Thursday, December 29, 2016

Gladstone Buys GSI Commerce Bldg in King of Prussia

Gladstone Commercial Corporation purchased the GSI Commerce Building at 935 1st Ave. in King of Prussia, PA from a private investor for $26 million.

The four-story, 104,000-square-foot office building was constructed in 2001 in Montgomery County, within the First Avenue Corporate Center.

The existing tenant in the building, Radial, will continue to occupy the building. The buyer plans to renovate the property at an estimated cost of $4 million.

Equus Capital Partners Closes Fund X at $361 Million for VF Outlet Center in Philadelphia

Equus Capital Partners Ltd., a Philadelphia-based private equity real estate fund, recently held final close of its 12th discretionary, co-mingled value-added real estate fund, Equus Investment Partnership X. (Fund X), at $361 million, just exceeding its target of $300 million.

Some investors in the fund include the San Joaquin County Employees Retirement Association, Municipal Fire and Police Retirement System of Iowa and the West Virginia Investment Management Board.

Equus Capital said its Fund X is currently about 50% invested across 11 properties in the office, multifamily, and lab/R&D sectors located in the East, Midwest, Southwest and Western regions of the U.S. Equus said many of the assets in the fund are being repositioned via a combination of physical renovations, lease-up or raising property rent rolls.

This month, Equus acquired the VF Outlet Center at 801 Hill Ave. in the suburbs of Philadelphia. Following the acquisition, Equus announced a $70 million redevelopment plan to transform the more than 1 million-square-foot site into a walkable mixed-use campus featuring office, retail and restaurants. Jerome Kranzel, a senior vice president with CBRE's Capital Markets Group, marketed the property on behalf of the seller.

As part of that plan, Equus executed a 150,000-square-foot lease with UGI Energy Services (UGI) to consolidate the firm’s regional offices into an adaptive reuse of one of the site’s original buildings. The property was 35% leased at the time of acquisition.

“As we sought buyers for the VF Outlet Center, it was important to find one committed to redeveloping this historic property in a way that enhanced the Reading community - and we found that in Equus,” said Rick Ott, General Manager of VF Outlet, the seller. “We are excited to be part of the redevelopment as we continue to operate the VF Outlet store at the center.”

Thursday, December 22, 2016

Invesco Sells 215,000-SF Hartford Corners in NJ for $35M

Invesco Advisors, Inc. sold the Hartford Corners shopping center at 1310-1361 Fairview Blvd. in Delran, NJ to Principal Real Estate Investors LLC and Levin Management Corporation for $35.1 million, or roughly $163 per square foot.

The 214,841-square-foot, grocery-anchored retail property was constructed in 2003 on 9.9 acres in the North Burlington County submarket of Philadelphia. The center is anchored by Shop-Rite, Planet Fitness and Staples.

New 780,000-SF Facility Breaks Ground in York, PA

 A brand new 780,000-square-foot warehouse that broke ground this month on-spec is up for lease. Orchard Business Park II - Bldg. A is expected to deliver on E. Canal Rd. in York, PA by year-end 2017.

The 5-Star industrial building will be LERTA-designated with modern amenities including several hundred car parking spaces and 161 trailer stalls, up to 82 loading docks and two drive-ins, potential 75-foot clear heights and 1,600-amp heavy power.

Conshohocken’s Tower Bridge Office Complex Developer Plans New Office Tower in Center City

By: Lance Knickerbocker at Montco.Today

Don Pulver is proposing to build a 38-story office tower at 13th and Market Streets in Philadelphia. He has already put the site under agreement with the Estate of Sam Rappaport, who, together with Richard Basciano, owned some of the city’s prime real estate properties.

The location has languished for years without any development plans. However, thanks to the recent interest in the city’s East Market area and over $1 billion in development planned or already underway, the value of the property has increased significantly.

This is prompting the Oliver Tyrone Pulver Corp to seize on the favorable market conditions and enter the Center City development.

The proposed new tower development would total 840,000 square feet and will cost several hundreds of millions of dollars. The majority of the space would be used for offices with some of the space set aside for retail and other related amenities.

Friday, December 16, 2016

Cohen Equities Acquires CBD Asset

Cohen Equities purchased the top seven floors of 801 Market St. in the heart of Philadelphia's CBD. The 382,801-square-foot office condo is currently anchored by Health and Human Services.

According to Cohen, the acquistions was driven by the strong market fundamentals and the quantifiable demand for high quality, low cost office space. The East Market and Fashion Outlets of Philadelphia mixed use projects are a major catalysts in this submarket as well as other recent leases. 801 Market has strong in place cash flow with a large capitalization. Cohen also said that there are not a lot of assets with value-add options in the marketplace. Cohen Equities' recent purchases are reflective of their institutional-grade focus on the office sector.

Kessler Rehab Institute Trades in $63.6M Sale Leaseback

Carter Validus Mission Critical REIT II, Inc. purchased the Kessler Institute for Rehabilitation at 92 Brick Rd. in Marlton, NJ from Kessler Institute for Rehabilitation, an affiliate of Select Medical Holdings Corporation, for $63.6 million, or about $714 per square foot. 

The seller, formerly known as Marlton Rehab Hospital, immediately leased back the facility from the new owner on a triple-net basis. The facility houses in-patient physical, occupational, speech and recreational therapy, outpatient aquatic therapy, prosthetic training, lymphedema management, balance rehab and vestibular therapy. 

The three-story, 89,000-square-foot medical office building was constructed in 1995 on 20.5 acres in the South Burlington County submarket. 

"We believe the Select Medical Rehabilitation Facility is a great addition to our growing portfolio. The facility benefits from its on-campus location and is directly connected to one of its primary referral sources, Virtua Marlton Hospital. We are pleased to align ourselves with Kessler and Select Medical on this transaction and anticipate it will bring additional value to CVMC REIT II," said Michael A. Seton, president of CVMC REIT II, which acquires mission critical real estate assets located throughout the U.S.

Merrill Lynch Leases 27,000 SF at Four Penn Center

Merrill Lynch & Co. has signed a lease for 26,696 square feet at 1600 John Kennedy Blvd. in Philadelphia, PA.

The 20-story, 522,600-square-foot Four Penn Center office building was built in 1964 and renovated in 2001. The building features on-site concierge, conferencing facilities, courtyard, restaurant and convenience center. It is located within close proximity to public transportation, within the Market Street West submarket.

Wednesday, December 14, 2016

LPT Breaks Ground $1B Improvement of Camden Waterfront's

Liberty Property Trust has broken ground on a new five-story, 222,376-square-foot office building at 1 Water St. in Gloucester City, NJ. Delivery is expected in late 2018.

The facility will be the new headquarters for American Water Works Co. located on the Camden waterfront. American Water, a publicly-traded water and wastewater utility, joins a growing list of corporations that have announced plans to move to Camden using incentives awarded through the Grow New Jersey program, which rewards employers that invest in struggling cities as part of the 2013 Economic Opportunity Act championed by U.S. Representative Donald Norcross (D-NJ) to boost struggling cities in South Jersey.

During the last 15 months of due diligence, Liberty assembled the land, sought and received approvals from and negotiated agreements with the New Jersey Economic Development Authority, the New Jersey Department of Environmental Protection, Camden County, the Camden County Municipal Utility Authority, the City of Camden and the Delaware River Port Authority. Liberty has also reached agreement with Dranoff Properties in connection with the removal of an impeeding view easement restriction.

"Today marks the beginning of what will become an energetic high performance community, anchored by world-class office buildings and a spacious waterfront park easily accessed by walking, biking, driving and public transportation; one which will build upon and greatly contribute to the revitalization efforts already underway in Camden," said John Gattuso, Liberty Property Trust regional director and senior vice president, urban region. "As we shift into the development of The Camden Waterfront, our focus shifts too, from that of a vision to that of a reality, and that is a very exciting thing."

One Water Street has been designed by Robert A. M. Stern Architects, and will pursue LEED Platinum - Core and Shell certification. The Camden Waterfront, master planned by Robert A. M. Stern Architects, represents a unique opportunity to develop a project of this scale in the center of a major metropolitan area.

Liberty is commencing development of the $1 billion project with its focus on three initial areas: infrastructure to support the overall development, an 806-car parking garage and One Water Street.

Liberty envisions a mixed-use development that will attract corporations, employment and significant inward investment. In addition to the anticipated 1.45 million square feet of build-to-suit projects for corporations, the development will include a proposed 180 room Hilton Garden Inn to be developed by Ensemble Real Estate Solutions and a 188-unit residential component, for which an agreement is pending with The Michaels Organization. Substantial investment is planned for the reconstruction and enhancement of the existing waterfront park, creating more than 2.5 additional acres of parkland, offering diverse opportunities for recreation, exploration, respite, and engagement with nature.

"I am thrilled that The Camden Waterfront project continues to move forward and this billion dollar project will soon break ground," said Mayor Dana L. Redd. "This great project goes beyond just the brick and mortar development of the waterfront. Liberty Property Trust has been a great partner throughout this process by ensuring that Camden residents have an opportunity for employment and local sourcing."

Tuesday, December 13, 2016

Montgomery McCracken Signs Long Term Leases in Philadelphia

Full-service law firm Montgomery McCracken has signed two long-term lease agreements in Philadelphia and New York City.

The firm signed a new 16-year lease at 1735 Market St. in Philadelphia. After more than 20 years at the nearby 123 S. Broad St., the firm will relocate its Philadelphia office to Market Street in June 2018. The new space consists of roughly 75,000 square feet across three floors.

"We believe 1735 Market will afford us greater space efficiencies and will allow us to enhance our collaborative work environment. 1735 Market also offers us a modern work space with accessibility to state-of-the-art technology," said Louis A. Petroni, chairman of Montgomery McCracken. "Staying in the central business district is a priority for us and the new building matched what we were looking for in terms of location, convenience and space."

1735 Market is a 54-story, 1.33 million-square-foot, 5-Star office tower built in 1990 by PREIT and architect Kohn Pedersen Fox Associates on one acre in the Market Street West submarket.

Friday, December 9, 2016

Abundant School Corp. Leases 19,000 SF at Two Greentree Center

Abundant School Corp. has leased 19,487 square feet in the Two Greentree Center office building at 9000 Lincoln Dr. E in Marlton, NJ.

The three-story, 56,075-square-foot office building was built in 1983 in the South Burlington County submarket. The tenant will occupy portions of the first and second floors in early 2017.

KGP Telecommunications Renews 121,000-SF Lease in Allentown

KGP Telecommunications renewed its lease for 121,064 square feet in the industrial facility at 7542 Morris Ct. in Allentown, PA.

The 168,967-square-foot building was constructed in 1997. Allentown is about 60 miles northwest of Philadelphia.

Acme Leases 54,000 SF in Snyder Plaza

Acme Markets, a mid-Atlantic grocery store, has signed a lease for 54,415 sqaure feet in the Snyder Plaza shopping center at 29 Snyder Ave. in Philadelphia, PA.

The center totals 324,102 square feet and was built in 1990. It is currently owned and managed by The Goldenberg Group, Inc. Other tenants include Target, Rite Aid and Dollar Tree.

Thursday, December 8, 2016

WeWork Leases 55,000 SF at 1900 Market Street

WeWork has signed a five-year lease for 55,238 square feet in the office building at 1900 Market St. in Philadelphia, PA.

WeWork will occupy the top floor of the eight-story, 457,000-square-foot office building. This will be WeWork’s fourth Philadelphia location.

Richard LeFrak: State of real estate under Trump (Video)

Wednesday, December 7, 2016

Center City District reports $1 billion in city retail demand

by Suzette Parmley, Staff Writer at
A slew of planned investments and appealing demographics are fueling $1 billion in retail demand for downtown space, according to a 24-page report released this week by the Center City District.

The high demand is being “driven by the downtown core and its surrounding neighborhoods” and $8.5 billion in planned developments for Center City before 2019.

In late October it was reported that Philadelphia’s average prime retail rents stabilized after an 87.5 percent increase over the last five years. The report cites only one other major U.S. city - Miami - as growing faster than Philly’s.

The growth, according to the CCD report, is supported by almost 300,000 downtown workers, a historic number of tourists, and residents of the “core Center City” area — Vine to Pine, Schuylkill to the Delaware — who have average household incomes of more than $111,000.

This is complemented by a transit network that deposits a couple hundred thousand people into Center Cit y every weekday and the general walk-ability of downtown, which makes shopping and dining easy.

“The report affirms with statistics what we all know and feel with our gut: that increases in those that live, work and play in Center City is fueling a seven-day per week retail and restaurant explosion."

The CCD report states that high-end retail, especially along Walnut Street, has skyrocketed over the last five years — and that demand is spreading to Chestnut Street and surrounding numbered streets.

A few notable projects: the $325 million renovation of the Gallery Mall into Fashion Outlets of Philadelphia due to be completed in spring 2018, and the $600 million, multi-phased East Market project are creating buzz for the former neglected part of downtown, said the report. It describes Market Street as east of City Hall and the blocks to the south.

Tourism was another factor fueling the retail demand. The CCD reported that 41 million domestic tourists visited the Philadelphia region last year and that the city was second only to New York in its Saturday hotel occupancy rate (89.6 percent). There are currently six hotels under construction and four planned for Center City.

Said Paul Levy of the Center City District: “This is not just a report on trends. This is a powerful magnet for retailers who want to be in the middle of surging demand. Two of our staff have just spent the last two days at the International Council of Shopping Centers conference in New York City talking to retailers who are looking for locations and this report shows clearly that Philadelphia has what they want.”

More on the ICSC New York Dealmaking Conference and its impact on the city’s retail scene in Sunday Inquirer’s Business Section.
Full story:

Tuesday, December 6, 2016

Trading Nation: Real estate & REITs lags badly (Video)

ECHO Realty Acquires Philadelphia-Area Grocery-Anchored Centers

by Steve Lubetkin,
ECHO Realty has purchased a portfolio of three grocery-anchored shopping centers in metropolitan Philadelphia. The centers include GIANT Marketplace at Bensalem, Media Shopping Center, and Lionville Station.

“We began to work with the Shooster family several years ago and are very pleased that we are finally acquiring these centers,” says Drew Gorman, Echo’s senior vice president of acquisitions and development. “The centers are well located, time-tested properties that also provide an opportunity for enhanced value.”

GIANT Marketplace at Bensalem is an 88,500 square foot GIANT-anchored center located at the intersection of Street Road and Mechanicsville Road in Bensalem, PA.

Media Shopping Center is a 71,000 Acme-anchored center located at the intersection of East Baltimore Pike and North Providence Road in Media, PA.

The third center, Lionville Station, is a 79,000 square-foot property located along East Uwchlan Avenue in Lionville, PA.

“We are very excited to be able to achieve a greater critical mass of high-quality grocery-anchored shopping centers in the greater Philadelphia market which has been one of our targeted growth areas for many years,” says Thomas Karet, CEO of ECHO Realty.

The acquisition adds nearly 250,000 square feet to ECHO’s expanding shopping center portfolio.  Last month, ECHO acquired two Harris Teeter-anchored properties in Charlotte, NC.  The company also purchased 15 acres in Dunkirk, MD where construction will commence on a 100,000 square foot, Harris Teeter-anchored shopping center set to open in the Spring of 2018.

Monday, December 5, 2016

Middle Market CRE Digest Northeast

by Steve Lubetkin,

Urban Land Institute Philadelphia, Mitchell Roschelle of PriceWaterhouseCoopers unveiled his annual industry outlook, with 82 percent of his survey respondents expecting a good or excellent year for profits in 2016, and just over 81 percent feeling that way for next year. Small developers are now facing a beauty pageant as global investors seek access to previously less-well noticed markets, Roschelle says.

 Industrial properties continue to froth and bubble as retailers, e-commerce companies, and others press for close-in access to the New York metroplex and its tens of millions of impatient consumers who want what they want and want it now. The feverish activity in the eight New Jersey Turnpike core submarkets has accounted for 82.8 percent of the state’s leasing velocity thus far in 2016. “We’ve witnessed positive industrial absorption in 22 of the past 24 months, which speaks directly to the sustained demand from tenants and their need to service the vast surrounding consumer base. As consumers increasingly gravitate towards making purchases online, the demand for industrial space in specific New Jersey locations will continue to grow.”

Building Blocks
Wawa has opened its newest Philadelphia store at 1900 Market Street. At approximately 7,000 square-feet, it’s Wawa’s largest street store to date, and its fifth Center City location. It is situated on the ground floor of Brandywine Realty Trust’s recently renovated 456,922 square-foot office building in the booming Market Street West corridor.

ACME Markets and real estate development firm, The Goldenberg Group, have signed a lease to construct a new supermarket in Philadelphia.  The new full-line grocery market will be located in the Snyder Plaza Shopping Center, 29 Snyder Avenue, and will serve the Pennsport and Whitman neighborhoods as well as the greater Center City area.  The new ACME, which opens in Summer 2017, will include Starbucks Coffee and a beer and wine shop.

Money Moves
Holliday Fenoglio Fowler arranged $6.061 million in financing for a 178,600-square-foot, vacant industrial warehouse at 4500 Westport Drive in Mechanicsburg, PA. HFF worked on behalf of the borrower, a joint venture between Foxfield Ventures and Novaya Real Estate Ventures, to secure the floating-rate loan. The financing facilitated both the acquisition and future funding needs to implement a light capital improvement program.

Wednesday, November 30, 2016

Ross Leases 26,000-SF Retail Space at Imperial Plaza

Ross Dress for Less, a discount clothing retailer, has signed a lease for 25,832 square feet in the Imperial Plaza shopping center at 3400 Aramingo Ave. in Philadelphia, PA.

The retail center totals 119,883 square feet. Kode Development Associates developed the property in 1995 on seven acres in the Northeast Philadelphia submarket. Other tenants in the plaza include Ihop, Modell’s Sporting Goods and Rainbow.

Dalian on the Park Goes on the Market

Dalian on the Park, part of the Rodin Square development overlooking the Benjamin Franklin Parkway in Philadelphia, has been placed on the market.

It is the newly-constructed, 293-unit, 5-Star multifamily property at 501 N. 22nd St.

The property, which just opened to renters in recent months, is currently approximately 30 percent leased. The 10-story building, which features a 55,000-square-foot Whole Foods in the ground-floor retail portion, was built by Dalian Development. It is estimated that the property, which sits on three acres behind the Rodin Museum, could go for as much as $180 million.

Connell Foley Leases 71,000 SF at Roseland II

New Jersey law firm Connell Foley has leased 71,000 square feet in the Roseland II office building at 56 Livingston Ave. in Roseland, NJ.

The tenant will relocate its New Jersey headquarters from its nearby location in Roseland after 30 years there, taking space on the first and second floors of the building in spring 2017 when it joins Lowenstein Sandler LLP, Brown & Brown, ME Safris and Magone & Company in the property. Additional space on the second floor and 51,000 square feet on the fourth are still available for lease.

"Our previous location served as the foundation for the growth of our firm," said Philip F. McGovern, Jr., managing partner of Connell Foley. "In continuing to build our platform for the future, we were attracted to 56 at Roseland as it is a tremendous fit from the standpoint of location, building amenities, services and technological capability."

New York-based Gensler will handle Connell Foley's build-out, with 58,000 square feet on the first floor featuring main conference rooms, attorney offices and support operations with its second-floor space housing the firm's working cafe, additional offices for the legal team and administrative workspaces.

Built in 1982, the four-story, 433,945-square-foot, 4-Star office building sits on 55.8 acres in the Suburban Essex / Rt. 280 submarket of Essex County, within the Prudential Business Park. Mountain Development Corp. (MDC) and Square Mile Capital Management paid Merck & Co., Inc. $18.1 million, or about $42 per square foot, for the asset back in December 2011.

MDC and Square Mile have invested nearly $50 million in upgrades and capital improvements to the property, which now features new furniture and flooring, upscale fitness center, cardio/yoga studio, lockers and shower area, a green roof and a professional, 56-acre campus with hiking trails, volleyball, walking paths and an outdoor fire pit and lounge area.

Lowenstein Sandler, another area law firm, recently leased 170,000 square feet in the building and its space is currently undergoing build-out by Manhattan-based Marner & Associates, with a 2017 move-in.

Lowenstein Sandler’s managing partner, Gary Wingens, said, "Our firm is excited to be joined by our colleagues from the Connell Foley firm at 56 Livingston. The building offers first class amenities, such as a new high-end gym and dining and catering facilities designed for professional service firms."

Monday, November 28, 2016

Burlington Leases 42,000 SF in New Castle

Burlington Coat Factory signed a lease for 42,443 square feet in the Brandywine Commons II shopping center at 1000 Rocky Run Pky in Wilmington, DE.

The 165,792-square-foot shopping center was built in 1993. Burlington’s lease includes the anchor space.

Whirlpool Breaks Ground on New 1M Sqft Warehouse in Silver Spring Twp

Whirlpool, a leading global appliance manufacturerwith approximately $21 billion in sales, has broken ground on a 1.1 million-square-foot industrial facility at 100 Fry Dr. in Mechanicsburg, PA.

The warehouse will replace the current building on the site, adding another 300,000 square feet in addition to rail access. It is expected to deliver in the third quarter of 2017 in the Harrisburg Area West Industrial submarket of Cumberland County.

Penntex Construction Center is building the warehouse and Exeter Property Group is in charge of property development. Both are Montgomery County-based companies.

Tuesday, November 22, 2016

Giant Food Leases 50,000 SF in Feasterville Trevose

Giant Food, a retail grocery chain with locations across the Mid-Atlantic States, signed a lease to occupy 49,672 square feet at 176 W. Street Rd. in Feasterville Trevose. PA.

The 99,648-square-foot former Big K-Mart center was built in 1973 on 12.3 acres in the Lower Bucks County submarket of Philadelphia.

Griffin Subsidiary Secures $26.7M Loan

Two subsidiaries of Griffin Industrial Realty, Inc. have secured a non-recourse mortgage loan totaling $26.7 million from Webster Bank for two properties known as Lehigh Valley Trade Port II.

Lehigh Valley Trade Port includes 5210 Jaindl Blvd. totaling 252,000 square feet and the 280,000-square-foot warehouse located at 5220 Jaindl Blvd. in Bethlehem, PA. Both properties were constructed in 2015 on more than 20 acres in Northampton County.

One of the properties had an existing mortgage with Webster Bank with a balance of $13.7 million. This was refinanced into the new mortgage loan.

Dranoff, Breaking Ground For Luxury Apartment Tower, Calls Newark ‘Undiscovered’

by Steve Lubetkin,
A long track record of building successful boutique multifamily properties in Philadelphia and its distressed neighbor across the Delaware, Camden, NJ, helped developer Carl Dranoff win the bid to develop One Theater Square, Newark’s first ground-up luxury multifamily construction in more than half a century.

“It’s a carefully calculated risk,” says Dranoff. “It’s just a bullseye location, you just can’t get a better location.”

Dranoff Properties, the New Jersey Performing Arts Center, and city officials broke ground last week on Newark’s first luxury living address, One Theater Square. The building is expected to top out next fall, with the first tenants moving into apartments in June 2018, Dranoff says.

The 22-story skyscraper, with a signature curved glass tower, will contain 245 apartments, 12,000 square feet of ground level retail, 285 parking spots and amenities that include:  24-hour concierge service, a state-of-the-art fitness center, club rooms, and an outdoor entertainment space outfitted with soft seating, TV’s and fire pits.

Apartments in the tower will rent for significantly less than comparable properties in the very hot multifamily markets of Hoboken and Jersey City, but with similar amenities and urban access, Dranoff says. The project includes 24 affordable housing units that will be marketed as artist residences, although they will be available to anyone who meets the financial criteria.

“Our rents will be one-third less than Hoboken and Jersey City,” he says. “You’ll be able to rent a two-bedroom for what a one-bedroom costs. Anybody who wants more space will be able to come to One Theater Square and get basically the same walkable location, the same access, everything.”

In an exclusive interview with at Philadelphia’s Union League Club, Dranoff explained that his successful redevelopment of the Victor Lofts in Camden, formerly the home of RCA Victor’s record plant, and properties like One Riverside and Symphony House in Philadelphia, gave his firm the credibility necessary to get the nod for the Newark project.

“We’ve constantly been looking for areas to expand into and bring our playbook into,” he says.  “We’ve diversified our company, we’ve gone from historic reconstruction to ground-up construction, from midrise to high-rise, from apartments to condominiums.”

Carl Dranoff, CEO of Dranoff Properties, at ALM Real Estate Media’s RealShare Philadelphia 2016 Conference (Bill Neumann Photo. Used by permission.)
Dranoff heard about the RFP for the property adjacent to the NJPAC in 2008, and realized it was similar to the Symphony House project, which was also connected with a nearby arts and culture venue, Philadelphia’s Kimmel Center.

“South Broad Street was not a residential street at all, but we thought we could develop the site, and do a major anchor project, and people will want to live there because they are interested in walkability, arts and culture, it’s lively,” he says.

Located a block from the Kimmel Center, which has some 300 days of performances a year, Dranoff’s Symphony House sold out its condominiums even during the recession, he says.

“So when I saw Newark, NJPAC, and this site, right across the street, not even down the street, I thought, why can’t I do what I did at Symphony House, in Newark?” Dranoff says. “Frankly, that’s why we were selected as the developer.”

Of 20 responses to the RFP, the selection committee narrowed down the list to four, including Dranoff, and when the team visited Philadelphia and saw Symphony House, “they got it right away,” Dranoff says. “They said, ‘This is the guy, he’s got the playbook, he knows how to do this.’”

Certain fundamentals of Newark help ensure the project’s ultimate success, Dranoff believes. The site is a short walk or light-rail ride from Newark Penn Station, which itself is just a 20-minute train ride into Manhattan. Trains from the station also serve the Amtrak Northeast Corridor to Boston and Washington, with Newark Liberty International Airport just 12 minutes from Newark’s central business district.

“Start with the big picture. Fifty thousand people are working downtown every day,” Dranoff says. “You don’t think we can fill up 250 apartments just with people who would like to walk to work?”

The project fits well with the redevelopment of the Military Park area adjacent to the NJPAC, the former Hahne’s Department Store building is being redeveloped into a Whole Foods, with connected retail shops and multifamily developments, and Prudential Financial recently completed a second office tower in the area.

The $116 million project has been realized through a unique public private partnership, which includes contributions from the city of Newark; the state of New Jersey; Prudential Financial; Fifth Third Bank; the developer and NJPAC.

“One Theater Square embodies a vision of downtown Newark more than a quarter century in the making,” says John Schreiber, president and CEO, NJPAC. “This is a transformative moment in a great city’s advance toward an even greater future.”

Plans for the ground floor include 12,000 square feet of retail space. Apartment rents are expected to start at $1,250 for a studio, $2,000 for 1-bedroom, $3,150 for a 2-bedroom and $4,500 for a 3-bedroom.

“One Theater Square is an important step forward for Newark,” says Newark Mayor Ras Baraka. “The pace of change downtown continues to accelerate as our central business district becomes more of a residential, artistic, and retail hub in addition to its strength as a regional business center.”

Dranoff expects to look for other opportunities for development in Newark.

“We think Newark is an undiscovered destination,” says Dranoff. “I see Newark as like Philly was ten years ago.”

Sunday, November 20, 2016

Potential new prison site sold to recycling firm

by Tricia L. Nadolny and Julia Terruso, Staff writers Philadelphia Inquirer
When the city last year considered buying land along the Delaware River as the site for a new prison, the backlash was swift and the plan was shelved. But the door remained open, as Mayor Kenney, then the Democratic Party nominee, said the land could be ideal for an educational facility for inmates.

That opportunity seems to have passed.

A purchase agreement is in place for the 58-acre property, which Morris Iron & Steel hopes to use to expand its adjacent scrap-metal recycling facility. Councilman Bobby Henon, who was in favor of purchasing the property last year in light of the poor conditions at the city's House of Correction, on Thursday introduced a resolution to rezone the property for the new use.

"This new administration is committed to ensuring the [inmate] population is decreased. And if they can decrease it enough, maybe there's not a need for the House of Correction," said Henon, whose district includes the land.

The proposed purchase was among the most contentious issues on Council last year, when the debate became intertwined with a conversation about providing more funding to the School District. Kenney has since focused on reducing the city's prison population, in part through a grant from the MacArthur Foundation.

His spokeswoman, Lauren Hitt, on Thursday said the mayor remains interested in a new facility only if it has "a heavy focus on rehabilitation and skills training for reentry."

Ron Greller, president of Morris Iron, said the company plans to maintain a walking path that runs along one side of the property and create a small community park along the Delaware River.

"It's a win-win for the community," Henon said.

Also Thursday, Council President Darrell L. Clarke introduced a bill that would make it harder for businesses that do not meet diversity workforce requirements to get city contracts. It would require such businesses to provide proof they sought minority participation, or risk being blocked from city contracts.

Clarke also introduced an ordinance approving the financing of a $60 million bond to pay for a backlogged home-repair program. The money would fund repairs in about 5,500 homes owned by low-income residents.

Friday, November 18, 2016

Aldi Signs 22,000-SF Sublease at Limerick Crossing

Aldi has subleased 21,702 square feet in the Limerick Crossing Shopping Center at 1 - 51 W. Ridge Pike in Limerick, PA.

The 120,775-square-foot shopping center was constructed in 2007. The lease is scheduled to commence in the spring of 2017. Aldi will join other national tenants such as Sleepy's and Hair Cuttery in the center, which is owned and managed by Brandolini Companies in Berwyn, PA.

Delta-T Group Renews Lease at 950 Haverford

Delta-T Group, a health, social work, education and behavioral health staffing firm, signed a renewal for its 18,146-square-foot location at 950 Haverford Rd. in Bryn Mawr, PA.

The three-story, 55,000-square-foot office building was constructed in 1972 and renovated in 2002.The property is located in the Main Line submarket in Delaware County.

Food Basics Leases 48,000 SF at Shelly Plaza

Food Basics, a discount supermarket chain, signed a lease for 48,131 square feet in the Shelly Plaza shopping center at 8914-8944 Frankford Ave. in Philadelphia, PA.

The 145,074-square-foot shopping center was constructed in 1997 in Northeast Philadelphia.

Thursday, November 17, 2016

Trouble Brewing in Commercial Real Estate

by Peter Grant, Wall Street Journal

Defaults are rising in a key corner of the commercial real-estate debt market just as borrowing
costs are set to jump, raising the likelihood of a slowdown of the $11 trillion U.S. commercial
property sector in 2017.

A financial crisis-era regulation is about to take effect that is expected to make some commercial
real-estate borrowing more expensive and complicated, analysts said.

At the same time, interest rates have increased since the election of Donald Trump as the
nation’s 45th president last week and seem poised for a sustained rise from recent historic lows,
which would further squeeze an industry built on borrowed money.

“I can paint a picture that it could be disastrous, with runaway inflation and high interest rates,”
said Charlie Bendit, co-chief executive of Taconic Investment Partners LLC, at a New York
industry luncheon last week.

The worries raise fresh concerns for the commercial property market as it enters its eighth year
of expansion.

Already, landlords are battling a slowdown in sales and rising vacancy rates of multifamily
housing units across the U.S. and of office space in Houston, Washington, D.C., and other big
markets. Commercial property sales volume was down 8.6% in the first nine months of 2016 to
$345.4 billion, according to Real Capital Analytics.

Now defaults are on the rise as well. More than 5.6% of some $390 billion worth of commercial
property mortgages that have been packaged into securities was more than 60 days late in
payment in September, according to Moody’s Investors Service. That was up from a 4.6%
delinquency rate earlier this year.

The culprit: loose lending before the financial crisis. Ten-year loans issued in 2006 and 2007 are
now coming due, and many borrowers aren’t able to pay them off despite rising property values.
In all, Morningstar Credit Ratings LLC predicts borrowers won’t be able to pay off roughly 40%
of the commercial mortgage-backed securities loans coming due next year. Suburban office
properties and shopping centers are being hit particularly hard, saidEdward Dittmer, a
Morningstar vice president.

“We’re seeing a lot of stress,” Mr. Dittmer said

Consider the Skyline office complex in Fairfax, Va. Vornado Realty Trust financed the property
in 2007 with a $678 million mortgage that was converted into bonds.
Vornado was forced to restructure the loan in 2012 after the portfolio ran into trouble. Earlier
this year, Vornado for a second time notified the loan servicer that “cash flow will be insufficient
to service the debt,” according to a regulatory filing. A Vornado spokesman declined to

Similarly, a venture including New York investor Jacob Chetrit that owns a 1.2-million-squarefoot
office property on Seventh Avenue in Manhattan is negotiating an extension of a $136.9
million loan made in 2006. The space is about 15% vacant.

Victor Gerstein, a lawyer working for the venture, stressed that it is current in its monthly debt
service and that there hasn’t been a default. The owners are moving to increase the building’s
occupancy and “will be very well positioned to get a very attractive loan in the near future,” Mr.
Gerstein said.
Adding to the market’s worries are new rules that go into effect on Christmas Eve under the
Dodd-Frank regulatory overhaul requiring issuers of commercial mortgage-backed securities to
keep at least 5% of the securities they create.
The so-called risk-retention rules likely will make borrowing more costly and complicated,
raising the chances that some property owners won’t be able to refinance loans from the boom
‘I can paint a picture that it could be disastrous, with runaway inflation and high interest rates.’
—Charlie Bendit
“You couldn’t have planned worse timing,” said Tad Philipp, director of commercial real-estate
research at Moody’s.
Mr. Trump promised during his campaign to repeal Dodd-Frank, but analysts said that could take
a long time and that certain provisions might remain on the books, including risk retention.
To be sure, banks, insurance companies and other finance firms have picked up some of the slack
from the shrinking commercial mortgage securities business. More than half of the bonds issued
in 2005 and 2006 for New York properties were refinanced by such lenders, according to a
report earlier this year by CrediFi, a real-estate data and analysis firm.
But there are other problems flaring up as well. Regulators earlier this year warned that vacancy
has been growing in the rental apartment market, and that higher interest rates in the next two
years could damp price growth there.
“They’re flashing a yellow light over the market,” said Ely Razin, CEO of CrediFi.

Transwestern Acquiring 160 Acres for 2.2-Million-SF Spec Warehouse Project

The industrial development arm of Transwestern will acquire 160 acres in Penn Township, PA, for the development and construction of a 2.2 million-square-foot warehouse project.

The speculative project dubbed Penn Commerce Logistics Center in Penn Township, located about 23 miles northwest of Pittsburgh, launches the first operations in the Northwest by Ridge Development, the industrial development division of Transwestern Development Co.

Ridge, under contract for the purchase of the site at Exit 37 on Interstate 81, will begin construction of a 1.4 million-square-foot building when the transaction closes in September 2017. The building is expected to deliver in 2018, with build-out of the project targeted for 2020.

Ridge has hired Senior Vice President Paul Pontius to lead the operation, based at the new Ridge office in Harrisburg.

In a statement, Ridge Executive Vice President Steve Kros said Central Pennsylvania is "severely underserved" by industrial product, making Penn Township in ideal entry point for the company's Northeast expansion.

The numbers would support Kros's contention. The Newville submarket where Penn Commerce Logistics Center will be located had just 2.57 million square feet of existing warehouse space at mid-year 2016, fully occupied, the company said. Nearby Carlisle, by contrast, had 18.2 million square feet of existing warehouse inventory with 7% vacancy and 2.35 million square feet under construction.

Ridge officials said the project will feature the largest floor plate, at nearly 1.5 million square feet, of any development within 30 miles of Harrisburg. The cross dock buildings will range from 36- to 40-foot clear heights.

Wednesday, November 16, 2016

Coretrust Closes on Two Liberty Place

Coretrust Capital Partners LLC, a real estate investment firm, has closed on its previously announced acquisition of the office portion of Two Liberty Place at 50 S. 16th St. in Philadelphia, PA.

Cousins Properties, Inc. and Teacher Retirement System of Texas sold the condo asset for $219 million, or about $233 per square foot.

The property consists of office space and residential condos. The buyer purchased the lower 36floors, which make up a 938,753-square-foot office portion of the 57-story, 1.2 million-square-foot, mixed-use property.

The building was constructed in 1990 by Rouse & Associates on three-quarters of an acre in the Market Street West submarket, between Market and Chestnut Streets. The office portion is occupied by a mix of notable tenants including CIGNA Health Management, Conner Strong, Eckert Seamans Cherin & Mellott, US Bank and more.

Pottsville Distribution Center Completes Addition, Bringing Total Bldg Size to 1.3M SF

The Pottsville Distribution Center at 25 Keystone Blvd. in Pottsville, PA has completed construction on a new addition that added 650,000 square feet of industrial space on-spec to the existing 617,500-square-foot facility.

The building now totals almost 1.27 million square feet of class A warehouse space on 88.8 acres in the I-81 Corridor Industrial submarket of Schuylkill County.

The property, originally constructed in 2000, now features 142 loading docks and three drive-in bays, a 125-foot truck court, 36-foot clear heights, seven-inch floors, 3,000-amp heavy power, 50-foot column spacing and a fenced lot, all in an abatement zone.

There is currently 650,000 square feet available for lease. The space is divisible to 200,000 square feet and is located in the newly-constructed portion, with access to 65 loading docks and two drive-ins.

Sam Zell: Upside to normalized rates (Video)

Kairos Leases Suburban Philly Office Campus to 91%

Kairos Real Estate Partners has successfully repositioned the 400,000-square-foot Apex office campus in Fort Washington, Pa. Since acquiring the three-building property in December 2014, Kairos has leased 190,000 square feet of space, having attracted notable anchor tenants such as Citizens Bank, Allstate Insurance, Lincoln Investments and Impax Labs.

Three new tenants have signed eight-year leases totaling more than 60,000 square feet in September and October. The agreements include:

Citizens Bank’s 38,000-square-foot lease; the company will relocate its suburban offices from Plymouth Meeting to Apex in July 2017

Office Practicum’s 18,000-square-foot lease; the company, a leading provider of electronic health record (EHR) and practice management software solutions for use in pediatric clinical settings, will relocate its headquarters from Horsham to Apex in March 2017

Compassus’ 7,400-square-foot lease; the Nashville-based company is a nationwide network of community-based, post-acute care services that operates more than 165 hospice, palliative and home health programs in 30 states across the U.S.

Over its ownership period, Kairos has also increased the property’s occupancy with three new anchor tenants, including Lincoln Investments (53,000 square feet), Allstate Insurance (25,000 square feet) and Impax Labs (47,000 square feet).

Big corporate names are drawn to Apex because of its attractive campus setting and the newly constructed Hub, a glass box at the center of the campus that connects the three buildings. Brand new amenity spaces include the Apex Café, the Apex fitness center and a 7,000-square-foot conference and training center. Outdoor grounds feature seating for functions, casual gatherings with fire pits and a lawn for outdoor events. Apex also provides abundant electrical power fed from two separate PECO substations, 9-foot finished ceiling heights, efficient floor plates, as well as on-site surface and structured parking at a ratio of 5.3 spaces per 1,000 square feet of rentable area.

The campus sits on 40 acres, just 16 miles northwest of Philadelphia’s CBD, offering easy access to the area’s two major roadways. Located just 1 mile from the interchange of PA Route 309 and the Pennsylvania Turnpike, the property also provides direct access to the Virginia Drive slip ramp of the Pennsylvania Turnpike.

Tuesday, November 15, 2016

Monthly Economic Outlook – November 2016

Endurance Signs 3 New leases & tenant expansion at Naaman’s Creek

Endurance is pleased to announce the signing of three new leases and an expansion totaling 61,384 SF at Naaman’s Creek Business Center, a five (5) building flex portfolio totaling 190,729 SF in Upper Chichester Township, Delaware County (“Portfolio”). With these leases, occupancy of the Portfolio is now 84% up from 30% at the time of acquisition in early 2015.

The recent expansion was by an undisclosed healthcare company that previously leased 17,378 SF within the Park. This tenant has expanded their operations by 17,200 SF and now fully occupies 9 Creek Parkway on a long-term lease. Diplomat leased two suites (700-701) that equal approximately 11,400 SF at 7 Creek Parkway. Diplomat serves patients and physicians in all 50 states. Headquartered in Flint, Michigan, the company focuses on medication management programs for people with complex chronic diseases, including oncology, immunology, hepatitis, multiple
sclerosis, specialized infusion therapy and many other serious or long-term conditions. Diplomat opened its doors in 1975 as a neighborhood pharmacy with one essential tenet: "Take good care of patients and the rest falls into place." Today, that tradition continues—always focused on improving patient care and clinical adherence.

SharpLink HVAC, LLC, leased 7,784 SF at Suite 200 in 23 Creek Circle. SharpLink was founded in January 2016 as a partnership between the principals of Hall Components and Mary Corey Client Services. With over 40 years of combined experience in the industry, this new company will take HVAC resale distribution and ecommerce into the future. Products currently offered on our exclusive wholesale distribution website include ACME/Miami, Beckett, Flanders, Magic Aire and UEi Test.

Zenith Freight Lines, LLC leased all 25,000 SF at 25 Creek Circle. Zenith Freight Lines was purchased in February 2015 by Bassett Furniture Industries, Inc. and is now their primary logistical arm. In addition to its trucking services, Zenith operates distribution centers in at least eight states and manages home delivery services for Bassett Home Furnishings retail stores and other retailers in local markets throughout the country. Primarily through organic growth and partially due to the Zenith acquisition, Bassett’s revenues have increased almost $200 million over the past five years.

“The leasing velocity we have experienced at Naaman’s Creek over the last 18 months is pretty
astonishing. Since acquisition we have completed ten leasing transactions including new deals and
renewals. The attractive nature of this well-located, functional flex product is desirable to many different tenants serving the immediate Delaware County market” said Albert J. Corr, Senior Vice President of Asset Management at Endurance.

Naaman’s Creek Business Park was constructed from the late 1990’s through the early 2000’s and
features all-masonry facades, 19’ clear ceiling heights, and multiple configurations to accommodate a
diversity of tenant requirements. The Portfolio fronts Route 322, providing easy access to Interstate 95 and the Philadelphia International Airport to the east (15 minutes) as well as Interstate 476, which
presents a direct connection from Interstate 95 to the Pennsylvania Turnpike.

Endurance Real Estate Group, LLC (, founded in 2002, is a Bala Cynwyd, Pennsylvania-based real estate owner/developer focused on income and value creation opportunities located in the Mid-Atlantic region. Since its formation, the company has acquired approximately $400 million of assets totaling over 8 MSF and currently owns and operates a portfolio totaling 3.4 MSF. For additional information on Endurance, please visit
Affiliates of EREG have closed on six separate transactions in the last year totaling almost 1.4 MSF of office, warehouse, distribution and flex space, including among other assets, 550 Glen Ave & 600 Glen Ct, two bulk industrial buildings in Moorestown, NJ, and 3747 Hecktown Road, a 307,000 SF bulk industrial building in Pennsylvania’s Lehigh Valley market.

Friday, November 11, 2016

Teva Scraps 137 Acre Development Site in Philadelphia

Teva Pharmaceuticals, the owner of 137 acres of land on Red Lion Rd. and Sandmeyer Ln. in Northeast Philadelphia, PA has retained Colliers International to market the site for sale.

Teva Pharaceuticals originally purchased the land for $40.59 million, with plans for a $300 million distribution center which have since been scrapped.

Thursday, November 10, 2016

Maguire Automotive Signs 19,000-SF Retail Lease

Maguire Automotive signed an 18,500-square-foot lease for the car dealership at 135 S. Chester Pike in Glenolden, PA as part of a lease-purchase agreement with the current owner.

Maguire is not expected to take occupancy until December of the single-story, 18,500-square-foot retail building in the Delaware County submarket. It was constructed in the mid-1950s on three-quarters of an acre.

Wednesday, November 9, 2016

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Vertex Leases 168,000 SF in King of Prussia

Tax technology solutions provider Vertex, Inc. has leased 168,000 square feet of office space at 2301 Renaissance Blvd. in King of Prussia, PA.

The five-story office building was constructed in 2002 within the Renaissance Park in Montgomery County. The tenant will relocate from 1041 Old Cassatt Rd. in Berwyn, PA.

Monday, November 7, 2016

Thousands of New Jobs Coming to KOP as 3 Companies Move Headquarters to Montgomery County

By: Ken Knickerbocker at Montco.Today
The new energy and momentum in King of Prussia continues to attract the interest of corporate headquarters in 2016.

Within the last six months, three significant leases were announced in KOP including:

  • The Judge Group (151 South Warner Road)
  • HTH Worldwide (955 First Avenue)
  • Vertex, Inc. (2301 Renaissance Boulevard)

Combined, these companies will bring more than 1,000 new, high-paying jobs to KOP.

“King of Prussia is experiencing a surge in Class A office leasing activity,” said Eric Goldstein, King of Prussia District Executive Director. “Corporations seems to be attracted to the exciting amenities, low taxes, great schools, and business-friendly township.”

Vertex, a corporate tax solutions provider currently headquartered in neighboring Berwyn in Chester County, will consolidate its operations in multiple locations to one central location in KOP. The company’s new 180,000-square-foot national headquarters will bring 225 new, high-paying jobs to KOP over the next five years. That is in addition to the 560 existing employees who will now be located in KOP.

“The decision to move was the result of a thorough, multi-year process that included research, employee focus groups, and careful consideration of our progressive culture and strategic vision,” said Lainie Sitko, Vertex Director of Workplace Strategy. “This move will enable us to grow and evolve as we continue providing exceptional value to our expanding client base.”

In October 2016, The Judge Group – a leading global provider of professional services specializing in technology, talent, and learning solutions – opened its 90,000-square-foot corporate headquarters on South Warner Road. The new location allows for future growth and better access to amenities for its 235 employees.

Brandywine Realty Trust is currently constructing a build-to-suite, 110,00-square-foot office building for HTH Worldwide, in the newly rezoned King of Prussia business park.

Friday, November 4, 2016

Prologis plans rare two-story warehouse project in South Seattle

by Marc Stiles Staff Writer Puget Sound Business Journal

It's hard to find empty warehouse space near downtown Seattle, so a global company is going to build a lot more. The end result will be something the Puget Sound region has hardly seen before.

Prologis (NYSE: PLD) has applied for city permits to build two, two-story warehouses at 6050 East Marginal Way S., where northbound traffic on the First Avenue South Bridge spills out onto a busy crossroads. One building will have 331,200 square feet of space, and there will be 209,350 square feet in the other. The project also will have parking for 330 vehicles.

While the size of the project is impressive, the two-story configuration is more intriguing. Prologis' involvement also is noteworthy because the company is upping its game in South Seattle, where it recently paid $63.25 million for two existing warehouses.

Chris Corr, an industrial broker with commercial real estate company Kidder Mathews, said the new Amazon (Nasdaq: AMZN) building in Kent is the only large two-story distribution center in the region. In Asian and European markets, where the supply of land is constrained, two-story warehouses are more common, according to Corr.

He said Prologis has to build a two-story project in South Seattle because of the price they're paying for the property. Real estate values are climbing in South Seattle, where demand for warehouse and distribution space is high because freight and other companies that deliver to businesses in downtown Seattle want to be nearby.

Currently, only 2 percent of the warehouse space in the submarket is available for lease, according to a new Kidder Mathews report.

The $63.25 million that Prologis paid for two warehouses works out to $158 per square foot for the buildings. People in the industry believe that is the highest price paid for a South Seattle industrial property. The old mark of $120 a foot was set with a sale at the end of 2013.

Prologis has not yet bought the property where it's planning the two-story warehouses. A limited liability company controlled by the Mohseni family owns the land. A Seattle commercial real estate broker, Wilma Warshak of Washington Real Estate Advisors, represents the Mohsenis. She declined to comment Wednesday as did a spokesperson for Prologis, which has $52.8 billion in assets under management.

Consolidated Freightways operated a facility on the site until 2002, when it filed for bankruptcy. The Mohsenis paid $9.9 million for the property, and the old Consolidated facility has been demolished.

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NorthPoint Dev Breaks Ground on Hanover Ridge Trade Ctr Bldg 2

NorthPoint Development broke ground Hanover Ridge Trade Center - Building 2, a 620,800-square-foot industrial building rising on 60.8 acres at 600 New Commerce Blvd. in Wilkes Barre, PA.

Slated for delivery in August 2017, the asset will feature ESFR sprinkler, 56 loading docks and four drive-ins, 36-foot clear heights, seven-inch floors, 52-foot column spacing, 400-amp power and a 195-foot truck court.

Initial plans for the three-building park call for up to 1.2 million square feet of class A industrial space in the I-81 Corridor Industrial submarket.

Wednesday, November 2, 2016

Linde Engineering Renews 60,000-SF Lease in Blue Bell

Linde Engineering, a leading technology partner for plant engineering and construction, has renewed its 60,103-square-foot lease at the 5 Sentry Parkway East office building at 325 Sentry Pky E. in Blue Bell, PA.

The three-story, 91,600-square-foot office building was constructed in 1984 and renovated in 2007. It sits on 10.5 acres in the Plymouth Meeting / Blue Bell submarket of Montgomery County, roughly 20 miles northwest of downtown Philadelphia.

Tuesday, November 1, 2016

The Galman Group Sells The Edge at Greentree Apts in Claymont

Real estate investment and development firm Spruce Capital Partners acquired the 286-unit The Edge at Greentree apartments at 1000 Cedartree Ln. in Claymont, DE from The Galman Group for $31.1 million, or about $109,000 per unit. 

The 241,480-square-foot multifamily complex consists of 26 buildings housing one-, two- and three-bedroom units. It was built in 1968

Sales of 'Zombie' Office Buildings Hit 10-Year High

They’re out there. Thousands of them milling about in markets like Detroit, Northern New Jersey, Dallas/Fort Worth, Chicago and Washington DC.

Zombie buildings that is -- empty or nearly lifeless office buildings that are still standing, creating dead zones that drain the vitality out of otherwise commercially viable areas. And just like in movies, TV shows and video games, these zombies are being hunted; not by apocalypse survivors but by real estate investors.

Nationally, CoStar data counts 1,814 office buildings that are larger than 25,000 square feet and 90% or more empty. Office buildings delivered in 2015 and 2016, those which are still lease-up stage, were excluded.

The remaining horde of mostly vacant office buildings total about 162 million square feet and account for 2.09% of the nation’s total office inventory. On average, they account for 18.7% of the vacant office space in the U.S.

Although some of these mostly empty buildings are victims of derred maintenance, many are in perfectly good shape but may have recently lost a major or full-building tenant.

George A. Romero, the director of the groundbreaking "Living Dead" films that popularized the notion of zombies (lifeless but living creatures) referred to his creatures blue-collar monsters. The same could be said of zombie office buildings. More than 84% of the empty office buildings in the U.S. are Class B or lower.

At the local market level, empty office buildings are more prevalent in certain markets than in others. In Detroit, they account for nearly one-third of the office vacancy and account for about 4.3% of total office inventory. In Northern New Jersey, they make up more than 28% of vacant office space 4.4% of total inventory.

You don’t see many of them in New York and San Francisco. In those two markets they make up less than three-tenths of a percent of total inventory and account for just 4% or less of total vacant office space.

Far from instilling fear, these mostly empty office buildings have been attracting investors in droves. More than $2.5 billion of these properties have sold so far this year. That is more than the amount sold in the two previous years combined -and much more by a wide margin than any of the past 10 years, according to CoStar data.

The average sale price per square foot has skyrocketed in the last two years, increasing from an average of about $79 per square foot in the third quarter of 2014, to more than $163 per square foot in the third quarter of this year.

The sale prices these office buildings are commanding in today's market is about 75% of what investors are paying on average for all office properties nationally.

That, of course remains the source of the strong appeal these empty buildings hold for risk-tolerant investors who see opportunity picking up these properties at a 25% discouunt from the going market value and building up their value through lease up and/or re-use and redevelopment.

Empty buildings have been included in some notable deals recently, oftentimes they are bundled into portfolios.

4550 S. 44th Place, Bldg 17, in Phoenix was included in Workspace Property Trust’s purchase of 108 buildings in five markets from Liberty Property Trust for $969 million. The Dubai-based global investment firm partnered with Safanad Ltd. and Square Mile Capital on the purchase.

With about 6.4 million square feet of empty office buildings located outside major markets, Workspace is comfortable taking on close-in suburban vacancy.

“The type of product we’re looking for are well-located properties close-in to the city, in communities with a 24/7 lifestyle (with) lots of food and retail options, and good public and highway transportation infrastructure,” Roger Thomas, president and COO of Workspace told CoStar. “What we’re not looking for are those one-off assets, the corporate headquarters white elephants that are far flung out in the middle of nowhere, where you have to drive 10 minutes just to find lunch.”

Last month, Rubenstein Partners picked up Stonebridge II, a 143,705-square-foot empty office building as part of its $265 million purchase of Sanctuary Park in suburban Atlanta.

"The Class-A property is generally regarded as the top office park in North Fulton and we are thrilled to complete the acquisition of this asset. We believe Verizon’s departure created an opportunity for the joint venture to acquire an asset with a strong historical performance as well as control the best large block of available Class-A space in a submarket that is lacking in the same," said Taylor Smith of Rubenstein Partners.

Smith added that the firm also plans to carry out renovations at the park to reposition the asset as a leading destination for prospective tenants.

A consortium of developers led by Akridge and Western Development paid $50 million for the vacant 609,265-square-foot building at 2100 2nd St. in Southwest Washington, DC, that once housed the U.S. Coast Guard. They plan to redevelop the site into an expansive mixed-use project dubbed Riverpoint.

In August, Onyx Equities LLC and PCCP LLC have acquired the 387,000-square-foot Kemble Plaza I office building at 340 Mount Kemble Ave. in Morristown, NJ for $7.6 million.

"Both PCCP and Onyx have a strong record when it comes to executing on value-add transactions in New Jersey," noted John Randall, managing director with PCCP, a real estate finance firm focused on commercial debt and equity investments. "We are acquiring a high quality asset at essentially land cost and we will ultimately offer prospective tenants the highest quality product and a Morristown address at very competitive rental rates."

And more zombie office buildings are likely to be hunted down. About 43.3 million square feet of empty office buildings are listed for sale - the highest total in 10 years.

Monday, October 31, 2016

Influx of New Developments Motivating Landlords to Revamp Their Suburban Properties

By: Ken Knickerbocker, Montco.Today
Thanks to the influx of new developments in the suburbs, owners of Class B apartments are starting to invest heavily in renovating their properties in a preemptive move to stay competitive.

These older buildings in areas such as King of Prussia and Phoenixville are getting new granite countertops, revamped kitchens equipped with stainless steel appliances, swimming pools, clubhouses, and pet friendly monikers.

The move is in direct response to the close to 6,000 new apartment units being constructed or announced for development in suburban areas by 2020. Over a sixth of them have already been completed in the first half of this year, with another 1,296 currently under construction.

These new developments are shaking up the market and forcing existing apartment landlords to look at ways to make their properties more attractive in order to remain competitive.

“We’re trying to look hip, nice and clean,” commented Brian Paule, director of property management for Jenkintown’s Galman Group, which owns 40 communities totaling 8,000 apartments throughout the region.

Thursday, October 27, 2016

Big Bob’s Flooring Leases 25,000 SF in Gateway Square Shopping Center

Big Bob’s Flooring, a flooring retailer, has signed a lease for 25,395 square feet in the Gateway Square shopping center at 105-125 Gateway Dr. in Mechanicsburg, PA.

The Gateway Square shopping center totals 214,829 square feet and was developed in 1998. Other tenants there include T.J. Maxx and Sky Zone. Big Bob’s Flooring will take occupancy in early 2017.

Eastern Manufacturing Expands at Bucks County Business Park

Eastern Manufacturing, a global producer and distributor of catalytic converters and related components, has expanded its footprint in the Bucks COunty Business Park, leasing 102,350 square feet at 2201 Cabot Blvd. W in Langhorne, PA, adjacent to its current facility.

The expansion doubles the firm's capacity to meet the growing demand for CARB-compliant converters.

The 102,350-square-foot warehouse facility is heated and fenced, and features 12 loading docks with levelers and two drive-in bays. There is parking available for about 60 cars and the building is completely sprinklered.

Roseland Breaks Ground on 310 Conshohocken Apts Units

Roseland Property Company has broken ground on its $70 million multifamily development at 51 Washington St. in Conshohocken, PA.

The 250,000-square-foot multifamily property will have a total of 310 units, though the exact unit mix has not been determined.

The five-story asset, owned and developed by Roseland, is expected to deliver by year-end 2017 on 3.3 acres in Montgomery County.

Skanska Completes Terminal F Expansion For American Airlines In Philadelphia

by Steve Lubetkin,
Skanska USA has finished Philadelphia International Airport’s American Airlines Terminal F expansion project. The expansion earned a LEED Gold certification from the US Green Building Council.

“We are proud to add another LEED certified aviation project to our list of sustainable work and accomplishments,” says Ed Szwarc, Skanska USA executive vice president and general manager. “Working with The Sheward Partnership, we were able to recycle 75 percent of construction and demolition debris, utilize salvaged, refurbished and recycled materials in construction and regionally source building materials to not only help the environment but also support regional businesses.”

The new facility enables American Airlines to increase capacity and improve the passenger experience at one of its primary east coast hubs. With a design by The Sheward Partnership, Skanska built a new 40,500 square-foot state-of-the-art baggage claim facility as well as a 40,000 square-foot renovation of the existing Terminal F ticketing building and Terminal E-F connector. The inbound baggage claim process was transferred out of the existing Terminal F ticketing building.

The new building is now located across from the main Terminal F building and can be accessed by an indoor 400-foot pedestrian bridge, which connects the two buildings. The project included the erection of a 91,000-pound, 100-foot-long baggage handling conveyor bridge over the main airport departure road, which was prefabricated and lifted into place in one night with minimal disruption to the airport.

The expansion also included realignment of the commercial road to create pull-off lanes at the new Terminal F baggage claim for easier departure. This new process will enhance the flow of travelers and improve the safety of their route to the arrivals area and ground transportation.

The new renovations permit passengers to circulate between Terminal F and the other terminals without leaving the secure area, which was previously only accomplished by shuttle bus.

Skanska has extensive experience in the Pennsylvania and the Delaware Valley region building such projects as the Nicholas and Athena Karabots Pavilion Addition at the Franklin Institute, University of Delaware East Campus Residence Hall, SugarHouse Casino, Inspira Healthcare Network, Christiana Care Health Systems Women and Children’s Health Building, and the Nemours/A.I. duPont Hospital for Children.

Monday, October 24, 2016

Friday, October 21, 2016

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Funiture & More Leases 20,000 SF at Dover Towne Center

Furniture & More Galleries signed a lease deal for 19,695 square feet in the Dover Towne Center at 1574 N. Dupont Hwy in Dover, DE.

The retail center totals 108,402 square feet in Kent County.

Wednesday, October 19, 2016

Philadelphia Market Isn't Slowing Down Anytime Soon

Matthew Rothstein, Bisnow

Although rents have been rising and more buildings are being built on spec than we’ve seen in years, optimism remains strong among some of the Philadelphia industrial market’s biggest names.

There is no more telling sign of the state of the industrial market today than the fact that manufacturing was not mentioned once at Bisnow's industrial event last week at Top of the Tower, the view from which is above. Rather, the industry on everyone’s lips is e-commerce, which means that far and away the biggest users of industrial space are warehouses and distribution centers.

E-commerce is growing at such an astounding rate that retailers are fighting to increase their capacity to meet demand—good news for developers, who are also having an easier time finding capital than ever before. “There’s so much appetite for industrial,” MRP Industrial’s Reid Townsend (below, center) said, “we can drive a better deal for each individual project.” “For every dollar of industrial that’s out there, there's about four dollars of capital chasing it,” added CBRE’s Mike Hines (below, left). “What’s more, this year it’s up to five dollars as opposed to four.” A big reason the market remains so bullish is that for all its impact on society, e-commerce still has room to grow within the economy. "For this year, e-commerce was 8% of total retail,” First Industrial Trust’s John Hanlon (at bottom, with microphone) said. “But that was a 4.5% growth in this quarter, and 15% from the year before...and total retail only increased about 2.3% [over that time frame].”

A big part of that growth is the increasing diversity of products commonly bought online. As e-commerce trades more in necessities, it becomes a more sustainable industry. “The warehouses had too many flat screen TVs in 2006,” said Liberty Property Trust’s Jim Mazzarelli (above, right), “But now if you look at our warehouses, they’re full of food and things that you can walk into a house and see five to ten of. “The consumer is pushing, not for the technology, but the needed products. And that’s what’s causing this trend to go consistently up,” Jim continued. “There’s another two-three years of runway for this, minimum.” This shift in the demands of e-commerce means that retailers are forced to constantly adjust to the logistics of fulfilling those demands. If they are used for more essential products, then shipping them quickly and efficiently becomes a need, not a want. Most of the industrial product that has been traded in the Philadelphia region has been outside of the city, in hot spots like the Lehigh Valley and South Jersey, for the standard reasons— it's easier to find space, cheaper to lease or buy the land (in general)—but the increasing demand for e-commerce to be faster and faster may soon change that.

“The industrial sector in the city proper has lagged behind,” says PIDC’s Tom Dalfo (above, right). “We’re seeing inquiries for sites to do construction, and getting a lot more interest in product that exists in the city. Part of the issue is the speed of delivery, and if you’re going to deliver food, you can’t be 200 miles away. Getting close to a population center is becoming a bigger deal.” Of course, any conversation about e-commerce has one retailer in particular’s name just waiting to be uttered: Amazon. It remains ahead of the curve on delivery speed, pricing and diversity, and it also buys more warehouse space than any other retailer in the region. Amazon’s quest for increased efficiency has led them to eschew the use of the post office or FedEx in some areas, using Uber drivers to make as many as 40 deliveries just between the hours of 8:00am and noon, Reid says. It’s such a tight timeframe that it requires a “unique design to retrofit [industrial] buildings.” “There’s some angst about what the long-term commitment of Amazon is to this delivery model,” Reid says. Rendering buildings functionally obsolete on a quicker timeframe than normal, as Amazon threatens to do, is a cause for concern, but if they abandon a space, developers have not had a hard time filling the vacancies. “If you build a building and it’s 75% occupied,” says Mike. “Someone’s going to pay you for that occupancy. Sellers aren’t concerned about vacancy today in the big box space, because they’re getting paid for it.”

If there’s one major concern among industrial developers for the continued growth of the market, it’s the potential for the labor pool to dry up. Automation in warehouses isn’t developing as fast as the warehouses are being built, which means that fulfillment and distribution centers require lots of staffing—and not every town can provide it. “Labor will be the big consolidator in this market,” Jim said. A test case for this concern is Carlisle, a suburb of Harrisburg that borders the Pennsylvania Turnpike and I-81, making it perfect for distribution centers. The only problem is that it already has so many, Mattel was forced to find a different location because they didn’t believe they could staff the warehouses they wanted to buy there. Of course, one town in central PA does not a crisis make, and other developers in the room cited the Elizabeth area of New Jersey as being ripe with potential labor. And then there’s the City of Philadelphia, which would require a “tremendous amount of construction” for labor to become scarce, according to Tom. “Our depth of the labor pool in the city is very deep and wide,” Tom says. “We also have the infrastructure of transit that will get people to workplaces.” In areas with a high concentration of industrial spaces, competition for labor will be very stiff—especially now, as retailers staff up for the holiday rush. Multiple panel members noted increased wages could be used as a powerful recruiting tool, which would be a welcome development for blue-collar workers, but not for developers already looking at compressed cap rates. “At this time in the cycle,” Reid said, “it’s very difficult to find a project that has it all in terms of both labor and tax incentives.” Despite those concerns, the Philadelphia region remains uniquely well-positioned in the current industrial market, if only because of its proximity to nearly a quarter of the country’s population. “You have incredibly powerful consumer demands in this area,” Jim said, “so warehouses have to be there.”

Hillwood Bringing 620,000-SF Spec Distrib Ctr Online in Central PA

Hillwood Investment Properties is nearing completion of its Trade Center 44 distribution center building, developed on-spec at 1495 Dennison Cir. in Carlisle, PA and slated to wrap construction later this month.

Hillwood broke ground on 50.4 acres in the Harrisburg Area West Industrial project back in October 2015.

When it delivers, the property will total 620,000 square feet and offer 96 dock-height loading positions with levelators and two drive-in doors, 32-foot clear heights, 3,000-amp heavy power, 52-foot column spacing and fluorescent lighting.

The building is currently available for lease, offered for a single user or divisible down to 200,000 square feet.

Tuesday, October 18, 2016

'Franklintown' dream renewed north of Center City

by Jacob Adelman, Staff Writer Philadelphia Inquirer

When Kevin Flynn moved his business to a former taxi garage north of Center City's office district in 1983, his was one of just a few occupied buildings among blocks of vacant lots and abandoned warehouses.

That was fine with Flynn, a property broker, investor, and developer of Harrah's Philadelphia Casino & Racetrack in Chester, among other projects.

He had relocated what is now the Flynn Co. to the area northwest of Broad and Vine Streets - remembered by some as the site of the 1970s' mostly unrealized "Franklintown" development scheme - because its little-trafficked streets made it easy to hop onto nearby highways to visit suburban clients.

Now, Flynn is preparing to bid those open streets goodbye, as a wave of development promises to fulfill Franklintown planners' largely forgotten dream of a vibrant northern extension to Center City.

"You'll be bumper-to-bumper trying to get out of here," said Flynn. "The roads will be jam-packed."

On the vast parking lot that fronted Flynn's two-story building - an eccentric warren of cigar-shop Indians, mounted hunting trophies, and ephemera recalling the 76-year-old's stint as a Marine - now rises a 32-story apartment building.

The 277-unit tower, the Alexander, is being built by Property Reserve Inc., the development arm of the Mormon Church, which unveiled its soaring Philadelphia Pennsylvania Temple about a block away in August.

About two blocks to the east, on the southwest corner of Broad and Callowhill Streets, Philadelphia's Parkway Corp. and a partner are developing a 239-unit, six-story apartment building as the eastern wing of their Hanover North Broad project.

Community College of Philadelphia, meanwhile, plans an 11-story complex beside its Spring Garden Street complex, with 500 student and nonstudent apartments.

And this month, to the south, PMC Property group plans to begin removing the concrete facade of GlaxoSmithKline's former 24-story headquarters in a bid to convert the long-vacant building into a glass-skinned office-and-residential tower with 360 housing units, to be called One Franklin Tower.

Those cumulative 1,376 new units will nearly double the 1,500 dwellings tallied by the U.S. Census in 2010, the most recent year data are available for the area between Broad and 18th Streets, from Race to Spring Garden.

And even more housing could be on its way, with the Archdiocese of Philadelphia set to present conceptual plans to community members next week for a possible development that could include residential buildings.

The interest in the area comes as developers seek to capitalize on its location near core Center City - where there are ever-fewer spots left to build - and the museums and parks along Benjamin Franklin Parkway.

"Pushing a couple of blocks north of the main business district provides great walkability, not only to the offices and jobs, but also to all the great amenities that line the Parkway," PMC executive vice president Jonathan Stavin said.

The activity in the area largely picks up on the never-fully realized Franklintown development scheme of the 1970s, which aimed to stem the loss of population from Center City with a new district of office towers, residential buildings, and hotels.

With the city's backing, area landowners - including the predecessor companies to GlaxoSmithKline and Peco Energy Co. - pooled their properties and cleared them for development.

But while the plan saw construction of the Glaxo headquarters tower, a hotel (most recently a Sheraton), and other buildings on the site's western half, it largely fizzled as it approached Broad Street to the east.

Paul Levy, president of the Center City District business association, said today's turnaround comes after the construction of the Barnes Foundation museum on the Parkway and the Mormon Church's moves to develop a large swath of vacant land into its apartment tower and temple complex.

"The result is a very positive connection that is being forged between the [central business district] and adjacent neighborhoods," Levy said.

But at the center of all this development, broker and developer Flynn expects the peace he's long enjoyed in his neighborhood to be upended by the coming wave of new residents.

Gone already are the days when cheap land let him enlarge his offices into a compoundlike state that includes the full interior - wooden wall panels included - of a since-demolished Kensington tavern and a big parking lot that doubles as a basketball court for Thursday night staff games.

Still, the real estate entrepreneur plans to leave the property intact for now.

"I'm not interested in making money off real estate here. This is our office," he said. "Where else are we going to put our basketball court?"

Thursday, October 13, 2016

Interview with Workspace Property's Roger Thomas -The Bold Contrarian Play for Liberty's Suburban Office Portfolios

By Randyl Drummer Costar
Workspace Property Trust this week closed one of the largest suburban office portfolio acquisitions of the year, acquiring 108 office and flex buildings and 26.7 acres of land in five markets from Liberty Property Trust.

The $969 million purchase with partners Safanad, a Dubai-based global principal investment firm; and affiliates of diversified investment firm Square Mile Capital Management LLC is WPT's second major transaction with Liberty Property and expands Workspace's holdings to 149 properties totaling 10 million square feet.

In the last year, Workplace Property Trust, led by former Mack-Cali Realty executives Tom Rizk and Roger Thomas, have so far amassed more than $1.2 billion in assets as part of its strategic plan to build a pure-play portfolio of suburban office properties in what they consider strategic locations.

Most investors continue to funnel capital into urban core office submarkets following millennial workers flocking into urban areas offering a "live, work and play" environment. However, somewhat under tha radar, U.S. suburban office markets have improved occupancy and rent growth significantly in the later stages of the economic recovery.

WPT President and Chief Operating Officer Roger Thomas proudly touted the firm's contrarian investment philosophy in an interview with CoStar this week.

CoStar:Why are you bullish on suburban properties at a time when most other investors continue to shy away from the segment?

Thomas:We've heard all the predictions - that there’s been a demographic shift and that all millennials want to live in the urban core and all employers are going to chase them and therefore the suburbs are dead or dying. We've seen Wall Street and the analyst community push the big institutional players like Liberty and Brandywine Realty Trust to get out or pare down their suburban office holdings. But suburban office is simply too big and important a component of the office market to simply go away.

We believe that the prediction of the death of the suburbs is greatly exaggerated. The desire of millennials to live and work in urban cores is true, to a point. They're young and before they have kids, it’s very exciting to live in an urban environment. But it’s only true to a point. Not all millennials want to live in the urban core, and not all employers want to be there.

We see the trend of the millennials living downtown to be part of a cycle. It may be a little bit longer of a cycle, but we think they will go through it and return to the suburbs when they start families, just as generations of adults before them have done. When we saw the pressure on the large institutional owners like Liberty to shed their suburban holdings, with no one else coming into the space to pick up the slack, that’s when Tom and I saw the opportunity. We see the disconnect.

What types of suburban assets meet your acquisition criteria?

When the market recovered in the mid-1990s (in the previous cycle), it lifted all property types, including suburban office. Almost all the suburban markets did really well across the board. (However,) we don’t think that will be the case this time around. While we think there’s a bit of a demographic shift, there will be haves and have-not properties.

The type of product we’re looking for are well-located properties close-in to the city, in communities with a 24/7 lifestyle lots of food and retail options, and good public and highway transportation infrastructure.

What we’re not looking for are those one-off assets, the corporate headquarters white elephants that are far flung out in the middle of nowhere, where you have to drive 10 minutes just to find lunch.

Can you give us a little background on how the mega-transactions with Liberty Property played out?

The $245 million acquisition of Liberty’s Horsham, PA portfolio was our first deal out of the box, closing last December. Having been in the public sphere through Mack-Cali and others, we know most of the players. Liberty had been shopping the Horsham portfolio, but it was not widely circulated, and we connected with them. The portfolio fit what we were looking for. It has maintained occupancy of 85% or above, for the most part, over the last 10 years.

Soon after that deal closed, in the beginning of 2016, we started talking again with Liberty, which was still in the middle of its disposition program of $1 billion in assets. We were impressed with the properties (in the second portfolio), which were well-leased and did not have a ton of deferred maintenance.

While there were understandable challenges putting together and executing such a sizable portfolio in the most recent transaction, all of the main players, including JPMorgan, Safanad, Square Mile and Liberty, worked well and cooperatively together to get to the finish. We hope to build on those relationships and take full advantage of the disconnect in the capital markets and our contrarian philosophy before the market tide shifts. Which we think is imminent.

At what point did Safanad come into the deal? Did you court them earlier for the Horsham portfolio as well?

Yes. We're very friendly with Safanad, particularly Vin Pica, their managing partner for North America. But it was a contrarian play and our first deal out of the box. So I think they were a little skittish about that and took a pass.

Once we closed that first deal, we went back to them again with the most recent Liberty portfolio and they were more interested. After we had the transaction tied up and structured with Liberty, we started working with Safanad. We started discussions around April, shortly after signing a non-binding term sheet with Liberty at the end of March.

Do you expect to broaden your search for suburban assets to other states or regions? Any markets or regions you’re not immediately interested in shopping for assets?

Some suburban markets may be a little too far along in the evolution of their recovery. Cap rates are bid way down and prices are pretty high. There are so many opportunities in other good markets that we may not chase the more expensive deals. We want to broaden our footprint and we don’t believe we’re limited to any geographic area.

I think the slowest suburban markets to recover may be those around New York City like Westchester County and New Jersey. They might present new opportunities. I think a market like Denver is almost too far along in its recovery; the cap rates are so low there.

United Natural Foods Leased 134,000 SF in York

United Natural Foods, a leading national distributor of natural and organic and specialty foods, leased 134,250 square feet in the industrial building at 57 Grumbacher Rd. in York, PA.

UNF will share the building with Bell Sports, Inc., a manufacturing company.

The single-story building totals 278,582 square feet in the York County Industrial submarket. The property is owned by High Street Realty Company, and was constructed in 1985 with renovations completed in 2015

Central Logistics Park Phase I Breaks Ground with 832,000-SF Spec Industrial Bldg

The first phase of construction has begun in the Central Logistics Park, a planned 832,000-square-foot industrial building located along I-78 / SR-22 at Camp Swatara Rd. in Bethel, PA.

This single-story warehouse will include 226 trailer parking spots and 359 surface spots, as well as 179 dock-high loading positions, 36-foot clear heights, 7-inch floors and 3,000-amp heavy power. Being built on-spec, the property is expected to be complete in May 2017.

The second phase of construction will begin at a later date, and is expected to consist of up to four additional industrial buildings in the park.

Brasler Acquires 19 Acres In Berks County For Industrial Development

by Steve Lubetkin,
Berks61, a unit of Brasler Properties, which develops industrial and logistics properties, has purchased 19 acres at 4030 Pottsville Pike, Muhlenberg Township, Berks County, PA.  The rail served site has received land development approvals for development of a 278,000 square-foot building, which has been designed in anticipation of manufacturing and logistics uses. It has also been approved for Local Economic Revitalization Tax Assistance incentives.

The land development approval was granted by Muhlenberg Township at the Commissioners meeting last month, pending mutual agreement of a Developers Improvements Agreement.

“Land development approval and our acquisition of the property effectively pave the way for us to begin construction on the site,” says Chris Brasler, CEO of Brasler Properties and principal of Berks61.  Preliminary utility relocations have already begun.

“Berks County has been losing business opportunities because we do not have shovel ready sites in the most desirable locations in proximity to our great workforce,” says Pamela J. Shupp, AICP, CEcD, president and CEO of the Greater Reading Economic Partnership. “It’s one of the primary reasons we are excited to work with Brasler Properties who are bringing on line a great ready to go location that is ideal for manufacturing.”

The Route 61 corridor of the Berks County industrial market hasn’t seen a new class A building project for more than 10 years, and vacancy rates for existing stock in Berks County sit below one percent as a result. Conditions throughout the Lehigh Valley are also tight, with overall vacancy at 1.6 percent.

“Berks61 is a rare and exciting project. It’s unusual to have the opportunity to promote an infill project that simultaneously offers public transportation, available labor, manufacturing-capable infrastructure, rail service, and modern site design with ample parking and great on-site circulation. The strength of this location and fast-track delivery capability is attracting interest across the spectrum of regional and national users.”

Wednesday, October 12, 2016

Commercial Real Estate Plays It Safe

Rani Molla a Bloomberg Gadfly columnist 

U.S. commercial real estate prices have reached new highs, but the sector is a much safer place today than it was before the 2008 financial crisis.
Moving On Up
Commercial property prices have surpassed pre-recession levels, but that doesn't mean a crash is inevitable

Low capitalization rates -- the net operating income a property generates relative to its price -- might normally keep investors away, but low borrowing costs have made potential returns from commercial real estate attractive.Lenders, for their part, are avoiding many of the risky practices that contributed to the last real estate crash. Thanks to pressure from the Federal Reserve and government regulators, banks have been tightening their commercial real estate lending standards.

Raising Expectations
Share of senior loan officers who reported tightening standards on loans at their banks. Banks have picked up the lending slack caused by a less robust market for commercial mortgage-backed securities. But bank lending largely involves mortgages for existing properties rather than riskier loans for new construction. Banks’ conservatism has made it more difficult for developers to fund new construction, which in turn has prevented many markets from being overbuilt. 

Under Construction
Bank construction and development loans are still 53 percent lower than their 2008 high. Mortgages themselves are more conservative as well, with banks lending against a smaller portion of a property’s value. 

Less Risky Business
Commercial loans as a share of property value are smaller than they were before the recession. Lenders are also requiring borrowers to keep more cash on hand to pay off debts, improving banks' odds of getting repaid.

Owning Up
Lenders are requiring higher debt service coverage ratios -- net operating income to debt services -- than before the crash, meaning borrowers will be more likely to be able to pay what they owe

None of this means there won’t be pain if real estate prices suddenly crash. No amount of structural padding can insulate lenders from a nasty downturn.There are also lots of players in the market who have looser lending standards and may face even more pain than banks should a downturn come. As my Bloomberg colleagues Sarah Mulholland and Heather Perlberg have pointed out, shadow lenders, including private equity firms like Blackstone and Starwood, as well as online crowd-funding sites, are all taking on loans that banks have decided to forego.