Wednesday, November 30, 2011

New Breed Inks 76,500 SF Warehouse Space

New Breed, a third-party logistics company, leased 76,500 square feet of warehouse space at 2303 Center Square Road in Swedesboro, NJ.

Located in the Pureland Industrial Complex, the 203,229-square-foot industrial building sits on more than 15 acres. The property features 30 loading docks, heavy power, and 30,000 square feet of built-out office space.

Dunham Sports Leases 58,000 SF at Schuylkill Mall

Dunham Sports, a sporting goods retailer, signed a seven-year lease for about 58,000 square feet in the shopping center at 432-830 Schuylkill Mall in Frackville, PA.

The 726,674-square-foot retail mall is located in the I-81 Corridor submarket of Philadelphia. It was developed in 1980 and sits on 185 acres.

Holtec Int'l Buys Two Marlton Office Bldgs for $22.8M

Brandywine Realty Trust sold two office buildings in Marlton, NJ. The buildings sold for $22.8 million, or about $111 per square foot, as an investment by Holtec International, Inc.

Five Greentree Center is a 165,956-square-foot, four-story, class A office building located at 525 West Lincoln Drive. Lake Center II is a 40,287-square-foot, single-story office building located at 30 Lake Center Executive Parkway. Five Greentree Centre is part of the Greentree Centre building park and sits on about 13.9 acres, while Lake Center II sits on about 6.36 acres of land and is part of Lake Center Executive Park. Both buildings are located very close to Route 73 N, and both were built in 1986.

How to jump start commercial real estate?

Kimco on Holiday Sales

Tuesday, November 29, 2011

Liberty Property starts U. of Pennsylvania medicine site

by Natalie Kostelni

"Though a ceremonial ground breaking was held last month, construction begins today on a $72 million medical office building at 8th and Walnut streets in Philadelphia for Penn Medicine.

The 12-story office building will be constructed by Liberty Property Trust on top of a seven-story parking garage operated by Parkway Corp. of Philadelphia. It will be completed in less than two years. Liberty is based in Malvern, Pa., and Parkway brought the company in to partner on the project.

The building is the fourth and final phase of a development that started in 1984, according to Parkway. The parking company constructed the garage, which ended up being phase one of the overall project. At the time, it had envisioned developing twin apartment structures on the eastern and western sides of the building but that never happened. Instead, for phase two, Parkway converted a part of the garage to medical offices and Jefferson University Hospital occupies that space. The construction of Wills Eye Hospital’s 125,000-square-foot medical facility ended up being phase three. Once the medical building is completed, a total of 650,000 square feet will have been constructed."

King of Prussia mall plans new wing

"Just months after acquiring majority ownership of the King of Prussia mall, real estate behemoth Simon Property Group Inc. is set to announce plans Tuesday for a new wing of stores and restaurants that would turn the East Coast's largest shopping mall into an even more formidable retailing powerhouse.

Particulars of the plan center on the construction of a 140,000- square-foot indoor corridor to connect the Court with the Plaza at the 2.6-million-square-foot mall.

The troubled economy's impact on consumer spending has not crimped King of Prussia's appetite to expand, due to its geography: It is located among some of the Philadelphia-area's highest-income households.

"This is a uniquely wonderful market," said David Contis, who became president of Simon Malls five months ago after working with Chicago-based real estate magnate Sam Zell and who is trumpeting the expansion plan.

Within a 10-mile radius of the Montgomery County mall, 41 percent of households have incomes of $100,000 or greater. That area is home to more than a half-million people in 220,000 households.
This has helped make the King of Prussia mall the envy of retail landlords nationwide by boasting retail sales of $700 per square foot - a figure so high it is shared by only a small handful of other malls nationwide.

Its performance is so hot that it is dubbed a "trophy" mall, in industry parlance.

Another reason King of Prussia has the financial wiggle room to invest in capital expansion despite the difficult economy is that it has a wide array of stores catering to financially squeezed shoppers and the more well-to-do.

Among its 327 stores are Bloomingdale's and Neiman Marcus on the high end, middle-market Sears and Macy's, too, and an equally diverse offering of specialty stores.

"When luxury is doing well, maybe the mid-market [retailer] isn't," Contis said. "We have such a diversity of tenants, we can weather the storm."

He added, on a more short-term optimistic note, that early tallies of consumer spending during the Black Friday holiday were encouraging compared with the prior year.

"If you look at retail sales for this Thanksgiving," Contis said, "they were pretty good."

A single holiday sales report, however, is not the driver behind such a massive decision. The expectation of an eventual economic recovery - and the desire to cash in when it comes - are the true catalysts in this sector, said investment analyst Benjamin J. Yang, who monitors Simon's financial disclosures and business moves for Keefe, Bruyette & Woods Inc., of San Francisco.

Yang said this expectation was the operative force at work at various construction projects under way across the country, whether it be a new outlet mall - Simon is the largest owner of outlet malls nationwide and owns Philadelphia Premium Outlets in Limerick - or upgrades of regular malls. (An expansion project is on tap also for Willow Grove Mall, owned by Simon competitor Pennsylvania Real Estate Investment Trust, based in Center City.)

"The construction that's going on today is based on an expectation of what the economy's going to look like a few years from now," Yang said. "Commercial real estate, retail real estate is a very long-term business."

Simon came up with the idea for King of Prussia soon after the publicly traded company increased its 12 percent stake in the mall to 96 percent, in August, according to Contis.

"We just created the concept," he said. The newly minted Simon company executive said he first discussed the idea of building a new corridor of upscale shops and dining spaces in a meeting with Upper Merion Township officials Oct. 26.

He expressed confidence that his leasing team would have little trouble securing commitments from prospective tenants as the project moved closer to reality.

"It could open in a couple of years," Contis said. "We have the demand for space."

Designs and approvals are still in early stages, but the plan is to construct an enclosed corridor of shops - including restaurants that would be run by notable Philadelphia restaurateurs, Contis said - linking the 1.7-million-square-foot Plaza with the 900,000-square-foot Court.

This would eliminate the need for shoppers to walk across a covered outdoor walkway to leave one wing of the mall to get to the other. The corridor would be built in a parking area.

New tenants could include national retailers looking to land their first spot at King of Prussia, merchants who want to relocate from elsewhere in the mall, or small local boutiques looking to expand, Contis said.

It would come after the planned completion next year of a 122,790-square-foot redo of a onetime John Wanamaker department store anchor at the mall. Most of that new space, to be carved into 10 new stores, should be leased by the end of this year end and open in 2012, Contis said.

The Wanamakers construction project was already under way when Indianapolis-based Simon, billed as the nation's largest real estate company, took a controlling interest in the formerly privately owned mall this fall.

Simon has sufficient cash from operations to finance the new project."

Talking Numbers: Retail REITs

Thursday, November 24, 2011

Dranoff team rescues troubled luxury condos

"The fog of uncertainty that has enveloped the 10 Rittenhouse Square condominium project is finally lifting, says the property's receiver, Carl Dranoff.

Two years after its developers took the wraps off the $300 million, 33-story building at 18th and Walnut Streets, enough of the haze has dissipated that 15 units have closed in the last five months.

All but one went for $1 million or more, and the lowest-priced sold for $890,000, said Dranoff's marketing director, Marianne Harris. Fifty of 10 Rittenhouse's 150 units have now closed.

Dranoff, president of Dranoff Properties, was appointed receiver June 7, but "it took us at least 30 days," he said, "to figure everything out."

When his team arrived, no one even knew how many units the Robert M. Stern signature building was supposed to have.

"There are . . . uncompleted floors in the building, 28 to 32, and no one had decided whether they were going to have single units or more," said Dranoff. "We are selling 32 as a single floor and have a buyer who hasn't yet closed, and 31 is sold and divided, but we are trying to make that one unit."

Floors 28, 29, and 30 now will have four units each. Raw (unfinished) space runs $900 to $1,100 a square foot.

As his own projects - from the Left Bank in University City, to 777 S. Broad St. in Center City - have demonstrated, Dranoff is into details.

"Until now," he said, handing over a slick new brochure for 10 Rittenhouse, "there wasn't even one of these."

Pricing was another hurdle. As the project faced legal and public-relations difficulties, prospective buyers began trying to set their own prices, often prolonging negotiations for as long as two years and scaring off those who feared the haggling would whittle away the value of the units they had already purchased.

In addition, Dranoff said, some lower-floor condos were priced higher than those on the more-desirable upper levels.

Both situations have changed, he said: Prices have been firmly established, and higher floors command more.

Crucial for Dranoff will be restoring confidence in the product, which took several knockout punches after developers Robert Ambrosi and Harold B. Wheeler, operating as ARCWheeler, launched 10 Rittenhouse Square on Nov. 10, 2009.

Among them: The grand opening came almost 21/2 years later than planned, missing the real estate boom by a mile because of legal appeals, which added at least $100 million to construction expenses.

"It was delivered at the wrong time," Dranoff said.

The delay and its accompanying costs led many who had signed contracts for units to pull out or pay higher prices, further compounding the effect the real estate market's downturn had on sales.

Wheeler's death in January 2010 added to the building's troubles. In July 2010, the project's mezzanine lender, Delaware Valley Real Estate Investment Fund, took over the project. That September, Istar Financial of New York, the senior lender, sued to foreclose.

On Dec. 30, just as Common Pleas Court Judge Albert W. Sheppard Jr. was ready to name Dranoff receiver, the investment fund, then operating as the developer, filed for federal bankruptcy protection. That bid was rejected in May, and the developer agreed not to contest Istar's foreclosure.

The building will go to sheriff's sale Jan. 10, Dranoff said, noting that "Istar goes from being lender to owner" when the deed is transferred about 30 days later.

When Dranoff was appointed receiver, Istar Financial vice president Cynthia Tucker said that he was in charge of operations and that the lender "will act on his recommendations."

That has, indeed, happened, Dranoff said.

"Istar's strategy is to roll out the building as an elite Robert M. Stern product, like 15 Central Park West in New York," he said. "I didn't know what to expect, but I've been pleased and surprised at how closely I've been able to work with Istar as the de facto developer."

From the $225,000 redo of one of the 3,700-square-foot, $3.2 million, three-bedroom, 18th-floor units that is critical to the sale of 15 others like it, to the renovation and expansion of third-floor amenities, to turning the second level into a "bicycle floor with its own concierge," Dranoff has put his stamp on 10 Rittenhouse.

Harris heads a brand-new sales team there, but she and Dranoff stressed that moving the condos would depend on real estate brokers and their agents.

"They account for 70 percent of sales," Harris said, and to get brokers and agents to bring prospective buyers to 10 Rittenhouse, they had to be able to demonstrate that the situation had changed for the better.

So demonstrated, said Prudential Fox & Roach vice president Joanne Davidow, who was involved in selling the units even as the building was under construction.

"It is being run as a first-class operation. There has been a respectable amount of sales since Carl has taken over. There is lots of interest," Davidow said. "I just sent clients information about it this morning, and I plan to take them to see the new models soon."

As he walked through the building last week, Dranoff said he would not have done many of the things ARCWheeler did. There seemed to be an overemphasis on million-dollar-plus units, he said, even though a studio goes for $375,000 and a one-bedroom for $575,000 .

Opening the door of one model, he said, the first thing you see is a bedroom at the end of a hallway that overlooks Rittenhouse Square.

"They lacked the seasoned experience of a residential high-rise developer," Dranoff said. "It should have been the living room."

Wednesday, November 23, 2011

SEER Interactive Expands Philadelphia HQ

SEER Interactive, a leading search marketing firm, today announced that it has completed the move to new Philadelphia headquarters to accommodate the company's rapid growth. SEER has added 27 employees in the past two years and was recently named for the fourth consecutive year to the Philadelphia 100 list of fastest growing, privately held companies in the Philadelphia region.

SEER's new headquarters, located at 1028 N 3rd Street in Philadelphia's Northern Liberties​ neighborhood, occupies 13,000 square feet of historic space that was built in 1850 and formerly housed a Methodist church. The main hall has been renovated and reconfigured to accommodate SEER's staff of SEO and SEM consultants. The second floor features an open meeting space for meetings and conferences.

"Our new headquarters provides us with dynamic office space that fits out startup personality while allowing us to grow our business and deepen our Philadelphia roots," said Wil Reynolds, founder of SEER Interactive. "SEER is committed to hiring and retaining the very best search consultants and my hope is that this new space will provide our team with the right work environment and creative outlets to do their best work."

"SEER wanted to give our team a place that inspired them to develop unique, custom and creative solutions for our clients," continued Reynolds. "Fulfilling that mission begins with having a unique space that encourages that kind of thinking. It amazes me how companies all too often expect out-of-the-box solutions from teams working in in-the-box environments. We wanted to be different."

SEER Interactive continues to grow and the agency currently has several SEO and PPC job openings.

Friday, November 18, 2011

Subleasing Office Space Can Be Risky If You Are Not Careful

"With all of the available office space available throughout the country And the economy still in the dumpster, many business are looking towards subleasing as a way to save money on their office rent. In almost every case a tenant can save anywhere between 10% and 50% off the current market rents through a sublease. It sounds like a good deal and in many cases it is, but as in all investments the return (savings) is related to risk. Subleasing space is a risky proposition. One in which it is very important to have a qualified expert assisting you to make sure you avoid costly mistakes or even worse, potentially cause your business to go under.

What are the risks?

First and foremost, what happens if the former tenant sub-landlord goes bankrupt? Most leases have a clause in them cancelling the lease or giving the landlord the right to cancel the lease if the tenant declares bankruptcy. If this happens and you do not have any protections, you will either be out on the street or paying higher rents.

What happens if you are paying rent to the former tenant sub-landlord, but they are not paying the landlord the full amount of the rent due? They are in default of the lease and therefore you are too. What happens if the landlord decides to give them the boot? Will you be able to stay in the space at the same rate you are currently paying? There is no guarantee that your sub-landlord will fulfill their obligation to pay the remainder of the rent or even the rent you pay to them to the landlord.

Although rare, hazardous waste can be another issue, especially if there is land involved. If your sub-landlord caused any hazardous waste, you could find yourself liable to clean it up. Cleaning up hazardous waste is not cheap.

There are ways to protect yourself when you are subleasing office space, but each sublease brings on different nuances that will need to be handled uniquely. A good real estate professional will be able to mitigate the risks for you through a number of different means. The most important one would be a no-disturbance agreement signed by the Landlord and notarized. Not all landlords will agree to one, so other means of protection will need to be developed.

If you decide to sublease office space, make sure you protect yourself by partnering with a qualified commercial real estate professional. You will be glad you did."

Wall Street & Real Estate

Five Tower Bridge building for sale 2nd time in 3 years

by Natalie Kostelni
"Five Tower Bridge, one of the premier office buildings in the suburbs, is up for sale just three years after it was bought by a California company.

KBS Realty Advisors of Newport Beach, Calif., bought the eight-story, 222,058-square-foot building at 300 Barr Harbor Drive in West Conshohocken for $73 million, or around $327 a square foot, in October 2008. It’s expected to trade for roughly the same amount this time around. (The highest office trade on a per-square-foot basis was in 2005 when BPG Properties sold 300 Four Falls, a 290,000-square-foot office building in West Conshohocken, for a staggering $100 million, or $340 a square foot.)

Five Tower was constructed by Oliver Tyrone Pulver in 2001 as part of the company’s Tower Bridge office complex that has developed over the years in West Conshohocken and Conshohocken. As with the other Tower Bridge buildings, it was designed by Skidmore Ownings & Merrill. It has a parking garage that can accommodate 700 vehicles. KBS declined comment.

The building is fully occupied and many of the tenants are in the space for the long term. Keystone Foods leases 50,000 square feet through 2019, Oracle America Inc. is in 49,000 square feet until 2020 and Hirtle Callaghan & Co. occupies nearly 30,000 square feet through 2021, according to a person familiar with the building.

Those characteristics, being in a strong submarket, fully leased with a cadre of top tier tenants, is the type of building that appeals to nervous commercial real estate investors. The investment market for office properties is struggling through a glut of distressed buildings working their way through special servicing, foreclosure and other issues. That had made sale velocity all but stagnate except for top-of-the-market buildings.

Few office buildings are on the market or have traded. In Center City, 1700 Market St., a 32-story, 841,000-square-foot office tower, sold for $143 million. In Evesham, N.J., Brandywine Realty Trust sold a portfolio comprised of 10 Lake Center and three buildings in the Greentree Corporate Center totaling 243,000 square feet for $22.8 million. Grubb & Ellis arranged that sale.

The office investment market remains challenging.

“In general, assets in the suburbs have been tough assets to sell over the last few years but Radnor and Conshohocken have been the most well-received investors. If you’re going to sell, you want to sell in Radnor or Conshohocken.”

Those two submarkets see rent growth and low vacancies.

The Central Business District is a different story. Many buyers don’t even consider Philadelphia these days.

“It’s not a growth city,” he said, noting that rent growth is limited."

Economic Outlook

The Reinvestment Fund completes its move to 1700 Market St.

by Natalie Kostelni

"The Reinvestment Fund has completed its move to the 17th floor of 1700 Market St. in Center City and held an open house yesterday to show off its new space.

It’s vastly different from its old digs at the Cast Iron Building at 718 Arch St., where it made its home for more than two decades. Its new 22,000-square-foot offices are very efficient and on a single floor compared with being scattered on three floors at Cast Iron.

The layout allows departments that work together to be close enough to facilitate easier communication. The offices are also purposefully more inviting to outsiders. They were was designed by Partridge Architecture with an assist from TRF’s Graciela Cavicchia, vice president of operations for TRF Development Co., TRF Development Partners, so that TRF could share its space. Several meeting rooms were carved out of the space to allow community groups and other nonprofits to “borrow” these rooms, free of charge, for meetings.

The office also has wall space where it will display rotating art exhibits. Its first is of Brandywine Print Workshop pieces. It also has a permanent art installation by Elisabeth Nickles that greets visitors at the reception area.

TRF signed a 15-year deal on the space in a deal."

Miami Dolphins Owner Stephen Ross on Economy

Thursday, November 17, 2011

Brandywine Realty Trust apartments rejected in suburban Phila.

by Natalie Kostelni
"A plan proposed by Brandywine Realty Trust to construct a 389-unit apartment complex at Plymouth Road and Butler Pike got shot down by Plymouth Township council.

The Times Herald reported that the developer, which owns office buildings in the suburbs and Center City, had proposed to construct the multifamily project on 20 acres in the Montgomery County, Pa., municipality.

Residents had worried about increased traffic the development might cause. A traffic study conducted by Radnor, Pa.-based Brandywine (NYSE:BDN) said the impact would be minimal."
Full story:

Simon Property to welcome Wegmans at Phila.-area mall

by Peter Van Allen
"Wegmans Food Markets will take over a vacant anchor position at suburban Philadelphia’s Montgomery Mall, the mall’s owner said Wednesday.

The store will be 140,000 square feet in what was once Boscov’s, Simon Property Group Inc. said.

It will be Wegmans’ first store in a Simon property and signals another shift in mall owners wanting to have more food offerings, including both supermarkets and fine dining.

On Tuesday, the owner of the Moorestown, N.J., Mall, Pennsylvania Real Estate Investment Trust, said it plans to add as many as four fine-dining establishments.

Montgomery Mall, in North Wales, Pa., is 1.15 million square feet; other anchors are Macy’s, JCPenney, Sears and Dick’s Sporting Goods. Boscov’s closed its department store there in October 2008 as part of its bankruptcy restructuring.

Simon Property Group of Indianapolis is the majority owner of the King of Prussia Mall."

Wednesday, November 16, 2011

16,000 SF Building Sale in NJ

"16,000 Square Foot Sale of Retail Property on Busy Route 73, Marlton, Burlington County, NJ
There was a sale of a 16,000 sf retail building at 120 Route 73 in Marlton, Burlington County. The property sits on 3.75± acres right at the new overpass on Route 73. 120 Route 73, LLC was the seller and Collision Care, Inc. was the buyer. The new owner purchased the building as an investment and plans to open his own business there as a collision service company serving the Delaware Valley. Sale price was not disclosed.

821 N. Bethlehem Pike, Spring House, PA leases to Born to Run

"Former 3,130SF 'A - Z Rental' at Spring House Plaza, 821 N. Bethlehem Pike in Spring House, PA lease to new tenant 'Born to Run'. They will be using it for the retail sale of running shoes, apparel and accessories. The aggregate, multiyear leasehold was valued at $221,000.

The former tenant of this space, 'A to Z Party Rental', started in 1968 in Flourtown, Pennsylvania, and moved to its location in Spring House, Pennsylvania, in 1980. Their new location in Montgomeryville is 28,000 sq. ft., including a 2,400-sq.-ft. showroom, a 2,800-sq.-ft. kitchen and a 600-sq.-ft. office area," Melani Kodikian, A to Z's president says.

'Born To Run' is a full service running specialty store located in Springhouse Pennsylvania, and now also in Lafayette Hill Pennsylvania, both about 20 minutes north of Philadelphia. They are runners with years of experience fitting all types of runners and walkers. It will begin moving its former location not even a block away starting Nov 1st, 2011."

PhillyDeals: How Philadelphia attracted a new Teva

by Joseph N. DiStefano

"After losing business to its newer, lower-cost neighbors, job- and tax-hungry Philadelphia is finding ways to welcome business that surrounding counties can't or won't attract.

"In the suburbs, this would be impossible," says Jim Petrucci, speaking of Teva Pharmaceuticals' new Northeast Philadelphia trucking and warehouse site.

Petrucci, owner of broker J.G. Petrucci & Sons in Asbury, N.J., represented investor John Parsons and his partners in landing Teva for the site.

Israel-based Teva's plant will rise on Red Lion Road, on 136 acres at the site of the short-lived Island Green Country Club, part of the former World War II-era Budd Co. complex that made cargo planes and railcars.

"When they put in the golf course, they left the underlying [industrial] zoning in place. And that's what made the deal work," Petrucci told me after speaking at last week's Urban Land Institute forum at the Union League.

Besides land for a million-square-foot-plus warehouse, Teva wanted hangar-like 125-foot floor-to-ceiling clearance. In most suburban towns, Petrucci says, "The zoning would cap a building height at 60 feet. People don't want giant buildings in the suburbs."

Teva had been trying to pick from among three suburban sites, including a former quarry in Warrington. Neighbors there mobilized against what they expected to be 24-hour truck traffic.

"Then we went to Philly, and they had not only the zoning, [but also roads and utilities] that could handle the project. It would have taken 20 times the site prep in the suburbs," Petrucci said.

Gov. Corbett sweetened the package by promising Teva a $2.5 million Redevelopment Assistance Capital grant. Teva earned $1.3 billion in profits over the last 12 months.
City agencies - the Philadelphia Industrial Development Corp., the Water Department - sweated the details, Petrucci says. "I've been doing this a long time, and I don't think we've ever been received this well," he told me. "Our experience, on a scale of 1 to 10, was a 12. Mayor Nutter was proactive and understood very early what this represented in terms of tax rateables for the city."

Tuesday, November 15, 2011

Buccini to build 116 riverside apartments

"Wilmington's Buccini/Polllin Grojup plans a new 116-unit apartment complex, "The Residences," at their Justison Landing development on the Christina River near the little city's Amtrak station. Units will lease around $1,250/one bedroom, $1,500/2 bedrooms. No public construction subsidies, the company says.

Brothers Chris and Mike Buccini stumbled with condos in the neighborhood during the recession, but after selling their inventory cheap at auction they're back with what the low-interest but tight-credit market now demands: rentals."

Monday, November 14, 2011

Philadelphia's Retail Vacancy Decreases to 6.5%

"The Philadelphia retail market did not experience much change in market conditions in the third quarter 2011.

The vacancy rate went from 6.6% in the previous quarter to 6.5% in the current quarter. Net absorption was positive 959,662 square feet, and vacant sublease space increased by 44,932 square feet.

Tenants moving into large blocks of space in 2011 include: Walmart moving into 125,040 square feet at 2801-A East Market St; Target moving into 125,000 square feet at High Pointe Commons; and Nordstrom moving into 122,000 square feet at Christiana Mall.

Quoted rental rates decreased from second quarter 2011 levels, ending at $14.03 per square foot per year.

A total of 14 retail buildings with 406,855 square feet of retail space were delivered to the market in the quarter, with 1,853,865 square feet still under construction at the end of the quarter.

This trend is compared to the U.S. national retail vacancy rate, which decreased to 7% from the previous quarter, with net absorption positive 18.85 million square feet in the third quarter."
Full research:

Saturday, November 12, 2011

Cocoa Services LP Completes Purchase in Pureland Industrial Complex for $2M

"Barry Callebaut USA LLC sold the industrial building located in the Pureland Industrial Complex to Cocoa Services, Inc. for $2,075,000, or about $32 per square foot.

Located at 400 Eagle Court in Swedesboro, NJ, the 65,804-square-foot industrial facility was built in 1995 on more than six acres. The new owner is going to occupy the entire facility."

Friday, November 11, 2011

New to Market, space at Two Commerce

by Natalie Kostelni
Full story:

"For the first time since Two Commerce Square was constructed in 1992, space is available on the upper portion of the 41-story office tower at 2001 Market St. —and nearly 100,000 square feet of it.

Ernst & Young, which is one of the tenants who moved in when the building was built for Conrail, signed on to stay in the office complex but in smaller space, on lower floors and in adjacent sister tower, One Commerce Square. The accounting firm struck a 12-year deal to lease 75,000 square feet on the sixth and seventh floor as well as a portion of the eighth.

This is a reduction in the space the firm had been in when it occupied floors 28, 35, 36, 37, 39 and 40 and totaling 96,000 square feet. Though it cut its space needs, the firm slightly increased its head count of roughly more than 810 employees by making its new space more efficient.

“The space they were in was 20 years old and the way they work now, it’s dated,” said Morgan Murray, senior managing director with Thomas Realty Partners, who helped arrange the Ernst & Young renewal.

Companies are starting to move from a cubical culture to one in which employees work side-by-side on long tables and don’t need as much space because of technology and telecommuting and more room dedicated to collaborative space. Where each employee used to get 250 square feet in space planning, now it’s 140 square feet.

“It’s dramatically different,” said Joe McManus, senior vice president at Thomas Realty. “These spaces are in need of a major overhaul and tenants are recognizing that.”

Chris Bruner, managing partner of Ernst & Young’s Philadelphia office, said that the firm wanted to stay on that side of the city because it’s close to 30th Street Station and convenient to the homes of many employees. It was important, however, to have new space designed to be more efficient.

Though floor 28 isn’t in the high-rise portion of Two Commerce, the remainder of the floors Ernst & Young had filled are. Their availability for the first time will likely be welcomed by the office market.

“It brings a little competition to the top of the trophy market that hasn’t been there. Even though the market hasn’t been all that active, all of the large blocks of trophy space is all but gone. There’s a sprinkling of sublets bit large blocks aren’t available.”

For example, space Unisys Corp. vacated at Two Liberty Place has been backfilled by Buchanan Ingersoll, a law firm, and Studley Inc. and a portion of the space Sunoco Inc. emptied out of at Mellon Bank Center has been subleased. Three Logan has made a dent in its vacancy with Janney Montgomery Scott taking 147,000 square feet.

Class A space in the Central Business District experienced a relatively tight 8.1 percent vacancy rate in the third quarter of 2009 only to have that swell to 15.1 percent by the third quarter last year. It has since edged down to 9.4 percent.

For Commerce Square, the floors from 15th down compete with the entire office market. The upper floors get attention from tenants looking for trophy space. McManus thinks the space in Two Commerce will get filled by several small tenants rather than one or two large firms.

Ernst & Young will move into its new space at the end of the year.

Chinatown proposes a $70 million, 23-floor building for 10th and Vine Streets

by Natalie Kostelni
Full story:

"Philadelphia Chinatown Development Corp. is seeking to build a $70 million, 23-story mixed-use tower at 10th and Vine streets that would create a flagship structure in Chinatown and push the future direction of the neighborhood north.

The building, called the Eastern Tower, would total 227,000 square feet and include 144 apartments, offices, recreational and retail spaces as well as a parking garage.

“It’s been a long time in the works, and we’re pretty excited about the progress we made this year,” said John Chin, executive director of PCDC.

The building would sit on three parcels totaling nearly a half-acre that Chin’s organization acquired this year. It has done initial site work and is scheduled to go before the Philadelphis Zoning Board of Adjustment Nov. 16.
“During the last decade, Philadelphia experienced a significant migration of Chinese-Americans relocating from New York to Northeast and South Philadelphia because Philadelphia is more affordable,” Chin said.
PCDC will seek out New Market Tax Credit funding to finance the project as well as arrange a loan for roughly 15 percent of it."

Thursday, November 10, 2011

BA Partners LP Sells 76,000 SF in West Chester

"Acero Holdings LLC acquired a vacant industrial building located at 1340 Enterprise Drive in West Chester, PA from B A Partners LP for $3.7 million, or about $48 per square foot.

This property was delivered in 1989 and totals 76,000 square feet. It has been vacant since April 2010 when the previous tenant's lease expired. This building will now be used by the owner as a location for its existing business, Acero Precision."

Wednesday, November 9, 2011

Inquirer Building in Philly Sells for $22.7M at Auction

Philadelphia Media Network, Inc. sold the Inquirer Building to Tower Investments, Inc. at auction for $22.7 million, or about $43 per square foot.

Located at 400 North Broad Street, the Inquirer Building is an 18-story, multi-tiered Beaux Arts structure that totals 526,000 square feet. Included in the transaction is a 502-space parking garage at 15th and Callowhill Streets, and an adjacent 200-space surface lot.

Philadelphia Media did a short-term lease-back of the property while they located new office space in Philadelphia.

Monday, November 7, 2011

Philadelphia-area buildings ripe for energy updates

"Owners of Philadelphia-area commercial property spend 29 percent more on energy than the national average, making the region's aging buildings good candidates for retrofits.

According to a study of the region's 9,058 middle to larger commercial and industrial buildings, about 77 percent were built before 1990 and would benefit from energy-efficiency improvements.

The report was compiled by Econsult Corp. for the Greater Philadelphia Innovation Cluster for Energy-Efficient Buildings (GPIC), the year-old federally funded organization in the Navy Yard whose mission is to transform the building-retrofit industry.

"Based on all this data analysis, we found that about 7,000 properties, or 300 million square feet of space, meet the requirements for consideration of an energy retrofit," said Laurie Actman, GPIC's deputy director for management and administration. "That's a lot of potential activity moving forward."

The Econsult market study and a companion study of government policies that affect or impede building improvements are expected to form the baseline for GPIC's work, funded by $130 million in federal grants over five years.

"The purpose was really to identify what is the world of opportunity here, and what are the opportunities and hurdles in the policy world that we need to address in order to really create this market for retrofit in the region," Actman said.

The market is big. According to the federal government, buildings account for nearly 40 percent of U.S. energy consumption and carbon emissions - most of that is heating and cooling costs. Commercial buildings represent about one-fifth of U.S. energy consumption, with office space, retail space, and educational facilities representing about half of commercial-sector energy consumption.

The regional study looked at 9,058 structures between 20,000 and 100,000 square feet - the target for GPIC retrofits. The 77 percent of those structures that are more than 20 years old likely contain older heating and cooling systems.
Owners of commercial property in this region spend an average of $2.84 per square foot a year on energy, 29 percent above the $2.21 national average and fourth highest among 14 large cities studied.
To narrow the universe to identify the "lowest hanging fruit," the study filtered properties by their end use, construction materials, and shape. The optimal candidate for energy improvements would be an older, low-rise brick building.

Not all buildings consume energy equally. Flex-industrial buildings, including warehouses, account for about 53 percent of the structures studied. But they consume about half the energy per square foot as the average commercial building, such as an office.

The study identified 2,047 buildings as retail, hospitality, or health-care businesses, which consume more energy, according to federal statistics cited by Econsult.

The authors said that lower-rise buildings - with fewer than six floors - are more cost-effective candidates for improvements. Buildings that depend on electric lighting rather than daylight for interior illumination are good candidates for improvements.

Masonry buildings are likelier to have more exterior gaps and benefit from improvements rather than steel-and-glass buildings.

The authors narrowed the focus to those buildings owned by the 25 largest commercial landlords for the "purely practical" reason that it will be easier for GPIC to deal with a few owners of multiple properties if its goal is to maximize its impact.

It whittled the prime list down to 232 larger buildings totaling about 50 million square feet, mostly in the commercial corridors of inner-ring suburbs such as Pennsauken, Valley Forge, Plymouth Meeting, Malvern, and Mount Laurel. The buildings were also concentrated in industrial corridors in Thorofare, Bridgeport, Hamilton, Bristol, Northeast Philadelphia near Philadelphia International Airport, and at the Navy Yard.

Janet Milkman, executive director of the Delaware Valley Green Building Council, whose members do energy retrofits, said the report reinforces the argument that efficiency improvements are a more cost-effective way to reduce emissions of greenhouse gases than building new power-generation capacity.

"Reports like this demonstrate that it's a bigger resource even than solar energy and wind," she said.

Jim Lutz, a senior vice president of Liberty Property Trust, the region's largest commercial landlord, said the study helped frame GPIC's aim. Even without the study, he said, Liberty Property in recent years has upgraded 70 of its 735 buildings nationwide to Energy Star ratings.

But Lutz said that property owners sometimes lacked incentive to invest in energy retrofits - tenants typically pay the energy bills, not landlords. But he said upgrading a property for a new tenant could make sense if the costs can be built into a new lease.

The information GPIC is collecting can also help guide investment decisions, said Brad A. Molotsky, executive vice president of Brandywine Realty Trust, the region's second-largest commercial landlord.

"Data aggregation to allow for informed decision-making is very relevant and very helpful and, frankly, very welcome," he said.

Thursday, November 3, 2011

H&R REIT Completes Triple Net Investment Purchase

"Trefoil Properties LP sold the BJ’s Wholesale Club retail store located in the Cedar Hill Shopping Center to H&R REIT for $15.9 million, or about $138 per square foot.

The 115,396-square-foot retail building is located at 152 Route 73 North in Voorhees, NJ. On a 20-year lease deal signed in 2004, BJ’s co-anchors the 275,247 square foot power center with Lowes."

LNR Property LP Acquires Ephrata Industrial for $2.5M

"LNR Property LP acquired the industrial building located at 465 N. Reading Rd. in Ephrata, PA from Homette Corporation for $2.5 million, or about $18 per square foot. This property will be used by the owner for his business, but may lease some of the space out in the future.

This property is approximately 136,000 square feet and was constructed in 1968 with additions made to the building in 1986. The building features 12 drive-in bays and four loading docks, a large fenced lot, and parking for 100 cars."

Wednesday, November 2, 2011

Liberty Property Trust Begins Construction on $62M Spec Warehouse Lehigh Valley

" Malvern, Pa.-based Liberty Property Trust has started construction on a $62 million, 1.2 million-square-foot, speculative, sustainable warehouse, located in Lehigh Valley Industrial Park at the crossroads of Route 412 and Commerce Center Boulevard in Bethlehem. The property is a brownfield redevelopment project, and will add more than 300 construction jobs to the area.

Through the inclusion of wall insulation, roof insulation, high output T-5 lighting with motion sensors and more, Liberty anticipates the property will achieve LEED Core & Sheel and Energy Star certifications.

“As we work with tenants looking to expand or relocate in the Lehigh Valley, two themes keep repeating,” said Bob Kiel, senior vice president of Liberty Property Trust, in a statement. “First, there are not enough large warehouse spaces available in the region. This project is very exciting because it creates that needed space while redeveloping an existing brownfield site. Second, it replaces that site with a highly efficient LEED and Energy Star certified location that will save the eventual tenants 35 percent or more in energy costs when compared with traditional buildings — real operational savings prospects are seeking.”

Liberty Property Trust owns and manages more than 17 million square feet of office, flex and industrial space in the Lehigh Valley and in the Harrisburg, Pennsylvania, and Hagerstown, Maryland, areas."

Trading the Shrinking Retail Footprint

Tuesday, November 1, 2011

Endo to move from Chadds Ford to East Whiteland

"Endo Pharmaceuticals Holdings Inc. on Monday became the fourth area drug company in 2011 to announce a substantial construction project.

The Chadds Ford specialty pharmaceutical company intends to move its headquarters 18 miles north to a new 300,000- square-foot office complex in East Whiteland, Chester County, by December 2012.

The company plans to relocate its 500 local employees into a build-to-suit. Endo spokesman Kevin Wiggins said the company ran out of space in Chadds Ford, where it leases 185,000 square feet in four buildings. The company has been based in the Delaware County township since its founding from the management-led buyout of a line of pain medicines from DuPont Merck Pharmaceutical Co. in 1997.

The details of the lease were not provided, describing it only as "long term."

The new headquarters will consist of two five-story buildings connected by a sky bridge and overlooking a 70-acre lake that used to be a limestone quarry, Goggins said.
It's a big win for Atwater, where just one of 15 planned office buildings totaling 2.6 million square feet has been built over the last decade. That pace of development could change with the completion next fall of a $48 million E-ZPass-only interchange linking the Pennsylvania Turnpike to Route 29 and the Atwater property.

Wiggins said the company was "working with Harrisburg" on possible financial incentives in connection with the project. A spokesman for the Pennsylvania Department of Community and Economic Development did not return a call seeking comment Monday.

Endo's announcement is the latest by an area drug company seeking to move into new space. GlaxoSmithKline P.L.C., Iroko Pharmaceuticals L.L.C. and Teva Pharmaceutical Industries Ltd. are building in Philadelphia. In addition, Shire P.L.C., with 1,000 employees in four buildings in the Chesterbrook Corporate Center in Chester County, is evaluating its options."