Monday, August 17, 2015

Brookwood Acquires 29-Building Office Portfolio in Suburban Philadelphia

By Steve Lubetkin,
Brookwood Financial Partners has acquired a 29-building portfolio of class A and class B office buildings in suburban Philadelphia. With this acquisition, Brookwood now owns and manages 110 buildings throughout the United States consisting of over 8.5 million square feet in 10 states with a current value in excess of $1.2 billion.

The portfolio, which includes 23 office buildings and six office/flex buildings that range in size from 17,750 square feet to 132,385 square feet, contains a total of 1,611,961 square feet and consists of the following four sub-portfolios:

Bucks County Sub-Portfolio, which consists of three Class B office buildings totaling 167,280 square feet with an occupancy of 80.6 percent located in Bensalem, PA;
Fort Washington Sub-Portfolio, which consists of six Class A and B office buildings totaling 457,913 square feet with an occupancy of 88.3 percent located in Fort Washington, PA;
Horsham Sub-Portfolio, which consists of nine Class A and B office buildings totaling 318,137 square feet with an occupancy of 84.6 percent located in Horsham, PA; and
Lehigh Valley Sub-Portfolio, which consists of eleven Class A and B buildings totaling 668,631 square feet with an occupancy of 85.2 percent located in Allentown, PA.
“We are thrilled with this institutional quality acquisition,” says Thomas W. Brown, Brookwood’s president and director of real estate acquisitions. “As value buyers, we look to acquire sound assets at substantial discounts to replacement cost near the inflection point of a market recovery. The office market in suburban Philadelphia is now entering the early stages of its recovery, as evidenced by its consistent positive absorption and high projected rental rates. With limited new construction in the pipeline, we believe increasing demand will continue to push rental rates higher and vacancy levels will drop to pre-recession levels.”

500 Office Center Drive, Ft. Washington, PA, one of the properties Brookwood acquired.
The Greater Philadelphia market has experienced positive absorption in 14 of the last 18 quarters, while vacancy rates are projected to decrease by 10.2 percent to 11.4 percent from the first quarter of 2015 through 2017 and rental rates are projected to experience significant growth in the coming years.

“We are not only buying at an opportune time, but at a purchase price that is substantially below replacement cost,” says Brown. “Given our low basis, we will be able to invest a significant amount of capital in the portfolio, enabling us to offer attractive rental rates and tenant improvement packages to tenants in the market that are looking for excellent space at a competitive price.”

Brookwood expects to spend approximately $7.6 million across the portfolio on targeted capital improvements, including: significantly improving building lobbies, common areas and restrooms; upgrading landscaping; refreshing building exteriors and entrances; replacing building roofs; and modernizing elevators.

“In addition to these building improvements, we plan to build out speculative suites with best-in-class amenities that will accommodate the needs of tenants in the Greater Philadelphia market,” says Kurt M. Zernich, Brookwood’s director of asset management. “We will be able to accommodate both large and small tenants as the Portfolio consists of a variety of office buildings, ranging from single-tenant office and flex space to multi-tenant, multi-story Class A office space.”

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