Monday, February 29, 2016

Philadelphia Tax proposal to impact commercial property owners

Commercial property taxes are usually pass through, operating expenses to the business tenants. So that means rents will be going up and the tenant pays and suffers. If the business taxes go down and property taxes go up, it is a wash or negatively effective for most commercial tenants in Philadelphia. Jim Kenney will be great for business growth in the Suburbs. -Joe O'Donnell

by Alison Burdo, Digital Producer, Philadelphia Business Journal

In a show of solidarity not seen in Harrisburg in quite some time, a bipartisan group of state lawmakers gathered in Philadelphia's City Hall Friday, along with Mayor Jim Kenney, and local civic and business leaders, to announce a legislative plan that would up the tax rate on the city¹s commercial properties while lowering wage and businesses taxes.
The bill, which would modify the state¹s constitution, aims to create up to 100,000 jobs in the city through a restructured tax system that is considered more attractive to business owners.

State Rep. John Taylor said the legislation would reposition the sources of Philadelphia¹s budget, making the city less reliant on wage tax ­ currently 3.92 percent for residents and about 3.49 percent for nonresidents.
"There is no other city in the Commonwealth as tied to the wage tax as Philadelphia," said Taylor, adding that Detroit is the only other major American city to have a model similar to Philadelphia¹s.

"And that is not company we want to be in," he said.
If the proposed changes make it through Harrisburg ­ a process that could take at least two years, it would allow Philadelphia to enact its own legislation "to assess real estate taxes on business properties at a rate up to 15 percent higher than the rate on non-business properties."
In turn, the wage and business taxes would be lowered. The rates would be reduced in sync with the raise in commercial property taxes ­ on a dollar basis ­ to prevent the creation of a funding gap, the lawmakers said.
No exact rates are named in the proposal. Kenney, however, said his goal was to lower the wage tax to less than 3 percent over the next 10 years. The proposal says the rate changes would move together and the commercial real estate tax could be as much as 15 percent higher, but no more, than the residential rate.
With the current residential rate of 1.3998 percent, the commercial rate could be as high as 1.6098.
Full story:

Morris Realty Sells Glenolden Self Storage To Sovran

by Steve Lubetkin,
Morris Realty and Investment has sold Glenolden Self Storage, a 383-unit self-storage facility located in the Philadelphia suburb of Glenolden, PA, to Sovran Self Storage. Sovran purchased the asset free and clear of existing debt in an all-cash transaction.

Glenolden Self Storage, a former lumberyard, was renovated and converted into a self-storage facility by the seller in 2008.  The 37,700-rentable-square-foot storage center features a mix of climate controlled and non-climate controlled units along with covered surface parking spaces.  The property is located at 407 South Chester Pike (Route 13), a heavily-trafficked thoroughfare in Glenolden.  Sovran, a publicly traded REIT, will rebrand the facility as Uncle Bob’s Self Storage.

“The density in the market, along with the solid rental rates, made this deal attractive despite the size of the property being less than 40,000 square feet,” Schontz says.  “This was a highly-contested deal with several bidders using both private and institutional equity.  In the end, Sovran stepped up to the plate with an attractive offer and terms, as this property fits in well with Sovran’s existing holdings in the region.”

90 North Buys Saint-Gobain Campus in Philly Burbs

by Brian Rogal,
90 North Real Estate Partners and Arzan Wealth just purchased the Saint-Gobain North American Headquarters, a two-building, 65-acre corporate campus in suburban Philadelphia. And today, Daniel Cooper, the Chicago-based 90 North partner and head of its North American operations, tells that this latest acquisition fits well within the firm’s strategy to build up a portfolio of safe long-term investments in suburban office markets, a sector that these days frequently garners less notice than office properties in the nation’s hot CBDs.

“We wanted to target investment-grade, long-term tenants,” Cooper says of London-based company’s plan when in 2014 it opened a Chicago office, its first in the US. That way, if the economy went into a downturn, “we would not be stuck with a bunch of vacant space to fill.” And it was the suburbs which seemed to offer a host of properties in the sweet spot, with good prices and strong tenants.

Saint-Gobain, for example, a Global 200, S&P rated BBB-company, is the world’s largest building materials firm, and has agreed to a 15-year lease with several additional renewal options. “The rent they will be paying is just a blip on their North American income,” Cooper says.

That impressive profile is matched by the credit-worthiness of other tenants in 90 North’s growing US portfolio. It bought a class A building in Denver fully occupied by the FBI. And in 2015, 90 North was also part of a joint venture that bought the Lenovo Enterprise Campus in Raleigh for $127 million. In addition, it recently bought The Reserve at Deer Park, a 351,425 square foot class A office building in Deer Park, IL, a suburb of Chicago. Continental Automotive Systems Inc. occupies about 60% of the building, which 90 North plans to reposition as a multi-tenant facility.  

Furthermore, although their newest acquisition was first built in 1968 for an insurance company, the previous owners gave it a $40 million makeover just before Saint-Gobain occupied the complex, transforming it into the type of modern space favored by 90 North. “It’s like night and day compared to what was there before,” says Cooper. “I wouldn’t say it is a country club, but it was made very attractive for employees.” The complex is now designed to meet LEED Gold certification, and Cooper would not be surprised if it gets Platinum.

90 North started in the US with a goal to invest $750 million. Cooper says the very first thing they look for is an investment-grade tenant, and then they begin to analyze its location. But they do strongly prefer markets that can show some positive demographic trends. For example, they looked at one property that had a very promising tenant, but its location in Midland, MI ended up not meeting their criteria.

And although some might be surprised to see an investor put so much money into a Philadelphia-area property, Cooper says “when you look at this part of the market the numbers are very strong.”

Similar stories can be told about many big metro areas. He estimates that about two-thirds of large US leases occur outside the downtowns. “The point we’re trying to make is that the suburbs are not dead.”

Dermody Properties Leases 500,400 SQ in Eastern PA

by Steve Lubetikin,
Dermody Properties and Granite Real Estate Investment Trust have leased the majority of their 750,000-square-foot industrial facility in the Lehigh Valley to a global consumer electronics company they declined to identify. The company has leased 500,400 square feet of the facility, which is located in the 323-acre industrial park known as Berks Park 78.

“When the Dermody Properties and Granite teams began developing this facility, we wanted to build a modern, flexible-use industrial facility that fit the needs of innovative, customer-centric companies,” says Gene Preston, partner, Dermody Properties East Region Office. “With the majority of the facility now leased, we are pleased to see that vision come to fruition.”

The new facility provides the tenant with a larger, state-of-the-art industrial space from which to expand its distribution operations. The company will move into the facility in April and use the space primarily for the distribution of its consumer home appliances.

Berks Park 78 is located in the heart of the Lehigh Valley, within 45 minutes of nearly 1.5 million consumers, putting 35 percent of the U.S. population and 50 percent of Canadian consumers within a one-day drive of its facilities. The industrial park is also home to PetSmart and Dollar General.

Friday, February 26, 2016

Former Showboat Casino Hotel Sells Again

Richard Stockton College of New Jersey sold the former Showboat Atlantic City at 801 Boardwalk in Atlantic City, NJ to Tower Investments, Inc. for $23 million, or just $17,000 per room.

Stockton College purchased the vacant property from Caesars in December 2014 for $18 million with the intention of opening their Atlantic City campus and student housing there. Land use restrictions prevented Stockton from moving forward with those plans, so the property was sold for the second time in 14 months.

The 23-story, 1.73 million-square-foot hotel and casino had 1,330 rooms above entertainment and retail space when it shuttered. The asset was built in 1999 on 23.1 acres and features boardwalk access.

Thursday, February 25, 2016

Off 5th Coming to Metroplex Shopping Center in Plymouth Meeting

Saks Off 5th has signed a lease for 24,680 square feet in the Metroplex Shopping Center at 2400-2470 Chemical Rd. in Plymouth Meeting, PA.

The retail power center totals 790,889 square feet and was built in 2000. It is currently owned by Pennsylvania Real Estate Investment Trust (PREIT).

Off 5th will take the place formerly occupied by Office Depot. Other tenants in the center include Giant Food, Bed Bath and Beyond, Target, Barnes & Noble, Best Buy, Lowe's, PetSmart, Party City, Ross Dress for Less, and Dick’s Sporting Goods.

Monday, February 22, 2016

$33M Retail Portfolio Trades In Eastern PA

by Steve Lubetkin,
An affiliate of Penguin Real Estate Investors has sold a portfolio of retail assets including nine buildings in the Philadelphia metropolitan area to Paramount Realty of Lakewood, NJ. The portfolio features the Quarry Crossings shopping center in Downingtown, PA, and five other assets, known as “Restaurant Row,” in Trevose, PA. Terms were not disclosed, but the asking price for the portfolio was “in excess of $33 million."

The properties were offered separately and as a portfolio to provide flexibility in the marketing process, which focused on private and institutional buyers. The purchaser acquired the assets in a single transaction that closed in late January 2016.

“In two weeks we produced more than 10 offers for the portfolio and even more for the individual assets. Ultimately, our tactical marketing plan and broad market reach produced a winning bid that realized the seller’s desire for the assets to trade as a portfolio and achieve top-of-the-market value.”

Quarry Crossings, anchored by LA Fitness, consists of multiple tenants, including Buffalo Wild Wings, Olive Garden, AAA Mid-Atlantic, and an undeveloped retail pad.

“The undeveloped pad provided a value-add opportunity. Through our collaborative, nationwide platform, we were able to use this opportunity to attract local, regional, and national buyers.”

Restaurant Row is a group of properties that serves as an outparcel to the area’s Walmart Supercenter, Lowe’s and part of the greater property initially developed by O’Neill Properties called Horizon Corporate Center. The portfolio includes Cracker Barrel, Wendy’s, Red Robin, Bertucci’s and Wells Fargo. The group is located directly off the Pennsylvania Turnpike with visibility from Route 1.

“It’s rare that we find a tenant mix this strong in a core market trade. This type of property at this price point appeals to all levels of investors.”

Friday, February 19, 2016

AmeriGas Propane signs lease for King of Prussia office space

by Jacob Adelman, Inquirer Staff Writer
AmeriGas Propane L.L.C. has signed a 10-year lease for 34,135 square feet at the Parkview office building in King of Prussia, building owner Keystone Property Group said in a release.

King of Prussia-based AmeriGas will move into the building at 1150 First Ave. in the coming months to expand its operations, Keystone said.

The Parkview building is attached to the Radisson Hotel Valley Forge and the Valley Forge Casino Resort.

Monthly Economic Outlook – February 2016 (Video)

Thursday, February 18, 2016

SEI Investments Co Leases Space in Malvern

SEI Investments Company, a financial services company, has signed a lease for 45,532 square feet in the office building at 52 E. Swedesford Rd. in Malvern, PA.

The class A Swedesford Square office building is three stories tall and totals approximately 131,017 square feet. It was developed in 1988 and is owned by Brandywine Realty Trust. SEI will occupy the entire third floor, joining MERIT Service Solutions and Verizon in the building.

Liberty Sells Eight Office Properties in Delaware, Florida and Minnesota

Liberty Property Trust, has sold eight properties in Delaware, Florida, and Minnesota for $131.1 million, to date in 2016.

The properties consist of:

301-321 S. Goolsby Boulevard in Deerfield Beach, Florida, for $3.8 million. The 41,614 square foot multi-tenant industrial building was 100% leased at closing.

6000 Clearwater Drive in Minnetonka, Minnesota, for $9.2 million. The 91,761 square foot office building was vacant at closing.

220 Lake Drive in Newark, Delaware for $10.1 million. The 183,235 square foot multi-tenant industrial building was 86.6% leased at closing.

Five office properties and approximately four acres of land in Tampa, Florida for $108 million. The properties comprise the following:  8705 Henderson Road, 142,881 square feet; 8715 Henderson Road, 111,012 square feet; 8725 Henderson Road, 105,165 square feet; 8735 Henderson Road, 105,110 square feet; and 8745 Henderson Road, 68,203 square feet. Upon transaction closing, the properties, were 100% leased.

BET Investments Acquires Montgomery Corp Ctr II

CBRE Global Investors Ltd. sold the Montgomery Corporate Center II office building at 200 Dryden Rd. in Dresher, PA to BET Investments, Inc. for an estimated $34.75 million, or about $154 per square foot, according to public records.

The four-story, 4-Star office building totals 225,722 square feet and delivered in 2002 on 25 acres. BET separately purchased 75 acres of raw land adjacent to this building with plans to develop a mixed-use business park.

Estes Renews 78,000-SF Lease in Middletown

Estes, a logistics and shipping company, renewed its lease for 77,987 square feet at the industrial building located at 400 Capital Ln. in Middletown, PA.

The warehouse totals 242,842 square feet, completed construction in 1998, and also houses AC Products and the Clark Group.

JDR Shoes Renews 16,000-SF Lease at 202 Marketplace

JDR Shoes, a footwear retailer, renewed its lease for 15,930 square feet at the 202 Marketplace shopping center located at 411 Doylestown Rd. in Montgomeryville, PA.

The retail strip totals 66,050 square feet in the Fort Washington / Spring House submarket of Philadelphia.

American Realty Buys Central PA Industrial From Dermody-PCCP JV

by Steve Lubetkin
American Realty Advisors has acquired the 700,000 square-foot warehouse/distribution property at 2 Ames Drive in Carlisle, PA, from a joint venture between Dermody Properties and PCCP. The class A building, on over 53 acres, is currently fully leased to a Fortune 50 tenant through 2024. Terms were not disclosed.

“This property is an ideal addition to our core industrial portfolio. The center’s great location in a key logistics market, its high quality construction, and the fact that it is fully leased long-term to a credit tenant are three factors that we believe will provide our investors with an attractive current income stream,” says Eric Cannon, American’s senior director, investments.

The facility is located one mile from Interstate 81 at Exit 44 in Carlisle, a hub for super-regional bulk warehousing and distribution within the greater Central Pennsylvania region.

“The I-78/I-81 Industrial Corridor has exhibited significant net absorption in the past several years – over 20 million square feet of industrial space was leased from 2014 through mid-2015,” says Cannon. “This area has become a Tier One East Coast inland market, with top industrial tenants including FedEx, Proctor & Gamble, Nordstrom, Georgia Pacific, and Walmart all occupying distribution space in the Corridor.”

“This facility provides its tenant easy access to the region’s transportation infrastructure, including highway, intermodal and parcel hubs, to cost effectively distribute goods throughout the entire Northeast region,” says Gene Preston, partner, Dermody Properties east region office.

Acquired by Dermody Properties in 2012, with tenant improvements completed in late-2014, the property features 32’ clear height, full air conditioning, 481 car spaces, 149 trailer spaces, T-5 lighting, and 8,000 amps of power, and was designed and constructed to LEED core and shell standards.

Wednesday, February 17, 2016

A Roundup Of Philadelphia-Area Commercial Real Estate Activities

by Steve Lubetkin,
$24 million of debt was arranged for the acquisition and redevelopment of the former West Philadelphia High School at 4700 Walnut Street. The 442,200-square-foot, four story building will be converted to a 298-unit multifamily property.


BRYN MAWR, MALVERN, AND PHILADELPHIA—Bryn + Dane’s, a fast food company that serves low-calorie farm fresh food will open three new locations, Bryn Mawr Village, 915-925 West Lancaster Ave., Bryn Mawr, PA;  Atwater South, Route 29 and Atwater Drive, Malvern, PA; and The Franklin, 834 Chestnut Street, Philadelphia PA. Their new sites are set to open beginning this summer and through 2017.


PHILADELPHIA—Sakura Japanese Restaurant has leased 4,000 square feet at Morrell Plaza in Philadelphia, becoming the latest restaurant to join the tenant mix at this 103,250-square foot shopping destination.

MT. LAUREL, NJ—Pediatric Dentistry  recently completed a 2,875-square-foot lease at Tomlin Station Commerce Center in Mullica Hill, NJ.

Tuesday, February 16, 2016

RealShare Philadelphia 2016: Build, Rebuild, Renew Panelists See Confusion, Opportunities

by Steve Lubetkin,
Redevelopment in Philadelphia can be perplexing and confusing to outsiders because of the lack of transparency regarding taxes, assesments, and how assets are perceived, according to panelists on the “Build, Rebuild, Renew” panel at ALM’s RealShare Philadelphia Conference February 9 at the historic Union League Club in Philadelphia.

“One of the most important things I’m seeing is the lack of education in terms of the opportunities that might exist on different properties, whether it’s new construction or a redevelopment project, or an acquisition with a value-add component to it, of all the different federal, state, local, even down to the utility credits, incentives, and rebates, available to the investors,” says Michael D’Onofrio, managing director, Engineered Tax Services. “It’s a lack of awareness of the opportunities involved.”

D’Onofrio says regardless of property type, investors should look comprehensively “up and down the food chain” for ways to leverage tax benefits. “It’s staggering the additional dollars that are left on the table every time,” he says. Historic tax credits could amount to between 10-30 percent of the property, he noted.

One member of the panel counseled a bit of caution regarding the currently frothy market.

“For us, it’s about caution today,” says Robert Cottone, president and CEO, IMC Construction. “I’ve been in the market for almost 40 years, and when things get too hot, we worry. The real estate industry is very good at putting product in place quickly, and when people are overly optimistic, we worry.”

The vendor market has not rebounded to the same extent as the overall economy, Cottone says. “As a result, there are stress cracks in the economy. There are looming labor shortages,” he says. “We’re not at a crisis point yet. We think the market will regulate itself, we’re seeing a stalling over the next year and a half.”

“We’ve put our focus on our new training complex,” says Chris Heck, chief revenue officer of the Philadelphia ‘76ers, noting that the NBA team is one of just three in the league that are tenants in the sports arena where they play. “It’s an opportunity for us to carry help carry the torch of Camden, and the rebuild of Camden, and the rebirth of Camden, but it also gave us the opportunity to do something very different.”

The team’s $80 million training complex is expected to include retail development eventually, he says.

“The first rule of real estate is to not fall in love with your buildings,” says Eric Blumenfeld, founder and principal, EB Realty Management Corporation, who described his experience developing residential multifamily space at 640 North Broad and the coming redevelopment of the Divine Lorraine Hotel on North Broad Street, which he originally bought ten years ago, sold, and then repurchased for the current renovation project. “I failed that test.”

The “Build, Rebuild, Renew: Development and Redevelopment Around Philadelphia” panel, also will included as panelists Brady Nolan, vice president of development for Dalian Development; and Gary Gabriel, executive vice president, Cushman & Wakefield of New Jersey. Moderating the panel was Carl Primavera, partner, Klehr, Harrison, Harvey, Branzburg.

Monday, February 15, 2016

"Live, Work, Play" Sees Multifamily Opportunities In Philadelphia Market

by Steve Lubetkin,
Investors in the new mixed-use marketplace are looking for “that specific, special asset,” with extensive amenities.

“That does involve amenities. These amenity packages and the lifestyle that is provided by many of these class A communities has only been in the last ten years or so. It used to be that the gym was kind of like, ‘oh, that last unit that you couldn’t rent, let’s make it a gym.’ That has obviously changed substantially.”

“Pricing and basis are important, but it’s really that quality and the ability to add value to these projects,” he said.
How corporations look at the workplace of the future is driving decisions on where to locate offices.

Some companies, like Google, are moving part of their workforce into urban environments, away from the suburban campus. Google has taken a million square feet of office space in San Francisco, he says.

“Others are moving aggressively and consolidating downtown. Independence Blue Cross is an example. Where they used to have their node at 19th and Market, and then separate facilities out in several suburban markets. They moved to the [Philadelphia] Stock Exchange [building], their leases there are about that consolidation, and the realization that they want their people together in one spot for collaboration, because that’s where innovation comes from.”

Urban environments have become important for corporate offices because that’s where their employees are living, Garvey says.  “In terms of attracting the best quality worker, you want the best-educated worker, and the most innovative,” he added.

“Compared to some of the markets we’re in, Philadelphia is by far the most stable market,” says Dustin Downey, senior vice president of multifamily development, Southern Land Company.  “Many markets, especially the Texas markets, rise and fall ten percent, they have ten and 15 percent vacancy one year, and four percent vacancy the next, and the Texas developers go out and build 23,000 units, and vacancy’s back up to ten percent. Philadelphia, through the good times and bad, has always remained a very stable market, mainly because of the stable base of ‘eds and meds.’”

Downey feels there is “a substantial amount of future growth left” in the Philadelphia multifamily market, especially as both millennials and their empty-nester parents seek out new smaller-footprint living experiences in the city.

“People are struggling to sell big houses on the Main Line now, because everybody is moving back downtown,” he says. “You may have a situation where 20-something millennial kids will be living next door to their 60-something move-down empty-nester parents, either in the same building or two blocks away. That will continue to drive a strong Philadelphia multifamily market, both in class A and class B+.”
Bradley J. Korman, co-chief executive officer, Korman Communities, agreed. “We are under-apartmented,” he says. “New York City has 1.6 million apartments, Los Angeles has 550,000 apartments. Chicago and Houston have over 300,000 apartments. We have 85,000. Both in terms of absolute number of units and as a percentage of our housing stock, we are way under-apartmented.”

From a rate standpoint, where San Francisco is the most expensive apartment market in the country, and New York is second, Philadelphia is 12th, Korman says.

“We have room from a capacity standpoint, we have room from a pricing standpoint,” he says.

Good Fundamentals, Not Cheap Debt, Mostly Responsible For Philadelphia's Rise

by Steve Lubetkin,
Good real estate fundamentals are what’s driving the commercial real estate market in Philadelphia, according to most of the industry leaders on the Capital Markets panel.

“We’ve got the strong ‘meds and eds’ institutions as a driving force, we’ve had some great policy work, converting some of the class B office into residential, and I think, relative to our competition, whether it be Washington, New York, or Boston, I think the economics work very attractively for Philadelphia right now.”

William “Billy” Procida, president, Procida Funding & Advisors, agreed that fundamentals are good.

“Working on the Divine Lorraine, which involved the state and the city, I would say this is the best city government to work with,” Procida said. “The Divine Lorraine would not have been possible without them. And coming from right outside of New York City and having done a lot of New York City work over the past 35 years, I can tell you that the break-even on a simple apartment in Manhattan is approaching $2 million for a simple two-bedroom box apartment. It’s unlivable, and I think this is a great city. My slogan is, ‘Come to Philly, twice as nice at half the price.’”

“One thousand percent fundamentals,” declared Lizann McGowan, senior vice president, CBRE. “I think that is what is driving all of the aggressive equity to come here, and that’s backed up by the fact that over a third of the deals we have sold over the last 24 months have been to someone who did not own here before.”

Chris Terlizzi, senior vice president and regional manager, First Niagara,  suggested that cheap debt could also be playing a role in the market’s rise.

“We did approximately 25 apartment buildings in Philadelphia last year,” he said. “Not one of those properties was over a four percent rate.”

“The fundamentals have been driving Philadelphia and most of the major growth markets in the United States up until this year,” said Terlizzi. “Looking at what’s planned, it’s clearly cheap debt and cheap equity.”

Procida said New Jersey had become “a state you can’t work in,” because of difficulty in getting projects approved. “In New York City, the prices are just out of control,” he said, noting that the American Bible Society had selected Philadelphia because of its affordability when the group decided to leave New York.

“I love Philly. We’ve done six deals, over $100 million here,” he said. “The government jumped all over and helped with everything we needed to get done.”

“The Mural Loft Building got built in half the time I expected,” Procida said. “That would have been an 18-month job in Manhattan.”

“It’s one of the cheapest interest rate pockets in the country,” said Rosenberg. “We see a lot of the lenders coming over from New York, New Jersey, into Philadelphia, putting out three percent money where the Pennsylvania banks are more in the four percent range. I’m starting to see interest rates push up from those New Jersey banks.”

Rosenberg says 70 percent of his firm’s 2,000 loans last year were multifamily, the rest retail.

Friday, February 12, 2016

Philadelphia Apartment Portfolio Sells for $73.8M

The Carlyle Group and Greystar Real Estate Partners have sold three apartment buildings in Philadelphia to Premier Properties for $73.84 million, or approximately $123 per square foot.

The deal includes the Rushwood Apartments at 10825 E. Keswick Rd., Winchester Walk Welsh at 2600 Welsh Rd., and Winchester Walk Roosevelt at 7801 Roosevelt Blvd.

Rushwood was built in 1966 and totals 339,800 square feet on two floors with 392 units. Welsh was built in 1960 and totals 135,000 square feet on two floors with 166 units. Roosevelt was built in 1954 and totals 123,400 square feet on two floors with 152 units.

Premier Properties is planning a renovation of the unit interiors and amenity packages at all three multifamily communities.

Carpenter Technology to move HQ to Philadelphia

by Jacob Adelman, Inquirer Staff Writer
Metals manufacturer Carpenter Technology Corp. plans to relocate its headquarters to Philadelphia from Wyomissing, Berks County, to increase contact with its customers, the company said in a statement Thursday.

Carpenter, which produces and distributes titanium alloys and other premium metals, said it is in the process of reviewing Philadelphia locations for its approximately 100-person headquarters office.

Nearly 2,300 staffers will remain at a Reading facility near the company's current headquarters after the move, which the company aims to complete in late 2016.

Wednesday, February 10, 2016

Kimco CEO: In the sweet spot of retail (Video)

MaguireHayden RE Pays $98.4M for Four Falls Corp Ctr Bldg

MaguireHayden Real Estate acquired the 300 Four Falls Corporate Center office building at 300 Conshohocken State Rd. in Conshohocken, PA from National Asset Services, Inc. for $98.4 million, or about $330 per square foot.

The 298,482-square-foot, seven-story property sits on 2.5 acres in Philadelphia's Montgomery County. It features a six-story, covered parking deck, on-site fitness center and full-service gourmet cafe with Wi-Fi. Built in 2001, the asset was 97 percent occupied at the time of sale to multiple tenants, including John Templeton, The Judge Group and EMC Corporation.

US Bankruptcy Court Leases 65,000SF in DE

U.S. Bankruptcy Court for the district of Delaware leased 65,941 square foot office at 824 N. Market Street in Wilmington, DE.

The U.S. Bankruptcy Court premises comprise the 3rd, 5th, and 6th floors and a portion of the 2nd floor of the 196,969-square-foot office building, which is owned by NNN 824 North Market Street, LLC. The new 10-year U.S. Bankruptcy Court lease has a gross value of $20.4 million. Although the Courts were an established tenant, due to the scope of the commitment the General Services Administration (GSA) dictated the protocol for a new negotiated lease agreement.

“The quality of the existing highly improved infrastructure and a central location were contributing factors to the Courts decision making. After a thorough evaluation and a partial footprint consolidation, the Courts committed to continued tenancy by a new 10-year lease at 824 N. Market Street.”

The U.S. Bankruptcy Court now occupies approximately 33% of the building. In addition to office tenants, the building’s retail level tenants include local stalwart Brew Ha Ha!, Jimmy John’s Gourmet Sandwiches and a Santander Bank branch.

Taxes, Schools Are Biggest Challenges To Philadelphia Market, Say CRE Industry Leaders

by Steve Lubetkin,
Commercial real estate developers around the Northeast are more interested in Philadelphia because of its lower cost of living and the ability to earn money from projects here, according to industry leaders on the opening panel at yesterday’s RealShare Philadelphia conference, produced by’s parent ALM Real Estate Media, at the Union League Club in Center City.

This interest comes despite challenges facing the city in terms of its struggling public school system and a tax structure disliked by most of the business community, panelists say.

“I think there is a new energy in the city, and all of you guys are doing some incredible development work,” says Anne Fadullon, director of planning and development for the City of Philadelphia. “The city is ready and willing to assist you to try to move that ball forward, and we realize that we have some significant challenges as well, but we have great people in the administration and we have great partners in all of you.”

Noting that she has only been in her job five weeks, Fadullon joked that “I have my head totally around it and I know exactly what I’m doing.”

The city is seeing growth that it hasn’t seen in a number of years, said Fadullon, citing 38 major projects underway, representing about $4.7 billion in combined public and private investment. By 2018, she says, $6.7 billion in completed projects in Center City is expected, including 6,700 residential units, 2,000 hotel rooms, two million square feet of new commercial mixed-used development, and more than 2.3 million square feet of new retail space.

The Navy Yard and University City submarkets continue to grow as well, Fadullon says, with more than seven million square feet of commercial space occupied at the Navy Yard and more than ten million square feet under construction or recently completed in University City.

“In spite of what we hear about all this luxury housing being built, we still have a relatively affordable cost of living,” she said. “We’re about 80 percent of that in New York City, and our median home prices are still about 50 percent less than Boston, New York, or Washington.”

Charles McGrath, managing director of Washington-based MRP Realty, says his firm was attracted to invest in Philadelphia by several factors, including cap rates, the city size, and job growth trends.

“You can buy office at a seven [cap rate] here, in DC it’s six on average, and in New York it’s five,” he says, noting that average residential cap rates for the three cities are five, four, and three, respectively.  As previously reported by, MRP recently acquired four office buildings from Kaiserman Company in the Market East submarket, including the landmark Bourse Building on Independence Mall.

“Philadelphia is the second biggest city on the East Coast, and the eighth biggest job market in the US,” he says. “If you really start peeling back what that means to us, it means job growth, and I wouldn’t be here if it wasn’t for job growth.”

In the office market, the arrival of Shorenstein Properties and other outside capital is a positive sign for development growth.

“Historically, a good year was maybe $800 million to $1 billion in total office trades,” says Walters. “In 2016, we feel very confident that we will do at least $1.5 billion in office trades, and perhaps even as much as $1.7 billion.”
Millennial “hipsters” and Baby Boomer empty-nesters both continue to play a key role in growth of multifamily development, but it isn’t a new trend, according to Carl Dranoff, president and CEO, Dranoff Properties, who recalled his earliest multifamily development in 1982, a project called the Wire Works, at 3rd and Race Streets.

Dranoff’s Left Bank development in University City has 282 apartments and 260 parking spaces. When the project was completed in 2004, Dranoff says, every parking space was rented, but today, half go unleased because Millennials aren’t driving cars. Whether they stay in the city depends on the quality of life.

“The City will have a big say, with the school system, with parks and recreation, with fundamental clean and safe services,” Dranoff says. “I think we have a real opportunity to keep the Millennials, and keep driving new development, driving the retail economy, new apartment buildings, and new office workers who also want to be urban.”

Panelists agreed that a major challenge facing further development in the city is the condition of the city’s public school system.

“No city in the Northeast other than New York has solved for good neighborhood public schools,” warned Matt Pestronk, president, Post Brothers, which is redeveloping several trophy properties in the region. “How is the business community going to become engaged, since government has heretofore not solved the issue of public schooling. That’s really what’s going to drive office buildings to be worth $500 a foot, when people can draw a large, educated employment base from within the city, and it’s what’s going to cause our residential rents to grow everywhere. That’s what will stabilize the neighborhoods.”

Panelists also said the current tax structure is slowing investment.

“The tax structure is still an issue,” says Chip Walters, chief investment officer, Keystone Property Group. “I’m an office guy, so to me, the tax structure presents a challenge to the continued growth and an opportunity to accelerate it.”

“The tax structure is what discourages job growth in the city,” says Dranoff. “If we ever change it, we will attract so much capacity in job creation, our heads will spin.”

More than 300 market participants attended the conference. Check back for coverage of the other panels at RealShare Philadelphia later this week.

Tuesday, February 9, 2016

Malls are not dead: Retail analysts (Video)

NoLibs development site sells for big number

Natalie Kostelni Reporter Philadelphia Business Journal
The Klein Co. has acquired a block-sized development site in the Northern Liberties neighborhood of Philadelphia for $7.25 million.

The 2.8-acre property at 1300-1354 N. 2nd St. is known as SOKO Lofts for its location South Kensington. The site as been approved for 320 apartments in three buildings.

“There was a lot of interest from Philadelphia investors as well as those from around the country,” said Mike Margolis, an investment broker with Newmark Grubb Knight Frank who arranged the sale along with colleagues Brett Segal, Dave Dolan and Jeff Mack.

The brokers represented Canus Corp., which took the property through the approval process. The parcel is bounded by 2nd Street to the east, American Street to the west and Master and Thompson streets to the north and south and has been environmentally remediated. It is the former Absco Inc. steel site.
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Friday, February 5, 2016

Do You Recommend Crowdfunding to Invest in Commercial Real Estate? (Video)

Live-Work-Play Opportunities Keep Graduates In Philadelphia

by Steve Lubetkin,
Developers are seeing live-work-play opportunities that can keep recent university graduates interested in remaining in the cities where they completed their educations, according to Dustin Downey, senior vice president of multifamily development, Southern Land Company, one of the panelists featured at ALM’s RealShare Philadelphia Conference February 9 at the historic Union League Club.
Downey’s firm, Southern Land Company, has recently developed 3601 Market, a 28 story mixed-use apartment complex in Philadelphia’s University City submarket. Downey will participate in the “Live Work Play” panel at RealShare Philadelphia.

“Traditionally, the areas surrounding colleges and universities were ideal targets for developers looking to take advantage of the booming undergraduate student market,” Downey tells exclusively. “As more and more cities push to create 24/7 hubs where students can live, work and play, however, some developers are seeing new opportunities to cater to the young professional set. 3601 Market is doing just that. Rather than cater to the approximately 27,000 Drexel undergrad and UPenn undergraduates, the project is attracting young professionals — junior faculty, office workers and young doctors — to live in University City.”

Cities like Philadelphia are also benefiting from increasing interest from empty-nesters, Downey says.

“Cities are seeing a Baby Boom as the boomer generation gravitates towards cities like Philadelphia with a preference for areas that will put them in closer contact with millennials,” he says. “Today’s boomers are seeking more active lifestyles in retirement than ever before.”

The “Live, Work, Play: The Areas Teeming with Activity” panel, also will include panelists José Cruz, senior managing director at HFF; Paul Garvey, senior director, Cushman & Wakefield; and Bradley J. Korman, co-chief executive officer, Korman Communities. Moderating the panel is Timothy J. Touhey, senior vice president, Investors Bank.

With rents on the rise in trophy-class and class-A properties along with dropping vacancies, Philadelphia seems to be a landlord’s market. In addition to out-of-town investors making their mark in the city, panelists will discuss factors that continue to drive the mixed use sectors and what particular areas are teeming with activity. Among the trends expected to be discussed are coworking, incubator spaces, and crowd-funding—and how they play into the most bustling areas.

The panel is scheduled to start at 10:15 a.m. The conference kicks off Tuesday, February 9 at 7:30 am at the Union League Club, 140 South Broad Street, Philadelphia.

Keystone seeks to buy Two Liberty Place

by Natalie Kostelni, Staff writer for the Philadelphia Business Journal
Keystone Property Group is making a run at acquiring the office portion of Two Liberty Place.

The Conshohocken, Pa., real estate company has reportedly made an offer on the tower’s 940,000 square feet of office space that could trade for as much as $250 million, according to several sources in the real estate community. There is speculation among these sources that Keystone is teaming up with an off-shore capital source to fund the acquisition.

Keystone, through Rich Gottlieb, a senior vice president at the company, declined to comment.

Up to this point, Keystone’s Center City acquisitions have focused on the historic part of town where it owns the Curtis and the Dow building.

A Two Liberty buy would be a new neighborhood for the real estate company. The property at 50 S. 16th St. is a signature skyscraper in the Central Business District and a prominent tower in the Philadelphia skyline.

The building’s office space is 89 percent leased to multiple tenants on a long-term basis including Cigna Corp., Buchanan Ingersoll, Republic Bank, and Eckert Seamans. Two Liberty’s owner, Parkway Properties Inc. (NYSE:PKY), put it up for sale in November not long after it secured a new lease with Cigna.
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Brandywine completes $400M sale for over 1M SQFT

by Natalie Kostelni, Staff Writer for the Philadelphia Business Journal
Brandywine Realty Trust has completed a nearly $400 million sale of 58 office properties that essentially finishes a multi-year effort to exit certain markets that don’t fit into its overall strategy to focus on urban areas and town centers.

In a complicated transaction that one analyst called “byzantine,” Brandywine (NYSE:BDN) said that yesterday it wrapped up a series of related transactions with affiliates of Och Ziff Capital Management Group involving the $398.1 million sale of those properties. The portfolio totaled 3.9 million square feet and it was 91.4 percent occupied at the time of the transaction.

The sale involved 10 buildings totaling 557,144 square feet in New Jersey, 11 buildings totaling 612,738 square feet in Pennsylvania as well as properties in Northern Virginia and Richmond, Va. A list of buildings involved in the Och-Ziff sale was not available.

The transaction was structured so that it involved: the sale of Brandywine's fee interests in a portfolio of land to an affiliate of Och-Ziff totaling $188.1 million; and the sale of leasehold interests in the portfolio to a newly formed Och-Ziff joint venture in which an affiliate of Brandywine kept a 50 percent stake.
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Greene Turtle Bringing Adding Six Sites to Central Pennsylvania

by Steve Lubetkin,
Six new The Greene Turtle sports bar and grille locations are coming to Central Pennsylvania, as the Maryland-based restaurant chain continues an aggressive expansion drive throughout the Northeast.

As previously reported by, Greene Turtle last year named franchisees to develop sites in Eastern PA and New Jersey.

Typhoon Central PA, a new franchise group consisting of partners Leho Poldmae and Dave Trimbur, will develop the restaurants in State College, PA, home to Penn State University’s ain campus, and throughout Cumberland, Dauphin, Lancaster, Lebanon and York Counties.

Poldmae and Trimbur have extensive experience with The Greene Turtle and the casual dining segment. Poldmae already operates three Greene Turtle locations in Maryland and Delaware.

Trimbur is managing partner of Typhoon Management, a company that owns and manages restaurants and other organizations, and has served as director of operations for Poldmae’s locations for the past several years. He is also executive director of the Big 33 Scholarship Foundation, a nonprofit organization that raises funds for academic scholarships and other charitable programs to develop and showcase excellence in students and communities. Previously, he was an area director for The Rose Group, one of the country’s largest franchisee companies, whose holdings include Applebee’s and Corner Bakery. Trimbur also was a regional manager for the Chi-Chi’s Mexican Restaurant chain.

“I’m thrilled to be partnering with Dave to introduce The Greene Turtle to Central Pennsylvania,” says Poldmae. “He is an operational expert with great depth of knowledge both in the restaurant business and in the markets where we plan to open. With his experience, my history with the company and The Greene Turtle’s strong family appeal, I’m confident we will do well.”

“There is a great growth opportunity with The Greene Turtle here,” Trimbur says. “The map is wide open for us to create many new, loyal customers while bringing The Greene Turtle closer to many who work or attend college here and already know The Greene Turtle from back home or from their travels along the central East Coast. We look forward to opening our first site as soon as possible.“

In mid-2015, The Greene Turtle announced a development agreement with another franchisee group that will yield 10 restaurants in markets surrounding Philadelphia. The first of those locations has now been secured and will open later this year in North Wales, PA. Combined with this new deal, The Greene Turtle now has about two-thirds of Pennsylvania covered with planned development.

“We’re very excited about this deal,” says Tom Finn, vice president of franchise development for The Greene Turtle. “The area it covers adjoins our core market and will benefit from our brand awareness. It also continues our penetration into Pennsylvania and expansion west of the coastline, and will let us tap into strong markets like State College, Hershey, Harrisburg, Lancaster and York. With this agreement in place, we are now actively seeking one more strategic franchise partner to develop Pittsburgh and the rest of western Pennsylvania.”

The Greene Turtle opened seven new restaurants in 2015, bringing the total to 44 locations stretching from southern Virginia north to New York’s Long Island and west to Morgantown, WV. As many as 10 sites will open in 2016, including the chain’s first locations in Pennsylvania and New Jersey. Franchisees have committed to develop more than 40 additional locations in Maryland, Virginia, New Jersey, New York, Pennsylvania and West Virginia, and The Greene Turtle is now seeking strategic franchise partners to develop western Pennsylvania, northern New Jersey and New York City, and markets in New England, Virginia, the Carolinas, Georgia and Florida.

Thursday, February 4, 2016

Smart Warehousing Leases Warehouse Space

Smart Warehousing, a Kansas-based supply chain services company, leased 101,601 square feet at the Lehigh Valley Trade Port Bldg 2 located at 4270 Fritch Dr. in Bethlehem, PA.

The tenant's lease commences in April 2016, and runs through June 2021. The building is currently occupied by NFI. The landlord is Griffin Industrial Realty.

The single-story, 302,800-square-foot distribution building was constructed in 2014 on 50.9 acres in the Lehigh Valley Industrial submarket of Northampton County.

AMES Cos Renews 114,000-SF Lease in Shiremanstown

AMES Companies, a hardware manufacturer, renewed its lease for 113,583 square feet at 485 St. Johns Church Rd. in Shiremanstown, PA.

The property totals 712,500 square feet was renovated in 1995. It houses Allen Distribution and other tenants.

Ashley Furniture Inks 20,000-SF Sublease

Ashley Furniture signed a sublease to occupy 20,000 square feet at Whitman Square, located at 9701 Roosevelt Blvd. in Philadelphia, PA.

The 468,457-square-foot shopping center was constructed in 2005 on 36 acres. Ashley Furniture joins Lowe’s, OfficeMax and Walmart there.

Rodin Place Lands Target in Anchor Space

Target Department Store has signed a lease to occupy 30,000 square feet of retail space at 2001 Pennsylvania Ave. in Philadelphia, PA.

Rodin Place is a 41,000-square-foot retail building formerly occupied by Whole Foods Market, Inc.

Wednesday, February 3, 2016

Ellis Preserve Newtown Square office portfolio hitting the market

by Natlie Kostelni, Staff writer for the Philadelphia Business Journal

In what could be one of the biggest real estate deals of the year, Equus Capital Partners Ltd. is seeking to sell off the office portion of Ellis Preserve in Newtown Square, Pa.

Ellis Preserve is a mixed-use development on 218 acres at Route 252 and Route 3 and is considered one of the more unique pieces of commercial real estate in the region.

Just the office segment of the development is being put up for sale and that involves 13 buildings totaling 596,000 square feet of space on roughly 40 acres, according to sources. The space is fully occupied more than two dozen tenants such as Sunoco Co., PetPlan and Main Line Health.

Why Equus would look to sell the office portion of Ellis Preserve couldn’t be determined. The private real estate firm has developed the entire property with a local partner. A contact at the Philadelphia company couldn’t be reached for immediate contact. It also couldn’t be immediately determined how much the portfolio might sell for.

Equus has sold other properties at Ellis Preserve in the past.

In 2005, it unloaded a 130,000-square-foot building that was fully leased to Main Line Health for a record-setting $388 a square foot. Though that was a big transaction, it shouldn’t be used as a direct comparison since it’s a single-tenant building leased on a long term basis. If anything, however, the appetite for fully leased office properties in campus-like settings where amenities are plentiful are appealing to investors.

There have been some large portfolio sales recently in the suburban office market.
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ULI 2016 Spring Meeting in Philadelphia (Video)

Kaiserman Family Sells Market East Portfolio To MRP

by Steve Lubetkin,
The Kaiserman Family has sold four office properties, including the landmark Bourse Building, in Philadelphia’s Market Street East district in Center City, to MRP Realty.

The four properties, known collectively as the Independence Collection and totaling 702,014 square feet of office, retail and parking, include 400 Market Street, 325 Chestnut Street, the landmark Bourse Building at 111 South Independence Mall East, and 400 Ranstead Street. The Kaiserman family owned and operated each of the properties for more than 30 years.

The Kaiserman Company did not respond to a request for comment.

“The Independence Collection provides a unique opportunity for MRP to reposition the office and retail space, renovate the common areas, add amenities and streetscapes while capitalizing on the portfolio’s unique location in Philadelphia’s Market Street East,” says Charles McGrath of MRP Realty. “The Kaiserman family were great stewards of these properties and MRP has a business plan that will allow them to compete in this sub-market.”

With the acquisition, MRP will implement institutional operations, complete all required deferred maintenance, execute comprehensive renovations, lease the existing vacancy, renew tenants and stabilize the newly repositioned assets.

At 325 Walnut Street, MRP will renovate the façade, the common areas of the property and adding amenity space. The property was built in 1960 and has 197,588 square feet.
For 111 South Independence Mall East—known as the Bourse building—MRP will reposition the ground floor retail space and renovate the façade and the common areas, as well as construct amenity space with the goal of creating a retail-rich office environment attracting a younger tenancy featuring the latest amenities. The property was built in 1895 and has 229,307 square feet.
MRP will renovate 400 Market Street’s common areas and lease up the remaining vacancy. Built in 1967, the property has 178,111 square feet.
The Bourse garage at 400 Ranstead Street will undergo a renovation of the common areas of the garage, a repositioning of the retail and re-leasing of the theatre space. Built in 1988, the property has 27,008 square feet.

Monday, February 1, 2016

How Do You Determine the Size Office Space You Need? (Video)

Why Philadelphia's central business district may end up in University City

Right under our noses, the rents in Center City have been steadily rising to levels not seen in recent memory.
There are several reasons for the rapid price increases beyond mere supply and demand including: (1) the consolidation of a large percentage of building ownership and leasing responsibilities into just a handful of players making it easier and quicker to move the market, and (2) a record number of buildings having recently changed hands with the new owners insisting on higher rents to justify the prices they just paid. Interestingly enough, the higher rents currently being realized in Center City may ultimately create new opportunities for tenants and longer term problems for building owners east of the Schuylkill River.

The average age of Center City office buildings is over 55 years and the skyline defining trophy towers that rose along West Market and 18th Street in the late 1980s and 1990s are now almost 30 years old. Many tenants, especially those employing young work forces, are now looking for something different that reflects a newer, dynamic office environment to support the way their people work and interact today.
Where are these types of workplaces? New buildings are popping up at the Navy Yard and in University City with many more in the planning stages. Drexel and it’s to be announced master developer have plans for up to 6,000,000sf of mixed use development including a lot of office space in Innovation Neighborhood just west of 30th Street Station. The University City Science Center, in partnership with BioMed Realty, have plans to develop about 4,000,000sf of new, mixed use development between 36th and 38th streets, just north of Market Streets at the old University City High School site.
Because for the past 20 years in Center City there was always plenty of available space in the existing office buildings and there was a price premium to move to a new building, almost no new office construction occurred in Philadelphia. However, that is starting to change. Many more tenants are starting to believe that the benefits of a brand new office building with better light, green space and amenities including outdoor space, social gathering places and a more human friendly scale justify the replacement cost rent premium as compared to the existing building stock. The proliferation of new office development at the Navy Yard and in University City clearly reflects this value assessment.
As rates continue to rise in the Central Business District and the existing buildings grow older, the price gap between current building stock and new construction will shrink, and the quality gap between existing buildings and new, state of the art buildings will widen. The interplay of these two phenomena will make it easier for companies to decide to move to new construction. When they make that decision, where will they go? While there will certainly be isolated building pad sites in the Central Business District, many of these will necessarily exist within the constraints of what is already nearby— a densely populated neighborhood of standalone, older buildings. Much like the Navy Yard (though on a smaller scale), Innovation Neighborhood and University City will provide opportunities for tenants to not only redefine their work environment within a shiny new building, but also become part of a larger, modern day community centered around public green spaces, recreational activities and neighboring state of the art buildings designed to a more people friendly scale.

Right now, for some companies, the Schuylkill River creates a psychological barrier that cannot be crossed. What happens, however, if we are lucky enough to land a Google, Microsoft, Uber or Oracle in University City because of its proximity to Penn, Drexel and 30th Street Station? What if three or four other well established corporations join FMC and the top firms at Cira Centre in locating major operations across the river? Given the changing economic and quality gap paradigms, isn’t it likely that other companies would want to join in the fun? What happens then? Demand for the current Central Business District will fall, rents will go down and it will be difficult for landlords to get tenants to come back without materially upgrading their product.
For most Philadelphians, the thought of our Central Business District shifting location seems farfetched. However, it happened here not that long ago and, to some extent, in other cities like Washington D.C. and now Boston. In the early 1970s, the center of the Philadelphia business world was South Broad Street. Most law firms, the largest occupiers of office space by industry in the City, were there. But the buildings got old and tired and new buildings started springing up along West Market Street and north 18th street where land was cheaper. The difference in product quality led some leading firms to move west even though the rent for these newer buildings was higher. Once a few established firms made the move, it became acceptable for others to follow. Eventually the Central Business District shifted west and north. The same thing happened in Washington, D.C. Up until the 1990s, there was little business presence east of 16th Street. However, as rental rates continued to rise in City Center and the existing building stock grew older and more tired, some pioneers moved east where the product was newer and, because land was cheaper, the rent premium was small enough to justify the change. The development of the Verizon Center and extension of the Metro helped make East End a more vibrant and accessible submarket. Once a few prominent firms moved east, more companies followed suit. While only one law firm was located in East End in the 1970s, today that submarket is home to many of the District’s largest law firms including Arnold and Porter, Venable, Covington, DLA Piper, Jones Day, Sidley, Hogan Lovells, Skadden, Morgan Lewis, McDermott, Crowell & Moring and White & Case.
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