Wednesday, January 28, 2015

Cabot Properties Pulls in $150 Mil. for a New Industrial Real Estate Fund

The Pennsylvania Public School Employees’ Retirement Board has committed to invest up to $150 million into a new core industrial fund being put together by Boston-based Cabot Properties.

Cabot Industrial Core Fund will focus exclusively on the industrial sector, targeting a limited number of select markets with growing demand and asset scarcity. With the PSERS investment, it is expected a portion of the fund’s investment will be in that state.

Cabot will generally pursue transactions smaller than $50 million and will seek to assemble portfolios for future sales at premium prices. Cabot anticipates investing $750 million in equity and will endeavor to create a portfolio of industrial properties with a fully capitalized value of $1.1 billion (assuming 40% leverage).

The portfolio is generally expected to consist of 80 to 120 buildings totaling 17 million to 20 million square feet.

Cabot anticipates that single tenant buildings will be 30% to 50% of the portfolio. Cabot projects building sizes will typically be 100,000 square feet to 700,000 square feet and that the tenant size may average 200,000 square feet.

Harrisburg Office Sold for $2.8M

Pennsylvania Higher Education Assistance Agency acquired 1303 N. 7th St. in Harrisburg, PA for $2.75 million, or about $84 per square foot.

The 32,604-square-foot office building was constructed in 1960 on 2.2 acres in the Harrisburg Area East submarket of Dauphin County.

American Bible Society to Move From NYC to Philly

by Jon Jordan
The American Bible Society is relocating its corporate headquarters from 1865 Broadway in New York City to 401 Market St. here.

The society has maintained its headquarters in New York City for 199 years, the last 48 years at the 1865 Broadway property, which the society put on the market for sale earlier this year.

Philadelphia Mayor Michael Nutter is expected to announce the relocation of the American Bible Society to the building near Independence Mall at a press conference today, according to The Inquirer.

American Bible Society CEO Roy Peterson says it was a "real heart-wrenching decision to leave New York," but that it was the right decision for the society’s staff.

"People can afford to live here (in Philadelphia), it's walkable, there's public transportation," Peterson said. "Our staff commutes an hour or two . . . from Long Island, the Bronx."

The ministry offices will lease almost 100,000 square feet on the eighth and ninth floors of the Market Street building, which is mostly occupied by Wells Fargo. The lease is for 25 years with a 25-year renewal option.

Tuesday, January 27, 2015

Cheltenham Square Mall sells for $30M

by Natalie Kostelni Staff writer for the Philadelphia Business Journal

Cheltenham Square Mall, once a go-to retail center in this Montgomery County community, has sold for around $30 million.

Sun Equity Partners, a New York firm that specialized on buying and redeveloping properties in metropolitan areas and urban markets, bought the property. The company, which owns more than 10 million square feet across the county, is still formulating its plans for Cheltenham Square Mall, according to Avy Azeroual, an executive at the firm.

"They are creative and good at what they do and our expectations are that they will will do a very good job with the property," said Peter Stevens, an investment broker with CBRE Inc. who arranged the transaction.

Cheltenham Square Mall has seen better days. It was foreclosed upon and put up for sale last summer.

The 639,000-square-foot retail property at 2385 Cheltenham Ave. in Cheltenham, Pa., last sold in 2005 for $71.5 million. At the time, New York-based Thor Equities bought the center from Simon Property Group with the assumption of a $54.9 million CMBS loan that was backed by a 423,000-square-foot portion of the property.

Full story:

Center City parking garage where Spruce Foods is located sells for $7.2M

by Natalie Kostelni, Staff writer for the Philadelphia Business Journal

An affiliate of Post Brothers Apartments has acquired a parking garage in Philadelphia where Spruce Food Market makes its home on the street-level retail space. It traded for roughly $7.2 million.

The 175-vehicle garage at 1524 Latimer St. was sold by CLL Towne Inc. Park America will continue to manage and operate the parking facility. Josh Nadel of MPN Realty arranged the transaction.

The structure runs from Latimer to Spruce streets and includes roughly 3,500 square feet of retail space at 1523-25 Spruce St. That space is leased to Spruce Food Market, which is a well-known institution in the neighborhood.

The store has been there for decades and it, along with its sign, is part of the urban landscape in that part of Center City, Nadel said in an email. Nadel likens the sign to the PSFS sign at what is now the Loews hotel and the Sophie Curson sign at 19th and Sansom streets, which have become permanent parts of the city's streetscape.

Full story:

Valley Forge National Historic​ Park preps for possible commercial renters

By Gary Puleo, The Times Herald

How would you feel about heading over to Valley Forge National Historical Park for a double shot cappuccino and a blueberry scone — in a quaint café setting where memories fairly resonate off the walls?

It could happen before too long.

The National Park Service has put a few historic buildings up for commercial use, including the venerable Maurice Stephens House, which one entrepreneur is eyeing to transform into a charming cafe.

“We’ve had a couple of groups through the building and one is interested in turning it into a café of sorts so that people at the park will have a place to go to get a cup of coffee and a bite to eat,” explained the park’s business manager Patrick Madden, standing outside the 1816 stone farmhouse nestled off of Route 23.
“Also, another group representing local art centers would like to turn this into an art center where people can come and take lessons and paint the landscape. It’s a great spot. The hustle and bustle of King of Prussia is less than five minutes away and here it’s practically silent. It’s a nice getaway for people.”
Whoever the beholder and future tenant turns out to be, they will be applauded for their desire to preserve an old building that is brimming with character, while giving it a whole new purpose.
The sturdy structure that perfectly mirrors the rural architecture of the period comes with built-in customer appeal and ready-made ambience, but no street address, Madden noted.
“We just describe it as being on Route 23 across from the Washington Memorial Chapel,” he said.
Although the interior of three first-floor rooms and four upstairs rooms will require a bit more than a splash of paint and some elbow grease, the exterior has been redone, with new windows, a cedar shingle roof and masonry repointing “in connection with the American Recovery and Reinvestment Act,” Madden pointed out, adding that the addition to the house, which was once used as an information center, was constructed in 1841.
Re-purposing historic buildings has met with great success at other sites, including the Golden Gate National Recreation Area, Madden noted.

Two New Medical Office Tenants Sign Leases at Springfield Plaza

by Steve Lubetkin

Willner Properties recently finalized two new leases at Springfield Plaza located at 130 South State Road in Springfield, PA. Moore Eye Institute and the Institute of Spine and Pelvic Pain Interventions & Rehabilitation leased a total of more than 3,600 square feet. Springfield Plaza recently completed a capital improvement project that features refreshed common areas, signage upgrades and a new roof.

The two new leases bring this mixed-use building to over 90% occupancy. Moore Eye Institute at Springfield Plaza will be the practice’s fifth location in Philadelphia area suburbs and will serve as their main corporate office location. The eye surgery and vision center chose to open their office in a Willner Properties’ owned locale due to the convenient location, their reputation for high quality management and overall value and quality of the space.

The Institute of Spine and Pelvic Interventions & Rehabilitation is the medical offices of Dr. Malathy Appasamy, a physiatrist specializing in physical rehabilitation services. This is the second office for Dr. Appasamy. Her original office is located in Center City Philadelphia.

Springfield Plaza offers convenient access to Delaware County’s skilled workforce with public transportation at the front door as well as numerous local restaurants and retail opportunities. The property sits at the prime crossroads of Route 1 and Route 320 just minutes off Exit 3 of the Blue Route.

“We are very excited to welcome these well-respected medical practices to our property to join the ranks of high profile tenants like Verizon Wireless, Santander Bank and Edward Jones,” says Craig R. Bradley, vice president of Willner Properties.

Monday, January 26, 2015

OFFICE OUTLOOK: Will 2015 Be the Year Demand Shifts Into Higher Gear?

While demand for apartments remained strong across most markets in 2014, office demand remained rather spotty, with traditional office strongholds such as Manhattan and Washington DC struggling while tech and energy hotspots such as San Francisco, Houston and Denver experiencing explosive growth in the office sector.

Total U.S. office net absorption is projected to enjoy robust 21% growth in 2015 to 95 million square feet, according to Director of Office Research Walter Page with CoStar Portfolio Strategy. And because new supply is still well below historical levels and growing at just half the rate of demand, office vacancy rates continue to slowly decline and are expected to gradually dip toward a low of around 11% in late 2016. As vacancy has declined, rent growth has picked up, rising at a respectiable 3.6% annual rate in the third quarter, versus 2.6% for the same period one year earlier.

With the U.S. economy in expansion mode and construction largely in check, the question facing office landlords in 2015 is, which way is the office market headed? For most, the answer may largely depend on your location.

"We’re very bullish on the marketplace right now, at least through the first half of 2015, Heading into 2015, we continue to see job growth in the Silicon Valley, with interest rates staying low and the stock market high. There are a lot of larger tenants that have been in the marketplace, and when those deals land, there are other new tenants backfilling their requirements."

While primary tech-driven markets are expected to continue see strong demand, secondary markets that are seeing job growth, such as Portland, Austin, Nashville, Salt Lake City, Atlanta and Raleigh-Durham, are also expected to get a boost of activity as tech companies look to tap into markets that have highly-skilled labor -- not to mention the bonus of lower real estate costs compared to markets like San Francisco and Silicon Valley.

However, tech's twin in driving driving U.S. office growth, the energy sector, has yet to fully realize the slowdown suggested by falling oil prices.

"Activity in energy-led markets will undoubtedly be lower than in recent years. In the fourth quarter alone, Houston saw seven of its major submarket hubs post rent declines in the 1% to 3% range over the quarter and job growth prospects remain positive, but forecasts are down 25% from actual levels achieved in the past few months."

For the remainder of office markets, Sikaitis said he is increasingly optimistic for increased office leasing activity.

"The recovery is consistently building across and through markets with expansionary leasing activity on the rise and confidence among landlords increasing, fueling rental growth across nearly 90% of markets tracked."

Investment capital is expected to keep moving further out on the occupancy and leasing risk curve in search of higher yields, moving more aggressively into other tiers of office markets and select submarkets of top metros in 2015.

"Yields have been severely compressed in gateway cities. We have already witnessed and I suspect the trend will continue much in the same way it did in the mid-2000s, where investors will target secondary and tertiary markets for yield."

An example of a lower-tier market benefitting from the rising economy is Charleston, SC, where some 22% of employers plan to increase hiring in the coming year.

"This is of little surprise to office developers and owners who are witnessing declining vacancy and rising rents, Office vacancy rates in the high-demand submarkets of Mount Pleasant and Peninsula Charleston have reached near zero status.

In fact, owners of well-positioned office properties are welcoming vacancies that give them an opportunity to re-tenant the space at higher rates, and tenants who insist on prime Class A locations and amenities have very few choices left in th emarket right now," adding that investors are met with multiple offers for office properties, most of which never reach the open market.

“The result will be sharp increases in asking office rents in 2015 while market forces race to develop new buildings to catch up with the surge in demand,” he added.

Increasingly, the focus is expected to shift to redevelopment and repositioning of older Class B buildings versus ground-up office development in the coming year.

"The push for creative or lifestyle office is no longer a fad but here to stay," said AY's Vittone. "Not only are investors/developers seeking to reposition Class B office product, but many are seeking antiquated, low-clear industrial buildings with decent parking as creative office conversions."

In Silicon Valley, where Class A office space trades at a premium after large tech companies like Google and LinkedIn scooped up huge blocks of space, "we’ve also seen startups take the single and two-story R&D product and convert it to a lower-cost but still very nice alternative product," Gabrielson added.

Lending terms will get more aggressive for office development and acquisition over the next 12 months.

"There is a backlog of equity and debt chasing deals in the marketplace. Lenders need to get money out and I would not be surprised to see credit spreads tighten anywhere from 10 to 25 basis points," Vittone added.

BB&T CEO seeing broad based commercial growth (Video)

Philadelphia Office Vacancy Stays at 10.8%

The Philadelphia Office market ended the fourth quarter 2014 with a vacancy rate of 10.8%.

The vacancy rate was unchanged over the previous quarter, with net absorption totaling positive 408,343 square feet in the fourth quarter. That compares to positive 319,373 square feet in the third quarter 2014. Vacant sublease space decreased in the quarter, ending the quarter at 1,363,785 square feet.

Tenants moving into large blocks of space in 2014 include: L3 Communication Systems-East moving into 233,333 square feet at Camden Innovation Campus; The Vanguard Group moving into 204,000 square feet at Great Valley Corp Center and Beneficial Mutual Bancorp, Inc. moving into 95,764 square feet at 1818 Market St.

Rental rates ended the fourth quarter at $21.80, an increase over the previous quarter.

A total of two buildings delivered to the market in the quarter totaling 343,850 square feet, with 2,966,000 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 10.9% from the previous quarter, with net absorption positive 37.53 million square feet in the fourth quarter. Average rental rates increased to $22.65, and 194 buildings delivered to the market totaling almost 15.9 million square feet.

Thursday, January 22, 2015

Thermal Industries, Inc. Sells Building in Philly

 Thermal Industries, Inc. sold of 3665 Richmond Street, Philadelphia, PA.  The 18,000 square foot modern, one story building, with 1,500 sq.ft of offices on the second floor. The 1.8 acres of ground is located one block south of Castor Ave. Multiple offers were received on the property with a final selling price of $429,500.00. The property was under agreement of sale within one week.

Wilmington, DE Restaurant Sold for $950,000

805 North Union Street in Wilmington, DE was sold for $950,000. The 4,575 square feet one-story building fronts Union Street in the heart of Wilmington's "Little Italy."

The property was sold by T & M Properties & Union City Grill, LLC, to a restaurant headed by Chef Matthew Curtis, to Bread & Butter, LLC, also known as Ashby Management Group.
Ashby Management plans to renovate the building and open a full-service, casual dining restaurant serving modern American cuisine with a Tai/Asian flare. The group has also opened and operates several other restaurants locally with great success, including three McGlynn's Pubs (Pike Creek, Bear & Dover), The Deerpark Tavern (Newark), and Cantwell's Tavern (Odessa).

PSM Properties Sells Flex Bldg

Lakeside Youth Services, a non-profit organization that empowers youth and families to overcome difficulties through education, purchased the flex facility at 310 Schoolhouse Rd. in Souderton, PA from PSM Properties LP for $2.73 million, or about $137 per square foot.

The 20,000-square-foot building was constructed in 2002 in Montgomery County.

Friday, January 16, 2015

Endurance Real Estate Group, LLC Announces Lease Transactions at 960 Harvest Drive in Blue Bell

An affiliate of Endurance Real Estate Group is pleased to announce it has completed redevelopment upgrades and renovations to 960 Harvest Drive, Building B in Blue Bell, PA.

The 130,000-square-foot office park was purchased in September of 2013 with the strategic plan to significantly update the interior and add amenities in order to attract Class “A” tenants.
Building B was the first building to undergo the planned transformation and work started this past
summer. The result: Building B has already leased up approximately 16,000 square feet of office space to two local companies, Halfpenny Technologies and Gen 3 Marketing seeking to upgrade their corporate image as part of their growth.

The building’s new look and quality upgrades were a major draw. Endurance’s strategy involved upgrading the interior aesthetics and functionality of the lobby, common areas, and bathrooms, adding amenities such as a gym, and outfitting the building with new, more technologically advanced and energy efficient building systems. “We are really pleased with the high level of broker and tenant interest indicated by the number of tenant prospect inspections we have seen as a result of modernizing the buildings and we are now in the process of doing the same for Building A within the park.

The building systems and common areas had not been renovated since their original development and as such this renovation has made a dramatic difference in the appeal of the buildings stated Benjamin Cohen, President of Endurance.” “Even after the costs to modernize and upgrade the building, our basis in the property allows us to offer our tenants tremendous value at more aggressive rental rates compared to our competition in this sub-market.” he continued.

960 Harvest Drive is comprised of two 2-story and one single story office buildings. The campus-like, private setting and access to major roadways and amenities makes the property attractive to all corporate clients. Boasting expansive window lines, classic, brick facades with modern interior finishes and expansive parking, Endurance Real Estate Group has created one of the most attractive office locations in Suburban Philadelphia.

PREIT Calls JCPenney Closure ‘Significant Opportunity’

by Steve Lubetkin, Staff write for
PREIT says the announced closing of the 51,000-square-foot JCPenney store at Cumberland Mall in Vineland, NJ gives the real estate investment trust a “significant opportunity to add value” at the regional mall.

"We are pleased that only one of the malls in our portfolio will be impacted by JCPenney's recent store closing announcement and that repurposing this location represents a significant opportunity to add value, given its premier position at the center and the existing economics," says Joseph F. Coradino, CEO of PREIT.  "It is also noteworthy that JCPenney did announce store closings at two of the malls we recently sold, which demonstrates the improved portfolio quality we have achieved through our strategic disposition program."

PREIT has successfully replaced 10 department store tenants in the past 10 years. In 2014, the Company executed 480,000 square feet of leases with anchors, big box and office tenants.

Cumberland Mall, one of the area's leading shopping destinations, is well-located with more than 18 million cars passing the property annually.  The Cumberland Mall is at the intersection of Routes 55 and 47 in southern New Jersey, along one route to the Jersey Shore, a regional tourist and vacation home destination. The anchor box occupied by JCPenney is particularly well-located at the number one entrance for vehicular traffic with visibility from the major roadways.  In addition, the hybrid nature of the center, which combines the convenience of a power center and an enclosed mall, lends itself to a multitude of options.

As of September 30, 2014, the Cumberland Mall was 94.3% occupied and generated comparable sales per square foot of $298.

Primark Leases 677K SF Lehigh Valley

by Steve Lubetkin Staff writer for the Philadelphia

 2485 Commerce Center Boulevard, a 677,088 square feet facility within Lehigh Valley Industrial Park VII, was leased by UK retail company Primark. This location will serve as their primary east coast distribution facility as the company makes its first venture into the United States.

“This is a truly significant transaction for the entire Lehigh Valley community. This site is part of the overall redevelopment of the former Bethlehem Steel Company properties. The neighborhood now includes Walmart, which recently leased 2.4 million square feet of space in two buildings, Crayola, which leased 800,000 square feet, and Zulily, which also leased 800,000 square feet

“The Lehigh Valley has become the preferred location for distribution of product to customers in the Mid-Atlantic and Northeast. The major companies that have located in Lehigh Valley versus New Jersey is significant.”

The property offers immediate access to I-78 and is adjacent to the Norfolk Southern Bethlehem Intermodal Terminal, making it ideally situated for a distribution center. Primark took advantage of the LERTA tax abatement zone and signed a 10-year lease. It has also recently leased the former Sears store at the King of Prussia Mall, and will be opening several more retail locations along the east coast.

Grand plans for riverfront hotels, wedding halls in Fishtown

Joseph N. DiStefano, Inquirer Staff Writer

Developer Bart Blatstein and caterer Joseph Volpe say they have signed a contract with Exelon Corp. to buy the former Delaware Station electric plant on the Delaware River in the city's Fishtown section.

The property has a 1,000-foot stretch of waterfront and includes a pier.

"We envision two boutique hotels, each leading into their own ballrooms with 55-foot-high ceilings," said Volpe, owner of Cescaphe Event Group, which organizes 600 wedding receptions a year at its five Philadelphia venues.

"It's a one-of-a-kind property," said Blatstein, best known for the Piazza at Schmidts and other housing-and-retail projects that have helped transform some of the city's older and grittier neighborhoods.

The partners have known each other since they were growing up in Northeast Philadelphia. Volpe said Blatstein has partnered with him in developing some of his wedding venues since he catered an event at Blatstein's home in 2002.

"When you hang out with Bart, it's always exciting," Volpe said.

Blatstein said the partners are not planning a retail center or any industrial uses. He and Volpe would not comment on the price, pending the sale closing. They have started talking to banks, Volpe added.

Exelon spokesman Robert Judge confirmed that the company, parent of Peco Energy, has made a sale agreement, but would not confirm the identity of the buyer or the price.

Judge said at least five serious bidders expressed interest in the property after the Binswanger real estate agency offered it for sale last fall. Exelon and Blatstein hope to close the deal in March.

Alan Greenberger, deputy mayor for commerce and development, said the city is hoping the former plant is renovated and put back to use.

"Blat is taking on a really amazing project," Greenberger said. "We always thought it could be an event-type place."

Greenberger said the plant is probably zoned as industrial, but said that should not be a problem.

"If there's a viable re-use, we will work with them to get the appropriate zoning," he said.

The property has 300,000 square feet of vacant buildings, including a power plant designed by architect John T. Windrim, who also designed the Franklin Institute. The buildings were constructed by the Philadelphia Electric Co. shortly after World War I on the site of 1800s-era shipyards. There are an additional 16 acres, some of which is underwater.

Inquirer architecture columnist Inga Saffron noted in a recent piece about the site that former electric plants have become art museums, such as the Tate in London; dance halls, as in Baltimore; and office centers.

One such office complex is in Chester, though that old power plant, converted 10 years ago, is half-vacant.

Blatstein and Volpe first collaborated on the former Imperial movie house on Second Street, which they turned into Cescaphe Ballroom, and a second Northern Liberties venue, Tendenza.

Volpe's group also organizes parties at the Down Town Club in the Public Ledger Building, 600 Chestnut St., and the Curtis Center next door.


Thursday, January 15, 2015

Penguin Sells Industrial Facility in West Chester

Exeter Property Group , a real estate investment management company, purchased the industrial facility at 1302 Goshen Pkwy in West Chester, PA from Penguin Industries, Inc. for $4.9 million, or about $66 per square foot.

The 75,000-square-foot warehouse was constructed in 1999 on 12 acres in the Chester Industrial submarket of Philadelphia. It features 24-foot clear heights and 10,000 square feet of built-out office space.

United Realty Trust Acquires Cherry Hill MOB

United Realty Trust Incorporated acquired the medical office building at 7 Carnegie Plz. in Cherry Hill, NJ from Fox Rehabilitation for $9.3 million, or about $103 per square foot.

The 90,070-square-foot facility was built in 1988 on 17.4 acres in the South Camden County submarket of Philadelphia, part of the Cherry Hill Business Park.

Fox Rehabilitation has leased back the building from the new owner and will continue to occupy the entire property for a ten-year term under a triple-net lease.

The buyer funded the acquisition in-part with a first mortgage loan of $5.5 million and mezzanine funding in the amount of $1.8 million.

Wednesday, January 14, 2015

Will REITs Be the Hot Investment for 2015? (Video)

Six Trends in Commercial Real Estate to Watch for in 2015

By Peter Burley and David Lynn for the Urban Land Institute Magazine

While many variables will determine the course of  U.S. commercial real estate, here are six potential trends for 2015 based on the current outlook:

Increased allocations and capital flows. With most institutions—not to mention high-net-worth investors—still being underallocated to real estate, combined with the strong four- and five-year performance of both NCREIF and NAREIT, we can expect more investment capital coming into commercial real estate. The significant amount of capital would be vexing if not for the fact that real estate seems to offer some of the best risk/reward propositions around, particularly given the multiyear run-up in equity and bond values. Look for higher allocation targets, and more foreign and retail investor money to continue to push capital values up well beyond the 2007 peaks, which should be cause for concern.

Continued low supply. New supply is at a historic low (see figure above), in part because market rents generally have not justified new construction and because financing has remained constrained. This leaves enormous upside potential in the property sectors to push occupancies and rents.
Increased appetite for risk. It has only been in recent quarters that investors have been willing to accept some additional risk to achieve higher yields. That has brought new activity to a number of secondary markets, including Philadelphia, Denver, Austin, and Charlotte, where well-priced Class A properties have come into play. In addition, there has been some “trickle out” through the marketplace into still-riskier placements in the suburban office arena, and into some Class B and C properties, where some investors are making strategic value plays. Finding the best investments in unfamiliar markets can be difficult. Class A office properties in one market are not always comparable to Class A office properties in another. The same is true across the spectrum of property sectors across the range of markets—from secondary markets to tertiary markets—anywhere in the country.

Investors continue to follow the jobs and people. Markets such as San Francisco, Austin, Seattle, and others have demonstrated advantageous population and job growth dynamics. Many of the jobs that are created in those cities are tied to technology as well as to energy and banking. Employment growth in the San Francisco area, for instance, outpaced the nation’s last year, with job gains exceeding 4 percent, and San Francisco is among the top tier of cities where a solid mix of job-creating industries is concentrated. Other Pacific Coast cities, including Seattle and Portland, also exhibit high concentrations of job-creating industries, driven in large part by technology. Other metropolitan areas, including Washington, D.C., with its still-substantial government employment base and growing financial services and technology sectors, and Houston, with its enormous energy sector and export machine, promise to be near the top of any list for investment—and not just in the office sector.

Multifamily still popular. Multifamily transaction volume has reached pre-recession levels, outstripping office transactions for the first time in ten years, as real estate investment trusts (REITs) and pension funds have fed a fierce appetite for the multifamily sector. The pace is unlikely to slow anytime soon. Apartment demand has been—and is expected to be—robust, supercharged by the shock waves of the recession and by strong demographic trends that are only beginning to manifest. And, as values moved ever higher, cap rates fell back toward 6 percent, close to where they stood in 2005 and 2006. Most deals have been concentrated in larger urban markets, such as New York, Washington, Los Angeles, and Chicago, with considerable focus on the echo boomers, who are partial to the amenities of an urban lifestyle, and their parents, who are realigning their housing needs toward walkable surroundings and mass transit.

Ongoing retail bifurcation. A confluence of factors including, especially, the economic recession and the inexorable wave of e-commerce has redefined the retail market equation. The day of the suburban mall, anchored by a mid-market department store, has probably passed. There will be no return. And, although the industry’s evolution continues, we are already beginning to see a deeply bifurcated mix of high-end urban retail destinations at one end of the retail spectrum with discounters at the other, and a scattering of local grocery-anchored strips in between. It may not be a formulaic trend, after years of consumer caution and austerity, but an improved housing market should lead to an improved retail environment. With home prices recovering and financial markets making strong gains, household wealth has risen to more than 5.5 times disposable income, the 20-year average. In addition, the annual expansion in retail sales, 6 percent per annum, is an indication that retail activity is well on its way to achieving a rate consistent with job creation and income growth.


At the upper end, Class A urban space has garnered the strongest rent growth and the lowest vacancies, as income, employment, and tourist activity are generally concentrated in the city centers (New York’s Fifth Avenue and Park Avenue; Chicago’s Loop and Magnificent Mile; Los Angeles’s Rodeo Drive; San Francisco’s Union Square). High-end department stores continue to thrive, and urban vertical mall space still commands a premium. Regional malls—most of which were developed prior to the downturn—serve as destination shopping venues for the affluent suburban population, and most of those malls have been holding their own, with vacancies hovering within a few basis points of 6 percent. Anchor tenants do well.

Industrial continues its steady improvement. Industrial real estate is subject to the whims of the national and global economies, as imports and exports wax and wane with the crises of the day, week, or month. There have been indications that economic slowing overseas has undermined some growth at some of the major ports and larger airports. And, as retailers move to be closer to customers, some intermediate warehouse points have suffered modest retrenchment. That the Amazon distribution model has affected the warehouse market goes without saying. A number of older warehouse properties have been tagged as obsolete. But, even locally based brick-and-mortar retailers still need warehouse space in many of the same places they have always been—near population centers where stores are and where people shop. Demand for industrial space—particularly in gateway markets—has been growing. Economic recovery and an upward trajectory in consumer spending, on furniture and electronics especially, have led to the absorption in many major markets, and there has been considerable “trickle-down” into secondary markets, including the Inland Empire of southern California, Sacramento, and Charlotte.

Investors are increasingly confident about acquiring assets, bolstered by attractive financing and still-attractive assets in the marketplace. We should expect to see multifamily continue to lead the Palio for investment activity, particularly in urban and infill locations and especially in transit-oriented locations, followed (in order) by industrial properties, hotels, office, and retail. While development remains subdued, with the exception of the apartment sector and in specialized areas of the industrial and hotel sectors, rankings are similar.

Investors are moving into an array of asset choices in a widening number of markets as they seek ever more attractive yields. Interest rates do not appear ready to rise substantially in the near to medium term (especially in light of the Fed’s ongoing accommodative stance and massive deflationary factors gathering momentum), and cap rates—even in many secondary markets—will continue to compress, creating negative spreads in some larger gateway markets for the first time in many years—a worrisome sign. While new construction has begun to pick up in a few areas, new product does not appear likely to offset positive absorption trends. The outlook for 2015 is that commercial real estate fundamentals will continue to improve—but will its popularity, as evidenced by ever-increasing investment flows, create the conditions for another pricing bubble?
Full story:

REITS outperform (Video)

Monday, January 12, 2015

Shopping Center in Monaca, PA sells for $41M

Township Marketplace in Monaca, PA sold to American Realty Capital for $41.12 million.

“Township Marketplace is the preeminent shopping center in the area, boasting a strong lineup of national tenants that all perform well at this location. We had national interest in the property given the regional nature of the center and the proposed $4 billion cracker plant.”

Township Marketplace is a 298,630 sq. ft. power center anchored by Lowe’s, and also includes such national tenants as Cinemark, Party City, Michaels, PetSmart, and Five Below. The property was built in 1999.

Building in Pureland Inustrial Park Sells for $2M

600 Heron Drive, Bridgeport, NJ sells to 602 Heron Drive, LLC for $2 million. The new ownership group purchased the vacant warehouse facility from Omega Engineering, Inc.

“The acquisition of this property will allow Camping World, the neighboring tenant/property, to expand its business onto this premises,”

600 Heron Drive is a 71,518 square foot warehouse building situated on about six acres within the Pureland Complex in Bridgeport, NJ.

Located off of Exit 10 of I-295 with excellent highway visibility, Pureland is one of the largest industrial parks on the east coast, with more than eleven million square feet of distribution, manufacturing, and light industrial space on 3,000 acres.

Friday, January 9, 2015

COPT to Finish Final Stages of Aborcrest, Blue Bell

By Natalie Kostelni, Staff writer for the Philadelphia Business Journal

Corporate Office Properties Trust is closing in on the final stages of the transformation of Arborcrest, its office campus in Blue Bell, Pa.
The company began redevelopment of what was the former Unisys Corp. complex in 2008 when it embarked on what will be a $120 million effort to reposition the property once occupied by a single tenant — Unisys — into a series of modern office buildings that would attract top tenants and top rents. So far, the company believes it has accomplished what it set out to do.

"We have absolutely had tremendous success with that marketplace," said Steve Budorick, chief operating officer at COPT of Columbia, Md. "It is a combination of tremendous product strategy and a very effective redevelopment and marketing team. Our value proposition of delivering very contemporary, well lit space that appeals to the Millennial work culture at a competitive price point has been effective."

Rents run in the high $20s a square foot and the roster of tenants at Arborcrest include Coredial, McGladry, Integrated Project Services, PRA Health Services, Annodyne Inc., Brokerage Concepts Inc., Mayo Seitz Inc. and others.

For decades, Unisys occupied about 960,000 square feet at the 137-acre property at Union Meeting Road and Penllyn Blue Bell Pike in the Blue Bell section of Whitpain. Unisys significantly shrank down to 180,000 square feet, giving COPT an opportunity to revamp structures on the property. It first completed Lakeside I, a 219,000-square-foot building at 801 Lakeview Drive that is now occupied by Unisys and McDonald's.

The real estate company then tackled a massive building it cut up into three structures — Hillcrest I, II and III — with a courtyard in the middle.
"We removed square footage to create the three buildings and to break the project down into more manageable redevelopment chunks," Budorick said.

Hillcrest I, a 115,700-square-foot building at 751 Arbor Way was carved out and completed by the first quarter of 2012. Hillcrest II, a 178,100-square-foot building at 721 Arbor Way, was built out by early 2013; and Hillcrest III, a 138,500-square-foot building, is scheduled to be completed sometime this quarter.

Three leases are in negotiations now and, once wrapped up, will mean the entire 651,300 square feet of redeveloped space - on which it spent $92 million - will be fully occupied.
It will also mean the eventual kick off of the final phase, the redevelopment of what is called Woodlands I, a 219,000-square-foot building.

COPT plans to spend roughly $28 million to re-do that structure and is still finalizing its plans.
"We have an extraordinarily exciting design for that," Budorick said.
Full story:

Thursday, January 8, 2015

Barry Sternlicht sees 'strange capital' in real estate (Video)

Liberty Plans More Warehouses in Nazareth, PA

by Anthony Salamone, Morning Call
Fresh off approving a controversial massive warehouse project, Lower Nazareth Township supervisors will hear a proposal on Wednesday, Jan. 14, for two more warehouses.

Liberty Property Trust is seeking conditional use for more than 50 acres situated between Nazareth Pike (Route 191) and Daniels Road (Route 946). The developer proposes constructing two warehouse-distribution buildings totaling 525,000 square feet.

The first would be about 225,000 square feet on 23.5 acres, while the second building would cover about 300,000 square feet on slightly more than 23 acres, according to the company's application on file at the township municipal building.

Liberty says in its application that no tenants have been lined up yet, but the company assumes warehousing and distribution will be conducted day and night, seven days a week. The company purchased the property in September 2013 for more than $4.5 million, Northampton County property records show.

The application also shows that the warehouses would contain more than 400 parking spaces and about 150 loading docks.

The proposed Nazareth Pike Warehouse Development would face both routes 191 and 946; the developer plans to build a public loop road that eventually would connect the highways and intersect with Lonat Drive. The site is about 2 miles south of Nazareth.

Efforts were unsuccessful to reach a Liberty Property representative for more information

Last fall, Lower Nazareth supervisors voted 4-1 to grant conditional approval to Industrial Developments International to construct an 822,500-square-foot warehouse distribution facility between Hecktown and Newburg roads. The decision came after supervisors heard concerns from residents of Lower Nazareth and neighboring Palmer Township during 10 public hearings.

Township Manager Timm Tenges said it's too early in the process to say whether Liberty Property's proposal could bring similar apprehension among residents.

"The concerns are always the same regardless of what it is," said Tenges. "The board looks at transportation issues, how the facility may or may not impact the surrounding area …"

Attorney Blake Marles, who represents Industrial Development, said this week that engineers are performing stormwater calculations and design work, with a goal of formally submitting development plans to the township later this winter.

New York's Nightingale Properties Expands Center City Holdings With Seven Penn Purchase

Nightingale Properties added Seven Penn Center to its growing Philadelphia portfolio. Philadelphia's Arden Group sold the 19-story, 286,574-square-foot Center City office tower at 1635 Market St. for $39 million in a year-end trade. Arden had owned the building since 1995.

Citibank provided $36.5 million loan, which includes $30 million in acquisition financing and $6.5 million to pay for planned property upgrades.

Nightingale is a Manhattan real estate investment firm founded in 2005 by Elie Schwartz and Simon Singer that focuses on value-add real estate investments with repositioning or redevelopment opportunities. With the Seven Penn purchase, Nightingale now owns a portfolio of four Center City office buildings in Philadelphia, including 1500 Spring Garden St., 1835 Market St. and 1700 Market St.

Keystone Nazareth Bank & Trust Sells Pond Professional Ctr

Limerick PA Gas Station LLC purchased the Pond Professional Center office building at 1620 Pond Rd. in Allentown, PA from Keystone Nazareth Bank & Trust for $3.84 million, or about $116 per square foot.

The 33,000-square-foot building was constructed in 1990 in Lehigh County.

The Gates at Somers Point Sell for $11.4M

A family trust sold The Gates at Somers Point apartments at 555 Shore Rd. in Somers Point, NJ to Streamwood Company for $11.4 million, or about $56,000 per unit.

The 157,000-square-foot multifamily property consists of five buildings with one-, two-, and three-bedroom layouts. The complex boasts landscaped grounds, parking, and on-site property manager. At the time of sale the property was about 98 percent occupied.

Dover Office Max Sold for $2.5M

A New Jersey-based investor acquired the retail building at 1350 N. Dupont Hwy. in Dover, DE from a group of investors for $2.5 million, or about $105 per square foot.

The 23,750-square-foot, freestanding retail building delivered in 1998 on 2.3 acres in the Kent County submarket of Philadelphia, part of a shopping center that includes PetSmart and hhgregg.

Wednesday, January 7, 2015

Center City office market saw vacancy rate drop last year

by Natalie Kostelni, Staff Writer at the Philadelphia Business Journal

Center City's office vacancy rate fell last year as firms leased up space, companies from outside planted a downtown presence and buildings were taken out of the market for residential conversions.
The vacancy rate for the Philadelphia office market, which totals 43.6 million square feet, ended the year at 13.4 percent, according to CBRE Inc. At the end of 2013, the rate was 14.7 percent. The last time the rate was below 14 percent was in 2009 when it came in at 13.5 percent, according to CBRE data.
Total absorption for the year, or the amount of space that was taken off of the downtown market, was 892,226 square feet, and average rents came in at $27.18 a square foot.
University City had the lowest vacancy rate of 5.5 percent and enviable rents of nearly $35 a square foot.
Full story:

$110M apartment tower reaches milestone

by Natalie Kostelni, Staff Writer for the Philadelphia Business Journal

Radnor Property Group will top off 3737 Chestnut, a 25-story residential building it is constructing in University City.

A ceremony is scheduled for next Wednesday to mark the construction milestone. The $110 million project was originally known as 38Chestnut for its location at 38th and Chestnut streets, though the name was reportedly changed to make its location even more specific and apparent.

The project is being developed by Radnor Property Group. It consists of a 287,000-square-foot residential tower that will have 276 market-rate apartments that will cater to graduate students and professionals. It sits a block away from the University of Pennsylvania's campus.
Full story:

MOM’s Coming to East Market Project

by John Jordan

MOM’s Organic Market has committed to lease 16,000 square feet of ground floor space at the newly renovated 34 S. 11th St. office building here.

The lease announcement coincides with the launch of the office leasing efforts at the office building that has 160,000 square feet of contiguous space available. The building is part of the larger 4.3 acre, mixed-use East Market redevelopment project. When completed, East Market will reopen the city block to pedestrian activity, provide local and global retail and dining experiences, deliver 322 new residential units and offer contemporary, collaborative office space.

"The mission and clientele of MOM’s Organic Market aligns perfectly with East Market,” says Daniel Killinger, director of development for East Market. “East Market will be a dynamic urban environment for young professionals and innovators who place value on experience and convenience. We are full speed ahead building an exciting development and look forward to adding more tenants that fulfill the vision of reviving Market Street.”

The store will feature free electric car chargers, bulk foods, local and organic meats, sustainable seafood, gluten-free foods and Naked Lunch, an all-organic vegetarian eatery.

“We are excited to open MOM’s in downtown Philadelphia – a city with incredible energy and community,” says MOM’S founder Scott Nash. “We believe that the more MOM's stores there are, the better off the world will be...we know of no other retail chain that is as environmentally responsible as we are. We have one Purpose-to protect and restore the environment. Through our actions and leading by example, the more stores we have, the more we can accomplish our Purpose.”

A former warehouse building, 34 S. 11th St. is being transformed into a Class A contemporary warehouse office building that includes large open floor plates, high ceilings, full height windows and a brand new HVAC system, elevators and lobby.

“34 S. 11th Street offers the benefits of a loft-style creative space with the comfort of all-new building systems—a unique blend here in Center City,” says Peter Soens of SSH Real Estate, the development’s office leasing firm and part owner of the project.

Pennsauken Office Building Trades for $1.75M

by Steve Lubetkin
The Bloom Organization has sold its18,240-square-foot office building in the Airport Industrial Park at 7895 Browning Road in Pennsauken, NJ for $1.75 million.

The Bloom Organization built 7895 Browning Road in 1985 for ADT, which had been the building’s only tenant, until vacating recently.

The buyer, Physical and Tactical Healthcare Services, LLC, received an incentive package from the New Jersey Economic Development Association. The building was ideal for PATHS because of the proximity to their current Cherry Hill facility as well as the abundant amount of parking spaces.

“This was a challenging assignment for our office, since we were trying to sell a well maintained office building located in the middle of an industrial park. However, we were able to overcome that ‘obstacle’ by creating and implementing a direct marketing campaign for this property.”

The Airport Industrial Park is situated between Routes 38, 70 and 130, providing direct access to Routes 676 and the Ben Franklin Bridge.

Monday, January 5, 2015

PREIT Rolls Strategic Disposition Program into 2015

Pennsylvania Real Estate Investment Trust completed the sale of eight properties in 2014 for $191.7 million and plans to continue its strategic disposition program this year and has identified five properties to sell.

PREIT has been divesting non-core properties to improve overall portfolio quality and focus resources on value-creating opportunities.

PREIT commenced its disposition program in 2012 and has sold its interests in 16 assets to date, including six non-core enclosed malls which generated average sales per square foot of less than $250. The interests sold had a total value of $424.1 million.

The five properties that it will seek to divest in 2015 are as follows.
Palmer Park Mall in Easton, PA
Uniontown Mall in Uniontown, PA
Lycoming Mall in Williamsport, PA
Washington Crown Center in Washington, PA
Springfield Park in Springfield, PA

"By proactively marketing additional assets for sale in 2015, we are confident that we are taking the right steps to continue a portfolio transformation that will set us apart from our peers while generating significant proceeds to further upgrade our core, high-quality properties" said Joseph F. Coradino, CEO of PREIT.

Keystone Unveils VEVA, Blue Bell, PA Office Complex

by Steve Lubetkin,

Keystone Property Group is banking on dramatic design and amenity upgrades to attract tenants to VEVA, its 425,000-square -foot office complex in Blue Bell, PA. The reinvented space, formerly known as Sentry Park West, has been upgraded and revamped into a contemporary office campus designed to compete with more recent urban core developments.

“We had purchased five buildings in 2013 and had the opportunity to purchase two more buildings, and this gave us the opportunity to make it a cohesive park,” Keystone partner Richard Gottlieb tells exclusively. “VEVA builds upon our earlier efforts to create a state-of-the-art business environment at this address. We are effectively taking our vision to the next level with VEVA, which combines best-in-class office space with an environment that will better promote vision, collaboration, and great ideas.”

VEVA’s reinvention is based on Keystone’s approach to integrating modern lifestyle design and inviting common spaces with the park’s workspace offerings.

Richard Gottlieb, partner at Keystone Property Group

 “At VEVA, we’ve created the workplace of tomorrow — a tenant experience that will attract and connect with today’s forward-thinking businesses,” says Bill Glazer, president of Keystone Property Group. “Businesses in the region have long been attracted to this complex due to its accessible location and high-quality office space. However, the grand-scale upgrades we’ve made will inspire a higher level of creativity, productivity, collaboration and imagination.”

Included in VEVA’s offerings are: A reinvented plaza and public pavilion; a unique array of ambient lighting; enhanced inter-and-intranet connectivity; redesigned building entrances; and upgraded furniture and room design. The complex also features a premium fitness and wellness facility, modern café and lounge, a state of the art conferencing facility and collaborative outdoor “green” workspaces.

Currently, VEVA is approximately 83% leased, with such tenants as CIGNA, Citizens Bank, Fiberlink Communications, inVentiv Health Clinical, Morgan Stanley Smith Barney and Fesnak and Associates.
Full story (with audio interview):

Friday, January 2, 2015

The Top Markets for Real Estate Investment in 2015 (Video)

York News Paper Bldg Sold for $3.4M

Principio Health Center 1 LLC acquired the flex building at 1891 Loucks Rd. in York, PA from the York Newspaper Co. for $3.35 million, or about $35 per square foot.

The 97,000 square foot building sits on 12.2 acres in the York County Industrial submarket of Philadelphia.

Pierce Phelps Facility Sold for $3.5M

Peirce Phelps Inc., an HVAC and consumer electronics company, sold its industrial facility at 2000 N. 59th St. in Philadelphia, PA to PECO Energy Company for $3.5 million, or about $17 per square foot.

The three-story, 202,217-square-foot building was constructed in 1951.

Koch Development Co Sells Retail, Land for $8.8M

Koch Development Company sold a retail building and three land lots located in Etters and Newberrytown, PA to the Rlgvs Partners LLC of Mechanicsburg for $8.78 million.

The deal totals five acres of vacant land located on Lot 4, 6 and 7 on Newberry Parkway in Etters and Newberrytown, PA, and one retail property that totals 32,206 square feet at 1303 Old Trail Rd. in Etters, PA.

Philadelphia Office Trades for $3M

Local investors acquired the office building at 113-115 Arch St. in Philadelphia, PA from Hanlan Midgette Scriven LP for $3 million, or about $136 per square foot.

The historic office delivered in 1860 and totals 22,000 square feet.