are experiencing occupancy levels that are higher than the state average.

“Continued demand for high-quality office space is supporting both successful repositioning of existing assets within prime locales and this cycle’s first speculative ground-up office development. These factors are putting upward pressure on overall market rents. The steady success of the New Jersey commercial real estate market is encouraging investors to move forward with new development plans throughout the state, in both urban and suburban areas.”

Among the major commercial real estate projects underway in the Garden State include Toll Brothers’ 1000 Maxwell Lane in Hoboken; 350,000 square feet of office space planned in Morristown by SJP Properties and Scotto Properties and the Silverman Group’s plans for more than 100,000 square feet of office space above existing retail properties in Morristown.
“The U.S. economy reached the longest expansion in U.S. history and at the same time, we’re seeing some remarkable trends and growth in the office sector. However, the Grow New Jersey tax credit program expired with no replacement and remained under scrutiny, which may pose some challenges to attracting and retaining businesses. The minimum wage increase could also impact hiring and potentially decelerate overall growth.”

The largest new leases signed in the suburbs by life sciences companies include the IQVIA sublease for 115,000 square feet in the Somerset/I-78 East submarket and Genmab U.S. Inc. for 90,000 square feet in the Princeton submarket. Other sectors during the that drove activity during the second quarter included law firms, professional services firms and healthcare companies, while government tenants were particularly active in Newark.
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Monday, July 15, 2019

Medecision Inks Sublease Deal at CrossPoint at Valley Forge

Medecision, a leader in software solutions for the healthcare industry, subleased 24,726 square feet at Prime US REIT's Class A office building at CrossPoint at Valley Forge in Wayne, Pennsylvania.

The 272,360-square-foot, four-story building at 550 E. Swedesford Road was built in 1974 and renovated in 2014. The 4-Star property spans 25.3 acres less than four miles from King of Prussia.
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Coworking Trends (Video)

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Friday, July 12, 2019

Teva buys three buildings in West Chester for its R&D campus

By John George and Natalie Kostelni  –  Philadelphia Business Journal

Teva Pharmaceuticals USA bought three buildings in West Chester this week that — together with three other adjacent buildings it already owns — will allow the pharmaceutical manufacturer to “firmly establish” a North America research and development campus in Chester County.

About 650 employees will be based at Teva in West Chester by the end of 2019, including teams involved in product and device research and development, regulatory affairs, medical affairs and a variety of support functions.

A Teva spokeswoman said the company is not planning to make new hires, but will be consolidating positions at other Teva locations in the region at the West Chester campus.

Teva declined to disclose the purchase price for the three buildings it purchased, all of which the company previously leased. According to county property records, the purchase price paid to Liberty Property Trust (NYSE: LPT), the seller, was $30 million.
Fully story: https://tinyurl.com/y4esz45g
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ShopOne Centers REIT Looks for Market-Leading Grocers (Video)

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King of Prussia Apartment Projects Are Leading the Philadelphia Metro Area in Lease-Up Pace


Almost 2,000 new, luxury apartment units have delivered in King of Prussia, Pennsylvania, just in the past two and a half years. While this rapid growth in high-end apartment options would cause apartment fundamentals to buckle in plenty of Philadelphia suburbs, tenant demand has been sufficient to match the new supply in King of Prussia, where new apartment deliveries are leasing up at the fastest rates of any projects throughout the Philadelphia metro area.

Three developments with more than 250 units delivered in King of Prussia last summer, including Hanover King of Prussia, Park Square and AVE King of Prussia. One year later, all three of these properties are more than 70% leased.

While large apartment properties that delivered in the Philadelphia metro area during the past two years have averaged 15 move-ins per month over the course of lease-up, within King of Prussia, it has been 30% faster, averaging just over 19 units per month.

Most of King of Prussia’s recent multifamily projects have delivered within the Village at Valley Forge masterplan development. The mixed-use and pedestrian friendly layout of Village at Valley Forge allows local residents to walk to the grocery store, as well as to local bars and restaurants.

These selling points are likely helping boost interest in King of Prussia’s new apartment stock, as there are very few pedestrian friendly enclaves in Philadelphia’s far western suburbs, which are dominated by major highways and sprawling office parks and shopping malls.

Thursday, July 11, 2019

Endurance/CenterSquare announce the signing of a 242,960 SF lease at 594 Distribution Center in Hazleton, PA

Affiliates of Endurance Real Estate Group, LLC (“Endurance”) and CenterSquare Investment Management (“CenterSquare”) are pleased to announce the signing of a 242,960 SF lease with Progressive Converting, Inc. (“Pro-Con”) at 594 Can Do Expressway located in Hazleton, PA (the “Property”).  The Property was recently purchased from Quad Graphics and rebranded as 594 Distribution Center (“594 DC”). The lease with Pro-Con increases the Property’s occupancy to 100%.

“Shortly after acquisition, ownership embarked on a capital improvement program which included the installation of a new roof, new LED lighting throughout the warehouse area, upgraded levelers and dock packages, select interior demolition and various office, paving and landscaping improvements. Pro-Con recognized the quality of the Property and we are thrilled we can accommodate their expansion within the park as this will be their third location within the Humboldt Industrial Park, which currently boasts a vacancy rate of less than 2%”.

594 DC is located just one mile from Exit 143 of I-81 and is part of the Humboldt Industrial Park. This location offers excellent transportation links to Interstate Highways and is within 250 miles of most major markets in the Northeast and Mid-Atlantic regions. As part of the Eastern & Central Pennsylvania Industrial Market, the Northeast Pennsylvania Industrial Market is an established center for national retail distribution and consumer goods companies in the Eastern United States.
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MarketFair Mall NJ Welcomes New Restaurant Tenant

by John Jordan Globest.com
Tommy’s Tavern + Tap, a family-owned restaurant specializing in coal-fired pizza and a wide variety of quality bar favorites, has leased space at the MarketFair Mall here and is slated to open in late 2019.

The new Tommy’s Tavern + Tap will be located next to Barnes & Noble and across from Corner Bakery and will total 8,740 square feet.
The new MarketFair Mall location will be the fourth for Tommy’s Tavern + Tap along the East Coast. Each location offers an upscale, yet comfortable atmosphere with rustic, modern and industrialized design elements. Tommy’s Tavern + Tap books live bands, regularly hosts parties for its patrons, and caters events to help customers celebrate the special moments in their lives. The restaurant has three East Coast locations in Freehold and Sea Bright, NJ and Staten Island, NY.

“Tommy’s Tavern + Tap will bring something new and desirable to our community,” says Richard Kenwood, general manager, MarketFair Mall. “The combination of the restaurant’s three specialty kitchens—coal-fired pizza, tavern, and sushi—will provide diners with a wide assortment of taste-tantalizing treats, and its comfortable atmosphere will entice visitors to stop by with their families during a shopping trip or to reconnect with friends to enjoy live music. There’s a huge demand for craft beers and fresh food today, and Tommy’s Tavern + Tap offers both.”
MarketFair Mall is a 246,000-square-foot lifestyle shopping center anchored by Barnes & Noble and the AMC MarketFair 10 movie theatre. The lifestyle shopping center offers more than 40 retail, service, restaurant, and entertainment venues, including Anthropologie, Free People, Pottery Barn, West Elm, Seasons 52 and Starbucks. Leased and managed by Madison Marquette, MarketFair is located off Highway 1 in Princeton, just one mile from Princeton University.
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Wednesday, July 10, 2019

Ricoh USA cuts office space by more than half, relocates HQ

Natalie Kostelni Reporter Philadelphia Business Journal
Ricoh USA Inc. has slashed the amount of office space it occupies by more than half and is relocating its headquarters to Exton from its long-term home in Malvern.

The company leased 45,971 square feet at 300 Eagleview Blvd. in Exton and is relocating out of 107,000 square feet at 70 Valley Stream Parkway in Malvern. It has been in the Valley Stream building for more than 20 years.

“No job loss is directly associated with this move,” the company said in a statement. The relocation and reduction in space are part of the company’s desire to modernize its office space and incorporate new, evolving work styles in its space, it said. 

In 2012, Ricoh USA renewed its lease at 70 Valley Stream in a deal that kept it in the space until 2020. At the time, it had been in the building for more than a decade. The company was originally known as Ikon Office Solutions.
Full story: https://tinyurl.com/y4kuodak
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Vici Propeties CEO talks sports betting and real estate (Video)

Vici Propeties CEO talks sports betting and real estate with Jim Cramer from CNBC.

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Corporate Downsizings Are Causing Available Office Space to Accumulate in Philly’s Northern Suburbs


The share of Horsham/Willow Grove’s office stock listed as available for lease rose to 15% last quarter, the highest level recorded there since CoStar began tracking the figure in 2005.

Toll Brothers was the largest single contributor to the recent rise in availabilities. In early 2019 the home builder announced it would vacate its 203,000-square-foot headquarters at 250 Gibraltar Road in Horsham by the end of the year and move to a smaller, 167,000-square-foot office at 1100 Virginia Dr., in the nearby Fort Washington/Spring House submarket.

Toll Brothers’ announcement followed 120,000 square feet coming available at 425 Privet Road in Horsham during late 2018. This property long housed a U.S. office of Israel-based Teva Pharmaceuticals, which enacted a major restructuring that included 14,000 layoffs globally last year.

Horsham/Willow Grove has long been the tightest office submarket in the northern suburbs, and it still is. But the accumulation of record space availabilities at a time when Philadelphia’s economy remains healthy and unemployment is at multi-decade lows sends a clear signal that tenant preferences are shifting away from the submarket. Long-term challenges could lie ahead for local landlords as tenants loyal to the northern suburbs gain increased bargaining power in lease negotiations.
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Hamilton Lane Inks Deal at Seven Tower Bridge

Hamilton Lane, the Bala Cynwyd-based alternative asset manager focused on private markets, preleased 127,500 square feet at Oliver Tyrone Pulver's Seven Tower Bridge.

The 260,000-square-foot office building at 171 Washington St. is slated to deliver in 2020.
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Monday, July 8, 2019

Envestnet Signs Office Lease in Berwyn PA

Financial services company Envestnet signed a 15,897-square-foot lease at a Class A office building in Berwyn, Pennsylvania.

The 173,036-square-foot building at 1000 Chesterbrook Blvd. was built in 1999. The 4-Star property spans 13.6 acres less than two miles from the Berwyn train station.
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Economist Talks Economic Outlook (Video)

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Philadelphia's Center City Office Rent Growth Outperforms Most East Coast Central Business Districts


by Adrian Ponsen Costar.com
The Central Business Districts of global gateway markets such as New York, Washington, D.C., and Boston, have long been perceived as the powerhouses for office rent growth in the Northeastern U.S. But that dynamic appears to be changing.

Since 2016, rents in the CBDs of the most-expensive East Coast markets have been flat-lining. With average office rents now between $55 to $75 per square foot, affordability constraints are coming into play for CBD tenants in New York, Washington, D.C., and Boston. Meanwhile, these three locations have seen a combined 48 million square feet of new office projects either complete, or break ground in the past five years. For owners of existing office properties, this rapid expansion in high-end office inventory means more properties to compete with and less bargaining power during lease negotiations.

The situation is very different in Center City Philadelphia, where the list of technology and finance tenants looking to expand may be limited, but sky-high construction costs are keeping new office development to a minimum. Averaging $33 per square foot, Center City’s rents are vastly more affordable than those in other nearby East Coast CBDs, and rent growth, which made a strong showing from 2013 to 2015, has only accelerated in recent years.

Investors who have piled into Midtown Manhattan and District of Columbia properties at 3% to 4% capitalization rates in recent years may not like it, but this divergence may well continue over the long-term, given the prohibitively high cost of doing business in the Northeast’s global gateway markets.
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Industrial Wave Surges With Tallest 3 Story East Coast Distribution Center

by Diana Bell Costar.com
A surge in online shopping and limited modern warehouses equipped for e-commerce is pushing a cutting-edge development wave into New York City’s industrial market, already one of the largest in the United States.

Developers in Brooklyn, Queens and the Bronx are rushing to upgrade the city’s aging industrial building stock that's hamstrung by typically low ceilings and poor capacity to support heavy load weights. E-commerce companies also tend to demand space with enough room to accommodate warehouse robotics and multiple truck ports, which is rare in New York.

Goldman Sachs Asset Management and DH Property Holdings have started construction for their joint-venture development of 640 Columbia St., a three-story logistics facility in Brooklyn’s Red Hook neighborhood that the team says will allow for the fastest last-mile fulfillment possible in the nation's largest city.

Spanning 336,500 square feet and designed by architecture firm Ware Malcomb, the project is touted to be the tallest distribution center on the East Coast. Located on the Red Hook waterfront, 640 Columbia is within an hour’s drive of 13.5 million consumers and specifically designed to capitalize on demand for efficient warehouse space by e-commerce tenants, according to the joint venture.

It is expected to be open in the fourth quarter of 2020, said Joe Sumberg, managing director of Goldman Sachs’ Private Real Estate division.

“We are more bullish now about last-mile industrial in the New York City area than we were when we originally acquired the property,” Sumberg said. According to a recent industrial report by CoStar market analytics, the team signed a 99-year ground lease for the lots comprising the site valued at $280 million.

Red Hook evolved from a Dutch settlement into one of busiest ports in the country by the mid-1800s, according to the Waterfront Museum. About a hundred years later, the largely industrial neighborhood was considered one of the city’s most dangerous areas, where mobster Al Capone learned his trade. But in the past decade, it has transformed into a hip enclave marked by cafes, trendy bars, specialty stores, Citi shared bicycles and a massive new Ikea store.

In recent years, Red Hook’s proximity to Manhattan has led to mounting investment interest, with developers Thor Equities and Aecom undertaking some of the largest residential projects in southwest Brooklyn, CoStar analysts wrote in a report on the area.

Plans for the Red Hook site being developed by Goldman Sachs and DH feature 28 loading docks split evenly between the first and second floors. Those floors can accommodate 130-foot-long delivery trucks. On the first floor is a 162-space parking deck and direct freight elevator access to the third floor. On the first and second floors, ceiling heights are penciled in to reach 28 feet. The third floor is being designed with 18-foot ceilings.

“The first and second floors will likely be most attractive to last-mile distribution focused on reaching the end consumer within minutes. For the third floor, in addition to bulk distribution, the space could be desirable to tenants focused on high-touch product preparations, food commissary, pick and pack, maker space, or more creative tenants looking for showroom space in conjunction with or independent from the lower floors,” Sumberg said.

Race for Modern Distribution Space

As New York’s 9 million residents increasingly adopt new digital-shopping channels, retailers’ need to be close-in for speedy delivery has become more crucial. Commercial real estate investors are pouncing on the opportunity. Across the five boroughs, there are 10 industrial warehouse projects in the works, according to CoStar data. Nearly a handful of those rise multiple levels.

There is “insatiable demand for modern, ‘last-mile’ distribution space located in highly populated urban areas,” said HFF’s Rob Hinckley.

Brooklyn is home to another major warehouse development targeting e-commerce and third-party logistics tenants for last-mile distribution.

Wildflower is at work on Brooklyn Logistics Center, a two-building, 214,000-square-foot facility. The property, about 5 miles from John F. Kennedy International Airport, carries 32-foot ceiling heights. It’s being constructed on speculation, or without any tenants lined up. The project’s October delivery date is expected to make it the first modern warehouse coming on line in the city, according to commercial real estate services firm Cushman & Wakefield, which has the exclusive listing.

“The market is starved for quality product, especially in Brooklyn, which offers quick access to Manhattan. Only 9 percent of the industrial market in Brooklyn is Class A, a very low figure. With the way retail has been changing, the industrial market can’t keep up with demand for product supply to high-density residential populations,” said Rico Murtha, a director of leasing at Cushman & Wakefield. The average age of industrial stock in the boroughs is 70 years old, according to the firm’s data.
JULY 05, 2019|DIANA BELLEMAILPRINT
Industrial Wave Surges With Tallest East Coast Distribution Center
Goldman Sachs Venture Aims for Fastest Last-Mile Fulfillment
Construction is underway at a three-story industrial facility at 640 Columbia St. in Brooklyn, New York. Illustration: DH Property Holdings
Construction is underway at a three-story industrial facility at 640 Columbia St. in Brooklyn, New York. Illustration: DH Property Holdings
A surge in online shopping and limited modern warehouses equipped for e-commerce is pushing a cutting-edge development wave into New York City’s industrial market, already one of the largest in the United States.

Developers in Brooklyn, Queens and the Bronx are rushing to upgrade the city’s aging industrial building stock that's hamstrung by typically low ceilings and poor capacity to support heavy load weights. E-commerce companies also tend to demand space with enough room to accommodate warehouse robotics and multiple truck ports, which is rare in New York.

Goldman Sachs Asset Management and DH Property Holdings have started construction for their joint-venture development of 640 Columbia St., a three-story logistics facility in Brooklyn’s Red Hook neighborhood that the team says will allow for the fastest last-mile fulfillment possible in the nation's largest city.

Spanning 336,500 square feet and designed by architecture firm Ware Malcomb, the project is touted to be the tallest distribution center on the East Coast. Located on the Red Hook waterfront, 640 Columbia is within an hour’s drive of 13.5 million consumers and specifically designed to capitalize on demand for efficient warehouse space by e-commerce tenants, according to the joint venture.

It is expected to be open in the fourth quarter of 2020, said Joe Sumberg, managing director of Goldman Sachs’ Private Real Estate division.

“We are more bullish now about last-mile industrial in the New York City area than we were when we originally acquired the property,” Sumberg said. According to a recent industrial report by CoStar market analytics, the team signed a 99-year ground lease for the lots comprising the site valued at $280 million.

Red Hook evolved from a Dutch settlement into one of busiest ports in the country by the mid-1800s, according to the Waterfront Museum. About a hundred years later, the largely industrial neighborhood was considered one of the city’s most dangerous areas, where mobster Al Capone learned his trade. But in the past decade, it has transformed into a hip enclave marked by cafes, trendy bars, specialty stores, Citi shared bicycles and a massive new Ikea store.

In recent years, Red Hook’s proximity to Manhattan has led to mounting investment interest, with developers Thor Equities and Aecom undertaking some of the largest residential projects in southwest Brooklyn, CoStar analysts wrote in a report on the area.

Plans for the Red Hook site being developed by Goldman Sachs and DH feature 28 loading docks split evenly between the first and second floors. Those floors can accommodate 130-foot-long delivery trucks. On the first floor is a 162-space parking deck and direct freight elevator access to the third floor. On the first and second floors, ceiling heights are penciled in to reach 28 feet. The third floor is being designed with 18-foot ceilings.

“The first and second floors will likely be most attractive to last-mile distribution focused on reaching the end consumer within minutes. For the third floor, in addition to bulk distribution, the space could be desirable to tenants focused on high-touch product preparations, food commissary, pick and pack, maker space, or more creative tenants looking for showroom space in conjunction with or independent from the lower floors,” Sumberg said.


The floor plan for 640 Columbia St. is being designed by architecture firm Ware Malcomb. Illustration: DH Property Holdings
Race for Modern Distribution Space

As New York’s 9 million residents increasingly adopt new digital-shopping channels, retailers’ need to be close-in for speedy delivery has become more crucial. Commercial real estate investors are pouncing on the opportunity. Across the five boroughs, there are 10 industrial warehouse projects in the works, according to CoStar data. Nearly a handful of those rise multiple levels.

There is “insatiable demand for modern, ‘last-mile’ distribution space located in highly populated urban areas,” said HFF’s Rob Hinckley.

Brooklyn is home to another major warehouse development targeting e-commerce and third-party logistics tenants for last-mile distribution.

Wildflower is at work on Brooklyn Logistics Center, a two-building, 214,000-square-foot facility. The property, about 5 miles from John F. Kennedy International Airport, carries 32-foot ceiling heights. It’s being constructed on speculation, or without any tenants lined up. The project’s October delivery date is expected to make it the first modern warehouse coming on line in the city, according to commercial real estate services firm Cushman & Wakefield, which has the exclusive listing.

“The market is starved for quality product, especially in Brooklyn, which offers quick access to Manhattan. Only 9 percent of the industrial market in Brooklyn is Class A, a very low figure. With the way retail has been changing, the industrial market can’t keep up with demand for product supply to high-density residential populations,” said Rico Murtha, a director of leasing at Cushman & Wakefield. The average age of industrial stock in the boroughs is 70 years old, according to the firm’s data.


Wildflower's Brooklyn Logistics Center project features mirror-image buildings. Illustration: Wildflower
“Multistory developments are swinging for the fences, looking for e-commerce/tech-type companies to take large 100,000-square-foot-plus blocks of space. What is so unique about this site is that it is in line with the traditional industrial market product, but it is brand-new. It is a traditional type of warehouse with off-street parking and loading that doesn’t exist in the outer boroughs. The scale of 200,000 square feet is also not available and makes it stand out, but even more so because the buildings are designed to be flexible and can be divided into spaces as small as 40,000 square feet,” said Cushman & Wakefield Managing Director Frank Liggio, who is working with Rico on leasing.

Meanwhile in Queens, a 300,000-square-foot, three-level logistics warehouse is rising from a three-acre plot also near JFK airport. Joint-venture partners Triangle Equities, L&B Realty Partners and Township Capital are building the project, dubbed Terminal Logistics Center, at 130-24 S. Conduit Ave., and expect it to be ready for tenants in 2020.
“We’ve wanted to invest in this type of venture for some time because of what we saw happening in New York City," said Josh Weingarten, director of capital markets at Triangle. "For years, New York City industrial in the boroughs has been rezoned to residential. The remaining industrial product is very old; it doesn’t have the features a modern logistics occupier wants," he said.

Possible tenants for the property include third-party logistics firms, business-to-business freight forwarders that move cargo through JFK to manufacturers, and businesses that support JFK, according to Weingarten.

"There is an incredible lack of supply of warehouse/fulfillment space while every year more retail is happening through e-commerce. So it’s this perfect storm," he said.

Also in Queens, New York-based landlord RXR Realty is stepping up its e-commerce pursuits with Grand Logistics Center, a 770,000-square-foot industrial site that will stand three to four stories as one of the largest warehouses under construction in the city.

RXR is working with national warehouse developer LBA Logistics on the project, which seeks to appeal to retailers’ need for supply-chain speed – it will encompass 84 doors, 32 truck stalls, staging areas, office space and secure parking lots. Trucks will be able to load directly from the first, second and third floors.

And in the Bronx, commercial real estate investment into new industrial product has been snowballing since 2018, as big names such as financier Square Mile Capital, Innovo and Prologis pursue development of modern, multistory industrial properties that brokers expect to achieve high-water marks for rent in the area. Most recently, Square Mile Capital made another industrial purchase, teaming with Himmel + Meringoff Properties to purchase a low-rise Bronx industrial property at 1601 Bronxdale Ave. for $89 million.

The partners will modernize the space as part of a new acquisition program targeting mixed-use and industrial properties. The partnership “intends to take advantage of increased local market demand for distribution facilities,” Square Mile Capital Chief Executive Craig Solomon said in a statement.
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Easton Coach Co. Inks Deal in Cherry Hill, New Jersey

by Johanna Jordan Costar.com
Transit services company Easton Coach Co. leased 47,670 square feet at Hillside Plastics' industrial building in Cherry Hill, New Jersey.

The 85,797-square-foot, single-story structure at 1941 Old Cuthbert Road comprises nine loading docks and levelators, one drive-in bay, 29- by 80-foot column spacing and a 27-foot clear ceiling height. Built in 1969 and renovated in 2000, the property spans 10 acres less than 11 miles from downtown Philadelphia.
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Liberty Property Trust Doubles its Money on Center City Medical Office Tower

by John Jordan Globest.com
Liberty Property Trust has sold a medical office building in Center City it developed six years ago, for just under $100 million, more than double what it cost to build the property.

The Wayne, PA-based firm sold 800 Walnut St., a 12-story 153,242-square-foot medical office building for $99.25 million to the University of Pennsylvania Health System. Liberty Property Trust developed the medical office tower in 2013 for $48.5 million.
The University of Pennsylvania Health System’s Penn Medicine Washington Square occupies the entire building. Penn Medicine Washington Square is home to more than 100 health care providers from a wide range of services, including cardiology, otorhinolaryngology (ear, nose and throat), primary care, surgery, urology, women’s health and more.

The “green” building features energy efficient heating and cooling, optimized day lighting, extensive recycling and storm water retention through a “green roof” terrace.
The University of Pennsylvania Health System could not be reached for comment at press time.

Liberty Property Trust reports it used a portion of the sales proceeds at closing to repay $35.9 million of mortgage debt encumbering the property and, consequently, will realize a loss on early extinguishment of debt of $7.6 million, or $0.05 per diluted share, in the second quarter of 2019. The debt extinguishment charge was not included in the company’s previously announced earnings guidance for 2019. The secured loan carried an interest rate of 4.84% and was scheduled to mature in 2033.

Earlier this year, Liberty Property Trust added to its Central New Jersey portfolio with the sale-leaseback acquisition of 75 Ethel Road in Edison, NJ for $12.2 million. The 101,454 square foot building features a 22-foot clear height and is strategically located along I-287 near Exit 10 of the New Jersey Turnpike.
Liberty also purchased 115 Moonachie Avenue, a “last-mile” property, in the Meadowlands for $39.6 million. The 168,800-square-foot multi-tenant building is 100% leased and features 28-foot clear height. It is immediately adjacent to three buildings Liberty previously acquired in two separate transactions in the Meadowlands.

Liberty Property Trust has been engaged in a strategy of exiting the commercial office sector and concentrating on the development, acquisition, ownership and management of superior logistics, warehouse, manufacturing, and R&D facilities in key markets in the United States and the United Kingdom. Liberty’s 108-million-square-foot operating portfolio services 1,200 tenants.
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Thursday, July 4, 2019

King of Prussia apartment complex sells for $108M

By Natalie Kostelni  – Reporter, Philadelphia Business Journal

UDR Inc. has acquired Park Square, a 313-unit apartment complex that opened last year in King of Prussia, for $108.5 million, or for $346,600 a unit.

While not reaching the per square foot prices that some Center City properties are getting, the sale price for Park Square is an encouraging sign for those worried the suburbs — particularly King of Prussia — were getting overbuilt with apartments. That may yet still be the case, but strong sales prices indicate that the units being built are getting filled, rents are being paid and properties are stabilizing.

There are 9,314 apartment units in various stages of construction or planning throughout the Philadelphia suburbs, according to a first quarter Berkadia report. Of those, two projects — the Smith at 580 S. Goddard Blvd. and Skye 750 at 750 Moore Road — are in King of Prussia. Between them, they have 568 units that are in the lease-up phase. Other projects planned for King of Prussia include Hanover Village (390 units) and two projects on Renaissance Boulevard (nearly 600 units), according to the report.

King of Prussia isn't alone seeing an abundance of new apartments. Malvern, Exton, Collegeville, Cherry Hill, N.J., and Marlton, N.J., are among the suburban communities where developers have either started or are planning new multifamily construction. In Kennett Square, High Real Estate Group recently broke ground on a $30 million apartment development called the Flats at Kennett. The 175-unit project is being built on 14.4 acres at 603 Millers Hill Rd. It will consist of three buildings totaling 230,000 square feet.

"We saw a specific gap in demand where there was no new apartment supply built in Kennett Square in recent years. We saw an opportunity and growing demand for an upscale project," said Brad Mowbray of High Associates Ltd. "We believe this will cater to growing demand in the millennial market and those downsizing."
Full story: https://tinyurl.com/yxhh9uoo
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Tuesday, July 2, 2019

Relative Properties Scoop Up Riverwalk at Millennium

Long Wharf Capital and Sully Co. have sold the Riverwalk at Millennium multifamily development here to Bryn Mawr, PA-based Relative Properties.

The joint venture partners acquired the 375-unit transit-oriented development in 2015 for approximately $81 million, according to multiple published reports. The property previously traded a decade earlier when an affiliate of JP Morgan purchased the property for $87.5 million, according to a report in the Philadelphia Business Journal.
Long Wharf Capital is based in Boston and Scully Co. is headquartered in Jenkintown, PA.

Relative Properties’ purchase of the property purchased the property with Long Wharf and Scully Co. in 2015 and arranged both the joint venture partnership between the two and acquisition financing in that deal.
In the latest trade,  Relative Properties to placed the fixed-rate acquisition loan through Freddie Mac. A Freddie Mac Multifamily Approved Lender for Conventional Loans. No financial terms of the transaction were disclosed.

Originally constructed in 2005, 189 units were rebuilt in 2010 after a construction fire at an adjacent property burned down two of the property’s four buildings.
Riverwalk at Millennium is situated on 7.89 acres at 309 Washington St. in Conshohocken, a suburb northwest of Philadelphia that borders the Schuylkill River.

The Schuylkill River Trail, which is used for running and biking along the river between Valley Forge and Center City, is directly behind the property. The four-story buildings sit above single-story parking garages and house a diverse blend of one- and two-bedroom units with contemporary floor plans averaging 923 square feet. Units also feature ceilings at least nine feet high, plank flooring, full-sized washer/dryers and six-foot windows. Community amenities include controlled access, a modern clubhouse with fireplace, a resort-style pool with sundeck and grill area and a contemporary fitness center with an on-demand fitness studio.
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Tight Labor Market Favors Apartment Rent Growth, but Limits Office Tenant Expansions

Chart: CoStar Market Analytics
Philadelphia's Unemployment Rate Falls to 30-Year Low
After another month of job growth, Philadelphia's economy has reached an important milestone. The metro area’s unemployment rate fell to 3.1% in May, the lowest level of unemployment recorded in Philadelphia since the Bureau of Labor Statistics (BLS) began publishing the figure in 1990.

For local commercial real estate markets, current record-low unemployment represents both a blessing and a potential risk.

On the positive side, it reflects how Philadelphia’s economy is clearly stronger than it was 10, 20, or even 30 years ago. The healthcare sector has powered this transformation, growing its employee count by 25% – or over 100,000 local jobs – since the end of the last recession 10 years ago.

With available workers in short supply, competition for new recruits is forcing companies to raise wages across industries and not just for the highest paid positions.

At least five local health systems have announced plans to raise their minimum wage since late 2018. The BLS also reported that average hourly wages across all sectors grew by 3.6% last year. Pay increases like these have supported rent growth over 3% among Philadelphia’s workforce housing rentals.

But the lower Philadelphia’s unemployment rate goes, the harder it will become for local companies to find the employees they need, making it more difficult for businesses to grow and less likely that they will expand their real estate footprints.

At 1.2% year-over-year, Philadelphia’s pace of job growth has already slowed to about two-thirds of the pace recorded in 2014 to 2015, when available workers were easier for companies to find. In line with that trend, the pace at which local office tenants are expanding their square footage has also slowed in the past three to four years.

Philadelphia’s tight labor market will likely persist into next year. Under this scenario, wage gains should continue to support accelerated rent growth in workforce housing rentals while slowing job gains keep a lid on office tenant expansions.

Office tenants may not be growing aggressively, but they will likely continue to put increased emphasis on leasing high-end space to help recruit and retain employees, as it is becoming increasingly costly to lose them.
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Monday, July 1, 2019

KBS to Unload 11 US Office Buildings Into New Singapore REIT

KBS Realty Advisors has priced the initial public offering of a new Singapore real estate investment trust, Prime US REIT, that will acquire 11 U.S. office buildings from KBS' U.S. nontraded REIT, KBS Real Estate Investment Trust III.

Priced at 88 cents per unit, Prime US REIT is set to raise more than $612 million. It’s poised to become the largest REIT controlled by a U.S. company to trade on the Singapore stock exchange and the third since April.

KBS Realty Advisors plans to purchase an equity interest of about $200 million. The transaction is scheduled to close this month.

Prime US REIT has agreed to pay $1.2 billion for the 11 office properties in nine states. The portfolio totals 3.41 million square feet:


  • 101 S. Hanley Road, St. Louis
  • 171 17th St. NW, Atlanta
  • 222 S. Main St., Salt Lake City
  • CrossPoint at Valley Forge, Wayne, Pennsylvania
  • One Washingtonian Center, Gaithersburg, Maryland
  • Promenade I and Promenade II at Eilan, San Antonio
  • Reston Square, Reston, Virginia
  • Tower I at Emeryville, Emeryville, California
  • Tower on Lake Carolyn, Irving, Texas
  • Village Center Station I, Greenwood Village, Colorado
  • Village Center Station II, Greenwood Village, Colorado

In a filing with the U.S. Securities and Exchange Commission, KBS III said, "The company believes that the Singapore transaction presents an excellent opportunity to monetize the 11 stabilized properties that comprise the portfolio at attractive pricing."

Additionally, it said it would avoid significant third-party closing costs by selling the portfolio to a single buyer compared to potentially selling the assets in multiple sales transactions to various buyers.

KBS III expects to distribute a substantial portion of the net proceeds to its stockholders and to pay down debt.

The sale will leave KBS III with a portfolio of about 17 office properties.

Going forward, KBS Realty Advisors said that potential asset acquisition opportunities would go first to Prime US REIT if they meet the following criteria: a Class A office building with a purchase price of at least $125 million and occupancy of at least 90% for the first two years based on contractual in-place leases.

Prime US REIT will be the third U.S. property REIT to launch in Singapore. Last month, Eagle Hospitality REIT Management completed the IPO of Eagle Hospitality Trust, an offering that raised about $566 million. The REIT used the proceeds from the offering to complete the $1.11 billion acquisition of the portfolio.

In April, ARA US Hospitality Trust priced the IPO of its 38 Hyatt select-service U.S. hotels, raising about $498 million.
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Real estate sector leads S&P 500 (Video)

Real estate sector leads S&P 500 from CNBC.

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Big story in real estate is all about yield (Video)

Marcus & Millichap CEO: Big story in real estate is all about yield from CNBC.

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Top 10 Issues Affecting Real Estate Part 1 (Video)

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Global Medical REIT Sees “Tremendous Growth” Ahead for Health Care Industry (Video)

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Medical Office and Campus Design Trends (Video)

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