Thursday, June 30, 2011

The Pepper Building Sells For $50.85 Million

"TIAA-CREF purchased The Pepper Building at 1830 Lombard St. in Philadelphia, PA. Philadelphia Management Company sold the apartment complex for $50.85 million, or about $275,000 per unit.

The 196,587-square-foot apartment complex was constructed in 1950. Renovations were completed in 2010. It is in the Market Street West submarket and is comprised of 185 apartment units."

Xanitos Inks 15,000 SF in Newtown Square

"Xanitos, Inc., a hospital housekeeping and environmental services management company, has leased 15,000 square feet of office space at Ellis Preserve I, located at 3809 West Chester Pike in Newtown Square, PA.

Owned by BPG Properties, LTD, the two-story office building located at the Ellis Preserve is 68,000 square feet and sits on approximately 1.5 acres. Amenities at the Ellis Preserve include a full service fitness center, a conference center with a 250 seat auditorium, and on-site management and maintenance."

Friday, June 24, 2011

Commercial Real Estate Rebound

Investors are taking a renewed interest in industrial sites

by Natalie Kostelni

"Industrial properties have increasingly become a top choice for investors who view them as stable, attractive commercial real estate that can provide steady long-term returns.

The focus on the industrial sector shows how investors are being picky about which commercial properties in which they want to invest. During the recession, multifamily properties became a popular choice and continue to derive interest from those seeking to plunk money into commercial real estate. Industrial is now getting some attention at the expense of office buildings, which, unless top-tier and well-leased, are still considered too risky.

One way to measure interest is noting how many investors take tours of properties that have hit the market. For example, more than 20 different groups took a peek at Drew Court, a 146,906-square-foot industrial complex in King of Prussia that is fully occupied and up for sale. The property could trade for as much as $10 million.

“There’s a tremendous amount of money chasing industrial rather than office today and a tremendous amount of industrial product on the market,” said the broker who is helping to sell Drew Court. “Industrial hit bottom and is starting to come back up.”

He is also overseeing the marketing of nine industrial portfolios totaling 6.6 million square feet in the mid-Atlantic states that got 26 offers made on them.

There aretwo large properties in Philadelphia that recently came up for sale.

One is the former Penn Jersey Paper building, which totals 180,000 square feet on nearly 11 acres at 2801 Red Lion Road. Asking price is $8.8 million. The other property is the former Homeline Furniture warehouse at 2121 Wheatsheaf Lane. The building totals 300,000 square feet on 21 acres and could go for as much as $12.2 million.

“We’ve had good activity on both buildings,” noting that investors along with prospective tenants have taken a look at them.

Even Liberty Property Trust of Malvern made a strategic decision to sell off some of its office and flex properties and shift more resources in buying big-box industrial real estate, where it sees future growth opportunities. Last month the real estate investment trust sold 32 of its older office and flex properties in the Lehigh Valley for $124 million and 14 similar properties in Richmond for $97 million and plans to deploy funds to increase its industrial presence in both areas.

Industrial leasing activity has also picked up compared with last year and that has started to make properties more valuable.

“You’ll eventually see an end to a tenants’ market because a lot of space is being absorbed and rents will go up,” he said.

Even the Barrington Business Center, a sprawling 931,525-square-foot expanse of warehouse and manufacturing space that has wallowed for over a year with a 710,000-square-foot vacancy in Camden County, is seeing some serious activity. About 250,000 square feet could soon be occupied.

The industrial vacancy rate fell to 8.1 percent in the first quarter of this year compared with 10.2 percent at the end of last year. Southeastern Pennsylvania experienced its seventh consecutive quarter of positive net absorption with 1.8 million square feet taken off the market and occupied by companies. South Jersey hasn’t been as strong and its vacancy rate rose to 10.1 percent from the previous quarter.

The boost in leasing activity can be attributed to gains made in the manufacturing sector as well as retailers, including grocery chains and others, occupying more space. As leasing continues to pick up, rents are expected to tick upward.

“There seems to be money chasing returns. The bond market is providing anemic returns and stock market is down. Investors are looking for alternatives and real estate is coming back in vogue. People are scared to death of office unless it’s trophy office.”

Real Estate: Sluggish, but positive signs are emerging

"The commercial real estate markets in Center City and the suburbs are beginning to show some signs of improvement though empty pockets of space are still dragging down the office scene. In Center City, the office market has a total vacancy rate of 19.2 percent, though for the first time in three years it experienced two consecutive quarters of positive absorption and a small decline in vacancy. While those are positive signs, large blocks of Class A space and GlaxoSmithKline eventually vacating 800,000 square feet in Center City for a move to the Navy Yard is dampening a sustained rebound in the office sphere.

In the suburbs, vacancy rates tightened up a tad, ending a two-quarter run of downsizing and negative absorption. The vacancy rate, now at 18.2 percent, is anticipated to fall below 18 percent this year and return to a level not seen in two years. In spite of the steep vacancy rate, large blocks of contiguous space are scarce, especially in the King of Prussia, Conshohocken and Radnor submarkets.

On the investment side of the commercial real estate market, apartment and industrial properties are receiving the most attention though multifamily appears to be seeing the most deal activity since funding from Fannie Mae and Freddie Mac are helping to finance deals."

Thursday, June 23, 2011

CTDI Renews in Sadsbury

"Global engineering, repair and logistics firm, Communications Test Design, Inc., signed a five-year lease renewal to stay in 314,521 square feet at 200 W. Stewart Huston Dr. in Sadsbury, PA.

The industrial facility was constructed in 2004 on a 27.9-acre parcel in Chester County. Building amenities include 20 loading docks, one drive-in bay, and 30-foot ceiling heights. Communications Test Design Inc. has been the sole tenant in the building since 2006."

Friday, June 17, 2011

Keystone Property secures $105 million in financing

by Natalie Kostelni

"Keystone Property has completed a $105 million refinancing of its debt on three of its suburban office complexes.

The deal with Deutsche Bank allowed Keystone to switch from short-term floating-rate debt to long-term debt with a fixed rate. The arrangement helps to financially stabilize those buildings. Such financing has been difficult for other commercial property owners who face issues with their loans on their buildings, such as being underwater or in special servicing.

Aside from seeking long-term debt with a fixed rate, the loans on the buildings were set to mature.

The Keystone transaction was challenging; it took nearly a year to put together and finally close. The deal had died at one point, said Matt Pestronk of Ackman-Ziff, who along with Christine Zivkovic, represented Keystone in the negotiations and arranged the financing.

“The market became more aggressive as we were underwriting the deal, and this is one of the more aggressive financings the market has seen in a while,” Pestronk said. “We got aggressive terms.”

The financing, which was part of a tranche in a commercial mortgage-backed securities deal, indicates the lenders are opening to doing big commercial real estate finance deals but continue to be selective with owners outside of New York and Washington.

“For properties that have good cash flow and good sponsorship — someone who is well respected and you can see how they managed when the market was down — there is virtually unlimited money available, Pestronk said.

The transaction was also part of an overall strategy for Keystone to buy properties, redevelop them and not only reposition them with tenants but also financially, said Bill Glazer, CEO of Keystone.

“It’s a little trickier to do these days because the capital markets are extremely disciplined,” Glazer said.

“The last three years were extremely difficult.”

The office properties involved in the transaction were:

One Presidential Blvd., a four-story, 130,804-square-foot building in Bala Cynwyd that is 95 percent occupied.

Valley Forge Park Plaza, a two-building, 155,000-square-foot complex in King of Prussia, that is 92 percent occupied.

Valley Forge Office Center, a four-building complex totaling 250,000 feet in Wayne that is 90 percent occupied.
While Keystone was successful in arranging this financing, Glazer said that money is finally beginning to flow from the CMBS market for new acquisitions, too. Keystone recently closed on an office purchase in Boca Raton, Fla., and is entering that market for the first time. It has four other buildings it is also expecting to close on in the next 60 days.

Philadelphia U. breaks ground on expansion

by Peter Key

"Philadelphia U. has broken ground on the building for a newly created college that will eventually be home to nearly half its undergraduate and graduate students.

The building will house the College of Design, Engineering and Commerce, which will include Philadelphia University’s School of Design and Engineering and its School of Business Administration.

The college is meant to give design, engineering and business students not only the skills they need to succeed in their own field, but also the ability to collaborate on projects with people in the college’s other two fields, something they will have to do at their jobs after they graduate.

“Instead of just learning to be a great engineer, you’re going to learn to be a great engineer in the total process, which we think means you’re going to be a better engineer, and a better designer and a better business person,” said Stephen Spinelli, who became the university’s president in September 2007.

The first class to enter the college will begin in the fall and consist of about half of Philadelphia University’s 600 incoming freshmen. If that continues, the college will wind up with half the university’s undergraduate enrollment, which was 3,000 this past school year, and likely half its graduate enrollment, which was more than 600.

The college was proposed in a strategic plan that was meant to guide Philadelphia University’s development from 2008 through 2013, but which Spinelli thinks will be influencing the university, which is located in Philadelphia’s East Falls section, for some time beyond that.

“I don’t see it as a five-year plan,” Spinelli said. “I see it as the basis for the future of the institution.”

The building that will house the college ties in to the portion of the plan that calls for the university to develop innovative facilities. Other parts of the plan call for the university to increase the amount of research done by its faculty and students and to add graduate and professional programs, among other things.

Both the college it spawned and the plan are meant to take Philadelphia University into the future while respecting its past.

The university was founded in 1884 to provide managers and workers who could help America’s textile factories compete with their overseas counterparts and its close ties with the businesses that employ its graduates have always been among its strengths. That emphasis on producing practically trained students has forced the school’s departments to collaborate with each other and the College of Design, Engineering and Commerce builds on that.

“Philadelphia University has been in a collaborative environment for a long time and this is just formalizing the levels of collaboration and bringing it to a more intense level,” Spinelli said.

The college’s new home is designed to enable the collaboration the college encourages, with storage space for students and flexible space for studios and seminars that can be reconfigured as needed. It also will have a two-story area for exhibits, presentations, lectures and social events.

The building is projected to cost $20 million, with the university covering half the cost itself and borrowing the rest. The university has raised $6.5 million of its $10 million portion, including a $5 million gift from an anonymous graduate. That money also is part of the nearly $29.5 million the university has raised towards a $40 million capital campaign that it began in January 2010 and announced in April.
When it opens in the spring of 2013, the building, which will have 38,500 square feet of space, will be the last of three major construction projects completed over about three years.

The first was the Center for Sustainability, Energy Efficiency and Design, a former gymnasium more recently used for storage space that was renovated for $4 million in a project that created 15,000 square feet of space when it was completed last September.
The second is a 20,000-square-foot dorm scheduled to be occupied when students return to Philadelphia University’s campus for the fall semester in August.
Both the SEED Center and the College of Design, Engineering and Commerce buildings consolidate functions that were scattered around the university’s campus.

“It gives us huge opportunities to reconfigure other space,” Spinelli said.

Although the college’s building won’t open until spring 2013, the college will launch its curriculum in fall. The curriculum was put together over the past two years in collaboration with businesses, which Spinelli said had an enthusiastic reaction to it.

The idea of integrating design, engineering and business is gaining fashion at colleges around the country.

Locally, the University of the Arts’ Corzo Center is trying to give the university’s students, alumni, and, in some cases the general public, the skills needed to turn their creative ideas into entrepreneurial ventures."

PMC seeks apartments in former AAA headquarters

by Natalie Kostelni

"PMC Property Group would like to convert the former headquarters on Market Street in Center City into an apartment complex, a project that entails expanding the building vertically.

The Philadelphia developer’s concept, submitted to the Philadelphia Planning Commission, calls for the construction of eight additional stories atop the existing five-story, 150,000-square-foot building. The extension is far from what current zoning allows, which would permit as much as 750,000 square feet to be built on top of it under certain conditions. Under PMC’s plans, it would add about 120,000 square feet to the building.
Approvals are already in place for an underground garage and PMC plans to construct 205 below-grade spaces. The proposed project, which would cost more than $50 million, would include 270 apartments and 15,000 square feet of retail space.
“We think it’s a strong area for residential development,” said Jonathan Stavin, executive vice president at PMC. “It’s closer to Rittenhouse Square than the Pepper building and it’s proximity to universities is strong.” (The Pepper building is an apartment complex at 1830 Lombard St., which PMC converted and recently sold for north of $50 million.)

PMC is targeting young professionals to occupy the apartments, Stavin said, adding: “We aren’t building student housing. These are market-rate apartments.”

The project was reviewed by the zoning committee of the Center City Residents Association, which saw the concept before the final plans had been developed, said Tim Kerner, an architect on the association’s zoning committee.

“We’re still in the process of reviewing it,” Kerner said. “There are several variances they need, the biggest is they are building a bigger building than [residential] zoning permits.”

The addition would be on top of the building as well as in the back of it, Kerner said. PMC is scheduled to return to CCRA June 28. It was presented before the planning commission earlier this week. While current zoning would allow for additional space to be constructed atop of the building, approvals are needed to convert the property to a residential use from an office.

Though it has taken some time, far West Market Street has gradually made the transition from an all-office corridor to one with a mix of residential projects. It began with the conversion in 2002 of the old After Six tuxedo factory by PMC into 168 apartments. Later, Thomas Properties constructed with P&A Associates the Murano, a $165 million, 42-story condominium tower, and Orens Brothers converted the former Daily News building at 2200 Arch St. into condos. Other residential projects tried to follow, such as Opus East’s proposed development at 1919 Market that was killed because of a softening residential market.

There is room for additional rental housing in Center City. The vacancy rate in Center City dropped to 1.9 percent, and rents have risen, according to Delta Associates, a research firm. Monthly rents have shot upward by 7.4 percent to an average of $1,918, or $1.88 a square foot.
The AAA building has been vacant since 2005 when the auto club moved to Delaware. Built in 1967 for AAA Mid-Atlantic, the unoccupied property had started to look shabby on the edge of the city’s Central Business District.

PMC, which bought the building for a little more than $8 million, has already started some interior demolition work. If it receives the approvals it is seeking, the developer anticipates completing the conversion in about 18 months."

LithChem battery company doubles space, employees

by Peter Key

"A developer of lithium-ion battery technology has more than doubled its space and nearly doubled its head count here in the past year and a half.

Energy has increased the amount of space it occupies in a former chemical plant to 18,000 square feet from 8,000 feet. The increase has given it more lab space and room to set up assembly lines if it can get money to fund them.

The subsidiary of Anaheim, Calif.-based Toxco Inc. was hoping to have about 24,000 square feet, including a clean room, developed by now. It has put plans for the clean room on hold, although it still hopes to be able to build a room with very low humidity so its employees won’t have to do as much work in glove boxes.

LithChem now employs 15 at the site, up from eight a year and a half ago. It plans to add more as needed, which it hopes will be soon.

LithChem was founded in the late 1990s as a joint venture between Novis Smith, its vice president of technology, and Toxco to develop a process for making salts and electrolytes for lithium-ion batteries. It then started developing batteries that used the electrolytes and finally decided to go into manufacturing.

Except for the money put into it by Toxco, LithChem has gotten nearly all its funding from federal grants under the Small Business Innovation Research program, which helps small businesses develop and commercialize new technology.

The company has used a $2.43 million Phase III SBIR grant it got from the Defense Department as an earmark when Joe Sestak represented its congressional district to fund the development of batteries for interceptor missiles. It has gotten a few small contracts added on to the SBIR grant and hopes to use them to get a production line set up over the next two months so it can make prototypes of the batteries that can be tested outdoors.

LithChem also is working on a less-expensive, more automated way of making rechargeable lithium-ion batteries, funded in part by a $985,000 contract it was awarded by the Defense Logistics Agency in December. The company thinks the process can be used to produce batteries that cost less than current rechargeable lithium-ion batteries for the Defense Department, which is why the DLA is interested in it.

LithChem also hopes to show the process can be used to make batteries for electric cars, which are potentially a huge market.

In an analysis of the lithium-ion battery market it put out in April, Seoul, South Korea-based Samsung SDI Co. Ltd. said it expects electric vehicles will comprise 7 percent of the global car market by 2015 and 17 percent by 2020. Samsung, which is the world’s largest rechargeable battery maker, expects the overall market for lithium-ion batteries to nearly triple to $32 billion in 2015 from $11 billion last year.

“The automotive industry … is going to fuel that growth,” said Visal Sapru, a research manager in energy and power systems for global consulting and research firm Frost & Sullivan, which predicts the global market for lithium-ion batteries will hit $30 billion to $35 billion by 2016.

LithChem also is developing ultra-capacitors for electric cars."

Thursday, June 16, 2011

401K Investing in Real Estate

Redner's is Coming to Chester Springs

"Redner’s Warehouse Markets, an employee owned supermarket chain, signed a ten-year lease for about 45,676 square feet at the Shops at Lionville Station, located at 447-449 E. Uwchlan Ave. in Chester Springs, PA.

Redner’s will be occupying the space recently vacated by SuperFresh in the first quarter of 2011. The 84,970-square-foot shopping center was built in 1996 and is located in the Exton/Whitelands submarket."

Wednesday, June 15, 2011

Gold’s Gym Inks 28,400-SF Deal in Harrisburg

"Gold’s Gym, a national fitness center, signed a lease deal to open a new, 28,400-square-foot location in Oakhurst Plaza this year.

Located at 4400-4500 Oakhurst Blvd. in Harrisburg, PA, the one-story retail center totals 111,869 square feet with almost 420 parking spaces. It was built in 1980 and renovated in 2001. Other tenants include Giant Food and CVS pharmacy.

Gold’s Gym originated in Venice Beach, CA 45 years ago, and has grown to more than 600 locations around the globe."

Sunday, June 12, 2011

King of Prussia developer J. Brian O'Neill has big plans in New York metro area

"The performance was vintage J. Brian O'Neill.

The King of Prussia developer paced around a conference room at his company's headquarters, talking animatedly about his latest project as he used a black marker on a flip chart to make certain points, letting loose with a profanity every so often to emphasize his excitement.

It was a side of the typically effusive, boastful, readily smiling O'Neill that hasn't been on display much lately.

Not since the economy tanked, leaving an admittedly unprepared O'Neill with sleepless nights "agonizing over keeping the company alive and laying off employees." (O'Neill Properties Group L.P. is down to 47 employees from 175.)

Not since the news releases announcing grand openings and groundbreakings stopped in 2009.

Not since O'Neill went to war with his longtime lender in January 2010, filing an $8 billion lawsuit against Citizens Bank of Pennsylvania alleging fraud and partial ruination of his company.

"It's been . . . brutal," he said last week.

But settlement talks are showing promise, according to one lawyer involved. And O'Neill Properties Group, whose work has been predominantly local in its 23-year history, is embarking on a business expansion to establish a footprint in a market its founder has longed to be in for a decade or more: the New York metropolitan area.

"We outgrew the ability to function entirely in the Philadelphia market; the sheer absorption numbers weren't enough," O'Neill said. "So I've targeted the Manhattan metro market as our next primary focus."

His plan is to enter that market in spectacular fashion: 8 million square feet of waterfront shopping, offices, hotels, and high-end housing at the confluence of three heavily traveled roads (Garden State Parkway and Routes 9 and 35) in Sayreville, N.J., about 30 miles from Manhattan.

If execution follows what's planned, there indeed will be no missing The Point, a $2.9 billion project expected to take 10 years to complete.

The vast exterior walls of its 3 million-square-foot "fortress mall" will include LED screens touting retailers and merchandise in colorful high-definition lighting. There will be 250,000 square feet of outdoor signage and "brandscaping," an amount rivaling Times Square and the Las Vegas Strip combined, says a flashy promotional video set to music.

The numbers that matter more to O'Neill are these demographics, which help lure tenants to the first phase of The Point, a 620,000-square-foot shopping center:

The 453-acre brownfield in Middlesex County, a former paint-factory site O'Neill bought for $50 million in fall 2008, is passed by more than 400,000 cars a day, is within a 20-minute drive to more than two million people, and sits among average household incomes that exceed $80,000.

"It's a growth market for our business," O'Neill said. "We have to rebuild. We've been harmed substantially by the recession and its effects."

And taught some painful lessons. A rarely self-critical O'Neill said, "I did a lot of things wrong."

Two big blunders: "I misinterpreted the ferocity of the financial meltdown. I allowed my overhead to be tied to growth, not current business."

He has become convinced of the importance of partnerships. The Point will involve an assortment of them, including Prudential Insurance Co., along with a national housing developer not yet selected to build the 650 units of for-sale housing, and a mall developer to be picked through a competitive process, O'Neill said.

O'Neill Properties will build 1,350 apartments and some retail. The company's financial stake in the entire project is "yet to be determined," he said.

"The financial markets are healing, but still very difficult," O'Neill said. "The Point will require a 24-hour, seven-day-a-week effort, a tremendous amount of tenacity, and great partners in order for us to realize its full potential. We have a plan to make all that happen."

Including naming son Brian Jr. to manage it. That O'Neill, 24, said last week that Bass Pro Shops, a Missouri-based outdoors recreation retailer, was finalizing paperwork to become the first signed tenant. The planned 200,000-square-foot store would be one of the largest in its 56-store chain, said spokesman Larry Whiteley.

There's already a hiccup: O'Neill was supposed to preside at a groundbreaking ceremony in Sayreville this week to whip up excitement and announce Bass Pro's signing. Friday brought the announcement that scheduling conflicts had forced a postponement.

Closer to home, things are equally fluid with the Citizens Bank litigation, currently scheduled for trial in Philadelphia in December. O'Neill has alleged that Citizens, Citizens Financial Group, and their parent, Royal Bank of Scotland Group P.L.C., breached significant financial commitments to him, destroying or seriously harming some projects.

Last week, he referred questions about the case to one of his attorneys, Lawrence G. McMichael, a partner at Dilworth Paxson L.L.P.

"The case is not settled yet, but we're very close," McMichael said. In April 2010, O'Neill's damage claims were drastically amended down to $297 million.

Robert C. Heim, a lawyer from Dechert L.L.P. representing Citizens Bank, declined comment last week.

A resolution would jump-start construction at O'Neill's stalled, and largely incomplete, $700 million Uptown Worthington retail/office/residential development on 101 acres along Route 202 in Malvern, the financing for which is at the center of the lawsuit.

What exactly the finished product will look like is uncertain, however. What had been planned there - a town-center concept with an open-air store arrangement - is now out of vogue.

O'Neill, 51, acknowledged as much last week in explaining why the heart of The Point will be an enclosed mall - albeit with lots of windows and airy spaces of natural lighting that were not primary to mall design in the 1970s and '80s, when most in this region were built. "Due primarily to the weather," he said, "people for convenience are going back to the mall."

"If Uptown could be enclosed, I would" do it, O'Neill said, while insisting that "there still is a place" for the project as originally envisioned, especially in a suburban area with no downtown.

"Uptown will become the Center City of Great Valley," he said. Currently, Uptown consists of two stores: a Wegman's and a Target.

As for O'Neill Properties' plans in the Philadelphia market, where it has several million square feet of office, residential and retail space, he said the company would do "fewer larger projects" and had "a very diligent strategy of selling off our smaller projects."
Among those currently in play is the $59 million upscale Londonbury at Millennium apartment complex in Conshohocken, completed last July as part of a fire-related reconstruction. O'Neill would not confirm recent published reports that a potential buyer has offered $80 million.

Construction continues on a 500,000-square-foot retail/entertainment complex next to the Philadelphia Premium Outlets in Limerick.

O'Neill would not provide any sales projections for his privately held enterprise other than to say: "This company is getting better, but is still in the rehabilitative stage."

Saturday, June 11, 2011

Cheap money is inflating property prices

"Asset sale pricing is being driven up by low-cost debt" and high expectations, "rather than underlying fundamentals" such as job creation or tenant demand, warns John W. Guinee, real estate analyst at Stifel & Co., in a report to clients after the yearly conclave of the National Association of Real Estate Investment Trusts.

Recovering prices have driven investors out of the market, despite the national economic slump -- leaving building owners and would-be investors to "laugh and cry," laughing at high prices, and crying about the lack of tenants.

The big exception is Manhattan, where leases in 34 "top buildings" are rising 10% a year, and vacancies are below 3% on premium floors (from the 25th floor to the roof).

But Washington-area "office leasing (is) very slow," and most other markets are paying "leasing musical chairs, with tenants upgrading into better space, often at a lower cost," while "job growth is very limited" and vacancies stay high.

The warehouse and factory recovery has also slowed. "Rental rate increases will remain elusive" for most landlords. But at least, with money so cheap, REITS have finally gotten debt levels under control.

Of the big Philly-based office landlords:

- Brandywine Realty Trust, newly invested in 1717 Arch (the ex-Bell Atlantic building, now called Three Logan in deference to tenant Comcast), and 25% of One and Two Commerce Square, "now owns or has an interest in over 50% of Class A buildings in the Philadelphia Central Busines District," which Stifel approves.

"However the suburban lease-up challenges are currently offsetting the positive investments." And Brandywine's suburban Washington (VA) market, like Philadelphia, is "soft, with little opportunity to increase rents," given the cuts in military contractors as the was in Iraq and Afghanistan grind down. Stifel cut its Buy rating to Hold last December.

- Liberty Property Trust, with its "very balanced strategy" of selling lesser properties and holding cash for "selective development" and acquisitions, is spending a lot on shareholder dividends, given its cash flow. The stock is still "attractively priced," but most of Liberty's investment is in "smaller, slower growth markets." Liberty is slowly selling offices and buying more warehouses and industrial properties, because that's where the little growth in the US is happening."

Friday, June 10, 2011

REITs: Office Building Surge

For Sale: Fed Property

West Chester Flex Bldg Sells for $4M

"1230 Wilson Drive in West Chester, PA was a part of the assets and products that were recently purchased by Kensey Nash Corp. from Norian Corp. The 37,000-square-foot building was sold for $4 million, or about $108 per square foot.

This flex building is located in the Brandywine Business Park on 4.5 acres with an adjacent three-acre lot. The building is in close proximity to Routes 202, 322 and 100."

McKeown’s Plaza Trades for $5.3 Million

"Klokova, Inc. purchased the property known as McKeown’s Plaza in Philadelphia, PA for $5.3 million, or about $181 per square foot. The properties are located at 6800 Rising Sun Ave. The center was fully occupied at the time of sale with both long and short term tenants.

McKeown’s Plaza is made up of three separate buildings. The strip center is occupied by Sherwin-Williams and Dollar Discount, Wawa occupies the outparcel, and the additional building behind the strip center is occupied by Enterprise Car Rentals. The property totals just about 30,000 square feet and sits on 3.2 acres."

Wednesday, June 8, 2011

Developer named receiver for high rise

"Developer Carl Dranoff has been appointed as receiver for the struggling 10 Rittenhouse Square project that's a 33-story mix of condos and commercial space, the Philadelphia Inquirer reports.

"Philadelphia Rittenhouse remains the legal owner, but as receiver Dranoff is now in charge of operations," the Inquirer said."

City hoping for a Market rebound

By Jason Nark
"Planners, architects, politicians, bloggers and just about everyone else with an opinion seem to think that the jelly's been sucked out of the middle - at Market East - by bad planning, bad economies, bad retail and even some bad people who sometimes run amok in the much-maligned Gallery.
After being teased with casinos and Walt Disney, the city wants Market East to become a better version of what it believes it's always been - a mixed-use shopping district that caters to everyone.

The goal is to attract tourists from Independence Mall and the expanding Convention Center, along with city residents who've stayed away. The city's strategic plan for Market East, now almost two years old, calls for high-rises on Market Street where two-story buildings and parking lots now sit, drawing Chinatown and Washington Square West closer to Market, and transforming The Gallery's 1 million square feet into something more inviting from the street.

The sketch for a possible Girard Square transformation on Market Street between 11th and 12th looks as if it were designed by Apple: a glass box filled with white light and likely filled with all the things young professionals crave. So, why hasn't it been done yet? Why can't you walk through this building or a brand new Gallery today when the area's been stagnant for decades?

Stakeholders say that it's all about money. Rents on Market East, they claim, are approximately 30 to 40 percent less than New York City, but construction costs are on par with New York.
Soens said that the Girard Square building would cost approximately $100 million to complete. He claims that a large anchor store has already expressed interest in the top floor (the rumors are that it's Target), but that deal is contingent on a controversial signage/billboard bill that was approved by City Council's rules committee yesterday.
"The goal is not to create large-format signs," he said. "We're trying to create a little excitement and additional revenues for the developers."

The signage measure would require building owners to make at least $10 million of improvements to their properties to get the OK to install larger signs.
"It's not rocket science to know that this parking lot shouldn't be here - it's taking up valuable land," he said, pointing to a street-level lot at 8th and Market, also known as "The Disney Hole." (Disney's plans for an indoor amusement park at the site failed.)

The Goldenberg Group owns two acres on Market between 8th and 9th. Senior partner Robert W. Freedman said in a statement that the company is "continually analyzing retail, hotel, entertainment and office uses to sculpt a dynamic mixed-use project that will add vitality to Market Street East."

Even without flashy signs or the welcoming aisles of Target and Apple, Market East does work for the thousands of people who use its transportation hub daily, buy its electronics and jewelry, and grab some fast food in The Gallery's basement. It can work better, with everyone involved, and that's the hardest part."

Friday, June 3, 2011

Korman Communities buys into the Benjamin Franklin House

by Natalie Kostelni
"Korman Communities has taken an ownership stake in the Benjamin Franklin House, a landmark apartment building along Chestnut Street near Philadelphia’s Old City historic area.

The Plymouth Meeting apartment owner declined to disclose details of the transaction other than it will take over the management of the building and is figuring out what to do with the property. Korman bought it from a Los Angeles-based partnership that also oversaw the management of the building at 834 Chestnut St. With the deal just wrapped up, it’s still too early for Korman to divulge what it plans to do with the property.

“We’re still evaluating what the right alternatives are,” said Brad Korman, co-president of Korman Communities. “It’s got great bones, a great location and all of the amenities you want. We’re very excited to be a part of it.”

This marks the second multifamily property acquisition for Korman in Center City and the company continues to look for opportunities between Washington, D.C., and New York. In Philadelphia, it owns One Rittenhouse Square at 135 S. 18th St., which carries the company’s AKA branding that caters to those desiring high-end extended stay accommodations in urban areas. It maintains an AVE brand for a similar type of apartment product in suburban locations.

“Korman is uniquely qualified because of their suite business,” Sheehan said. “They have already done it on Rittenhouse Square, and it’s a natural for them. It’s also a good strategic move for Korman in light of the Lafayette building being converted as a hotel, the expansion of the convention center, and in the path of tourists, convention business and business.”

It’s seldom a multifamily building of this size gets traded in Philadelphia but when they do, investors swarm around them, said Ken Mallin of Mallin Panchelli Nadel, who has handled Center City apartment transactions.

“There’s tremendous interest in this property type from institutional investors and there’s a scarcity of product so when they do come available, investors are all over it,” Mallin said.

While the bulk of Philadelphia apartment buildings have traditionally been owned by local real estate investors and families, institutional money has increasingly been looking at Philadelphia because it’s a stable market, said Mallin, who predicted more such investors will continue to seek out deals.

“The Ben” was designed by Horace Trumbauer and constructed in 1925 as the Benjamin Franklin Hotel. It had a grand ballroom and lobby and at the time, and was the largest hotel in Philadelphia with 1,200 rooms. In 1986, the previous owners converted the 23-story building into an apartment complex with 420 units. It kept 125,000 square feet as office space. The ballroom, which can accommodate 350 people, is master leased by a catering company that arranges events in the space.

“There are great amenities in the building and our goal now is to bring that local expertise and management to it,” Korman said."

Veritas Buys 62,000 SF Office Building in Marlton for $7.7M

"The 62,000 square foot office building at 13000 Route 73 in Marlton, NJ has sold for $7.7 million or $124/sqft.

The buyer is Veritas Real Estate Investments, LLC, a Marlton, NJ-based full service real estate management and investment company - and the seller is Liberty Property Trust.

Major tenants in the building include Bank of America , Foundation Title, Hahnemann University Health, and Avnet. Colliers has been retained as the leasing agent for current space availabilities ranging from 1,000 to 8,000 SF."

Thursday, June 2, 2011

Inquirer office building back on the market

"Philadelphia Media Network Inc., owner of those two dailies and the online portal, has plan to sell the 526,000-square-foot building at 400 N. Broad St. as well as the five-level, 502-space parking garage at 15th & Callowhill streets and adjacent 200-space surface lot.

The building was last put on the market in August 2007 by then-CEO Brian Tierney. The real estate market was at its frothiest, but quickly cooled as the nation dropped into recession that December."

First Niagara closing 4 Montco branches

"First Niagara Bank is closing four branches this summer in Montgomery County, in Blue Bell, Lower Gwynedd, Franconia and Worcester, the Mercury reports.

"All four are branches that serve senior communities in the area and all will be consolidated into nearby bank branches," the Mercury said, citing a bank spokesman."

Temple set to open new medical school in Bethlehem

"Temple University’s School of Medicine has a head start on the health system in expanding its presence beyond North Philadelphia.

The medical school is getting ready to open a regional medical school campus at St. Luke’s Hospital & Health Network in Bethlehem, Pa.

“This fall, the first group of students will start here, in Philadelphia, then spend their second, third and fourth years at St. Luke’s,” said Dr. Larry R. Kaiser, dean of the Temple University School of Medicine.

The class is expected to have 30 students.

Temple and St. Luke’s have an affiliation that dates back to the 1970s, when Temple medical students first began clinical rotations at St. Luke’s. Since March 2006, St. Luke’s has served as a clinical campus of Temple, a designation that means third- and fourth-year Temple medical students can take all of their required clinical rotations at the campus. By 2014, Temple and St. Luke’s expect more than 120 future doctors will be enrolled at the regional campus where they will complete all four years of study.

The Donald B. and Dorothy L. Stabler Foundation recently awarded a four-year, $1 million grant to St. Luke’s to establish an endowment fund that will be used exclusively for scholarships for students attending the regional Temple University School of Medicine/St. Luke’s Hospital & Health Network.

“Declining numbers of physicians and an aging population [are driving] the need to train more doctors, yet the cost of a medical education can be daunting and often prohibits people from making this career choice,” said Dr. Joel Rosenfeld, St. Luke’s chief academic officer and senior associate dean for the Temple University School of Medicine. “This gift will certainly make a difference for academically gifted students with financial need.”

Temple also has clinical campuses at West Penn-Allegheny Health System in Pittsburgh and Geisinger Medical Center in Danville, Pa. Kaiser said the medical school is establishing a four-year regional medical campus at West Penn-Allegheny. He said the first group of Temple medical students will begin at Pittsburgh in the fall of 2013.

“We expect about 50 students in the first class,” Kaiser said."

Curtis Center, Public Ledger on market

by Natalie Kostelni

"The Curtis Center and Public Ledger, two office buildings overlooking Independence Mall, are up for sale and join a growing list of Center City commercial properties hitting the market.

The buildings are owned by a fund involving Apollo Global Real Estate. A partnership that included local real estate investor Joe Grasso and a fund managed by Citi Property Investors originally bought the buildings in 2006. Since then, Grasso’s involvement diminished and the Citi-related fund was sold off to Apollo.

In 2006, the Curtis Center sold for $94 million, and Public Ledger traded for $43 million. If these properties sell, it will help illuminate where the downtown office investment market now stands. As of now, 1700 Market St. is up for sale and reportedly under agreement for an estimated $135 million. A local investor has also tied up Two Penn Center, also on the market.

The Curtis Center and Public Ledger are two of the largest buildings in the Independence Square office submarket. The submarket has a vacancy rate of 13.4 percent. Usually a tight submarket, it has seen some tenant defections in the last year, such as Wolters Kluwer, which relocated to the Central Business District.

The two buildings will be marketed as a pair. The brokers and owners involved declined comment.

The Curtis Center totals 885,000 square feet at 124 S. 6th St. It is 94 percent occupied with the General Services Administration as one of its lead tenants. The building has a 350-space underground garage that can be expanded.

The 12-story building, which also overlooks Washington Square, was constructed between 1909 and 1921 for $3 million by publishing magnate Cyrus H.K. Curtis for his company’s headquarters. There The Saturday Evening Post, Ladies Home Journal and other magazines were published. It was designed by architect Edgar Viguers Seeler.

Curtis incorporated several amenities for his employees that were considered unusual at the time. Some of those perks included a purified drinking water system, stocked library, an infirmary that could accommodate minor surgery, recreation rooms, food service, a roof garden and special lighting, as well as an ice-cooled air circulation system.

While the building was under construction, Curtis commissioned Maxfield Parrish and Louis Comfort Tiffany to create a glass mosaic for the building’s lobby that became the artistic treasure called “Dream Garden.” Completed in 1916, the five-ton masterpiece stands 15 feet by 49 feet and became a point of controversy. The dispute that arose over the mosaic came to light in 1998 when it was revealed that Steve Wynn, the casino owner, offered to buy it from the estate of John W. Merriam, which owned the artwork. Wynn eventually decided against buying the mosaic and the question of how to preserve the piece swirled around for years until November 2001, when the Pew Charitable Trusts decided to pledge $3.5 million to the Pennsylvania Academy of the Fine Arts to acquire the mosaic.

The building is also renowned for its historical renovation. A previous owner bought the building in 1984 from Merriam for $25 million and launched a $75 million renovation. The face-lift included prettying up the hand-carved walnut paneling, decorative moldings and marble floors. A 13,000-square-foot courtyard was transformed into a 12-story enclosed atrium with a vaulted glass roof and is now used as a prime spot to host special events.

Its sister building, Public Ledger, has a less flamboyant history. The 12-story, 456,000-square-foot building at 620 Chestnut St. is about 92 percent occupied. It was designed by Horace Trumbauer and built in 1924 as home to the city’s first penny journal called the Public Ledger, which was also owned by Curtis. It’s listed on the National Register as a historic property."

Trump Marina Hotel & Casino Sells for $38M

"Trump Entertainment Resorts, Inc. sold the 728-room hospitality and casino building to Fertitta Entertainment and Landry’s Restaurants, Inc. for $38 million, or about $52,200 per room.

Located at 1 Castle Boulevard in Atlantic City, the facility sits on more than 14 acres of land. The new owners plan to renovate the property, transforming the property into the Golden Nugget. Upon completion of the renovations the Golden Nugget will contain a total of 740 rooms and suites, and will be the only casino with a full service marina."

NJ Laborers Union Makes Delaware Building Purchase

"GSM Industrial, Inc. sold the office and warehouse buildings at 308 Markus Ct. in Newark, DE to New Jersey Laborers Union for $2.7 million, or about $161 per square foot.

The 3.3-acre parcel contains a 10,250-square-foot office building and a 6,500-square-foot warehouse building. The New Jersey Laborers’ Union plans to occupy the entire facility for training."