Friday, July 29, 2011

Sale of 238,000 SF Industrial Building for $3.34M in Cherry Hill, NJ

"The sale of a 238,000 SF industrial building on approximately 14 acres of land located at 11 Perina Boulevard in Cherry Hill, NJ, which was sold by Macy's Corporate Services traded to Perina Associates, LLC for $3.34 million.

Perina Associates is an entity that is controlled by Industrial Investments Inc. Industrial Investments is a regional owner and operator of approximately 4,000,000 SF of industrial properties in Pennsylvania and Southern New Jersey. The property was sold by Macy's Corporate Services and was operated for many years as The Accumark Distribution Center for Federated Department Stores which distributed soft goods and general merchandise to Macy's northeast store group.

The 238,000 SF building was built in the mid 1970's and later expanded in 1985. Industrial Investments plans to divide the building into a multi-tenant property and make significant improvements. Once divided, the building will offer spaces with clear ceilings heights of 32', 28' and 22'. Each section will have its own loading and office areas. Located at Exit 34 of I-295, this site provides great access to the region's highway systems."

American Piping Products, Inc. and Goshen Leisure lease space in West Chester

"American Piping Products has more than doubled its West Chester facility by moving into a 3,538 square foot flex space at 15 Hagerty Blvd., West Chester. American Piping Products joins Creative Playthings, Allvette, and Dougherty Automotive in the Hagerty Blvd. project which is conveniently located just off of Rt. 202 at Matlack Street. Phase one of the new project is nearly 100% occupied."

Phila. Media announces sale of building 400 N. Broad

"Philadelphia Media Network Inc. has agreed to sell the 18-story building at 400 N. Broad St. that houses The Inquirer, Philadelphia Daily News and to developer Bart Blatstein of Tower Investments Inc.

The price was not disclosed.

"As Philadelphia Media Network continues its successful digital transformation, the efficient utilization of our assets will be our highest priority in the development and distribution of all PMN products," said Gregory J. Osberg, chief executive officer and publisher.

PMN said it was exploring options for future space - remaining in its present location or looking for new space in the region."

Original story here:

Costco expanding in the area; in Bucks right near Walmart

by Peter Van Allen

"Costco Wholesale Corp. is expanding in the Philadelphia market, but it remains to be seen how much of a presence it will eventually have.

In coming months, Costco, the Issaquah, Wash.-based discounter, plans to open stores in Limerick and Warminster, increasing its count of Philadelphia-area stores to five.

In Warminster, Costco’s location will be across the street from another well-known discounter, Walmart. Each will occupy corners of the intersection of Street Road and Jacksonville Road.
While it would seem to set up a prime rivalry, analysts insist they’re going after separate customers.

David Strasser, an analyst who follows Costco for Janney Montgomery Scott, also downplayed the rivalry.

“Two things: First, Costco and Walmart are very different stores, very different demographics and probably not very big competitors,” he said.

For now, Costco has been quiet about its intentions locally. It has not said how many stores it intends to build in the area. The company has 588 “warehouse” stores, including 429 in the United States. Sales for fiscal 2010 were $76 billion.

Walmart, which is based in Bentonville, Ark., and posted annual sales of $418 billion last year, has a long-established presence in this market, going back to the mid-1990s. In the region, it has 20 stores. The company’s Sam’s Club has seven area locations, but none within close proximity of the Costco stores.

On Aug. 17, Costco will open a Limerick store. Walmart’s plans to open in Limerick were stopped by resident opposition last year and, at least for now, Walmart’s nearest stores are in Pottstown and Reading, each of which are about 10 miles from Limerick.

The 148,000-square-foot Limerick store is at 14 W. Lightcap Road in the Gateway at Sanatoga shopping center, next to the Philadelphia Premium Outlets, off Route 422.

It will be the fourth store in the Delaware Valley. Other stores are in King of Prussia and Montgomeryville, and in Mount Laurel, N.J.

The Costco store will offer name-brand and private-label merchandise. It will offer a wide range of products and services, from gas to groceries. It will also have an optical department, one-hour photo, pharmacy, tire center, hearing aid center and food court.

Costco operates on a membership basis, starting at $50 a year. An “executive membership,” at $100 a year, offers additional discounts plus a 2 percent reward, or rebate, up to $500 a year.

In addition to discounts, members get help in booking travel and buying cars. Costco has 61 million card holders worldwide.

Sam’s Club memberships start at $40, with a $100 “advantage plus” level."

Owner gives up Four Falls

by Natalie Kostelni

"Four Falls Corporate Center, once a crown jewel in the Conshohocken office submarket, is in receivership.

CB Richard Ellis was appointed to oversee the property once owned by a joint venture between Thomas Properties Group Inc. of Los Angeles and California State Teachers Retirement System.

In a deed in lieu of foreclosure, Thomas relinquished Four Falls as well as two of its other suburban office properties — Walnut Hill Plaza and Oak Hill Plaza off Warner Road in King of Prussia.

“The bank is taking a strategic look at these properties to get them to achieve their potential,” a broker with CB Richard Ellis who is helping to lease up any empty space in the buildings. “The bank is going to make whatever investment necessary to keep all of the tenants happy and get it fully stabilized and accretive.”

Then the lender will eventually try to sell the properties, Dagit said.

In its quarterly report filed May 13 with the Securities and Exchange Commission, Thomas Properties said that as of that date it had a total of $96.5 million in mortgage loans owed on Four Falls as well as Oak Hill Plaza and Walnut Hill Plaza. All of the loans, Thomas said, matured and became due in full. Thomas stopped making payments on the loans and defaulted on them. The landlord decided to work with the lender to have a receiver appointed.

The buildings have seen their appraisals slashed in recent months and the value of suburban office properties, in general, have not recovered the way core assets in urban centers have begun to show gains. It became evident the loans on these buildings exceeded the current value of the properties. It’s at that point that property owners decide that these multilayered, securitized capital structures don’t lend themselves to working out extensions with a lender.

It’s becoming more common for landlords in suburbs and city centers these days to relinquish some buildings in their portfolios when loans can’t be renegotiated or it’s determined that it’s just not worth it. In Center City for example, 260 S. Broad St. is in receivership and 2040 Market St., the former AAA Mid-Atlantic building, was taken back by its lender and subsequently sold.

Thomas declined comment.

Four Falls consists of two, six-story buildings totaling 254,000 square feet. It is 80 percent occupied.

“It’s having good activity right out of the box because it was in limbo before,” he said.

One of its anchor tenants, Northrup Grumman, renewed a 25,000-square-foot lease for five years.
Walnut Hill is a four-story office complex totaling 150,572 square feet at 150 S. Warner Road in King of Prussia, and Oak Hill is four-story, 164,360-square-foot office property 200 N. Warner Road in King of Prussia. While Oak Hill is fully occupied, Walnut Hill is half vacant.

Thomas bought Four Falls, Walnut Hill and Oak Hill in 2005 when it spent an estimated $170 million to buy the suburban portfolio owned by Equity Office Properties Trust. The portfolio consisted of nearly 1 million square feet in 11 buildings. It marked Thomas’ foray into the Philadelphia suburban market after it built up a strong presence in Center City with One and Two Commerce Square and 1835 Market St.
The gem in that portfolio was Four Falls, which was constructed in 1987 by Acorn Development on a site that had once been a restaurant called the Inn of the Four Falls. The complex kicked off that submarket, setting the stage for West Conshohocken and Conshohocken to become among the most desired local office addresses.

With Thomas no longer owning these buildings, its presence in the Philadelphia area has shrunk especially after selling a stake in Commerce Square to Brandywine Realty Trust."

Thursday, July 28, 2011

REITS Overvalued?

Eagleview Corporate Center Trades for $3.55M

"Pitcairn Properties sold the office building at 600 Eagleview Blvd. in Exton, PA to J. Loew & Associates, Inc. for $3.55 million, or about $74 per square foot.
The 48,000-square-foot office building sits on more than five acres and is located in the Eagleview Corporate Center. The property is a corporate headquarters building with a cafeteria and a data center with a backup generator. The facility has a prime location at the Route 100 interchange of the PA Turnpike."

Wednesday, July 27, 2011

Brandywine Realty Trust Announces Janney Lease at Three Logan Square in Philadelphia, PA

"Brandywine Realty Trust announced today that it has executed a 146,321 square foot, 15-year lease with Janney Montgomery Scott LLC at Three Logan Square in Philadelphia, PA.

The execution of the Janney transaction brings Three Logan Square to 82.1% leased with occupancy scheduled to commence during the third quarter of 2012. Including two other existing leases in Pennsylvania and New Jersey, Janney now leases a total of 160,291 square feet from Brandywine.

PA Gov. Tom Corbett signed off on $10 million in state aid to Janney to help move its headquarters earlier this year.

Tracing its roots to 1832, Janney Montgomery Scott LLC provides comprehensive financial advice and service to individual, corporate and institutional investors."

Monday, July 25, 2011

Celsion Corp. Moving HQ from Columbia, MD to New Jersey

"Celsion Corp. has signed a lease with Brandywine Realty Trust to relocate its corporate headquarters currently located in Columbia, MD into 10,870 square feet at 997 Lenox Dr in Lawrenceville, NJ., a town located between New York City, Philadelphia, Princeton and Trenton.

The Company plans to begin operations in its new headquarters at 997 Lenox Drive by the end of the third quarter.

Celsion Corp. will not pay base rent for the first six months of the lease. Following the first six months, the Company will pay monthly base rent of $23,099, which escalates to $24,910 per month by the end of the lease. The aggregate rent payments of the Lease total just over $1.44 million.

The 66-month lease is contingent upon receiving a Business Employment Incentive Program (BEIP) grant from the New Jersey Economic Development Authority. BEIP grants are available to expanding or relocating businesses that create jobs in New Jersey."

Host Hotels Triples Profit in Q2

ChemPak Renews 125,969SF at Airport Business Complex

"ChemPak International has renewed its lease at 10 Industrial Drive in Lester, PA for another five years. ChemPak occupies 125,969 square feet, offering storage, packaging and transportation of chemicals. The company has been in the Philadelphia area since 1995.

10 Industrial Drive is one of several buildings located in The Airport Business Complex. Building B was built in 1945, has 11 drive-in bays, and high ceilings. The Airport Business Complex sits on 297 acres centrally located with access to I-95, I-476 and Philadelphia International Airport."

Philadelphia's Office Vacancy Decreases to 11.9%

"The Philadelphia Office market ended the second quarter 2011 with a vacancy rate of 11.9%.

The vacancy rate was down over the previous quarter, with net absorption totaling positive 709,347 square feet in the second quarter. Vacant sublease space decreased in the quarter, ending the quarter at 1,737,583 square feet.

Tenants moving out of large blocks of space in 2011 include: HSBC Bank moving out of 132,300 square feet at Churchman's Corporate Center; and Broadview Networks, Inc. moving out of 99,851 square feet at 2100 Renaissance Blvd.

Tenants moving into large blocks of space in 2011 include: Quest Diagnostics moving into 136,919 square feet at 1001 Adams Ave; and Broadview Networks moving into 57,209 square feet at Valley Forge Park Place - Bldg 2

Rental rates ended the second quarter at $20.79, a decrease over the previous quarter.

A total of five buildings delivered to the market in the quarter totaling 464,718 square feet, with 1,496,243 square feet still under construction at the end of the quarter."

Thursday, July 21, 2011

Power Center Sells for $52 Mil in Philadelphia Suburb

"US Realty Associates sold the Ashbridge Square Shopping Center to The Morris Companies for $51.75 million, or about $133 per square foot. The center changed hands with a 7.83% CAP rate, and was a 1031-exchange on the buyer’s side. The sale included the assumption of $38 million in existing debt.

The Ashbridge Square Shopping Center is a 388,016-square-foot suburban power center located at 845 - 983 East Lancaster Avenue in Downingtown, PA. The center was built in 2000 and sits on about 49 acres. A combination of long-term and short-term tenants occupy the facility on triple net leases. Anchor tenants include Home Depot, Staples, and Christmas Tree Shops."

Signs of CRE life, Brandywine logs 1.4 million square feet

by Natalie Kostelni
"Despite reports of the recovery possibly slowing down, commercial real estate sales and leasing activity continues to show signs of picking up.

Both Brandywine Realty Trust and Buccini/Pollin saw decent activity. Brandywine logged 1.4 million square feet of leasing activity in the second quarter. Of that, 372,146 was in the Pennsylvania suburbs with a spattering in Center City and South Jersey.

Among Brandywine’s largest deals: Federal Express renewing in 104,500 square feet at 442 Creamery Way in Exton; Larson Allen signing a 28,880 square foot lease at 610 Plymouth Meeting Executive; and Pepper Hamilton renewing 27,326 square feet lease at 400 Berwyn Park; In Navigant Consulting Inc. renewing a 15,410 square foot lease at Three Logan Square in Center City

Buccini/Pollin leased 120,665 square feet before the close of the second quarter. Among some of its deals were: Monetate, which moved into 20,165 square feet at Quaker Park in Conshohocken; Summit Foods, in a new lease for 12,432 square feet at 500 S. Gravers Road in Plymouth Meeting; and Progressive Financial’s renewal on 15,480 square feet in Baldwin Tower, in Eddystone … Ferrandino & Son, a national provider of commercial construction and property maintenance services from New York, leased 11,185 square feet at 2600 Eisenhower Ave. in Valley Forge from BioMed Realty Trust Inc. Ferrandino is relocating its national general contracting division from Collegeville to the 2600 Eisenhower location. The deal means the 27,750-square-foot building is fully leased.

In a court-approved multifamily portfolio sales, Gebroe-Hammer Associates handled a $8.5 million sale of three apartment complexes totaling 386 units in Chester. The three apartments were in receivership and an undisclosed buyer who already owns properties in Chester bought them. The largest of the three properties is St. James Gardens, a nine-building, 228-unit, two-story garden apartment complex at 314 East 224th St. Also sold was Renshaw Terrace Apartments, at 1300 Renshaw Road, which is a three-building, 78-unit garden-apartment complex. And lastly, Willow Gardens at 1101 Dorian Drive is a seven-building, two-story, 80-unit garden complex …Willow Ridge Village, a 296-unit, 24-building complex totaling 251,824 square feet at 1 Meridian Court — not far from Routes 70 and 73 in Marlton, N.J. — traded for an undisclosed price but at a 6.25 percent cap rate. The property garnered 45 property tours and received almost 30 offers …

All Medical Supply leased 4,800 square feet at 60 James Way in Southampton. The company will be occupying this space for offices, storage and warehousing of medical supplies."

Wednesday, July 13, 2011

Correction: Tower Investments Acquires State Building for $21 Million

"Correction: Tower Investments Acquires State Building for $21 Million
Tower Investments, Inc.
has closed on its purchase of the Philadelphia State Office Building at 1400 Spring Garden Street in Philadelphia, PA for $21 million, or $87.50 per square foot, from the Commonwealth Of Pennsylvania.

The 19-story, 300,000-square-foot office building was built in 1958 on almost two acres in the Market Street West submarket. The building features 240,000 square feet of rentable space above grade, and a 208-car parking garage.

Tower Investments has indicated it plans to convert the tower into a mixed-use, retail and residential property.

The property was on the market for 30 days, after which a buyer was selected through a sealed-bid process in the fourth quarter of 2007. The contract and escrow period that followed lasted three years pending the relocation of several Commonwealth agencies to 801 Market Street, as well as the buyer obtaining financing in the amount of $19.6 million. The building previously housed approximately 900 employees from various departments including Conservation and Natural Resources, Education, Insurance, Labor & Industry and Public Welfare.

"The sale of the Philadelphia State Office building not only will save taxpayers a substantial amount of money over the next 20 years, it will also put the property back on the tax rolls for the City of Philadelphia and it will serve as a catalyst for continued economic development for the region," said then-Governor Ed Rendell in a January, 2008 release issued about the sale.

Original Story on 7/13/2011
"Tower Investments, Inc. acquired the Philadelphia State Office Building at 1400 Spring Garden Street in Philadelphia, PA for $25.2 million, or about $104 per square foot, from the Commonwealth Of Pennsylvania.

The 19-story, 240,000-square-foot office building was built in 1958 on almost two acres in the Market Street West submarket. Tower Investments has indicated it plans to convert the tower into a mixed-use, retail and residential property.

The property was on the market for more than three years."

Pineville Properties Sells 11,400-SF Walgreens for $6.83M

"Pineville Properties LLC sold the retail building located at 494 Nutt Road in Phoenixville, PA for $6.83 million, or about $599 per square foot. The building was sold to a private investor.

The retail building was delivered in 2008. It totals 11,400 square feet and sits on 1.42 acres. The property is occupied by Walgreens on a triple-net lease."

AIG Sells Central Jersey Multifamily Portfolio for $241.5M

"A joint venture of Angelo, Gordon & Co. and Vantage Properties LLC has acquired a six-property multifamily portfolio located in New Jersey for $241.5 million, or about $110,500 per unit, from affiliates of AIG Global Asset Management Holdings Corp.

The portfolio is 91.6 percent occupied overall at time of sale. The communities, located in Monmouth and Middlesex counties, total 2,185 units across more than 1.2 million square feet. The sale included $150 million in existing debt.

The individual properties represent a diverse mix of well-located assets across central New Jersey:

Quail Ridge Apartments located at 33 Quail Ridge Dr. in Plainsboro totals 1,032 units.

Pheasant Hollow Apartments at 19 Pheasant Hollow Dr. in Plainsboro totals 440 units.

Jumping Brook Apartments at 3633 Highway 33 in Neptune totals 308 units.

Marine Gardens at 220 Ocean Ave. in Long Branch totals 24 units.

Long Brook Apartments at 11 Sutton Dr. in Matawan totals 241 units.

Leonardine Gardens at 110 Leonardine Ave. in South River totals 140 units."

Tuesday, July 12, 2011

Two Sale Transactions Totaling 42,484 Square Feet Completed in Berks County

"The transactions consisted of the following:

1) The US Small Business Administration sold a 31,682 SF ice rink at 2 Oesterling Drive, Reading, Pennsylvania to an affiliate of Kreitz Construction Services. The property is situated on a four and one half acre parcel.

- Sailer Stone & Stucco, L.P. sold a 10,800 square foot flex building at 20 Oesterling Drive to an affiliate of Kreitz Construction Services. The four acre parcel is contiguous to 2 Oesterling Drive.

Founded in 1912, this leading millwright, rigging, and machinery moving company, will start occupying both properties at the beginning of August."

Ferrandino & Son, Inc. Leased 11,185 Square Feet in Valley Forge

"Ferrandino & Son, Inc. in leased 11,185 square feet of office space to at 2600 Eisenhower Avenue, Valley Forge, Pennsylvania.

Ferrandino & Son is a national provider of commercial construction and property maintenance services. The Farmingdale, New York-based company signed a long-term lease with BioMed to support its long-term growth and will be relocating its National General Contracting division from Collegeville, Pennsylvania to the 2600 Eisenhower location on July 1, 2011.

This property was built in 1973 and went through major renovations in 2000. This lease transaction brings the 27,750 square foot property to 100% occupancy."

Saturday, July 9, 2011

Huge warehouse proposed for former Bethlehem Steel Corp. land

"Liberty Property Trust proposes a 1.35 million-square-foot warehouse on Commerce Center Boulevard, the largest proposed reuse so far of former Bethlehem Steel Corp. land.

The company, which owns the 120,000-square-foot Liberty Center in Center City Bethlehem along with about 30 other commercial properties in the Lehigh Valley, submitted its plans Thursday for consideration before the Bethlehem Planning Commission.

The proposed warehouse is within Lehigh Valley Industrial Park VII. LVIP President Kerry Wrobel said Liberty is working with numerous prospective tenants for the property.

Liberty’s plans call for an estimated 200 workers per shift, which could total up to 600 employees if the warehouse fits the typical round-the-clock model, Wrobel said. Actual employment numbers will depend on the tenant, he said.

Bethlehem Mayor John Callahan said four or five large companies are considering warehouse space at LVIP VII or the adjacent Majestic Realty Co. property. Callahan said an estimated 500 employees are expected to work in the proposed Liberty-owned warehouse.

“We’re confident we’re going to be able to move forward with a number of these over the next few years,” he said.

Bill Bumber, the senior project manager in Liberty’s Bethlehem office, did not return a call for comment on this project.

Liberty’s 107-acre lot is the largest lot subdivision so far of the 1,000-acre LVIP VII parcel, Wrobel said. The organization decided to subdivide such a large lot because officials felt a large use would generate more tax revenue than splitting up the land into smaller lots, he said. Wrobel said he has no tax estimates for the property.

Otherwise, LVIP VII so far has been split into smaller lots, such as space for the 62,000-square-foot Synchronoss Technologies building or the 115,000-square-foot Cigars International warehouse. In all, the organization has sold eight lots within LVIP VII, Wrobel said. The lots consist of 11 companies with a total of 2,500 employees, he said.

Liberty’s proposed warehouse is significantly larger than the first warehouse for which Majestic has approval on its land. In February, the company received approval for a 482,591-square-foot building for an unnamed data storage company.

Majestic owns 441 acres of former Bethlehem Steel land and plans to build more than 7 million square feet of industrial warehouses there."

Friday, July 8, 2011

Tenants Jump into Office Market Early

by Natalie Kostelni

"Morgan Lewis & Bockius’ lease at 1701 Market St. isn’t scheduled to expire for another three years but the prominent law firm is already evaluating its options in the Center City office market.

“It’s not so early,” said Eric Stern, a partner at Morgan Lewis who is head of its real estate department. “In the world of big leases, three years is certainly not too early to be looking around. … We’ve got to be out in front of it. You simply can’t wait until the 11th hour.”

Morgan Lewis, which occupies 280,000 square feet at 1701 Market, isn’t alone.

Nine big downtown office tenants totaling more than 1.5 million square feet — enough to fill Comcast Center and then some — have started to have early conversations about their office prospects and begun to assess what space is or, what they fear, isn’t available. In some cases, such as Morgan Lewis, leases don’t run out until 2014. For others, it’s five years out.

Companies get an early start on office searches for multiple reasons.

“The market for good trophy-class space is fairly tight so if tenants want to do something there aren’t many blocks out there. In some cases, staying put may be the only option.”

Some options available for top-tier contiguous blocks of office space include Three Logan, 1818 Market, Centre Square, and some pockets in Commerce Square. Three Logan is close to cinching up a couple of large deals that could make it less of an alternative.

“There are times going into the market five years early makes sense, and that’s why it seems there are so many tenants looking.” Sometimes lease expirations some times come in bunches. “Today, there are so few places to put a 200,000-square-foot tenant that a lot are getting an early start for fear there aren’t going to be places available for them,”

The Center City office market has steadily been improving this year.

Vacancy has edged down to 14 percent at the end of the second quarter from 14.9 percent during the same period last year with positive absorption of 87,293 square feet of office space. It has experienced three consecutive quarters of increases in office occupancy and a resurgence of tenant demand, particularly for Class A space, according to the research. Eventually, rents will rise and tenants will no longer be driving deals, which is why some firms are trying to seize on current market conditions.

Even as big blocks are scarce and the Central Business District begins to tighten, the market can unexpectedly shift.

“People panic but things happen to free up Class A office space,” citing GlaxoSmithKline moving to the Navy Yard, Wolf Block going under, Unisys Corp. never moving into One Liberty Place and Day & Zimmermann relocating from 1818 Market St. to 1500 Spring Garden St.

Some tenants are starting out a tad too early. Two years is typically adequate to conduct a comprehensive search and three to three-and-a-half years for moving into new construction, noting no new office tower is on the horizon. It’s also difficult to predict where tenants land and possibly open up offices that had not been available. Such moves can trigger something akin to a checkers match among tenants and buildings.

Others try to get a jump on lease negotiations to use to their advantage.

“Some of it may be to create leverage with a current landlord if you threaten to leave.”

Large lease transactions these days take much longer than they used to, Stern of Morgan Lewis said. Aside from planning and designing space and negotiating lease terms, lenders are more involved than ever.

“The prominence of the lender’s role in the long-term disposition of space in a building is far greater today than it was five years ago and adds to the time for planning for a renewal or a new lease,” Stern said.

Though Stern didn’t address it, by being out in front of its lease situation Morgan Lewis is trying to ensure against a repeat of what ensnared the firm when it moved into 1701 Market. The firm had been at One Logan Square and its lease was scheduled to expire August 1998. It let an August 1996 deadline to renew at One Logan lapse as it tried to negotiate lower rents and other issues with the landlord. It wanted to stay at One Logan but after an arbitration and a series of other unforeseen events, reluctantly relocated to 1601 Market in the fall of 1998."

Thursday, July 7, 2011

Zuckerman on Commerical Real Estate

Chester County’s Office Market Saw Small Improvement

"Chester County’s main commercial office market saw a small improvement in the first half of the year.

The Malvern/Exton/West Chester submarket moved into the positive arena for the first time in 2½ years, reporting a positive net absorption rate of 53,150 square feet in the second quarter, bringing the year-to-date rate to a positive 4,580 square feet, the report found.

Positive net absorption occurs when more space is leased than is left vacant.

Class A office space in the Chester County market made up the lion’s share of positive net absorption, at 58,275 square feet.

Rental rates in the market continue to zig-zag from the second quarter of 2010 when rates were reported at $20.25 and then went down to $19.78 in the first quarter of 2011. They were back up to $20.33 in the second quarter of 2011.
 The vacancy rate for office space in the Chester County market is at 22.7 percent now, down from 23.3 percent last year at the same time.

“It’s not the 11 percent you would see in a healthy market but the good news is that for the first time in some time there’s positive absorption."

“We are clearly moving from negative or neutral absorption into positive absorption. We’re seeing a much improved environment on the demand side.”

One of the more promising signs for the commercial real estate market is that “bankers are looking for deals.”

The Greater Philadelphia region’s midyear 2011 commercial office market reported a year-to-date positive absorption of 657,000 square feet, indicating the trend of a gradually improving market still rings true.

“The most significant comparison is when we look at the state of the market a year ago when year-to-date net absorption was a negative 780,850 square feet; this gives us a better snapshot of the improvement the Greater Philadelphia market is experiencing,” the company said in a statement. “This upward absorption trend is spread fairly evenly among the major submarkets with the first quarter contributing 60 percent of the positive 2011 leasing activity and second quarter contributing 40 percent.”

Particularly strong was the King of Prussia submarket, which accounted for 84 percent of the positive absorption in the suburbs."

Centurion Inks 97,200-SF Industrial Deal

"Centurion Medical Products signed a long-term lease for 97,200 square feet in the industrial building at 2001 Gehman Rd. in Harleysville, PA.

The 97,200-square-foot manufacturing building was built in 1989 and is located in the East Montgomery County Industrial submarket. The tenant will take occupancy of the entire building by the end of this year."

Wednesday, July 6, 2011

Drug-industry exodus leaves suburban offices vacant

By Joseph N. DiStefano

"Center City's office market is still lots weaker and cheaper than New York's. But vacancies have slipped lower for three quarters in a row, to 14 percent at the end of June, from 15 percent three months earlier.

It's worse in the suburbs, where the drug industry, whose glass offices and labs stud the U.S. 202 corridor south to Wilmington, have lately been abandoning space, instead of renting new offices and hiring people.

In the city's Pennsylvania suburbs, and in northern Delaware, vacancies edged up to nearly 18 percent, as drug companies cut back. GlaxoSmithKline, which is consolidating its Center City space to a smaller Navy Yard location, has also given up space at 600 Park Ave., King of Prussia. Locus Pharmaceuticals Inc. shut its Blue Bell facility. In Delaware, AstraZeneca is vacating buildings at its Fairfax complex.

South Jersey vacancies are similar, though banks and other financial companies there have started leasing new space, for the first time since the recession started.

Sunoco Inc., which last year put all 10 floors of its headquarters at 1735 Market St. up for rent as it sold plants and business lines, has done better than expected in filling space. It won new tenants for three floors, including Brazil-based Braskem, which last year bought Sunoco's polypropylene plant in Marcus Hook. The growing multinational chemical-maker FMC Corp. is staying put in four floors and will sublet an additional three.

Urban bargains?
As we noted last week, Standard & Poor's cut credit ratings for Toll Bros., citing the fact that the Horsham-based homebuilder was still buying land, despite the still-sluggish market for new homes.
"We don't think we're spending too much on land at all. We think it's a great time to buy" for future homes, chief financial officer Marty Connor told me.

He acknowledged, as S&P and Moody's have pointed out, that Toll has at least 13 years' worth of lots to build on - at the company's current sales rate of about 2,600 homes a year. But if the market rebounds, the supply "shrinks dramatically," Connor said. (Toll peaked at 8,600 homes a year before the 2007 meltdown.) Plus, in the Northeast, Toll's home market, "it takes a long time to get land approved - five to seven years in New Jersey," Connor said.

"We are sensitive to paying too much for land. We did that in 2005 and 2006," then wrote down more than $2 billion in land values from 2007-10, as property prices dropped 80 percent in Las Vegas and Phoenix, Connor said.

But Toll gets back up to 30 cents per lost dollar by claiming the drop against federal income taxes. That cuts the loss to maybe 50 percent, "which is a good recovery," compared with what other investors lost in the bubble, Connor added.

Wells Fargo & Co. economists warned last month that the home-construction market in the Northeast might not recover for a generation or more, given the region's slow growth.

No, says Connor: "The housing stock is aging," and more homes have been demolished than built lately. Already there are hot pockets, he said. "We're encouraged by what we see up in New York. We've raised prices 10 percent, year over year, in Hoboken and Brooklyn and Manhattan."

Sales are up at Toll's gated Naval Square development in Southwest Center City since the reopening of the South Street Bridge last fall, Connor said.

Toll has sold all but 12 of the 493 completed rowhouses and condos at Naval Square. "We just started digging the foundations" of the last 126 units that will be built at Naval Square, he added, to be offered at prices from $289,000 to $750,000.

Who are buying? Professionals working at Penn and Children's Hospital, both of which are expanding from University City into Center City. When Naval Square is done, Toll will break ground on 122 units to be built at 2400 South St. Emmons expects work to start by January."

Tuesday, July 5, 2011

Dwindling concessions good sign for office market

by Natalie Kostelni

"A couple of trends emerged in the second quarter. In the Center City market, though overall rental rates are basically unchanged from the first quarter, concessions are starting to dwindle at well-positioned assets, and smaller tenants have started to renew and expand their footprints but doing so by relocating within their existing building to accommodate this organic growth. Both of those I take as positive news for the office market …

Bluestone Real Estate Capital, a real estate investment banker, lined up $5.5 million in permanent financing with Firstrust Bank for the 30 remaining units at Old City Lofts, a 90-unit loft-style residential development project in the Old City neighborhood of Philadelphia. The five-year loan in the mid-5 percent range was secured on behalf of 806 Capital, a real estate investment and development company with offices in Philadelphia and Chicago.

Old City Lofts involved the conversion of three historic buildings — 10 Letitia St., 313 Arch St. (the Hoopskirt Building) and 209 Cuthbert St. — into a 90-unit luxury residential loft project with four ground floor retail condos. As part of the initial conversion, 60 of the residential units and two of the retail units were marketed and sold as condos, with the remaining 30 residential and two retail condo units to be kept by the sponsors as income properties, according to Bluestone. To date, 66 percent of the condo units available have been sold …

Wharton Business Group bought 2329 Yellow Springs Road in Malvern for around $515,000 from Customers Bank, which held the loan and took the building back. Wharton Business Group will use the renovated historic building as its new offices and will be relocating from Exton.…

Advanced Therapy leased 5,200 square feet at 1998 Route 70 in Cherry Hill.…

Leap Academy University Charter School bought a 15,000-square-foot building at 528-532 Cooper St. in Camden for $375,000."

Cowboys Tattoo Ranch in Paoli sold

by Natalie Kostelni

" Locals know Cowboys as a landmark and are apt to refer to it when giving directions. For old-timers, that will still hold true but now that the property at 2-18 E. Lancaster Ave. has traded hands, it will diminish.

A local partnership of three real estate investors going under the name Paoli Town Center LLC bought the 18,000-square-foot, four-story property structure for $925,000. The seller was Tim Bruni, who runs Bruni Tailoring out of one of the property’s commercial spaces. Apartments are on the upper floors."

Conshohocken office building sells for $4M

by Natalie Kostelni

"An office building in Conshohocken, Pa., has sold for $4 million, in what may be the first office property to trade in that submarket since 2005 when 300 Four Falls sold for a eye-popping $100 million.

Though not on that scale, this recent transaction may be the beginning of other sales to come in the submarket.

A partnership out of Jenkintown bought the 31,000-square-foot building at 375 Elm St. from Royal Bank, which had taken the property over. The building, constructed 10 years ago, is half-empty but the buyer is planning to make interior and exterior upgrades."

Developer O’Neill on hook for $5M judgment

by Natalie Kostelni

"As he struggles to deal with multiple judgments entered against him totaling tens of millions of dollars, developer J. Brian O’Neill’s woes have grown.

Firstrust Bank secured a $5.56 million judgment against O’Neill personally as well as against Washington Street Associates III LP, an entity affiliated with O’Neill Properties Group. The judgment was entered in Montgomery County Court on May 31 after O’Neill defaulted on a loan and forbearance agreement worked out between the developer and the bank, according to court documents.

The King of Prussia developer, through Washington Street Associates, had originally taken out a $2.2 million loan in October 2004, and a second, $3.8 million loan in July 2006. The money was being use to remediate the former Hale Products site at 433 Washington St. in Conshohocken in preparation for a residential project.

The bank and O’Neill worked out a forbearance agreement that laid out a payment schedule on the two loans as well for additional security on the loans. For that, O’Neill personally “unconditionally guaranteed” payment of the loans, interest and other fees associated with the loans, according to the agreement filed in court. A March 7, 2011, letter from Firstrust to O’Neill provided the developer with formal notice that Washington Street Associates was in default by not paying monthly interest on the notes beginning in November 2010 and failed to pay the loans off in full on their extended maturity date of Jan. 31, 2011. The bank added that it would seek judgment against Washington Street Associates as well as the developer personally.

Firstrust Bank, through a spokeswoman, declined to comment, citing pending litigation. Several calls to O’Neill weren’t returned.

Perhaps O’Neill has gone quiet as a reported settlement is being worked out or has been worked out between Citizens Bank and him. I’ve heard a range of different settlement figures, the latest around $42 million. Such a deal, if true, would put to rest litigation that erupted between Citizens and O’Neill after Citizens sought and secured in November 2009 a $61 million judgment against the developer for a loan taken out for the construction of Uptown Worthington in Malvern. O’Neill vowed to “go to war” with Citizens and filed an initial $8 billion suit against the bank that was subsequently lowered. The real estate company said in court papers it wasn’t in default and the bank had “engaged in fraud and deceit and had breached its contractual obligations,” according to documents filed in Chester County Court.

While that litigation was going on, the bank continued to try to put the Worthington development in foreclosure and filed a petition to appoint CB Richard Ellis as receiver until it was time to bring the property to sheriff sale, according to court documents filed in Chester County. Several hearings on that matter were postponed while the reported settlement was being worked out.

I’m eager to see how all of this will get resolved.

Many people who know Brian O’Neill personally call him a survivor. I’ve heard that description so many times that it’s hard to disagree with it and with that in mind, it will be interesting how O’Neill and his real estate company emerge from all of these challenges. He’s got office properties up for sale and other deals in the works. He is already thinking of the future, and is seeking a mall developer for a $2 billion, 8 million-square-foot mixed-use project in Sayreville, N.J. How the project would be financed couldn’t be disclosed, according to an email from Josh Greenwald, a spokesman for O’Neill on the Point.

The other interesting facet to this goes beyond O’Neill’s troubles and Citizen’s and Firstrust’s business maneuvers. It will be interesting to see how real estate developers and banks move forward once the market fully pulls out of the doldrums, the banks’ books are cleaned up of bad loans and developers begin to build again. Both sides have learned many lessons during the recession. Let’s see how they apply them."

Giant Supermarket to open in Northeast, Philadelphia

"Giant Food Stores said Tuesday it will open its first Philadelphia supermarket on July 20.

The 74,000-square-foot store, at 2550 Grant Ave. in Northeast Philadelphia, will be open 24 hours a day and include a pharmacy and on-site gas pumps.

During promotional periods, the grocer’s Bonuscard holders will receive a gasoline discount of 10 cents a gallon by buying $100 in grocery or out-of-pocket pharmacy items.

Giant said the store will have 275 employees, both full- and part-timers.

Giant Food Stores, which is based in Carlisle, Pa., has 139 stores statewide and 47 in Bucks, Chester, Delaware and Montgomery counties. It has 25,000 employees statewide."

PA warehouse rentals up; burb offices still weak

by Joseph N. DiStefano

"The big job payoff from Gov. Corbett's kindness to his natural gas developer pals may still be years in the future - if ever - but industrial spaces are filling back up in eastern Pennsylvania - America's Warehouse - thanks to a revival of import and export trade, according to new data.

That's good news for warehouse workers and truck drivers who haul imports to stores and exports from factories. But office leasing is still slow.

Philadelphia-area warehouse and other industrial vacancies have fallen to 8.6%, down from over 9% last winter, as wholesalers leased back nearly 2 million sq ft that went empty during the 2008 recession. That's a "welcome trend," but the Federal Reserve Bank of Philadelphia has warned, as he puts it, that "a slowing of manufacturing activity in the region may portend stalled occupancy" this fall.

Up in the Easton-to-Chambersburg I-81/I-78 corridor - the freeway alternative to the tollboths of the Pennsylvania Turnpike and I-95, thank you federal taxpayers - industrial vacancies dropped to 9.4% from 9.8% in the winter. As in the Philadelphia area, wholesale importers and exporters took more space.

But that's still not enough to encourage new construction, except up at developer Rob Mericle's speculative CenterPoint Commerce & Trade Park in Pittston. As in PA, South Jersey and Wilmington-area industrial vacancies have also fallen, to around 10%.

The office market is weaker. Center City Philadelphia is the bright (or less-bad) spot: vacancy is down to 14%, from 15% late last year, but still way above the sub-10% brokers measured way back in 2007.

Out in the burbs things are worse: In the PA suburbs vacancy edged up to nearly 18% as drug companies cut back. Tenants are still demanding deep concessions, especially up in Bucks and central Montgomery counties. South Jersey vacancies slipped just below 18%, though banks and other financial companies have started to add space again. Down in New Castle County, vacancies are still rising toward 18%, and likely to go higher as Wilmington Trust's new owner, M&T Bank, prepares to lay off redundant headquarters workers."

Friday, July 1, 2011

MIM-Hayden fund buys office buildings in Wayne

by Natalie Kostelni

"A local real estate fund teamed up with a Boston real estate investment firm to buy two buildings in the Valley Forge Office Center on East Swedesford Road in Wayne.

MIM-Hayden Real Estate Fund aligned with Davis Cos. to acquire the first mortgage on 530 and 580 E. Swedesford Road. The loan totaled roughly $44 million and was bought at a discount from CW Capital for somewhere in the low to mid-$30 million range, according to various real estate sources.

The two, four-story buildings total 258,000 square feet and are fully leased to Independence Blue Cross and GE Capital for the next four years.

“The bet we’re making is you have a four-year runway to get the building up and running,” said Anthony J. Hayden, principal of Hayden Real Estate Investments of Conshohocken.

The new owners intend to spend more than $13 million making exterior and interior renovations of which the most notable will getting rid of the drab red exterior and re-skinning the buildings with a facade that is more consistent with some nearby redeveloped office properties. The owners will also add a fitness center and cafeteria. D2 Solutions was retained to complete the design work.

The buildings had been owned by Keystone Property Group of Bala Cynwyd but the loan, which came due last August, was taken over by a special servicer and subsequently put out to bid. Keystone even attempted to buy the loan.

“The note was marketed for sale and Keystone aggressively bid to purchase the note,” said William H. Glazer, president of Keystone. “Based on Keystone’s experience as a buyer and seller of real estate in this market, where we own and operate more than 3 million square feet, we determined in the final bidding for the note, the capital required to purchase the note on risk adjusted basis was better deployed in other investments.”

Such loan sales are common these days as lenders try to get rid of bad commercial mortgages on their books and sell loans at a discount and owners try to buy their own loans to regain control of the property but at a lower price than the loan. These sales have helped to push down commercial real estate prices here and across the country. Moody’s/Real National All Property Price Index that was released last week indicated that commercial real estate prices slipped by 3.7 percent in April.

Even though transaction volume has increased, many are distressed transactions and that has hindered a broad market recovery at this time, according to Moody’s. Distressed sales have comprised at least 20 percent of the repeat-sales transaction volume for 17 consecutive months, according to Moody’s data. On the bright side, trophy properties in top-tier markets started a year ago to experience a price recovery and that continues.

Keystone bought the six-building Valley Forge Office Center, which totals 480,000 square feet, in 2005 for $64 million from the Ashforth Co. of Connecticut and GE Capital. Keystone launched a major, multimillion-dollar renovation of the six buildings soon after it acquired them. Four of them were transformed into Class A space and 530 and 580 E. Swedesford — the buildings the fund and Davis bought — were left as is.

While Davis focuses on repositioning distressed assets, the Valley Forge acquisition is the type of deal the MIM-Hayden fund is seeking out for its $108 million fund it closed on in March. The fund is co-managed by Miller Investment Management and Hayden Real Estate Investments and is targeting underperforming office, industrial and flex properties within a 200-mile radius of Philadelphia. It is looking to make a significant bet on the Washington market and is also interested in Center City. Hayden Chairman J. Anthony Hayden (Anthony J. Hayden’s father) stepped down from his seat on the Liberty Property Trust board so he could pursue properties he may have competed with Liberty to buy.

While Hayden has a long history in real estate, Miller Investment, which manages and invests money on behalf of high-net-worth families and institutions, was seeking to add real estate to its offerings.

“Real estate is an area that is very important for our clients,” said Radcliffe Hastings of Miller. “We think the timing is good.”

Davis focuses on the redevelopment of distressed assets and was looking to enter the Philadelphia market. It anticipates joint venturing with the MIM-Hayden fund on other acquisitions.

It has used 20 percent of the fund on five properties totaling 325,000 square feet as well as a 46-acre in-fill tract in Montgomery County. It expects to close four deals this month and to fully invest the fund over the next two years."

Rentals in Middle America Return Big

2Q Avg Philadelphia Commercial Real Estate Rents and Purchase Prices

Philadelphia Avg. Office Rents 2Q 2011

Philadelphia Avg. Office Purchase/sqft 2Q 2011

Philadelphia Avg. Industrial Rents 2Q 2011

Philadelphia Avg Industrial Purchase/sqft 2Q 2011

Flurry of Deals in Chester County

"The first deal involved the sale of three units at the newly constructed Lincoln Independence Park in West Chester. The 8,100 SF flex / industrial condominium was purchased by 4 Moses Properties, LLC and will be used for office and warehouse space for a locally owned distribution company.

Another recent transaction also included one 2,700 SF unit at Lincoln Independence Park. This space will also be used for office and warehouse space for a local company serving the international electrical generation industry. The Buyer was NWES Holdings, LLC.

The sale of 2329 Yellow Springs Road, Malvern, PA. This historic office building will be used as the future offices of Wharton Business Group, an Exton, PA based financial and business planning firm. The Buyer was 2329 Yellow Springs Road, L.P. and the Seller was Customers Bank."

25,000 + Square Foot Office Space Expansion for RPS

"The Landlord, Commonwealth Real Estate Investment Trust in the expanded Research Pharmaceutical Services' space at 475 Virginia Drive in Fort Washington, PA.

Research Pharmaceutical Services (RPS) occupies the entire 2nd floor at 475 Virginia Drive which totals 25,517 square feet of office space. RPS moved into the space in December 2010 and due to substantial company growth, they required additional space. At the beginning of May 2011, RPS signed a long-term lease agreement for the entire 3rd floor of the building (25,517 square feet), giving them a total of 51,034 square feet within the Class "A" office building.

This transaction brings the building up to just over 90% occupied."

Communications Construction Group, LLC Leases 10,060 Square Feet in West Chester

"1060 Andrew Drive in West Chester, PA is 10,060 square feet of office space to Communications Construction Group, LLC.

The aggregate rental of the lease is in excess of $965,000.

Communications Construction Group, LLC., was founded in 1979, and since that time, has become the nation's largest, most respected, and successful full service construction company. They have developed an excellent reputation for designing, building, splicing, and engineering quality coaxial and fiber optic distribution systems.

Situated at the corner of Andrew Drive and Phoenixville Pike right at the entrance of the West Goshen Business Park, this one-story office building contains a total of 43,180 square feet of space featuring a two-story atrium lobby, extensive parking for 195 cars and is adjacent to a bank and day-care center. Other tenants currently occupying the building include, Stantec Consulting Services, Inc. and Strategic Wealth Management Advisors, LLC."

Former Trenton Bank Branch Sold

"The sale of 226 South Broad Street to Conrado Poblete was completed. The property is 8,132+ square feet and was formerly operated as a bank branch. The property is a Trenton landmark location at Market and Broad Streets across from the County Court House."

Drexel University Renews Sublease in Malvern

"Drexel University's Bennett S. LeBow College of Business has renewed their multi-year sublease for their satellite campus for 7,526 square feet of office space on the second floor of Quarry Ridge located at 2 West Liberty Boulevard within the Great Valley Corporate Center.
The sublease contract is with Sanchez Computer Associates, LLC, the original leasee of the space.

Aggregate rental of the long-term agreement exceeds $1,000,000.

The space occupied by the College at 2 West Liberty Boulevard features reflective glass and architectural masonry spandrel construction in a signature building with a spectacular two-story atrium entry foyer. The extensively landscaped building site includes front-door parking with access to multiple entrances.

Great Valley Corporate Center is located at Route 29 and Swedesford Road, within walking distance of the Desmond Hotel/Conference and The Shoppes at Great Valley."

Winthrop Properties, LLC, acquires 516 Stump Road, Montgomeryville

"Winthrop Properties, LLC, an entity related to Panadyne, Inc., acquired 516 Stump Road, Montgomeryville Industrial Center, Montgomeryville,PA. Winthrop Properties, LLC, purchased the property from CFC Investors, Ltd. The 22,890 square foot one-story building located on 2.48 acres and sold for $1,400,000 or about $62/sqft."