Tuesday, November 30, 2010

Commercial RE Markets Stabilizing, Picking Up Slightly In 2011: NAR Chief Economist

"Lawrence Yun, Chief Economist for the National Association of REALTORS® sees a stabilizing commercial real estate sector for 2011, affecting retail, office and multi-family.

“The basic fundamental of rising commercial leasing demand, resulting from a steadily improving economy, means overall vacancy rates have already peaked or will soon top out,” he said. “The outlook for the office and industrial markets has moderated with modestly declining vacancy rates expected as 2011 progresses, while the retail sector should hold fairly steady. Still, high vacancy rates imply falling rents.”

Yun anticipates a rise in household formation from an improving economy, which will increase demand for housing, both ownership and rental. “Multifamily housing is the one commercial sector that has held on relatively well in the past year, and can expect the best performance in 2011,” he added.

“Apartment rents could rise by 1 to 2 percent in 2011, after having fallen in 2009 and no growth in 2010,” Yun said. “This rent rise therefore could start to force up broader consumer prices as well.”

Improving Commercial Vacancy Rates
The Society of Industrial and Office Realtors, in its SIOR Commercial Real Estate Index, an attitudinal survey of more than 400 local market experts, shows vacancy rates are slowly improving, but rents continue to be soft with elevated levels of subleasing space on the market. The SIOR index, measuring the impact of 10 variables, rose 1.6 percentage points to 42.6 in the third quarter, but remains well below a level of 100 that represents a balanced marketplace. This is the fourth straight quarterly improvement following almost three years of decline. The last time the commercial market was in equilibrium at the 100 level was in the third quarter of 2007; the index now matches where it was at the beginning of 2009. Fifty-nine percent of respondents expect improvements in the office and industrial sectors in the current quarter.

Commercial real estate development continues at stagnant levels with little investment activity, but is beginning to pick up in many parts of the country.

Office Markets
NAR’s latest COMMERCIAL REAL ESTATE OUTLOOK offers projections for four major commercial sectors and analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors. Office vacancy rates are on the decline. In the office sector, where a large volume of sublease space remains on the market, are forecast to decline from 16.7 percent in the current quarter to 16.4 percent in the fourth quarter of 2011, but with very little change during in the first half of the year. The markets with the lowest office vacancy rates currently are New York City and Honolulu, with vacancies around 9 percent. All other monitored markets have double-digit vacancy rates.

Annual office rent is expected to decline 1.8 percent this year, and then slip another 1.6 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, should be a negative 3.7 million square feet this year and then a positive 16.4 million in 2011.

Industrial Markets
Industrial vacancy rates are projected to decline from 13.9 percent currently to 13.2 percent in the closing quarter of 2011. At present, the areas with the lowest industrial vacancy rates are Los Angeles, Salt Lake City and Kansas City, with vacancies in the 8 to 10 percent range. Annual industrial rent is likely to fall 4.0 percent this year, and decline another 3.4 percent in 2011. Net absorption of industrial space in 58 markets tracked should be a negative 25.1 million square feet this year and a positive 134.0 million in 2011.

Retail Markets
Retail vacancy rates are expected to change little, declining from 13.1 percent in the fourth quarter of this year to 13.0 percent in the fourth quarter of 2011.

Markets with the lowest retail vacancy rates currently include San Francisco; Orange County, Calif.; and Honolulu, with vacancies in the 7 to 8 percent range.

Average retail rent is seen to drop 3.4 percent in 2010 but largely stabilize next year, slipping 0.3 percent in 2011. Net absorption of retail space in 53 tracked markets is projected to be a negative 0.5 million square feet this year and then a positive 5.0 million in 2011.

The apartment rental market – multifamily housing – is expected to get a boost from growth in household formation. Multifamily vacancy rates are forecast to decline from 6.4 percent in the current quarter to 5.8 percent in the fourth quarter of 2011. Areas with the lowest multifamily vacancy rates presently are San Jose, Calif.; Miami; Boston; and Portland, Ore., with vacancies in a range around 4 percent. Average apartment rent is likely to rise 0.2 percent this year and another 1.4 percent in 2011. Multifamily net absorption should be 85,200 units in 59 tracked metro areas this year, and another 147,000 in 2011."

Best yield might lie within commercial real estate?

Great video on CNBC:

Thursday, November 25, 2010

Loads of surplus lab space hitting the market

"More than 1 million square feet of laboratory and research space is hitting the real estate market as two major pharmaceutical companies shift their operations and other smaller life science companies lose funding and fold up.

Sanofi-Aventis will move out of 350,000 square feet of office and lab space in the Great Valley Corporate Center in Malvern and Centocor Ortho Biotech Inc. will vacate 300,000 square feet in Radnor, of which more than half is research space.

And Pfizer Inc. is looking to lease out 480,453 square feet of lab space in Collegeville, where it took over the former Wyeth campus and decided to close the research and development facilities.

The abundance of space coming available highlights how the region is flush with large pharmaceutical and life science companies but that strength can make it vulnerable when firms within the industry merge, downsize or reorganize operations.

“We’re looking at a vacancy rate in this type of space that is still relatively speaking pretty low, but we have been bombarded by a spate of mergers that has freed up a lot of capacity all at once."

It’s not just the mergers that have edged up the amount of life science space coming on the market. Several factors are at work. Some young companies have found it difficult to get additional rounds of funding to stay afloat and have decided to wind down. Many companies have started to work on more of a virtual model, curtailing the need for additional lab space.

“The biggest thing we see as far as trends is you have companies willing to collaborate together, and moving forward we will see a lot more collaboration.”

In the case of Sanofi-Aventis, the company decided to close its Great Valley R&D headquarters by next July as it shifts employees and other functions to its main corporate offices in Bridgewater, N.J. At one point, the drug company had 750 scientists and researchers working from Malvern. Now there’s 400 or so.

Sanofi-Aventis leases 400,000 square feet in Malvern from Liberty Property Trust. Of that space, about 100,000 square feet is for labs. The company will keep a small presence in Great Valley, signing a long-term lease on 50,000 square feet. The lease on the bulk of the space expires at the end of next year. Liberty has already begun actively marketing the space.

Down the road in Radnor, Centocor is vacating in phases the 300,000 square feet at 145 King of Prussia Road and relocating those operations to buildings it owns in Spring House, Montgomery County, said Brian Kenney. The current building Centocor leases in Radnor has 183,110 square feet of research space and 115,325 square feet of office space. It is owned by BioMed Realty Trust.

Just last year, BioMed Realty sought and received township approval to construct a new building totaling 81,636 square feet to accommodate an expanding Centocor but that project never happened.

Centocor is also departing from 160,000 square feet of office space it leases at 955 and 965 Chesterbrook Blvd. in Wayne. Those employees are also heading to Spring House; between its Radnor and Wayne locations, more than 1,000 employees will be making the move.

“We see these moves as a way to leverage space that we own while enhancing collaboration across our research and development scientists so that we can maintain a long-term footprint and continued scientific innovation in the Pennsylvania area,” Kenney said in the e-mail.

After Pfizer completed its acquisition of Wyeth, the pharmaceutical company decided it no longer needed the nearly 500,000 square feet of research space, which includes 315 science labs, in Collegeville at Routes 422 and 29.

“There are doing a lot of startup work and spin-offs. That’s what we see in a down market.”

When pharmaceutical or bio companies lay off employees and even those at the executive level, it leads some jobless workers to seek out venture capital funding and establish their own companies.

For example, a 21,000-square-foot building owned by Alexandria Real Estate Equities Inc. that Genaera Pharmaceuticals Inc. had occupied in Plymouth Meeting is under contract by a life science user who is also looking at the building as an investment. Since May a 40,000-square-foot building off Electronic Drive in Horsham has been on the market for lease . A life science tenant is seriously considering leasing 15,000 square feet of it.

These types of companies also see a benefit in being near each other, making the space in Malvern attractive for prospective tenants. Even though Sanofi-Aventis is leaving, Centocor, Orthovita and Fujirebio Diagnostics Inc. remain in Great Valley.

The bigger blocks, such as the Pfizer lab space in Collegeville, will likely be filled by multiple tenants rather than one big one and companies who want to move out of older space into more modern lab space, Brown said. He also envisions space, such as the Centocor site in Radnor, as an opportunity for a landlord to create a suburban version of the Science Center, where fledgling bio companies land and grow. The site sits on two rail lines, at a major crossroads and in a desirable community that would help attract talent.

“I’d love to see a collective effort by the region to create a couple of centers outside of the center. That’s the way some of these larger chunks are going to get filled.”

Wednesday, November 17, 2010

Office tenants moving on up

"Marshall Dennehey, a law firm with offices in 1845 Walnut St., has zeroed in on relocating to 2000 Market St. after 19 years in the same building overlooking Rittenhouse Square.

The firm, which has 119 attorneys in Philadelphia, considered a dozen different office towers before narrowing its list down based on price and location, said Pete Miller, chief operating officer.

“The folks at 2000 Market have been very aggressive and the economics of the move are attractive,” Miller said, without divulging any details because a deal is still in negotiations. The building will also allow Marshall Dennehey to consolidate into a contiguous block and make the offices more efficient.

Indeed, 2000 Market could use a big lease like Marshall Dennehey. The firm would backfill about 130,000 square feet being left by Arkema Inc., which is emptying out of five floors at the building and moving its 300 Center City employees to a renovated building the company owns at 900 First Ave. in King of Prussia. Arkema had been in 2000 Market 17 years.

The current state of the downtown office market, with rising vacancies, negative absorption and falling rents, has allowed some tenants that have resided in the same, modest offices for decades to move up to a fancier business address on the cheap. As market conditions remain challenging, the trend is expected to continue.

In Center City, vacancy rates rose in the third quarter to 14.85 percent, which is 5.9 million square feet. The vacancy in Class B space is even greater at 16.23 percent and on the rise. “B buildings will struggle to maintain occupancy as the Class A owners work aggressively to lease” the space they have empty, the report said.

“It depends on the extent of the renovation and the economics of deals,” “Sometimes the renovations you have to do to your space are so extensive that people decide they’d rather move over a weekend rather than live through 18 to 20 months of a renovation, eating your dust. And sometimes in a market like this when you have buildings so stressed, a landlord will provide enough to offset the cost of moving.”

Klehr Harrison, which moved into 1835 Market St. this year after a decade at 260 S. Broad St. Klehr moved into space that had been occupied by another former law firm and came already decked out, leaving few renovations that needed to get done.

The Reinvestment Fund is considering leaving the Cast Iron Building at 718 Arch St. where it has been for more than two decades. It is the largest tenant in the 105,000-square-foot building but is looking to lease 22,000 square feet uptown at 1700 Market St. in a 15-year deal, according to market sources.

Drucker & Scaccetti, in some form other another, has spent the 33 years at 1845 Walnut St.

Two years ago, the tax consulting firm decided to take a look at other office space throughout Center City and examined 20 buildings along Market Street.

“We love the Rittenhouse location but wanted a modern building with better air quality,” said Ron Drucker, one of the firm’s founders.

Its search list included a building with a restaurant, one with enough space to allow it to consolidate on one floor, and competitive terms on a lease. Drucker & Scaccetti found what it was looking for. After three decades in the same space, the firm signed a 12-year lease on 17,742 square feet with an option to grow to 22,000 square feet at 1600 Market St., and moved its more than 50 employees at the end of last month. It grew from about 13,500 square feet.

Some of tenants who are moving may leave with fond memories of their old locations. “We’re going to miss this,” said Miller at Marshall Dennehey. “Rittenhouse has become a jewel.”

Not so for Drucker & Scaccetti. “We’ve moved on,” Drucker said."

Mitchell & Ness opening new Phila. store

"Mitchell & Ness Nostalgia Co. in Philadelphia will open a “flagship” location Nov. 19, the company said Thursday.

The new, 2,800-square-foot store will be at 1201 Chestnut St. in Center City, about a block from its current location, which will close after the holidays.

It will feature two floors of authentic, vintage sports apparel from Major League Baseball, the National Basketball Association, National Football League, National Hockey League and college sports. The store will also feature historic sports images and memorabilia, plus a new-school touch, the playing of classic sports footage on 47-inch, flat-screen televisions.

Mitchell & Ness was founded in 1904 as a golf-and-tennis company by Frank P. Mitchell, a tennis-and-wrestling champion, and Charles M. Ness, a Scottish golfer, according to the company’s online history. At various times, it provided uniforms for the Philadelphia Eagles, as well as the Athletics and Phillies baseball teams.

Inspired by a customer, in 1983 the company created Mitchell & Ness Nostalgia Co. to recreate authentic “throwback” jerseys. In 1987, Sports Illustrated featured Mitchell & Ness in an article, “Baseball flannels are hot.” In 1988, Major League Baseball created its Authentic Cooperstown Collection, giving Mitchell & Ness exclusive permission to make vintage jerseys. The NBA, NFL and NHL all followed suit, granting Mitchell & Ness licensing deals."

RPS Signs Long-Term with HUB

"ReSearch Pharmaceutical Services Inc. (RPS) signed a long-term lease for 25,517 square feet at 475 Virginia Drive in Fort Washington, PA. The landlord is HUB Properties Trust."

Capitol Interior Products Leases 38,000 SF

"Capital Interior Products leased the entire warehouse facility located at 201 Erie St. in Camden, NJ.

The 38,400-square-foot industrial building sits on 17 acres in Camden County and features 12 loading docks and a 23-foot ceiling height."

Shadow Lawn Pays $9.75M for Lancaster Industrial Bldg

"Shadow Lawn, a Pennsylvania-based property investment firm, acquired the City Line Business Center in Lancaster, PA, from Thermal Solutions Products, LLC for $9.75 million, or about $60 per square foot.

The fully leased manufacturing building located at 1175 Manheim Pike in Lancaster, PA was delivered in 1989. The property totals 161,000 square feet and sits on eleven acres."

Walgreens Inks 645,000-SF at ProLogis Park 33

"The nations largest drugstore retailer, Walgreens, signed a lease deal to occupy 510,000 square feet of existing distribution space at 3850 Prologis Parkway in Nazareth, PA. ProLogis has also agreed to expand the space occupied by Walgreens by adding an additional 135,000 square feet of space to the building.

The ProLogis Park 33 Building One is a class A distribution facility totaling 930,000 square feet. The building was completed in 2008, and sits on 75 acres. The property features 63 loading docks and 32-foot clear ceiling heights."

Thursday, November 11, 2010

Cedar Shopping Centers Pays $13.4M for IRS Bldg

"Cedar Shopping Centers, Inc. acquired the 230,000-square-foot IRS office building in Philadelphia for $13.38 million, or about $58 per square foot, from 11501 Roosevelt Partners, LP.

The single-story office building was delivered in 1969 at 11501 Roosevelt Blvd. It totals 230,000 square feet and sits on 9.7 acres in the Northeast Philadelphia submarket."

Wednesday, November 10, 2010

Krispy Kreme opening this week in Northeast Philadelphia

"Krispy Kreme Doughnuts is back in the Philadelphia market.

After a five-year absence, a new local franchisee will open the first Krispy Kreme Tuesday at 6 a.m.

The store will be at 7855 Oxford Ave. in Fox Chase.

The franchise group, Dough Nuts for Doughnuts LLC, has development rights for southeastern Pennsylvania, South Jersey and northern Delaware. It is led by Keith Morgan, former CEO of Horsham, Pa.-based AAMCO Transmissions, and Brian Zaslow, a former vice president of marketing at Philadelphia-based Aramark.

Krispy Kreme Doughnut Corp. (NYSE:KKD), which is based in Winston-Salem, N.C., has 560 locations worldwide.

An earlier effort to expand in the Philadelphia market ended in December 2005, after a Chapter 11 bankruptcy filing and the closure of four area stores.

At the new location, customers will be enticed with a 24-hour drive-through window and promotional gifts."

Hersha bets $250M on hotel recovery, NYC, KofP deals

"Members of the Shah family, who control Hersha Hospitality Trust, are betting the economic recovery, and corporate overnight travel, are coming back fast.

Today they arranged to borrow up to $250 million from TD Bank and other lenders, almost double their old $135 million credit facility. Hersha has also sold five hotels in New England's Connecticut River Valley, upstate Pennsylvania, and other slow-growth markets. They'll use the money to buy more hotels in the New York, Philadelphia, Boston and Washington areas, says chief executive Jay H. Shah.

Founder and chairman Hasu P. Shah remains in Hersha's Harrisburg headquarters. But his Ivy League-educated sons, CEO Jay and President Neil H. Shah, now work from the Penn Mutual tower in Philadelphia's historic district, closer to the company's East Coast growth markets.

Also yesterday the Shahs opened their newest hotel, a $150-a-night Park Hyatt, on the renovated King of Prussia site where they formerly ran a $120-a-night Mainstay Suites.

"We have taken a bet on the recovery," Jay Shah told me. "We're relying on the corporate transient traveler in the Northeast markets. You've got the recovery in financial services. You're starting to see signs of life in the pharma industry."

The strategy shows early signs of paying off: In 2008 Hersha bought New York's Tri-Be-Ca Hilton Garden Inn at $400 a room; the price today, Shah estimates, would be closer to $500, boosting the company's valuation.

At around $6 a share, Hersha stock remains down at the same price it fetched in the early 2000s. But it's up 132% for the year, vs. 39% for other real-estate investment trusts and 46% for other hotel REITs, according to Bloomberg LP. Unlike many REITs, Hersha didn't cut its dividend, Shah notes, and hopes to boost it.

The recession has changed some hotel practices. By selling distant hotels, Hersha has been able to centralize engineering and maintenance in its major markets. The chain has left coordinator and assistant coordinator jobs vacant. The Hyatt Park has a staff of just 30, for 129 rooms.

The Hyatt Park idea is also post-2008. Instead of trying to draw a fancy marquee restaurant, it's room service by the laptop and flatscreen: "The rooms are larger, it's a work-eat-live concept. Generation Y likes to work while it's eating, while it's watching television. It's more of a Starbucks feel. But with deeper wood finishes."

Sunday, November 7, 2010

Checkpoint Systems moves corporate HQ to Philadelphia

"It’s not often a company with more than $800 million in annual sales establishes its headquarters in Philadelphia.

Even rarer is one that doesn’t make a big deal over it.

Checkpoint Systems Inc., a company that’s long had its headquarters in Gloucester County, moved its chief executive and about 20 other people into Center City in mid-August.

No press conference with the mayor. No news release announcing the move. Just the notation of a new “principal executive office” on the first page of recent Securities and Exchange Commission documents and a new dateline on this week’s earnings release.

Checkpoint, a maker of anti-theft and inventory-tracking systems for retailers, now shares the 24th floor of One Commerce Square, 2005 Market St., with Dolchin, Slotkin & Todd P.C., a small law firm.

Those executives and staff moved from 101 Wolf Dr. in Thorofare, where the company has about 250 employees in its research-and-development, accounting, human resources and other departments, according to Bob Powers, Checkpoint’s vice president of investment relations.

So we’re talking about a small office, equivalent in size to one touted by Mayor Nutter in an Oct. 18 news release for the Neiman Group, an advertising agency that received low-interest financing and tax credits from the city to expand its offices at 1619 Walnut St.

But having a New York Stock Exchange-listed technology company plunk its global headquarters smack in the middle of the city is quite a surprise. After all, doesn’t Philadelphia possess a lousy reputation when it comes to business-tax burden?

I asked Powers about that. “If it was so onerous, we wouldn’t have done it,” he said.

Could it be that Philadelphia’s office market functioned in almost free-market fashion? An office building had some empty space. A company scouted for a prime address at a good price. It signed a lease and moved in.

From his Market Street offices, chief executive officer Rob van der Merwe runs a very global enterprise, with 5,785 employees as of the end of 2009.

With operations in 30 countries, Checkpoint generated only 34 percent of its $772.7 million in 2009 net revenues from the United States, Puerto Rico, and the Dominican Republic.

Retail theft is a global problem. An annual study funded by Checkpoint found losses from shoplifting by customers and employees totaled $107.3 billion in 2010, down about 5.6 percent from the previous year.

Checkpoint and its competitors, such as Tyco International’s ADT Worldwide unit, peddle a variety of defenses to merchants. Retailers spent $26.8 billion on “loss prevention and security” in 2010, up 9.3 percent from 2009, states the study done by Joshua Bamfield, director of the Centre for Retail Research in Nottingham, England.

Checkpoint had been contemplating a headquarters move three years ago, Powers said. But the financial crisis and recession and Checkpoint’s own restructuring delayed those plans.

Still, acquisitions made in recent years were starting to cause a space crunch in Thorofare as various functions were relocated there, Powers said.

Landing that year-to-year lease in the diamond-topped One Commerce Square became the solution.

It doesn’t sound like a long-term commitment to me, but maybe the city can employ its own loss-prevention methods to make sure Checkpoint remains happy with its choice."

Friday, November 5, 2010

DGI Services, LLC, in leased 80,000 square feet

"DGI Services, LLC, in leased 80,000 square feet of the 108,000 square foot building located at 540 Pedricktown Road, Pureland Industrial Complex, Bridgeport, New Jersey.
The building offers approximately 5,600 square feet of office space and features mostly 24' clear heights, 100 percent wet sprinkler system, fifteen (15) tailgate loading doors, one (1) drive-in door and four (4) rail doors. The facility is conveniently located just minutes from Exit 2 of the New Jersey Turnpike, Commodore Barry Bridge, Interstate 95 and the Blue Route.

DGI Services, LLC are a single-source provider of integrated direct marketing campaigns. The company offers a wide range of direct marketing projects from small-cell mailings to full scale, multichannel campaigns."

Two Industrial Leases Announced Totaling 40,000 Sf In Philadelphia Area

"Richmond Waterfront Industrial Park, LLC, leased KanCo Metals, Inc. 30,000 sf at 4710 Bath Street. The new tenant is a scrap metal recycling company in PA and NJ that purchases and sells non-ferrous metals such as copper, brass, aluminum and insulated wire. This is a consolidation of the company s operations at the Frankford Arsenal due to redevelopment.

In the second transaction, Bridge Industrial Center Associates leased 10,000 sf to M.J. Electric, LLC at 2251 Fraley Street in Philadelphia. This national company was founded in 1959 and specializes in electrical and instrumentation construction and maintenance. M.J. Electric provides an experienced technical and professional management team capable of directing the electrical instrumentation effort from project concept through its completion."
"Driving Passions Collision Center lease 409 Business Park Lane, Allentown, PA. The facility was formerly used as an auto repair shop. The lessee, Driving Passions Collision Center, relocated from a smaller and older to a larger and newer facility. It is a family owned business, part of the Allentown Area Corvette Club and a lease was signed for five years."

Select Rx has leased 10,221 sq. ft.

"Select Rx has leased 10,221 sq. ft. of office and air conditioned flex space at 165 Veterans Way in Warminster. The one story building features 53,000 sq.ft. of air conditioned office and warehouse space at Franklin Commons, a mixed use office and technology park."

Thursday, November 4, 2010

Neighborhood Center Sells For $2.35 Million

"KNC Property acquired the 24th Street Shopping Center at 2528-2546 S 24th St in Philadelphia from a private investor for $2.35 million, or $69 per square foot.

The one-story, 34,200-square-foot general retail building is a neighborhood center located in the South Philadelphia submarket."

Avalon Carpet & Tile Inks 24,000-SF Deal At Henderson Square

"Avalon Carpet and Tile has leased the former Staples space in Henderson Square, located at 310-314 S Henderson Road in King of Prussia, PA. The tenant signed a 10-year deal for 24,000 square feet, and is expected to take occupancy this spring.

Henderson Square is a 102,360-square-foot shopping center located in Montgomery County, just north of the Pennsylvania Turnpike."

PPD to expand former Merck vaccine-testing lab in Wayne

"PPD Inc., a North Carolina-based contract research organization, plans to expand a Tredyffrin Township laboratory it bought from Merck & Co. Inc. at the end of 2008 and create 86 jobs.

The Pennsylvania Department of Community and Economic Development announced Wednesday that the state would provide $608,000 in funding for a $25 million project planned by PPD.

When PPD acquired the 130,000-square-foot vaccine-testing laboratory in Chester County from Merck, it hired the lab's 80 employees. According to a statement issued by the state, PPD intends to renovate the lab at 466 Devon Park Drive, buy new equipment and provide employee training.

The company would create at least 86 jobs within three years, according to the state.

Under its transaction with Merck, PPD agreed to supply testing services to Merck for five years. According to PPD's 2008 annual report, it paid $25.2 million for Merck's lab.

With revenues of $1.42 billion in 2009, PPD is one of the largest providers of outsourced services to the pharmaceutical industry. It employs more than 10,500 people worldwide.

"With a large concentration of pharmaceutical and biotechnology companies based in the northeastern United States, expanding our laboratory operations in Wayne builds on our ability to serve clients in this region more effectively," said Lee Babiss, PPD's executive vice president of global laboratory services, in the statement.

Pennsylvania provided a $275,000 opportunity grant, $74,700 in job training assistance, and $258,000 in job creation tax credits."

Monday, November 1, 2010

Coatesville sees cycle track on parcel

"For six years, a parade of developers has systematically dashed Coatesville's revitalization hopes for a centerpiece tract known as "the flats."

Proposals for the approximately 25-acre property at Lincoln Highway and Route 82 have included condos, a lumberyard, a power plant, and a grocery store, all of which produced dead ends for the struggling former steel hub.

Now on the table is the East Coast's first indoor cycling velodrome.

Last month, the proposal generated an uncommon response from the public at a City Council meeting: hearty applause.

The equally enthusiastic council unanimously approved a 90-day purchase-option agreement for a National Velodrome and Events Center on the tract, part of which hugs Brandywine Creek.

The Velodrome Management Group wants to build a 200-meter, banked track in a 100,000-square-foot arena that would also serve as a cycling training center and a venue for concerts and other sporting events.

The promoters include David Chauner, an Olympic cyclist known for bringing the Philadelphia International Championship to Manayunk's now-famous "Wall."

"The sport is exploding," Chauner told the Coatesville audience.

The closest velodrome is in Lehigh County's Trexlertown; however, because it lacks a roof, it is a seasonal operation.

"I think it is absolutely the coolest thing to come along since I've been involved with the RDA," said Patrick C. O'Donnell, solicitor for the city's Redevelopment Authority.

The authority bought the land in 2004 for $1.7 million when the G.O. Carlson steel plant closed. Across Lincoln Highway, ArcelorMittal, a steel company based in Luxembourg, employs about 800 workers at what was the vast empire of Lukens Steel, whose workforce once exceeded 6,000.

"It doesn't conflict with the steel plant and could give the city international recognition," O'Donnell said. "Who knows? Coatesville could produce the next Tour de France winner."

He cautioned that the proposal was far from a done deal. During the 90 days of the purchase-option agreement, the buyers will need to come up with conditions and a purchase price agreeable to the city. In addition, several of the acres lie in Valley Township, and parts of the plan also require approval there, O'Donnell said.

The velodrome proposal's history reinforces the speed bumps that could lie ahead.

For starters, Coatesville rejected the same project in February 2006, when the city was reeling from a failed golf-course plan. The unpopular proposal was so audacious in its quest to seize a family homestead in a contiguous municipality that it garnered national headlines.

By November 2006, the velodrome's promoters had settled on a location in Montgomery County's Lower Providence Township. But funding woes derailed the project.

In August, the promoters had productive discussions with Caln Township, a Coatesville neighbor, but failed to strike a deal.

In an interview last week, Chauner, who also heads the Pro Cycling Tour, a cycling and marketing event management company, said he was optimistic that an agreement could be negotiated in Coatesville.

"We're a lot further along than we've been before, and we have a solid financial partner," he said. "We don't envision any insurmountable problems."

Chauner credited Crosby Wood, the financial backer, with bringing the project back to the city.

Wood, a principal in Wilson Wood L.L.C., a private equity firm, told the City Council that he also runs a real estate company that has been buying property in the city and is committed to its rebirth.

USA Cycling, the national governing body for the sport, listed 2,611 licensed racers in Pennsylvania in 2010 and 69,000 nationwide, said Andrea Smith, a spokeswoman for the group.

David Mitchell, president of the Pennsylvania Cycling Association, the state affiliate of USA Cycling, said he believed that the Coatesville facility would be welcomed, and that the region could support two velodromes.

Ron Ruggiero, a 25-year cyclist, who heads the Tri-State Velo Cycling Team.

"It's a very good thing," he said, stressing the benefits of youth training. "Really great riders have come out of the track programs in Lehigh County." His only gripe? "I wish it were closer to Philadelphia."

"I think everyone agrees it's a good thing," Mitchell said. "It would continue to grow the sport."

Chauner estimated annual revenue for the projected $15 million project at $3.5 million to $4 million. He said that 50 to 100 jobs would be created in addition to the construction crews, and that the project would draw ancillary businesses such as bike shops and physical-therapy centers.

The center would have 2,200 permanent seats, and could add 1,500 to the infield - the area inside the track - for non-cycling events, Chauner said. Cycling demands would fill 103 evenings a year, leaving plenty of time for other activities, he said.

Unlike the failed proposals for the site, the velodrome would be a "destination" facility, Chauner said. "People will come to Coatesville specifically for this," he said.

Mitchell agreed, saying he continues to be amazed at how far people travel to Trexlertown, citing one group that rode nine hours from North Carolina for a race.

Chauner recalled how publisher Bob Rodale decades ago sought his help in building the Trexlertown facility, which at the time was dubbed Rodale's "white elephant."

Within three years, they created "the best outdoor velodrome in the world," Chauner said. "To this day, Lehigh County points to it as one of their best attractions."

City Council President Ed Simpson said he remembered being excited by the proposal the first time around.

"I'm just as excited now," he said."

REITs: Overvalued? with Scott Rechler

CNBC Video: (start video at minute 4:30)