Sunday, February 28, 2010

Phila state tower price falls as sale to Blatstein drags

"Two years after Pennsylvania announced the sale of its office building at 1400 Spring Garden St. to developer Bart Blatstein's Tower Investments, the deal still isn't done, and the sale price has gone down.

The sale is now scheduled to close in July, for around $23.4 million, down from the original price of $25.2 million, state Department of General Services spokesman Ed Myslewicz told me. That's because the state took longer than expected to negotiate replacement rental offices at 801 Market St (the old Strawbridge & Clothier store, partly owned by Ron Rubin's Pennsylvania Real Estate Investment Trust) and 801 Race St.

But Blatstein has also faced delays, due to the difficulty of arranging financing, Misewicz added. He's paying the state "up to $40,000 a month" past last November's previous deadline. Blatstein has said he plans apartments - probably rental, maybe condo - and a row of stores.

On Monday, the state will announce the sale of its Pittsburgh office building to a group called River Vue Associates, from Canonsburg, Pa."

Friday, February 26, 2010

Grocery shopping centers are hot

"Three grocery-anchored shopping centers have traded in recent weeks and a fourth one is set to close for about $50 million in May, highlighting a boost of investor interest in these types of commercial properties.

Although additional centers are expected to hit the market, retail brokers say there are more interested investors than there will be centers in which to invest.

“There’s definitely a strong appetite for best of class, grocery-anchored centers,” said an investment broker. We are preparing to market for sale a couple of these types of centers in the next few weeks. He expects one of the properties will generate a “tremendous” amount of interest. The property, which he declined to name or locate, is a grocery-anchored center that has a long-term lease with a top-tier grocery store.

Last fall, Morrell Plaza set off what has become a boost in sales activity in the region. Morrell Plaza, a 103,244-square-foot center in Northeast Philadelphia was sold for $22 million to Levin Management Corp. of Plainfield, N.J.

“I think it’s a great sign for a couple of reasons. The grocer-anchored center is really the cornerstone for all real estate. Everybody needs to eat and therefore grocery stores and the centers they rest in will always have a place in this world even with the advent of the power center and malls. The good old-fashioned supermarket-anchored centers still represent stability in an unstable world.”

The recent sales have also begun to establish property values for at least that property type. For the last year or so, buyers and sellers have been at odds as to the worth of real estate as values have fallen.

Three of those recent sales:

Bensalem Crossing, a 67,000-square-foot center off Neshaminy Boulevard that is anchored by a ShopRite and a CVS. It’s fully leased. The Goldenberg Group of Blue Bell sold the 10-year-old center to a private investment partnership from New Jersey for $13.6 million, just shy of the $14 million asking price. The property garnered multiple bids and was on the market for fewer than 40 days before going under contract. “Marketing to closing was less than four months."

Lakeview Shopping Center, a 190,000-square-foot center off Route 422 in Royersford is anchored by Giant and has a Marshalls and a Kohl’s, and a TD Bank branch, among other stores, and is fully leased. Reitnour Investment Properties of Phoenixville sold the property for $23.5 million to One Liberty Properties of New York. The center was constructed in 2001 and was on the market for three months. Twenty-seven offers came in on the deal, which included the assumption of a loan. “It was a very competitive process."

Towne Square Plaza, a 123,000-square-foot center on Fifth Street Highway in Reading is anchored by a Giant and has A.C. Moore and PetSmart as other tenants. The property was fully leased and constructed just two years ago. While the asking price was $19.2 million, it traded for $18.85 million. “We marketed for three months and closed within 60 days."

If all goes according to plan, that next deal could close for about $50 million sometime in May.

Investors are looking for properties that are not only grocery-anchored but the grocer must be the dominant player in the market it is serving.

While investors and institutions had been chasing office buildings before the real estate peak in 2007, they have switched their focus to these types of shopping centers as a safe bet.

“The perception is the grocery business is very well insulated from the volatility of the economy. There’s more capital this year that is chasing best-of-class properties. The problem is, in those markets, very few trade. There’s a fair amount of private and [real estate investment owned] assets and they are difficult to get their hands on.”

Thursday, February 25, 2010

New M.O.B. (Medical Office Buildings) Coming to Brinton Lake Corporate Center

"Brinton Land Development Associates L.P. is breaking ground in April on a new 60,000-square-foot medical office building at Brinton Lake Corporate Center in Glen Mills, PA. The projected delivery date is December.

Upon completion, 500 Evergreen Drive will be a three-story, state-of-the-art facility. Approximately 45,000 square feet of space has been preleased to various medical tenants.

500 Evergreen Drive will join The Crozer Medical Plaza at Brinton Lake and together, making Brinton Lake Corporate Center a premier medical destination. Brinton Lake Corporate Center is part of a master planned mixed-use development project with a host of onsite amenities including banking, retail, restaurants, hotels and office space."

Roses discount chain opening Philadelphia store

"Roses, a discount retailer, has moved into 50,000 square feet at Rising Sun Plaza in Philadelphia and will officially open a new store there today.

The new store will create 40 to 50 jobs and is the first of what is expected to be several Roses to roll out in the Delaware Valley. The shopping center is located at the intersection of Rising Sun and Adams avenues. The lease backfills a portion of space that had been occupied by National Wholesale Liquidators. Roses is a subsidiary of Variety Wholesalers Inc., which is based in Henderson, N.C."

Tuesday, February 23, 2010

Chester Soccer stadium and more

"The Buccini/Pollin Group of Wilmington provided an update for its project, the Wharf at Rivertown, the Philadelphia Union soccer stadium and its related residential and commercial projects in Chester. Here’s the latest: The $110 million, 18,500 seat stadium is near completion and scheduled to open this summer; a new I-95 on/off ramp is set to be completed by late fourth quarter; a new 30,000-square-foot office building remains in the design stages; and an existing 400,000-square-foot office building is nearly fully leased. At build out, plans call for constructing 180 townhouses, 225 apartments, 42,000 square feet of retail space, a 200,000-square-foot convention center, 435,000 square feet of new office space and structured parking with 1,350 spaces. With any project of this scale and in shifting markets, plans change but so far the developer has 30 acres prepped for the new development

... Gateway Business Park at Fellowship Road and Gaither Drive in Mount Laurel, N.J., lined up three tenants totaling 63,000 square feet who renewed their leases. Jacobs Engineering, an engineering services provider based in Pasadena, Calif., renewed its lease of 36,000 square feet. The company has been at Gateway Business Park since 2003.

In another deal, Surgical Center of South Jersey, re-upped on 17,000 square feet. It has been a tenant at the park for 22 years. And in the last deal, Acteon, a manufacturer of electronic dental equipment based in France, re-signed for 9,886 square feet.

... RAIT Financial Trust (NYSE:RAS) closed out the year with losses but slightly less of a loss than it reported in 2008, reflecting how the company has been trying to manage its exposure to the mortgage market. The company recorded for the fourth-quarter earning $15.6 million, or 24 cents a diluted share, compared with a net loss of $505.9 million, or $7.78 a share during the same period in 2008. For the year, RAIT reported net loss of $441.2 million, or $6.77 total loss a share compared with $443.2 million, or $6.99 loss, last year, according to the company.

Some highlights: The company ended the year with fewer assets under management — $10.1 billion compared with $14.2 billion; reduced its debt from $517.4 million to $398.5 million; got the repayment of its debt extended to 2011 from 2009; and ended the year with $25 million of cash."

Sunday, February 21, 2010

Blackstone Reaches Deal to Revamp Hilton's Debt

This article was in the Wall Street Journal over the weekend. It is a good sign that financiers are getting creative for handling potentially bad debt by cutting amounts, buying back debt at a discount and extending maturities dates.

"Blackstone Group has reached an agreement to restructure the balance sheet of Hilton Worldwide as it looks to improve the flagging fortunes of its single largest investment.

Hilton's lenders and Blackstone are finalizing a deal that would cut its $20 billion debt load by about $4 billion, according to two people familiar with the negotiations. The agreement calls for Blackstone's funds to contribute $800 million of new equity, which will be used to buy back debt at a discount. It would also extend the maturity of some debt issues, these people said.

The restructuring will help shore up Hilton's finances as it struggles through a downturn in the hotel industry. For months, some analysts have said there was a risk that Hilton might not be able to generate enough cash to stay current on its $20 billion of debt. Without a restructuring, Blackstone could have been forced to sell Hilton assets to cover its roughly $900 million in interest payments, according to the analysts.

A Blackstone spokesman declined to comment.

A number of large leveraged buyouts—walloped by the economy and large debt loads—have managed to stave off default over the past year by restructuring their balance sheets. They've been helped by high-yield markets, which have proven eager to snap up new debt of even the weakest credits.

Freescale Semiconductor Inc., the computer chip maker owned by Blackstone Group and three other private-equity firms, is expected to close Friday on a $750 million bond sale that will extend maturities on its debt. Friday, crafts retailer Michaels Stores Inc. said it extended the maturity on $900 million of loans.

Talks with Hilton's lenders have been contentious and dragged on for at least four months, according to several people involved. Roughly $4 billion of Hilton debt is held by the Federal Reserve, through a fund called Maiden Lane, which acquired the position from Bear Stearns Cos. when it brokered the collapsed investment bank's sale to J.P. Morgan Chase & Co.

Hilton is a poster child for overpriced acquisitions of the era. In July 2007 Blackstone agreed to pay $26 billion for the storied hotel chain. The firm's funds and co-investors put up $5.6 billion in equity in the deal and borrowed $20 billion in debt from a group of seven banks. The banks sold some of the debt to investors but ended up keeping much of it on their books after debt markets closed later that summer.

A collapse of the business-travel market has hit Hilton hard. Blackstone has written down the value of its equity investment by about two-thirds, according to people familiar with the firm.

The firm's real-estate unit has gotten more active over the past few months after a long fallow period. In September it acquired 50% of Broadgate, the largest portfolio of office buildings in London. And it's now considering joining Simon Property Group Inc.'s bid to buy bankrupt General Growth Properties Inc., according to people involved in that deal. The firm's real-estate funds have more than $12 billion in so-called dry powder to invest.

Separately on Friday, federal prosecutors in Manhattan acknowledged for the first time in a court filing that Hilton is under criminal investigation related to the alleged theft of confidential documents from rival Starwood Hotels & Resorts.

A Hilton spokeswoman said it continues to cooperate with the government's investigation."

Friday, February 19, 2010

3 Law Firms Lease Up

"Three law firms have settled on new leases, seizing on a leasing market that allowed them to upgrade their office space at cheaper rents. The deals may serve as a harbinger for the year as businesses begin to make leasing decisions and landlords try to lock in tenants to stabilize their office buildings.

The deals:

• Sweeney & Sheehan signed an 11-year lease on 15,246 square feet at 1515 Market St., where it has made its home for the last three decades. Though the firm considered other buildings in Center City, it decided to relocate within 1515 Market and move from the western side of the 19th floor to the other side of the same floor. The firm is shrinking from 19,000 square feet as it makes its new space more efficient. The firm has expansion rights to occupy an additional 900 square feet.

• Segal McCambridge Singer & Mahoney took 18,800 square feet at 1818 Market and will relocate from 15,000 square feet at United Plaza at 30 S. 17th St. The firm signed a 10-year deal.

• Chamberlain Hrdlicka White Williams & Martin restructured its lease at 300 Four Falls Corporate Center in West Conshohocken. The firm restructured its lease and will double to 12,259 square feet on the fifth floor of the building. To structure the deal, they negotiated to recapture a portion of space being marketed for sublease by an adjacent tenant, so that Chamberlain could lease the space directly for a five-year term. They also negotiated a rent reduction, based on the tenant’s willingness to sign a new lease nearly a year in advance of expiration."

Wednesday, February 17, 2010

Sixth Avenue Electronics Buys Montgomery Commons

"Sixth Avenue Electronics Inc. acquired the Montgomeryville Commons in Montgomeryville, PA, from Blank Aschkenasy Properties for $3.95 million, or $113 per square foot.

The 35,000-square-foot retail building was built in 1980 in the Fort Washington/Spring House submarket. Sixth Avenue Electronics has been a tenant in the property for approximately seven months, occupying 23,500 square feet. Petco leases the remainder of the space."

Tuesday, February 16, 2010

Blatstein's new urban plan for Northern Liberties

"Developer Bart Blatstein has been a powerful force in refashioning the old working-class, beer-making neighborhood of Northern Liberties into a hipster enclave studded with galleries and cafes. Now, he is about to push that bohemian district in a tonier direction with the construction of an immense, 21st-century retail-and-residential hive on the former Schmidt's brewery site.

Blatstein's company, Tower Investments, will hold a formal groundbreaking today for the first phase of that project, a $30 million retail complex anchored by a Pathmark supermarket. The innovative design by New York's Beyer Blinder Belle Architects & Planners will not only provide the neighborhood with much-needed services, but it promises to restore an urban street wall along Girard Avenue and Second Street.

Depending on how quickly the city's damaged real estate market heals, Blatstein said, he intends to follow up over the next several years with an ambitious agenda of additional projects, including two high-rise apartment towers, townhouses, a hotel, a garage, and a one-acre green park.

When fully built, the dense development will cover the entire 8.5-acre block where C. Schmidt & Sons once fermented and bottled Philadelphia's most ubiquitous taproom lager. A new master plan, prepared by Beyer Blinder Belle and vetted by city planners, calls for a total of 600 residential units, 978 parking spaces, and 110,000 square feet of retail.

Today's groundbreaking also marks the end of a decade-long stalemate between Blatstein and local residents over how to develop the site. When the developer first acquired 14 acres of Schmidt's property at auction for $1.8 million in 2000, his intention was to build a suburban-style strip mall.

The neighborhood, a mix of old-timers, artists and twentysomethings, rose up in rebellion.

As Blatstein now acknowledges, the decade of sparring with the Northern Liberties' community has taught him to appreciate the area's rich urban form. That's especially important because Blatstein is the area's dominant landowner, holding 30 acres scattered over 100 parcels.

With each successive development, his projects have become more sensitive to their surroundings, an eclectic combination of traditional rowhouses and hardy factory buildings that has also become an unlikely laboratory for Philadelphia's most experimental architecture.

Schmidts North, as some are calling the new development, will be arranged so that all five sides of the irregularly shaped block are lined with buildings and active ground floor uses. The edges will start low, in deference to neighboring rowhouses, and build up to a height of 26 stories on the site's southern edge, next to Blatstein's Piazza at Schmidts development. A one-acre landscaped park will eventually tie Blatstein's Liberty Walk, and his egg-shaped office tower at Germantown Avenue, into the future development.

Blatstein and his lead architect, Richard Metsky, have even managed to come up with a design for the supermarket that does not mar the crucial Girard Street corner with blank walls, the downfall of most new supermarkets in Philadelphia.

Supermarkets are reluctant to break up their facades with windows because they are intent on maximizing space for shelving and storage. But the lack of transparency can be deadening for a commercial street.

So Metsky and his team placed the grocery on the second floor of the complex. That freed up the ground floor for other retailers, like banks and hardware stores, which like large shop windows to help attract passersby. The entire retail frontage along Girard Avenue and Second Street will be lined with glass.

Metsky, who has done master plans for clients as various as Princeton University and the Kansas City Live entertainment district, could have settled for prosaic stucco on the upper floor. But the architects jazzed up the supermarket facade with opaque colored glass, arranged in a staccato pattern of grays and yellows. It culminates at Second Street with a clock tower, featuring both a digital clock and a Gothic-style 'S' lifted from the Schmidt's logo.

Because the architects were determined to ring the edges of the site with active uses, all the parking will be on the interior of the block. Supermarket shoppers arriving by car will enter the main garage from Second Street. Pedestrians will take elevators to the store.

Blatstein said the sophisticated arrangement required more effort to piece together, and will cost more to build than a strip mall - about $300 a square foot. But he believes the design will pay off in helping to attract better tenants.

"I've built a lot of strip shopping centers," Blatstein acknowledged, "and I wanted to avoid the temptation to do that here. . . . I kept playing with the site."

Noting that the Girard Avenue stop on the Market-Frankford El is just a block away, he added, "This is a real transportation-oriented development. You never have to use your car."

Nevertheless, the project includes plenty of parking. The retail garage has room for 311 cars on three levels, while a later residential structure will provide 258 spaces.

Although it took Blatstein almost a decade to work out a design the neighborhood would embrace, the components of the current plan are almost identical to the ones he proposed in 2001, and may even include more density than he first envisioned.

For many years, Blatstein resisted hiring a professional planner to lay out the complex project, preferring to do the work in-house. During the final days of the Street administration, he tried to rush an inferior version through the Zoning Board of Adjustment. When that strategy failed, he hired Beyer Blinder Belle and entered serious negotiations with the Northern Liberties Neighborhood Association.

"Beyer Blinder Belle was terrific," said Larry Freedman, who heads the group's zoning committee. "We went from a sea of parking to this, where we don't see parking at all." He likes the design so much, he even plans to attend today's groundbreaking.

Even before hiring the planners, Blatstein had won the neighborhood's trust with his handling of the Piazza. Designed by Erdy McHenry Architects, it includes a generous public open space that has effectively become Northern Liberties' town square.

As Blatstein's thinking has evolved, so has the neighborhood's. It is an increasingly desirable place to live, and not just for artists or singles in their early 20s.

With Schmidts North, neighborhood association president Matt Ruben said, it is inevitable that Northern Liberties will become more upscale. "We realize that being a hipster district was part of the process of gentrification, and we have to be careful not to be nostalgic for a period that is fleeting," he said.

Blatstein's position as a major landholder allows him to shape the transition on his own terms and schedule. The project, which has received several federal tax breaks, is one of the few projects moving ahead.

"I can't think of another neighborhood that has had a single hand transforming it in this way," said Alan Greenberger, the city planning director. "We think the plan is really quite good."

Monday, February 15, 2010

Alcoa plant sold to local developers

"Eli Kahn and Jack Lowe have boosted their industrial holdings in the Downingtown market by picking up a former Alcoa Inc. packaging plant. The two business partners had the 200,000-square-foot building at 512 Lincoln Ave. under agreement since late summer 2009 and paid cash for it.

How much? Kahn won’t divulge say, but the duo borrowed against another nearby property, the Downingtown Technology Center, to help pay for it.

Univest Corp. was the lender.

Alcoa closed down the plant in March and vacated. The building is about 50 years old and had originally been used by Reynolds Aluminum, and Alcoa bought it about five years ago, using it to make metal packaging used for pharmaceutical and food industries. It needs some work, Kahn said, and about $2 million to $3 million will be invested in upgrades.

The property sits adjacent to the Downingtown Technology Center, a project that Kahn and Lowe redeveloped beginning in 1994. That used to be a former Pepperidge Farm Bakery Plant that had 350,000 square feet of vacant industrial space. That property was completely renovated and leased up with over 18 tenants, the largest being Victory Brewing. The Alcoa building will be branded as part of the technology center.

In all, Kahn and Lowe own about 2 million square feet of industrial space in that market.

“It’s been a good little market for us,” Kahn said."

Sunday, February 14, 2010

Conshohocken developer lands missing piece

"For more than two decades, the view from developer Donald Pulver's office window has been of his own failing.

Several stories below, along the banks of the Schuylkill and at the base of the glass-and-granite office towers Pulver built on a once-forsaken stretch of Montgomery County waterfront, an ugly, low-rise factory has sat in defiance.

Despite Pulver's persistent offers to buy, owners Robert and Jack Florig would not sell their three Conshohocken acres, site of the brothers' steel-processing business.

Pulver had been trying to acquire the property almost since the Florigs moved their company there in 1984 from across the river in West Conshohocken. He even tried a takeover attempt through eminent domain that Commonwealth Court ultimately found improper in 2001.

Undeterred from his sweeping urban-renewal vision for the Conshohockens, Pulver built around RJ Florig Industrial Co., creating 1.2 million square feet of office space and two hotels. Still, the head of Oliver Tyrone Pulver Corp. never had a sense of completion - not with that factory planted where he envisioned another commercial tower.

Not until last week, when what Pulver had long coveted finally became his - oddly enough, with a big assist from the Florigs.

Pulver closed on a $10 million deal to pick up the property, which cost the Florigs only $135,000 nearly 26 years ago. As part of the transaction, the Florigs are providing an undisclosed amount of seller financing through a first mortgage.

"We basically had to take back a lot of the paper on the value of the land to inspire a deal," Robert Florig said, declining to elaborate. "We'd rather . . . get this behind us."

The land is the missing patch in the development quilt that transformed two blue-collar towns into one of the region's most recognizable office addresses.

Pulver's projects generate $3.5 million a year in real estate taxes alone, making him among the top taxpayers in the county. His critics add that they also generate traffic gridlock during rush hour.

Ironically, it was Pulver's high-rise handiwork around the Florig land that drove up the asking price. The morning after Tuesday night's closing, he was matter-of-fact about reaching "the end of the road" in what veteran real estate experts called an extraordinarily long land deal.

"You just got to finish what you start," Pulver said.

When told of the deal, Jim Mazzarelli, regional director at Liberty Property Trust, reacted not jealously, as one might expect from a competitor in this dismal commercial market, but with relief.

"It's a really good sign that things are starting to loosen up," Mazzarelli said. "Land is a nonperforming asset. If Don can close on a land deal, that means there's some loosening in the lending world - and that's a good thing."

The deal's financing is complex, involving not only the Florigs' holding the first mortgage, but also equity from private-investment entities and more than $8 million in state loans and grants. Those are to be used not just for the acquisition, but for demolition, site preparation, and some construction.

Such a joint-financing effort underscores just how dreadful the commercial real estate market is - even for a proven developer such as Pulver, who has been at it for almost 40 years.

"Couldn't do it without it," Pulver said of the public financing. "Not a chance."

The principal equity partners are entities controlled by Pulver; Brandywine Realty Trust, which has worked with Pulver on five office buildings and one hotel in the Tower Bridge complex; and the Delaware Valley Real Estate Investment Fund, a union pension fund.

None would provide specifics. But an application filed in October 2008 for one of the state grants said private equity would total $1.6 million, with the Florig purchase-money mortgage valued at $6 million. People close to the deal said those figures had changed, but they would not disclose by how much.

An earlier majority partner, Apollo Real Estate Advisors L.P., of New York, backed out in 2008 as the market for new-office construction evaporated, Pulver said.

Public funding consists of a $5 million state Redevelopment Assistance Capital Project grant, $2 million from the state Enterprise Zone revolving loan fund, and a $1.25 million loan from the state Infrastructure Development Program.

The deal was finalized in the One Logan Square offices of Hangley, Aronchick, Segal & Pudlin P.C., the Center City law firm representing Pulver. It came after nearly a dozen hours of phone calls and faxes, said Pulver's attorney, David Scolnic.

Helping provide the momentum to get the deal done, Scolnic said, was the commercial real estate market itself. It helped convince the Florigs that holding out for more money was not likely to deliver any promising results.

"When it became clear that values were not going to continue to go up forever, it made it possible for the parties to come together on a price," Scolnic said. "If they didn't do the deal, there was a risk that the financial markets would force the deal to fall apart entirely."

Said Robert Florig: "We were absolutely never greedy and never looking for anything other than what we deserved."

The only way he and his brother stand to "see any real serious money" from the sale, he said, is if "the economy goes well" and Pulver demolishes the now empty Florig factory and builds his planned office building there.

Pulver said demolition of the 109-year-old factory, once part of the Alan Wood Steel complex that dominated Conshohocken's waterfront, would start within a week. As soon as the market improves, construction will begin on the 14-story office building, to be known as 7 Tower Bridge.

"Right now, there's no financing available and no tenants available," said Pulver, who put the value of the project at $75 million.

Jerry Sweeney, president and chief executive officer of Brandywine Realty Trust, said his firm's involvement in the deal was, among other things, "a reflection of what we think the underlying long-term strength of the commercial market is, and protects our existing investment in Conshohocken."

Eighteen months ago, the Florig company relocated to a seven-acre site along the Blue Route in Plymouth Township. That was when it seemed to all parties that a deal on the Conshohocken property was near.

The Florigs had bought the Plymouth property in 1997 for a little more than $1 million - one year after the Redevelopment Authority of Montgomery County, at Pulver's behest, moved to condemn their Conshohocken site through eminent domain.

The Florigs appealed that action. In 2001, Commonwealth Court found that the Redevelopment Authority had transferred its condemnation power to a private citizen, Pulver, in violation of the Urban Redevelopment Law. The authority's attempt to appeal that decision to the state Supreme Court was rejected.

The Florigs responded with a federal lawsuit claiming their civil rights had been violated by the eminent-domain action. In December, U.S. District Court in Philadelphia dismissed that claim, and the Florigs immediately appealed to the U.S. Court of Appeals for the Third Circuit, where the matter is pending. That the Florigs have agreed to sell their property to Pulver has no bearing on their desire to press on with that case, said Richard Bazelon, their attorney in that action.

The Florigs "were damaged financially by the existence of an unlawful condemnation that went on for many years," Bazelon said Friday. "We have a very strong claim, which we are entitled to pursue and which we will continue to pursue."

The Redevelopment Authority responded with a claim of its own in U.S. District Court, where it is seeking reimbursement from the Florigs for attorneys' fees associated with their latest appeal of the eminent-domain case.

Those fees total $151,000, said Jerry Nugent, the authority's executive director, "and the meter is running."

Real Estate Investor Bressler & Reiner Inc. experiencing financial trouble

"Bressler & Reiner Inc., a real estate investor that bought a dozen office properties in the Philadelphia suburbs at the peak of the market, is experiencing financial trouble with nine of them.

The real estate company’s problems are becoming increasingly common with commercial real estate nationwide as property owners are struggling to hang on to buildings. In the case of Bressler & Reiner, the Rockville, Md., company is facing foreclosure on four of the office buildings and is delinquent on loans associated with five properties, according to Trepp Inc., a New York research firm that tracks commercial real estate loans. Many of the loans on which the company has defaulted are in special servicing, in which the lender and borrower figure out if the property should be foreclosed upon or salvaged through renegotiating loan terms.

The buildings that don’t have any issues include 600, 601 and 602 Fort Washington Executive Center in Fort Washington. NutriSystem Inc. recently signed a 12-year deal to move into 120,000 square feet at 600 Office Center Drive. The deal has put the building on more solid footing and fills a gaping hole in the 135,000-square-foot building left by Hartford Insurance Co., which moved out of the space when it relocated to Horsham about a year ago. In addition, 1150 Northbrook Drive in Trevose has no reported issues.

The 12 properties, some of which have multiple office buildings, total roughly 2 million square feet and are clustered in Bucks and Montgomery counties with one in Chester County.

The company’s rise and current position is becoming an oft-repeated modern classic real estate tale.

Formed in 1971, Bressler & Reiner bought properties throughout the Philadelphia area between 2003 and ’06, according to Securities and Exchange Commission documents. In retrospect, those purchases ended up being made during the peak of the market that ran from about 2002 to the first quarter of 2007. That’s when commercial real estate was trading at some unprecedented high prices.

The company bought commercial, residential and hospitality properties as well as undeveloped land. At one point, it owned the locally renowned Divine Lorraine Hotel at Broad and Fairmount streets and 640 N. Broad St. but sold them. It also once had an interest in two of developer Carl Dranoff’s residential projects — Venice Lofts in Manayunk and Symphony House on South Broad, according to company documents.

Bressler & Reiner bought the buildings using money it raised as a public company, proceeds gained through selling real estate and by borrowing money from financial institutions and arranging mortgages on the properties. It generated revenue and by leasing office space, renting out apartments and the use of its hospitality properties. Darryl Edelstein, CEO, couldn’t be reached for comment.

The buildings the company bought in the Philadelphia suburbs include: Mearns Park in Warminster; One and 900 Northbrook Drive in Trevose, 200-220 W. Germantown Pike in Plymouth Meeting, and 102 Pickering Way in Exton. The properties were typical Class B buildings that thrive during tight office markets when rents are high and tenants, priced out of Class A space, turn to less expensive offices.

With the onset of the recession, some of Bressler & Reiner’s buildings experienced a loss of tenants or saw some cut employees accompanied by falling rents, higher vacancies and a credit crunch that has made refinancing difficult. Also at play is a flight-to-quality dynamic that enables some tenants to leave Class B space and lease better office buildings that now have lower rents.

For example, its Fort Washington Executive Center was 45 percent occupied at the end of September, according to its quarterly report. While Mearns Park was 96.1 percent occupied, its 900 Northbrook property stood at 52.4 percent occupied. Both 900 Northbrook and Mearns are going through foreclosure proceedings."

Friday, February 12, 2010

Is Keystone Property $54M loan a signal?

This is how real estate investing and refinancing is supposed to work.

"In a sign that the CMBS market may be regaining its legs, Keystone Property Group was able to refinance and close on a $53.5 million loan. The loan is the first to be originated and closed under the second generation of commercial mortgage backed securities financing for a multiborrower securitization, according to Keystone.

The loan was made on a property Keystone owns in the Pittsburgh office market called the Keystone Summit Corporate Park. Ackman-Ziff helped Keystone during the loan negotiations.

Keystone Summit consists of five buildings totaling 704,474 square feet. It has everything going for it that would make it appealing for a refinancing in this skittish and capital-constrained environment.

Keystone of Bala Cynwyd, Pa., bought the property in September 2008 when it was less than 75 percent leased. The company put $2 million into exterior and interior improvements, rebranded the property and began targeting tenants. It ended up signing 345,000 square feet of tenants, boosting its net operating income from $1.7 million to $6.2 million. Some tenants include Westinghouse Electric Co., Ericsson Inc., Heinz North America and Seimens.

With the refinancing, Keystone was also able to cash out two-thirds of its equity."

Thursday, February 11, 2010

Commercial Real Estate Threat to Banks

Elizabeth Warren, from the Congressional oversight panel, was on CNBC this morning about the effects of commercial real estate loans on small banks. This is good interview until she starts bashing Wall Street, Commercial Banks and the credit card companies.

Wednesday, February 10, 2010

Newtown Development Group Sells Reading Shopping Center

"Newtown Development Group LLC sold the Town Square Plaza, located along North Fifth Street Highway in Reading, PA, to a partnership between RioCan Real Estate Investment Trust and Cedar Shopping Centers Inc. for $18.85 million, or $153 per square foot.

The 123,211-square-foot shopping center was built in 2008 on 10.4 acres. It is anchored by Giant Food and shadow anchored by a 127,000-square-foot Target. The center also includes Pet Smart, A.C. Moore and Affinity Bank."

Susquehanna Bank moving in at 1845 Walnut

"Susquehanna Bank has taken space at 1845 Walnut St. in Center City for a new downtown branch.

The bank signed a long-term lease on 2,164 square feet in space where TD Bank used to maintain a branch. TD took over a former Commerce Bank just a few steps away at 18th and Walnut, vacating the space at 1845.

This marks Susquehanna’s second branch in Center City. It already has one at Seven Penn Center at 1635 Market St.

The 25-story high rise, which underwent a major lobby renovation last year, is 97 percent leased. The bank will open the branch in the spring."

Hayden in joint venture

"Hayden Real Estate Investment held its second closing on an investment fund and expanded its partnership.

The Conshohocken real estate company has lined up about $85 million and formed a joint venture with Miller Investment Management, a Conshohocken investment firm that will become a co-general partner in the fund. The fund is expected to have a final close with $100 million in commitments within the next 90 days. The money will be spent buying distressed real estate …

Salvage Direct Inc. leased a 20-acre site in New Britain, where it will operate its consignment and other salvage operations. The company leased the parcel at 77 Bristol Road. The company is used by insurance companies and financial institutions to sell online salvage vehicles to licensed dealers and dismantlers. Its corporate headquarters is in Titusville. … Infinity Mortgage Co. signed a lease at 7 Carnegie Blvd. in Cherry Hill. The new space will serve as Infinity Mortgage’s main office and is a result of expansion. EwingCole, a Philadelphia architectural firm, is designing a new two-story, 59,000-square-foot cancer center for Pocono Medical Center in East Stroudsburg. The building will allow the medical center to expand and consolidate two other facilities it operates."

MDS sale means end for King of Prussia office

"MDS Inc., of Toronto, has agreed to sell its early-stage clinical trials business to two separate buyers for a total of $45 million.

The transaction does not include MDS Pharma Services' headquarters in King of Prussia where about 50 people work, the company said.

A statement issued by MDS Pharma president David Spaight said that he and his executive team have agreed to remain in place during the transition to new ownership, which should occur over the next two months.

Some of the 50 employees in the King of Prussia office are expected to be hired by the new owners. The rest will get severance payments based on years of service and career transition assistance, the company said. The Montgomery County headquarters is the only local MDS Pharma operation.

Another MDS Pharma facility to close will be its early clinical reseach and bioanalysis operations in Montreal. When it winds down in early 2011, about 225 people will lose their jobs.

There are two buyers involved. Ricera Biosciences L.L.C., which provides contract research organization services, will acquire MDS Pharma's discovery and preclinical operations in Bothell, Wash.; Lyon, France; and Taipei, Taiwan.

A new company owned by Bain Capital Ventures and SV Life Sciences will acquire MDS Pharma's development and regulatory services consulting operations and five "early-stage development" facilities in Belfast, Northern Ireland; Lincoln, Neb.; Neptune, N.J.; Phoenix, Ariz.; and Zurich, Switzerland.

MDS had first announced its intention to sell the MDS Pharma operations in September.

The Canadian company said the divestiture leaves it in the fields of medical imaging, radiotherapeutics and sterilization through its MDS Nordion business."

Tuesday, February 9, 2010

Liberty Property Trust posts $52.1M 4Q loss

"Local real estate investment trust Liberty Property Trust, in Malvern, said yesterday that it lost $52.1 million in the fourth quarter last year, compared with a profit of $52 million in the same quarter a year earlier.
The Philadelphia office and warehouse landlord earned $56.4 million for the full year 2009, compared with earnings of $152 million in 2008.

The company said the quarterly net loss was 46 cents per share for the quarter ended Dec. 31, compared with net income of 53 cents a share for the quarter a year earlier.

For the full year 2009, Liberty Trust posted a profit of 52 cents per share, compared with $1.62 a share for 2008.

The company posted a noncash impairment charge of $94.5 million in the quarter related to investments in unconsolidated joint ventures and related goodwill.

"Fourth quarter activity was encouraging," chief executive officer Bill Hankowsky said. "At the end of the year, we saw a marked increase in the number and quality of industrial prospects, coupled with renewed willingness on the part of companies to make commitments, to both the office and industrial sectors."

Hankowsky added, "This translated into very strong leasing performance. We believe that the market has bottomed, we are beginning to see very gradual recovery in the industrial sector, and we may see similar positive signs in the office sector in the second half of this year, should the nation's employment situation improve."

Liberty has 78 million square feet encompasses more than 700 properties and 2,000 tenants.

Shares fell 22 cents, or 0.76 percent, to $28.91 on the New York Stock Exchange."

Friday, February 5, 2010

Norristown movie studio shelved

"Perhaps those visions of Hollywood glitz for humble Norristown were unduly rosy, like most showbiz dreams.

For now, the hyped plan to revive the hard-bitten Montgomery County seat with one of the largest movie studios on the East Coast is off the table, replaced by the more pragmatic construction of office space for a janitorial concern and a Pathmark.

The latter, aimed at completion early next year, would be the municipality's first new full-service supermarket in a generation.

It won't be the glamorous, California-esque 100,000 square feet of studio space talked up in 2007 as a magnet for feature films and even celebrity gawking.

Developer Charles Gallub said yesterday that the poor economy and the state government's budget-crunching trim of the film tax credit precluded, for the moment, building a movie studio in a faded shopping center on Norristown's eastern edge.

"We absolutely like the movie studio concept," Gallub said, "but it has to be a bankable and financially viable concept."

Instead, the $78 million construction of the Studio Centre complex will focus on bringing in a Pathmark and expanding the headquarters of USM, formerly US Maintenance, into space that was a Sears in yesteryear. Site improvements are to include environmentally friendly roofs and solar panels.

Gallub said he had not quite given up on someday building a studio in the 35,000-square-foot office building that USM is leaving. But even that is "at least one Pennsylvania state budget cycle away," he said.

Film production companies, he said, were skittish after the state cut the film tax credit's budget in this fiscal year from $75 million to $42 million - with the hope of partially restoring it, to $60 million, in the next.

Even as a supermarket and office space, the project is in line for sizable government help.

County commissioners yesterday unanimously approved signing on to Gallub's $10 million loan application with the federal Department of Housing and Urban Development in an arrangement that would make the county the loan's guarantor.

A similar arrangement to have Norristown join with the developer in applying for a separate $5 million HUD loan is scheduled to go before the Norristown Council on Feb. 16.

A third pot of government money, though, is in limbo.

In 2008, the state government awarded a $10 million redevelopment subsidy to Gallub's studio project - a sum that would be used to reimburse construction expenses. Technically, the grant could pay for Studio Centre construction that did not involve a studio, provided Gov. Rendell gives permission. Whether he would is unclear.

"In approving that amount, it was clearly with the idea of the movie studio in mind," Rendell press secretary Gary Tuma said yesterday. "So if they have other plans, they would really need to come back to us and explain what they really want to do in detail. . . . Then we would have to evaluate whether we think it's worthwhile."

Gallub said he expected the project, which has already created 100 jobs with the expansion of USM's offices, to keep its $10 million grant.

Construction of the Pathmark is to begin in late spring or early summer, and the store should open within a year of that, he said."

Thursday, February 4, 2010

Blue Elk Development Sells Verizon Facility in Norristown

Valley Forge Business Center Building Trades.

"Blue Elk Development Co. sold the warehouse at 2580 General Armistead Blvd. in Norristown, PA, to a private buyer for $2.25 million, or about $90 per square foot.
The 24,600-square-foot facility is in the Valley Forge Business Center and is fully occupied by Verizon. Built in 1989, the warehouse sits on over 6.5 acres. "

Tuesday, February 2, 2010

Dependable Distribution Service Leases 122,000-SF Facility

"Dependable Distribution Service signed a two-year, 122,000-square-foot lease at 2500 Grant Ave. in Philadelphia.

The 330,000-square-foot warehouse was built in 1980 and renovated in 2006. It is in the Greater Northeast industrial submarket."

Cott Beverage Renews 90,000-SF Lease in Aston

"Brand Soft Drink Provider Signs for Additional 5 Years.

Cott Beverage, the world’s largest retailer of brand soft drinks, renewed its 90,000-square-foot warehouse lease at 105 Commerce Drive in Aston, PA, for five years.

Located in the I-95 Campus Industrial Park, the 375,500-square-foot facility was built in 1982, and sits on approximately 38 acres of land."

Cigars International Moving HQ to Bethlehem

Now that's a walk in humidor.

"Cigars International is relocating and expanding its headquarters, signing a full building lease at to 1911 Spillman Drive in the Bethlehem, PA.

J.G. Petrucci Co. Inc. (JGPCO) delivered the 113,534-square-foot warehouse this month in the Bethlehem Commerce Center at Lehigh Valley Industrial Park VII.

The construction alone created 150 jobs. Cigars International plans to create 50 new jobs, in addition to the 175 Pennsylvania jobs it is preserving from its current, smaller location in Bath.

Features at the new facility include a 41,706-square-foot humidor, 56,868 square feet of pick and pack/warehouse space and 15,000 square feet of office space. The structure has 28-foot ceilings and 10 loading docks.

Cigars International is a subsidiary to Stockholm tobacco company Swedish Match."