Friday, January 31, 2014

Health Care Center Breaks Ground in North Philly

By Michael Boren, Inquirer Staff Writer
Promising to restore a North Philadelphia neighborhood known for dilapidated buildings and a lack of medical resources, city and state officials helped break ground Wednesday on a $15 million health-care facility near the Strawberry Mansion area.
The Stephen Klein Wellness Center, named for the developer, is expected to offer primary care, dental, and behavioral health services - as well as 50 job openings - when it opens near 21st Street and Cecil B. Moore Avenue. More than 100 people jammed inside a heated tent Wednesday for the ceremony.
High rates of obesity have been a problem in the area. In the 19121 zip code, where the center will be built, for example, more than 50 percent of adults were estimated to be obese, according to the 2012 Southeastern Pennsylvania Household Health Survey released by the nonprofit Public Health Management Corp.
Residents say they have to travel long distances for doctor's appointments or treatment.
"This is something that's really needed," longtime resident Valeria Chalmers, 67, said after the ceremony.
Project HOME, which takes on homelessness and poverty, will direct the nearly 29,000-square-foot center, which is also slated to include a pharmacy and YMCA-managed fitness area. Sister Mary Scullion, executive director of Project HOME, hefted one of the shovels to officially break ground Wednesday.
Residents and advocates point to the center as a sign of a neighborhood in transformation. Problems - abandoned properties, spurts of violent crime - still exist. But signs of improvement, such as a renovated bus hub near 33d and Dauphin Streets, are there, too. City officials said they hoped the wellness center could accelerate that trend.
"This community hung in there," Mayor Nutter said. "They never gave up on themselves, and we have a responsibility to stand with you."
Gov. Corbett, who also hefted a shovel at the ceremony, called the center "the right thing to do for the community."
"We do have an obligation," he said, "to help those who can't help themselves."
The center is the result of a collaboration among the city, Project HOME, Thomas Jefferson University Hospitals, and Phillies partners Leigh and John Middleton, among others. The Middletons; Stephen Klasko, Jefferson president and chief executive; and Stephen Klein were among the biggest funders. The center is expected to be completed in early 2015.

Thursday, January 30, 2014

First Hotel Opens at Philadelphia Navy Yard

Courtyard Philadelphia South has opened its five-story, 172-room Navy Yard location. This project, developed by Ensemble Hotel Partners, is the first hotel to be constructed at The Navy Yard. 

Erdy McHenry Architecture designed the Marriott-branded hotel, which features LEED certification, lounge, dining and fitness facilities, as well as office meeting space. The hotel, located at 1001 Intrepid Ave., is just four miles from Center City. 

"We are thrilled to open the first hotel at The Navy Yard," said Kam Babaoff, managing director of Ensemble Hotel Partners. "It's an honor to introduce this unique hotel, featuring a design that reflects the progressive campus in which it is located."

Lannett Co Acquires Two Philadelphia Industrial Bldgs for $9M

Lannett Company, a Philadelphia-based manufacturer and distributer of affordable generic medications, acquired the industrial building at 11501 Roosevelt Blvd. in Philadelphia, PA from Bridgeblocks Partners II LP for $5 million, or about $26 per square foot. 

The 196,000-square-foot distribution building was constructed in 1969 with renovations in 2000. The building is situated on 15.3 acres and contains three loading docks and 32-foot ceiling heights. 

In a separate transaction, Lannett Company also purchased the adjacent industrial building at 11601 Roosevelt Blvd. in Philadelphia from Inrevco Associates LP for $4 million, or about $9 per square foot. 

This 452,262-square-foot manufacturing building was constructed in 1963 on 23 acres in the Greater Northeast Industrial submarket of Philadelphia. It features five loading docks, 15-foot clear heights, and A/C.

Wednesday, January 29, 2014

Horsham Seeks Master Developer For Willow Grove Base Redevelopment

The Horsham Land Redevelopment Authority (HLRA) has put out a call for proposals from developers for the redevelopment of the former Naval Air Station/Joint Reserve Base Willow Grove in Horsham, PA, into 862 acres of residential, retail, office, and community space. 

The HLRA's redevelopment plan calls for 1,486 residential units of various types,1.8 million square feet of commercial space, including a hotel and conference center; and 452,000 square feet of other uses that would include a regional recreation center, school, historical aviation museum, along with parks and open space. 

The agency this week issued a request for proposals to prequalify developers, which will then be invited to participate in a request for proposals expected to begin in the second quarter. 

Redevelopment of the former base in Montgomery County, PA, is expected to generate nearly $930 million in construction spending, create 10,000 jobs and generate $15.6 million a year in new tax revenues for Horsham Township, according to a report by the U.S. Navy, which departed from the base in 2011. 

The government transferred control of the base to the Pennsylvania Air National Guard and the name changed to the Horsham Air Guard Station.

Nordstrom to Open Fulfillment Center in Elizabethtown

Nordstrom, Inc. will open its third fulfillment center at Conewago Industrial Park on Zeager Rd. in Elizabethtown, PA. 

The 1.14 million-square-foot distribution building will be comprised of 672,000 square feet in addition to a 470,000-square-foot mezzanine. The project will break ground this month as weather allows, and is expected to deliver in mid-2015. Nordstrom said the center will create nearly 400 full-time jobs in the area in the first three years, and may ramp up to 700 full-time jobs plus additional seasonal employees as the business grows. 

"Today's announcement continues Pennsylvania's steady economic progress with another company expanding and more jobs for our citizens," said Governor Tom Corbett. "It's a testament to why Pennsylvania is built to advance - our keystone location, our talented and hardworking people - all contributed to Nordstrom bringing hundreds of new jobs to Lancaster County." 

The new fulfillment center will enable faster delivery for and catalog orders from customers on the East Coast. The company's other two centers are located in Cedar Rapids, Iowa and San Bernardino, Calif. 

"Speed of delivery is simply just part of our customers' expectations of what good service means today," said Jamie Nordstrom, president of Nordstrom Direct. "This is an ideal location to add to our fulfillment capabilities and improve the delivery experience for our customers. E-commerce is the fastest growing area of our business and this is another example of how we're investing in people and capabilities to help us support this growth and responding to our customers' changing definition of service." 

Martin and William Murray own the Conewago Industrial Park, offering a wide range of distribution and light industrial facilities with access to air, rail and interstate highway systems. H&M Company will construct the build-to-suit property on 92 acres on Lot #4 in the park, located in the Lancaster County Industrial submarket of Philadelphia.

Tuesday, January 28, 2014

Why Tenants AND Landlords Should Love Tenant Rep Brokers

by Kristian Lee

I have recently completed a transaction where I was the representative for the Landlord on a property and executed a lease with a tenant who did not understand the talent (Tenant Rep) AND time required to open a new location! Although the tenant was a very smart medical doctor, they had no experience in commercial real estate nor any experience in opening a new office location for the very first time!
At our first initial meeting they wanted to move quickly and get their practice up and running in short order. Negotiating the general lease terms through to the final proposals happened over a course of a few days, keeping on track with their fast pace desires.
Things started to stall once the lease was drafted and they brought in their general contractor to determine what needed to be done to the vanilla box suite.

At this time it was evident the process of commercial real estate was now taking over the speed of the transaction.
Since this tenant prospect was new to commercial real estate, AND they had no tenant representation (cringe) they had no clue how much time building-out their space would really take; the players necessary to execute the task; nor the cost and time needed to do it properly. For me, it was so very hard to watch this prospective tenant with no clue and the fact that my obligation was to the landlord. In my capacity, I was only able to advise them of the process, but not fully assist.
This is where a tenant representation broker can really ease the pain. A tenant representation broker is not just there to assist in finding the right space and negotiating a marketable deal, they are also there to hold the tenant’s hand and assist with the entire process and work hand in hand with the landlord’s broker.

Note to Tenant:

If believe you can go it alone (not advisable), please be aware of how long this stuff really takes and what professionals you need as an integral part of your team!

Note to Landlord:

If you want the process to go smoothly and have a great experience with your new tenant, who you will be living with you for the next 5 years, appreciate those tenant representation brokers who are at the frontline!
Blog Bonus: I want to share my take on what a typical timeline looks like. In this particular case, the tenant really had no idea how long and drawn out this process could be.

Typical Timeline

Step 1:

Allow a few weeks time to identify and meet a good broker to represent you. 

Step 2:

When evaluating a new location one must consider how it will best function for their needs. If construction is needed, it is advised to bring in a general contractor to discuss the layout, and obtain a budget. This could take a week or more depending on the build-out needs.

Step 3:

For a total renovation or building from a vanilla box an architect will be needed. The architect will put together the demolition plans, new construction plans, MEP (mechanical, electrical and plumbing plans) and prepare all the necessary documents for permit. This process is estimated to take 2-3 weeks.

Step 4:

Architect shall file for permit. Permit time ranges for every municipality but one can expect 4-6 weeks for issuance of permits.

Step 5:

During the permit filing, your general contractor will facilitate subcontractors and quotes. Once you have selected the trades they can start ordering materials.

Step 6:

Construction. This time frame varies based on the scope of the work. Most permitted jobs take anywhere from 4-8 weeks.

Step 7:

Final walk-through with the municipality to provide occupancy permit.
As you can see from the above list of the time and talent involved, from broker selection to lease execution to actual business opening, the entire process can take you 18 weeks or more.
Of course, the entire process is subject to many variables, such as, size of the deal, specific build-out needs, equipment vendor schedules, and building-specific issues, such as work schedules and other unforeseen conditions. No matter what, you should go in with your eyes wide open as far as the potential timeline and the impact on your business, when trying to find new space. Always remember that the tiniest detail overlooked, can throw your schedule off course and cause delays.
Based on the complexity of finding new space and preparing the space for your unique needs, it is vital to have the right team in place to assist you through the entire commercial real estate process from selection to opening and you need to have a realistic understanding of how long it really takes!

Full story:

CRE in the Philly Suburbs Isn't Dead

Summary of the Biz Now event on January 15, 2014

They're not even undead. That was the message our record-turnout crowd heard at our first-ever Future of the Suburbs Summit in King of Prussia. (Though the thought of undead soccer moms is itself epic.)

For one, the 'burbs are finally shedding their image of sprawl, says Pennoni SVP Joe Viscuso (left, with JLL managing director Mike Morrone, Keystone SVP Rich Gottlieb, and Hayden REI's CEO Tony Hayden). Joe sees more clustering around urban nodes that are transit-oriented, like West Chester to Doylestown, with projects such as the renovations to the Malvern train station having positive impacts on growth.

Gen Xers with kids and downsizing Boomers are the key demographics for these nodes. Rich says Keystone is pursuing mixed-use developments along City Avenue in Bala Cynwyd to give people a live/work/play locale, and rezoning single-use properties will be a necessary component of that. Plus, having restaurants and other retail outside the 9-to-5 window helps a lot in easing traffic congestion.

Hayden Real Estate Investments hosted us at 150 South Warner Rd, in 32k SF of third-floor space. To get it ready for lease, Tony says the floor is getting a full renovation. He and the panelists agree that the new office economy looks a lot different. Tenants are seeking leases for smaller spaces and ditching cubicles for open-floor plans and collaborative spaces. (Mike, our moderator, quipped that this event was the first time brokers were actually paying a landlord to see their property.)

While homeownership dominates, at least a third of the population will continue to rent, Morgan Properties CFO Patrick O'Grady says (left, we snapped him with Liberty VP Tom Sklow). Indeed, Fannie and Freddiehave been good for multifamily in the suburbs by providing loans at the same rates as the city. It's true that job growth post-recovery has been less than robust, but Pat believes that long-term population patterns favor a rising tide that will lift all boats. (Double great news for multifamily house boats.)

What about demand for amenities? Tom says it's great for larger developments like Liberty's 700-acre Great Valley Corporate Center, which includes daycare, fitness centers, and shopping to go with over 3MSF of office space. But for buildings under 100k SF, these things may be harder to sustain. Still, Brandywine SVP Jeff DeVuono says people expect a high-end product: “A lukewarm approach to amenities doesn't have the samepayback,” Jeff says. He also sees the end of low interest rates, with Tom predicting more M&A activity before rates angle upward. (It's like junior prom: Everyone looks for a dance partner before they play Green Day's "Good Riddance.")

Hayden acquired 150 South Warner (aka Walnut Hill Plaza) through a partnership with MIM last August. (Pictured: VP Tara Hayden, founderTony Hayden Sr., CEO Tony Hayden Jr., and Stephanie Hayden.) The four-story building includes over 45k SF in leasing opportunities and is getting brand new elevators, restrooms, and lighting. Located just off the Turnpike and the 202 corridor—not to mention right by a fancy Wegman's—the team sees 100% occupancy as a realistic achievement.

Full story:

Friday, January 24, 2014

Philadelphia's Retail Vacancy Stays at 6.3%

The Philadelphia retail market did not experience much change in market conditions in the fourth quarter 2013. 

The vacancy rate stayed at 6.3% in the current quarter. Net absorption was positive 616,052 square feet, and vacant sublease space decreased by 109,997 square feet. In third quarter 2013, net absorption was positive 416,003 square feet. 

Tenants moving into large blocks of space in 2013 include: Wegmans moving into 125,047 square feet at 500 Montgomery Mall; Restaurant Depot moving into 72,643 square feet at 2950 Roberts Ave; and ShopRite moving into 71,900 square feet at 3450 Fox St. 

Quoted rental rates decreased from third quarter 2013 levels, ending at $13.75 per square foot per year. 

A total of 15 retail buildings with 252,369 square feet of retail space were delivered to the market in the quarter, with 282,479 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 6.6% from the previous quarter, with net absorption positive 21.28 million square feet in the fourth quarter. Average rental rates increased to $14.59, and 563 buildings delivered to the market totaling more than 10.4 million square feet.

Australian Energy Firm Leases at Navy Yard

by John Jordan, Staff Writer for GlobeSt.
PHILADELPHIA-City officials announced on Thursday that Ecosave Inc., an Australian energy efficiency firm, will occupy 20,000-square feet at a building to be constructed at the Philadelphia Navy Yard.
The lease deal culminated a two-year effort to bring the firm to the Navy Yard, city officials state. “We are delighted to welcome Ecosave to Philadelphia,” said Philadelphia Mayor Michael Nutter. “Increasingly, companies from around the world are choosing to start, stay and grow in Philadelphia as we offer a very competitive business climate, unrivaled quality of life, and world class leadership in sectors such as energy efficiency. I want to thank all of the partners involved in the effort to bring Ecosave to Philadelphia.”
Ecosave is Australia’s largest independent energy services company offering free energy and water savings assessments, guaranteed savings, fixed fee proposals, and funding solutions. Ecosave has delivered savings to more than 3,000 sites in Australia and internationally since 2002. In 2013, Ecosave purchased a Bristol, PA-based energy efficiency firm and in January 2014 moved to the Navy Yard.
“Ecosave carried out a two-year search, considering six potential cities in the northeastern U.S., to select the best city in which to base our North American head office,” said Ecosave CEO Marcelo Rouco. “The two key factors in our decision were being among thought leadership in green buildings at the Energy Efficiency Buildings Hub in the Navy Yard, and the welcoming we received from the local commercial community that made it much easier for a new entrant into the market to do business here.”
Ecosave will occupy approximately 20,000 square feet of a new, 75,000-square-foot building to be constructed in the Commerce Center of the Navy Yard, developed by Liberty Property Trust and Synterra Partners.
Full story:

Thursday, January 23, 2014

Blackstone 'actively' investing in real estate: CEO (Video)

West Park Distribution Center Trades for $36.8M

Walsh Construction Company sold the West Park Distribution Center at 6974 Schantz Rd. in Allentown, PA to Gramercy Property Trust, Inc. for $36.83 million, or about $75 per square foot. 

The 480,000-square-foot distribution building sits on almost 28 acres and is fully occupied by Amcor Rigid Plastics on a new 15-year, triple-net lease. The facility contains 70 loading docks and 30-foot clear heights.

Crowdfunding: Changes and Impact on CRE

Crowdfunding is the collection of funds from multiple parties to finance a particular project or venture. I concluded by stating that technological and social pressures gradually rendered the regulatory regime from the 1930s obsolete and impractical. This forced the SEC to relax its once black-and-white advertising restrictions and turn them into a gray mess of guidance.
In 2012, Congress recognized this problem and finally put an end to the old advertising restrictions for private deals and created a regime for “crowdfunding.” The new regulatory framework would empower market participants on both sides of the equation, thereby providing much-needed relief to startups and smaller investors alike, removing some of the old barriers to entry and access to capital.
So, what precisely did the JOBS Act do? Here is an overview of the changes that are most likely to affect private real estate fundraising:
1. Gimme an “A”! New Reg.  “A+,” which was proposed by the SEC last December, would expand the scope of the seldom-used Reg. A and allow sponsors to raise up to $50 million in capital (currently capped at $5M) with a simplified registration process. Unlike current Reg. A, this new exemption would preempt state securities laws. This means sponsors would advertise and sell their deals in all 50 states without having to look up each state’s securities laws. The price to pay: registration and reporting with the SEC, investment limits (10% of investor’s net worth or income), and audited financials. The impact of this new rule on real estate will be highly dependent on the amount one hopes to raise. For smaller deals, it could be unworkable due to legal and audit costs.
2. For the ballers. Rule 144A offerings, which are limited to qualified institutional buyers (“QIBs,” which include financial institutions and other big players), can now be generally advertised. Perhaps market conventions will change, but don’t expect these sophisticated institutional markets to change radically anytime soon.
3. For the lesser ballers. Rule 506 offerings can now be marketed to the general public. The price to pay: issuers lose the ability to sell to anyone other than accredited investors ($200K in income or $1M+ in net worth) and have to verify that investors are in fact accredited. Bingo: as I will explain in future articles, this one is already changing market dynamics and is destined for glory.
4. For everyone else. Proposed crowdfunding regulations are exhaustive and cumbersome. For now, let’s just say that the impact of these regulations on real estate will likely be minimal due to the overwhelming complications that they bring (e.g. requirement to use a registered intermediary, yearly $1M limits per sponsor, audit requirements for offerings larger than $500K, and ongoing reporting requirements).
Stay tuned! I will expand on these new rules in future articles and explain how I see them affecting real estate fundraising in the years to come.

Wednesday, January 22, 2014

Big retailers to close stores: Switch to REITs? (Video)

U.S. Property Markets Post Strongest Sales Volume Since 2007

For buyers and sellers of commercial property, 2013 was a very good year. By the time all CRE sales are tallied, total commercial real estate sales are expected to be more than 18% higher in 2013 from the previous year as U.S. property fundamentals and the economy continued to improve and investors in all property types fanned out into smaller markets in search of higher returns. 

According to CoStar COMPs data based on property transactions of all sizes that closed by Dec. 31 and were recorded as of Jan. 15, sales of office, industrial, retail, multifamily, hospitality and land totaled $366 billion in 2013 -- 17% higher than the $312.4 billion in property that changed hands in 2012. CoStar continues to track down and tabulate additional 2013 property transaction activity, which is expected to boost total sales for 2013 to nearly $370 billion when all deals are counted. 

In any case, the preliminary figures clearly reflect the strongest year for CRE investment since 2007, when $489.6 billion in total transactions were recorded. 

As of the second week of January, property sales totals for the fourth quarter of 2013 were below the record-setting volume of a year ago, with a preliminary $106.3 billion in sales tallied as of Jan. 15, though that number is almost certain to rise in coming days and weeks. Property sales spiked in December 2012 as investors hustled to close deals prior to year-end, driven in part by concern over anticipated tax hikes and the restoration of previous tax rates for capital gains. The rush helped drive total CRE sales volume to $115.86 billion in fourth-quarter 2012. 

In national market reports, vacancy rates decreased and net absorption continued its strong pace in the U.S. office, industrial and retail markets. 

For commercial property sales tallied as of Jan. 15, investors were especially active in the hotel property sector, with hospitality investment seeing a 40% increase to lead all major property categories in 2013, followed by sales of industrial property, which increased 23%. Office sales rose 18% and led all building types in dollar volume, followed by multifamily sales, which rose 14%. 

Retail property sales rose 10% over 2012, while land sales increased 5%. 

Rebounding Investment Activity Evident in Major Markets

The rebound in activity in the Manhattan office market helps tell the story of the U.S. office investment market last year. More than a half-dozen building sales and partial equity stakes in buildings were valued at more than $1 billion in 2013, all located in Manhattan. In 2012, no single-property CRE sales eclipsed $1 billion. Similar blockbuster transactions closed in the industrial, retail, multifamily, hospitality and land markets around the U.S. during 2013. 

Another hallmark of 2013 was the spread of activity into secondary and tertiary markets in all property types as rising prices and diminishing supply compelled investors to seek higher yields outside of New York City, Chicago, Washington, D.C., Los Angeles and San Francisco. 

The booming Texas economy and the recovery in other Sun Belt markets has sparked investor demand in such non-gateway markets as Austin, Dallas, Houston, Denver, Phoenix, Miami and Atlanta, according to Steve Pumper, executive managing director of capital markets for Transwestern. 

"In our estimation, this recovery will continue into 2014 and beyond," Pumper said. "For the Sun Belt markets that have not yet experienced rent spikes, we expect them to see increases within the next 12 to 18 months." 

Interest Rates Remain Top Concern

The main question facing commercial property investors in 2014 is what will happen with interest rates. The 10-year Treasury bond yield, currently around 2.88%, could increase to 3.25 to 3.50%, possibly impact property pricing and development costs, Pumper said. 

The improving economy also translated into stronger investment volumes around the world, with a solid fourth quarter pushing global 2013 investment volumes up 18% to $549 million, according to preliminary figures from Jones Lang LaSalle. 

"The desire of experienced investors to look at opportunities which require additional asset management or more creative solutions has helped push 2013 volumes past our initial expectations," said Arthur de Haast, lead director with JLL's International Capital Group. "With this trend expected to continue into 2014, we are confident that investment volumes will continue to grow."

Sunoco Acquires Two Office Buildings

NEWTOWN SQUARE, PA-In connection with its move out of Center City in Philadelphia, Sunoco has acquired two office buildings at Ellis Preserve here totaling 233,000 square feet.
Sunoco announced it would relocate from its offices at Mellon Bank Center in Philadelphia in December. No terms of the transaction were reported.
Sunoco plans to commence renovations of the existing buildings immediately, with the scheduled completion estimated for the second quarter of 2015. 
“This is a great opportunity for Sunoco to unify many of its employees as they move forward with their exciting future. Ellis Preserve is an ideal location for them, not only is it a beautiful spot, but it sits centrally relative to their locations."
“Sunoco’s internal considerations created deadlines and confidential issues that are not always experienced on these types of searches. We followed a somewhat unique process in order to accommodate their needs, but ensured that they found the kind of facility that they required.”
Full story:

Lifestyle Health Project Under Way in Bucks County, PA

BENSALEM, PA-Perhaps the name of a future $120-million healthcare development in Bucks County, PA—Lifestyle Healthcare Center—explains the goal. The developer, Newtown, PA-based Lifestyle Healthcare Group, says it has a goal of changing the way people in the area northeast of Philadelphia receive medical services.
It also sounds as if the company is setting up a mini health system at the complex, recruiting affiliated physicians and group practices and providing central appointment-making, central billing, electronic medical records and comprehensive healthcare services in a hospital-without-beds setting. According to Lifestyle Healthcare Group officials, the future 200,000-square-foot outpatient campus under construction on an 11-acre site near the Neshaminy Mall in Bensalem will try to provide everything patients need in one location.
So far, services and specialties lined up include a women’s center, orthopedics, general surgery, ophthalmology, cancer treatment, plastic surgery and several other medical services, including primary care. A surgery center will have eight operating suites, with an adjacent nursing facility for surgery patients who need to recover on site. Plans also call for the complex to feature in-house labs and a separate sports complex for training and rehabilitation.
“We are truly revolutionizing healthcare in the greater Philadelphia area with the Lifestyle Comprehensive Healthcare Center,” said Fred Rappaport, CEO and chairman of Lifestyle Healthcare Group, in a statement. “We have successfully developed a healthcare model that allows primary care physicians to easily interact with specialists who can deliver a superior level of care at one convenient location.” According to the company, the center is scheduled to open in 2015.
Rappaport refers to the project as a “field of dreams,” saying he knew it would not come to fruition unless the company could receive commitments from enough doctors and practices. As of recent weeks, it had received signed agreements from more than 100 physicians, well on its way, officials have said, to meeting a goal of bringing in anywhere from 300 and 400 doctors.
As more and more doctors and practices commit, the scope and variety of services offered will most likely evolve and expand, officials say. Rappaport believes the outpatient healthcare campus will be able to address two key goals of the country’s overall healthcare system—cost savings and patient satisfaction—by providing medical treatment in a less costly and more convenient setting. “Hospitals are fighting to fill beds now and really most of these procedures can be done in outpatient centers.”
The center’s labs will be equipped with what company officials call the latest in medical technologies and equipment for performing tests and procedures.
In order to provide cancer treatments, Lifestyle Healthcare Group has signed a letter of intent with Palo Alto, CA-based Varian Medical Systems, which will use its TrueBeam radiotherapy system at the site. TrueBeam is designed to address more complex cancer cases of the head, neck, liver, lungs and prostate.
Havertown, PA-based GS Architects Inc. designed the facility; Philadelphia-based P. Agnes is managing construction.

Monday, January 20, 2014

Tight market for city’s trophy towers

By Natalie Kostelni, Staff Writer for Philadelphia Business Journal
Center City’s trophy office market is experiencing the lowest vacancy ever and the highest rents ever.
This high-end office space comprised of six towers — Comcast Center, Cira Centre, One Liberty Place, Two Liberty Place, Mellon Bank Center and Three Logan Square — has a vacancy rate of 3.9 percent and average rents of $40.16 a square foot. That trend isn’t expected to continue.
“Trophy space is peaking and it’s going to be difficult for it to climb a whole lot higher,” 
What is expected to happen is more tenants leasing Class B space will flee to better space in the Class A market. Class C tenants will also likely seek better quality space, all of which will go toward improving the overall office market.
The dynamics at work in the Central Business District has meant the office market is finally shedding some of the doldrums it experienced during the recession and is finally returning to balance, Fisher said. The market, which totals 43 million square feet, ended last year with a 13.6 percent vacancy rate. That is down from year-end 2012 when the rate was 14.1 percent. In fact, the CBD has the lowest vacancy in the region with South Jersey at 16.9 percent, the suburbs at 17.9 percent and Wilmington at 19 percent.
While landlords have the upper hand in certain buildings where there isn’t a lot of available space, property owners don’t have total control of the market but deals are improving from a landlord’s perspective.
“Clearly, we’re headed back to a level playing field,” Fisher said.
About 2.3 million square feet of space was leased last year in Center City and about the same is expected this year. The vacancy rate is projected to slip below 13 percent. The median vacancy is typically 12.6 percent.
“We’re headed back to normal.” 

Friday, January 17, 2014

Philadelphia's Office Vacancy Decreases to 11.2%

The Philadelphia Office market ended the fourth quarter 2013 with a vacancy rate of 11.2%. 

The vacancy rate was down over the previous quarter, with net absorption totaling positive 1,209,045 square feet in the fourth quarter. That compares to positive 93,523 square feet in the third quarter 2013. Vacant sublease space increased in the quarter, ending the quarter at 1,265,856 square feet. 

Tenants moving into large blocks of space in 2013 include: GlaxoSmithKline moving into 205,000 square feet at Five Crescent Dr; Drexel University moving into 117,464 square feet at Three Parkway; and Comcast moving into 110,000 square feet at 2801 Valley Rd. 

Rental rates ended the fourth quarter at $21.10, an increase over the previous quarter. 

A total of five buildings delivered to the market in the quarter totaling 374,040 square feet, with 797,349 square feet still under construction at the end of the quarter. 

This trend is compared to the U.S. National Office vacancy rate, which decreased to 11.5% from the previous quarter, with net absorption positive 25.62 million square feet in the fourth quarter. Average rental rates increased to $22.06, and 177 buildings delivered to the market totaling more than 11.7 million square feet.

Thursday, January 16, 2014

New Anchor Tenant Leases 64,000 SF at CenterPoint East

Maximus signed a lease to occupy 64,000 square feet at 575 Keystone Ave. in Jenkins Township, PA located in the CenterPoint Commerce and Trade Park East. 

The 120,416-square-foot flex building was recently completed on 23 acres. The multi-tenant building features 13 loading docks and a drive-in bay, and has a clear height of 34 feet. Maximus, a leading operator of government and health and human service programs, will become the anchor tenant for this building. 

Former Sunshine Market Sells for $4.8M

Betone Realty Co., Inc. sold the building located at 1492 Hwy 315 in Wilkes Barre, PA to Medico Industries, Inc. for $4.88 million, or about $18 per square foot. 

The 270,000-square-foot industrial building with retail space is situated on nearly 40 acres. At the time of purchase, the building was 100 percent leased.

630 Municipal Trades for $3.9M

Selvaggio Enterprises, Inc. has sold the flex building at 630 Municipal Dr. in Nazareth, PA to Camellia Partnership Ventures LLC for $3.85 million, or about $57 per square foot. 

The 67,366-square-foot building was built in 2000 on 5.1 acres. It contains five drive-ins, three loading docks, and 30-foot ceiling heights. Located in the Lehigh Valley Industrial submarket, the property was fully leased at the time of the sale.

Wednesday, January 15, 2014

Private wealth takes over global property market (Video)

Comcast to Expand Philadelphia Presence with State-of-the-Art, $1.2 Billion ‘Comcast Innovation and Technology Center’

Comcast Corporation and Liberty Property Trust announced today they will jointly develop the “Comcast Innovation and Technology Center” on the 1800 block of Arch Street in Center City Philadelphia. The proposed $1.2 billion 59-story, 1,121-foot tower will neighbor Comcast Center, Comcast Corporation’s global headquarters, and become a dedicated home for the company’s growing workforce of technologists, engineers, and software architects. The facility will also create a media center in the heart of the City by becoming home to the operations of local broadcast television stations NBC 10/WCAU and Telemundo 62/WWSI and offer space for local technology startups.
Designed by world-renowned architect Lord Norman Foster of Foster + Partners, the glass and stainless steel tower will complement Comcast Center as a new energetic dimension to Center City. The 1.517 million rentable square foot project will include a new Four Seasons hotel and a soaring, block-long lobby with a glass-enclosed indoor plaza accompaniment to Comcast Center’s existing, dynamic outdoor plaza. The lobby will feature a restaurant and a new concourse will provide direct connections with SEPTA’s Suburban Station, enhancing accessibility and providing new options for commuters. The $1.2 billion mixed-use tower is expected to be the tallest building in the United States outside of New York and Chicago and will be the largest private development project in the history of Pennsylvania.
“This is yet another historic moment for Comcast,” said Brian L. Roberts, Chairman and CEO, Comcast Corporation. “We continue to be proud to call Philadelphia our home, and are thrilled to build a world-class media, technology and innovation center right in the heart of the City, to bring NBC 10 and Telemundo 62 downtown, and to create thousands of jobs and further drive economic activity in the region. We have assembled an incredible design and development team to expand our vertical campus, and I am more excited than ever about the future of Comcast in Philadelphia.”
Liberty Property Trust Chairman and CEO William P. Hankowsky said, “Liberty is thrilled to again have the opportunity to develop a transformative project for the city of Philadelphia, a project that will significantly contribute to the continuing renaissance of Center City as a forward-looking yet uniquely livable urban environment.”
Lord Norman Foster commented, “This is a very special project. It is an opportunity to create a unique and sustainable model for mixed-use, high density development, which uniquely combines spaces for high tech research and development with restaurants, gardens, fitness facilities and a significant public reception space – a window on Philadelphia. At ground level this ‘urban room’ embraces the city; it opens the building to the public and anchors it as a vital new neighborhood. It also links directly into the below ground public transport system. Above this, the highly flexible loft-like spaces and studios are designed for a dynamic way of working – an engine for the city’s evolution as the kind of leading technology hub presently associated with Silicon Valley. We look forward to continuing our collaboration with Comcast and Liberty Property Trust to further develop an outstanding location and a new landmark on the Philadelphia skyline.”
In addition to office space, the Comcast Innovation and Technology Center will house a Four Seasons hotel, featuring more than 200 rooms. The luxury hotel will include world-class spa, fitness, event and meeting facilities as well as an exciting new restaurant located on the top floor of the building, offering spectacular 360 degree city views.
“Four Seasons has called Philadelphia home for more than 30 years,” said Scott Woroch, Executive Vice President Worldwide Development, Four Seasons Hotels and Resorts. “During this time we have set the standard for luxury hospitality in the city and become an integral part of the community. Today, Philadelphia is experiencing renewed growth and popularity. We are proud to be a part of one of the largest, most exciting new developments in the region and reaffirm our long-standing commitment to this great city.”
Four Seasons will continue to manage its existing hotel at 1 Logan Square and assist the owner with the transition to a new brand prior to the expected opening of the new hotel in 2017.
The Comcast Innovation and Technology Center will generate a staggering amount of upfront economic activity during the project’s construction period alone, including $2.75 billion in economic activity within the Commonwealth and the creation of more than 20,000 temporary jobs. The estimated direct and indirect ongoing impact of the Comcast Innovation and Technology Center is also remarkable, creating almost 4,000 new permanent jobs within the Commonwealth and 2,800 new permanent jobs within the City. The project will also produce $30.7 million in annual Commonwealth tax revenues and $21.5 million in annual City tax revenues.**
Comcast and Liberty Property Trust will establish Economic Opportunity Plans to demonstrate the companies’ commitment to diversity and to ensure the participation of minority contractors during the construction of the Comcast Innovation and Technology Center.
“Comcast's announcement is another chapter in Pennsylvania's transformation. Our economy is growing, job creators from small businesses to Fortune 500 companies are thriving and our citizens are going back to work,” said Pennsylvania Governor Tom Corbett. “I'm excited that our partnership with Comcast will not only revitalize and transform Philadelphia's downtown areas, but will also create at least 1,500 new family-sustaining jobs. Comcast is not alone in believing in our workforce and in Pennsylvania's very bright future.”
“This new building is a game-changer for Comcast and for Philadelphia,” said Mayor Michael A. Nutter. “A world-class building, designed by a world-class architect, built by a world-class developer for a world-class company, all happening in the world-class city of Philadelphia. This building will serve as yet another physical monument to the transformation of this city, home to global companies, transformative technologies, standard-setting buildings, and some of the most talented entrepreneurs in the United States. Congratulations to all involved in this project. We are very proud that Comcast calls Philadelphia home.”
“The arrival of the Comcast Innovation and Technology Center makes it perfectly clear that Philadelphia is a premiere U.S. hub of innovation, technology, creativity and productivity,” Council President Darrell L. Clarke said. “This announcement isn’t just about boosting economic activity in our City – it is proof that Philadelphia’s greatest assets are its people. The jobs and opportunities the Center will provide will not only retain and attract top talent in media, technology and commerce, but will feed the private-public partnerships that ensure future generations are educated and trained to run innovative companies such as Comcast. I thank all the partners involved for their diligence and collaboration on what will certainly be an amazing asset to Philadelphia and the Commonwealth of Pennsylvania.”
Construction of the Comcast Innovation and Technology Center will commence in the summer of 2014, and the building is expected to be complete in the fall of 2017. It will seek LEED Platinum certification. Comcast will execute an initial lease for at least 957,000 square feet, or approximately 75 percent of the rentable office space, for a term of 20 years.
The project will be owned by a joint venture, 80 percent owned by Comcast and 20 percent by Liberty Property Trust, and managed by Liberty. The project includes an approximately $1.2 billion private investment of which approximately $900 million will be funded by the joint venture and approximately $300 million will be tenant funded interior improvements.
Comcast Corporation and Liberty Property Trust held an international competition of some of the most renowned architects around the world and selected Lord Norman Foster of Foster + Partners.
For more information, including a video and images, click here .
**Economic impact estimates provided by Econsult Solutions in the recently released report, “The Economic and Fiscal Impact within the City of Philadelphia and the Commonwealth of Pennsylvania of Comcast Corporation and of its Proposed Expansion Development.”

COPT Leases 150,000 Square Feet in Blue Bell, PA

PRA International has signed two office leases totaling 150,000 square feet at its Arborcrest Park in Blue Bell, PA. Corporate Offices Properties Trust (NYSE: OFC) inked the two long-term deals at its five-building office park located in the Plymouth Mtg / Blue Bell submarket of Montgomery County. 

The first deal is for 38,000 square feet at 721 Arbor Way, a 183,400-square-foot building that COPT redeveloped in 2012. Hillcrest II is now 86 percent leased with the new lease, which commences in the second quarter of 2014. 

The second deal is for 112,000 square feet at the to-be-redeveloped 731 Arbor Way. Hillcrest III is an adjoining 141,000-square-foot building that is now 79 percent leased, with an anticipated completion date in the first quarter of 2015. 
PRA, one of the world's largest clinical trial organizations, is expanding its operations in a move expected to create 250 full-time jobs within in the next three years. The company will invest more than $10.9 million to support its new site through renovations, improvements, new equipment and employee training, made possible in part due to a number of grants provided by the State of Pennsylvania and the Department of Community and Economic Development. .

Tuesday, January 14, 2014

Alexandria CEO: Real estate a long-term play (Video)

Host Hotels Sells 89% Stake in Ownership of Philadelphia Marriott Downtown for $270M

Host Hotels & Resorts LP (NYSE: HST) sold an 89% stake in its ownership interest of the Philadelphia Marriott Downtown for $270.03 million, or about $215,000 per room, in a deal that values the hospitality asset at $303.4 million. 

Oaktree Capital Management LP and Clearview Hospitality Capital LLC will take a controlling interest in the area's largest hotel, with Host retaining the remaining 11% stake. 

Located in downtown Philadelphia's Market Street East submarket at the corner of 12th and Market Street, the 22-story, 1.06 million-square-foot hospitality building was constructed in 1994 on two acres. It is comprised of 1,408 guest rooms, and is expected to continue flying the Marriott International flag. 

"We are pleased to announce a sale that further reduces our exposure in non-core assets and brings our total dispositions since the beginning of 2012 to approximately $1.1 billion," said Struan B. Robertson, executive vice president and chief investment officer at Host.

Friday, January 10, 2014

Why one Philly property mogul hasn't been investing here

By Joseph N. DiStefano, Philadelphia Inquirer

Philadelphia is too expensive -- and too cheap -- to attract big private property investors, says one of the biggest real estate moguls based here. "We've been looking in this city. We just can't make the numbers work," says Dan DiLella, chairman and CEO at Equus Capital Partners LLP.
The firm boasts $3 billion in public, corporate, wealthy-family and union-pension funds invested in U.S. office buildings and other properties, mostly in the East and Midwest. 

DiLella just raised a new investment fund -- the firm's 11th, worth $310 million. He's already invested one-third of it, and his team is looking for more places to buy. Too bad, he says, that "expenses in Philadelphia are double what you pay in the suburbs,” while rents in the city are lower than in nearby towns. He figures taxes and other costs eat up as much as $10-14/square foot in the city, vs. around $6.50 on the Main Line – while rents in premium Radnor and Conshohocken buildings list in the low $30s a square foot, compared to the high $20s for similar space in Center City.

While costs are equivalent, Philadelphia rents have long trailed Boston, New York and Washington rents and remain at 1980s and 1990s levels -- or less, adjusted for inflation. Only two of Philadelphia's modern skyscrapers were ever sold by their developers at a profit, he added.

That would be the black-glass “Darth Vader building” on Market St., where PNC Bank has its regional headquarters,and the Comcast Center, where builder Liberty Property Trust lured in German investors.
If it's a tough town for builders, it's a great town for bargain-hunters: Brandywine Realty Trust has been buying up skyscrapers like the old Bell Atlantic tower for one-half to one-third what they cost to build. Other patient, private investors have picked up dozens of suburban properties at a discount to historic values in recent years. DiLella's firm focuses on properties it can turn around and sell within five years.

Besides taxes, DiLella had tough words for the construction unions whose healthcare and retirement plans boost construction costs in the region. DiLella says the costs force builders to demand city and state subsidies and new construction tax breaks. Citing a recent Center City District report showing how Philadelphia employment has lagged other big East Coast cities, he said Mayor Nutter and City Council are said City Hall lacks leaders willing to do to change old patterns and attract growth.

Equus's trophy properties include the former Charles Ellis School tract in Newtown Square. Once an all-female equivalent of Philadelphia's venerable but troubled Girard College, the school property is now among the region's top corporate headquarters address, home to SAP Americas and, soon, the new Sunoco headquarters.

With fewer corporations adding space, Equus has lately boosted its residential arm, Madison Apartment Group, which owns more than 18,000 apartments, about a quarter of them in the Philadelphia area. And like Liberty Property Trust, Equus is building more “logistics” or “fulfillment centers,” including a McKesson medical supply center it recently completed and sold in West Virginia. “We've tied up land from I-80 down to Virginia” for future centers, he told me.
Those big warehouses aren't rising in Philadelphia but at the metropolitan fringe, where land and labor is cheaper. It's a shame,” said DiLella. 
DiLella endowed Villanova University's real estate business school program, working with former dean Jim Danko (now president at Butler University)and current dean Patrick Magitti. DiLella is to VU what Chicago real estate impresario Sam Zell is to Penn's Wharton School. “We've got a 25-person national real estate board,” DiLella told me. “Most of them are Villanova graduates.”

Full story:

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Sale of two facilities in Montco takes another step

By Jessica Parks, Philadelphia Inquirer

NORRISTOWN The Montgomery County commissioners on Thursday moved ahead with plans to sell the Parkhouse geriatric center in Royersford and the Human Services Center in Norristown by authorizing the retirement of $19.75 million in outstanding debt on the two properties.

About $13 million of that is for the Human Services Center, and $6.75 million is for Parkhouse, said chief finance officer Uri Monson.

The sales are not yet complete, but Monson said the county must notify bondholders in advance if it wants to pay off the debt early.

Parkhouse, which is being sold to a private nursing-home company based out of Maryland, is still in the due diligence phase. Commissioners Chairman Josh Shapiro said the sale is on track to close Jan. 31.

The Human Services Center is in final review and should close in mid- to late January, Shapiro said.
The sale of the two complexes would reduce the county's outstanding debt by 4.6 percent, to $407 million. On an annual basis, the county's debt service would drop about $1 million, Monson said.

A group of residents opposed to the sale of Parkhouse - and in particular, the inclusion of about 200 acres of surrounding undeveloped land - is planning another protest on Saturday in Norristown.