Wednesday, December 27, 2017

ImmunoTek Bio Centers Leases 15,000 SF in Allentown

ImmunoTek Bio Centers, an operator of plasma donation centers, has signed a 15-year lease for 15,000 square feet in the Parkway Shopping Center at 1471-1523 Lehigh St. in Allentown, PA.

The retail center, known as Parkway Shopping Center, totals approximately 153,745 square feet and was developed in 1953. Tenants include Dollar Tree, IHOP and H&R Block, among others.

FD Stonewater Acquires River Park I Office Bldg Conshohocken

FD Stonewater has acquired the River Park 1 office building at 1000 River Rd. in Conshohocken, PA from BPG Real Estate Services LLC for $30.64 million, or about $181 per square foot.

The historic four-story office building was originally built in 1870 and was later renovated in 1999. It totals 169,160 square feet and is occupied by Envision Healthcare.

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Jefferson Health signed a 237,000SF Lease, Renamed to Jefferson Tower

by Steve Lubetkin,
In the largest new CBD Lease of 2017, Jefferson Health signed a 237,000-square-foot lease to anchor 1101 Market Street, which will be renamed as Jefferson Tower.
Following mergers with Abington Health, Aria Health, Kennedy Health System and Philadelphia University, and completion of its overall Master Plan, Jefferson will unify the enterprise’s corporate services in the new headquarters facility. Upon initial occupancy, Jefferson will occupy 40 percent of Jefferson Tower at the top of the building with the option for substantial expansion over time. The landlord of Jefferson Tower, Girard Estate, will renovate the lobby, add a direct connection to the Jefferson Station concourse and replace the building’s signage with Jefferson signage.

Pennsylvania’s I-78/I-81 Warehouse Corridor Booming

by Steve Lubetkin,

At the year’s end, warehouses all around Pennsylvania’s I-78/I-81 Corridor are swelling with extra employees and bustling with activity to satisfy holiday wish lists across the Northeast. The Corridor’s enduringly strong industrial market performance transcends seasonality, however. In a new report  research indicates that in 2017, 11.5 million square feet of warehouse space was absorbed, creating about 5,800 new transportation and warehousing jobs, and a 20-basis-point drop in fourth quarter warehouse vacancy to 6.6 percent, vs. 2016. While deliveries modestly exceeded absorption this year (11.8 million square feet delivered), looking at cumulative supply and demand over the past five years shows total net absorption to-date in the cycle still well outpaces new development.

The Lehigh Valley continued to fulfill occupier needs for modern warehouse space as one of the biggest development hubs in the nation, and produced new transportation and warehousing jobs at the fastest pace since 1993. This warehouse market is filed squarely in the “Nice” column on CRE Santa’s list.

*Source:  Moody’s Analytics, 2017 (Harrisburg-Carlisle, Allentown-Bethlehem & Scranton-Wilkes Barre MSAs, seasonally adjusted employment data including forecast for Q4 2017).

In 2018, warehouse development will remain elevated, and considering forecasts from Moody’s Analytics, Econometric Advisors own projections, the real estate firm expects to see another year of annual positive absorption and transportation & warehousing employment growth, if at a moderating pace.

Friday, December 22, 2017

Blackstone REIT Buying 22 Million-SF Industrial Portfolio for $1.8 Billion

In what would amount to its largest purchase since its formation in the summer of 2016, The Blackstone Group's non-traded REIT, Blackstone Real Estate Income Trust Inc., has struck a deal to acquire a 22 million-square-foot industrial portfolio from Cabot Industrial Value Fund IV for $1.8 billion.

The portfolio consists of 146 industrial properties primarily concentrated in Chicago and comprising 18% of the portfolio's base rent). Other holdings are located in Dallas (12%), Baltimore/Washington DC (12%), Los Angeles/Inland Empire (7%), South/Central Florida (7%), New Jersey (7%) and Denver (6%).

The REIT said it industrial vacancy across the portfolio's markets has continued to decline over the past seven years and is currently just 4.6%, while rents across the portfolio's markets have increased 5.7% year-over-year, according to a Blackstone REIT filing.

The continued rent growth in the portfolio's markets resulted in rents on new leases exceeding rents on expiring leases by 9% in the portfolio during the third quarter of 2017. The company believes the portfolio will see further rent increases as the portfolio is currently 90% leased versus average occupancy in the portfolio's markets of 95%.

The portfolio is leased to 377 tenants including e-commerce and logistics companies such as Amazon, FedEx, and DHL as well as Coca-Cola, Fiat Chrysler and the U.S. government.

Blackstone REIT said it expects to fund the acquisition through a combination of cash on hand, property-level debt and borrowings under the company's line of credit. The property-level debt is still being negotiated with potential lenders and detailed terms have not yet been agreed upon. Closing is expected in March or April of 2018.

Cabot Industrial Value Fund IV was formed in the spring of 2013 with an investment strategy of acquiring value-add properties that tend to be smaller in size. Cabot's average deal size up to that time was about $13 million.

Blackstone REIT since it began acquiring properties this year has shown a preference for industrial properties. In April, the REIT acquired a 6 million-square-foot portfolio of predominantly infill industrial assets from High Street Realty Co. for $402 million.

With the Cabot purchase, the REIT's holdings will include industrial properties with an acquisition value of $2.31 billion - making industrial properties, its largest sector holding followed by $1.4 billion of multifamily.

Blackstone REIT's parent company also has shown a renewed interest in the sector. In September 2016, Blackstone Group jumped back into the industrial property space buying 46 logistics properties totaling over 26 million square feet from LBA Realty for a reported $1.5 billion. Previous to that deal, the private-equity company had sold off industrial properties, notably dealing its IndCor portfolio to Global Logistic Properties Ltd. for a staggering $8 billion.

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Monday, December 18, 2017

Bond House Collective Leases Space at One Penn Center

Bond Collective has signed a lease for 22,506 square feet in the office building at 1617 John F. Kennedy Blvd. in Philadelphia, PA.

The 20-story building, known as One Penn Center at Suburban Station, was built in 1929 by Pennsylvania Real Estate Investment Trust (PREIT) and was later renovated in 1987. The building is currently owned and managed by Realex Capital Corp.

Bond Collective’s lease utilizes the entire 20th floor. Other tenants in the building include the City of Philadelphia, American Heart Association and QTC Management.

Dependable Distribution Leases Space in Philadelphia

Dependable Distribution LLC has signed a lease for 332,640 square feet in the industrial building at 9801 Blue Grass Rd. in Philadelphia, PA.

The food processing plant totals 448,681 square feet and was built in 1978. Hunter Truck is another tenant in the building.

Habitat For Humanity Leases Space in Village Mall

Habitat For Humanity Restore has signed a 10-year lease for 22,400 square feet in the Village Mall shopping center at 200 Blair Mill Rd. in Horsham, PA.

The mall was built in 1972 and renovated in 2003. It totals 274,840 square feet. Tenants include Acme, Dollar Tree and Retro Fitness.

This Week by the Numbers #CRE

by Steve Lubetkin,
As e-commerce claims an increasingly larger portion of holiday retail sales, retailers’ efficiency in limiting and handling returns of merchandise bought online – which could amount to as much as $32 billion this year – will make or break the holiday season for many.

E-commerce consistently generates more returns than brick-and-mortar retail, partly because shoppers often can’t sample online merchandise before buying it and partly due to the widespread practice of online shoppers ordering several versions of a product and returning those that don’t appeal.

Historically, returns of store-bought merchandise have amounted to eight percent of total retail sales. However, for e-commerce, that share ranges from 15 percent to 30 percent, depending on the product category.

Assuming those percentages hold true, the value of returns this season will increase by the same 13.8 percent that Adobe Analytics predicts for the increase in online sales this season. Adobe foresees online sales this season reaching $107.4 billion, up from approximately $93 billion last year. By extension, it is calculated that the projected ceiling for returns is $32 billion, up from roughly $28 billion last year.

“The increased amount of e-commerce returns will benefit Pennsylvania’s I-78/I-81 industrial corridor. We have a huge presence of 3PLs, public warehouses and reverse logistics firms in the area which are able to receive and process returned goods. In the past few years, we have witnessed shipping companies invest heavily to bolster their networks to accommodate the increased online traffic. Since the I-78/I-81 corridor is located within a day’s truck trip of 40 percent of the nation’s population, we believe the region will be an ideal location for returned online goods.”

Those well positioned to thrive in the online-returns market – also called reverse logistics – include third-party logistics firms and owners of 3PL facilities. Many retailers opt to contain costs and preserve their retail focus by outsourcing reverse-logistics functions to 3PL firms that specialize in that field.

Wednesday, December 13, 2017

Solid Labor Market Gains, with Even More Room for Improvement

Latest Jobs Report Continues to Reflect Solid and Sustainable Economy

Nonfarm payroll employment marched further forward in November, adding 228,000 jobs and also revising October’s jobs upward by 3,000, as reported by the Dept. of Labor on Friday. The average number of jobs added per month in 2017 now stands at 175,000, a slowdown from the same period in 2016 but still defying expectations for job growth as the economy enters what is widely believed to be a state of full employment.

The unemployment rate held steady at 4.1%, as the growth in the labor force over the month added not only to the number of employed but also to the number of unemployed.

The rosy employment picture buttresses the case for optimism as economic conditions continue to swing to the upside. Consumer confidence levels are reaching new heights (in spite of a small dip in November), and household balance sheets continue to improve. Meanwhile, increases in equity and home prices also add to the buoyancy among market participants. Expectations for economic growth settling in above 3% are growing given recent data.

With an economy at full employment -- meaning that everyone seeking a job is able to find one -- how much room can there be for continued job growth above the rate of population growth?

November’s report shows that jobs were added at an annualized rate of 1.9%, more than twice the rate of population growth. With an unchanged unemployment rate, this indicates that individuals are still being drawn into the labor force.

And there may well be a surplus still waiting to be gainfully employed. Labor force participation has been on a steady decline since the end of the recession and has only recently begun flattening out, sitting at 62.7% in this report compared to the pre-recession high of 66% and more than 67% in 2000.

To put these numbers in perspective, an increase of half of one percentage point in labor participation equals almost 1.3 million additional available workers. If the economy were to return to a higher participation rate, there could be plenty of available workers for employers to add jobs without further tightening the labor market.

An encouraging sign is that the labor force participation rate of the prime-aged working population (those between the ages of 25 and 54) has been on the rise after years of steady declines. Accounting for almost two-thirds of the labor force, this is the largest cohort and the most watched, and still has some way to go before reaching levels that were seen in the earlier years of the century.

Wage growth remains muted and continues to weigh on our optimism, but pessimism and caution may be misplaced. The lack of consistent and generous wage growth is clearly a function of the industries and occupations that are growing.

Jobs added in November were distributed by industry sector as shown in Exhibit 3 below. The highest number of jobs was added in leisure and hospitality, many of which are typically part-time jobs with modest wages. Almost 40% of the jobs added in professional and business services were temporary positions, which provide limited tenure and modest wages.

High-wage jobs such as those in information, financial activities, mining, construction, and manufacturing accounted for smaller job gains, dampening the potential for overall earnings growth.

As we noted last month, the picture continues to be one of healthy earnings in a handful of industries that add, in the aggregate, fewer jobs, and weak earnings in sectors that add, in the aggregate, many more jobs.

One cause of low wages and weak wage growth is certainly related to the job status of workers. Retail jobs, temporary jobs, and employment in the leisure and hospitality industry sector and in social assistance are more likely to be part-time and subject to lower wages. During the recession, with jobs being lost across the economy, part-time positions grew as a percentage of all jobs from 17% to over 20%.

Since the end of the recession, the full-time job market is continuing to gain momentum. These positions are more likely to enjoy benefits such as paid time off for vacation and sick leave and to receive health insurance coverage and benefits - added employment compensation which is not included in the earnings data. With the balance between full-time jobs and part-time jobs reverting to pre-recession levels, we are likely to see overall earnings grow.

The flip side of tepid wage growth is that labor costs may place less of a burden on profit margins. With plenty of potential labor available for further job increases, moderated labor costs, and price increases kept in check, there would seem to be less motivation for the Federal Reserve to seek faster interest rate increases, potentially choking off what is arguably a solid and sustainable economy.

Barring any unforeseen event, there are few clouds on the horizon in this fair-weather environment.

Monday, December 11, 2017

MRP Industrial, Hillwood Tee Up Largest Spec Dist. Ctr. Building in Eastern Pennsylvania

Construction Started on First Two Bldgs. Planned in Hamburg Logistics Park on Former Perry Golf Course

A joint venture of MRP Industrial and Hillwood has begun work on two of the three distribution buildings planned in the Hamburg Logistics Park located off I-78 in Berks County, PA.

The 165-acre project on the site of the former Perry Golf Course is approved for three buildings totaling 1.9 million square feet.

The first phase of construction includes the speculative development of 101 and 201 Logistics Dr. PLans for 101 Logistics call for a 336,000-square-foot, single-loaded distribution center scheduled for delivery in the third quarter of 2018. The second building at 201 Logistics will be a 1,240,000-square-foot, cross dock distribution center with expected delivery by year-end 2018.

At that size, MRP/Hillside said 201 Logistics Dr. will be the largest speculative building ever developed in eastern Pennsylvania.

A second phase of construction will include the development of 301 Logistics Dr., a 324,000-square-foot facility.

"Hamburg Logistics Park’s location is another example of the continued growth of the Lehigh Valley industrial market. In addition to its proximity to a valuable labor pool, the park will provide convenient access to the region’s major third party parcel shipping hubs, responding to steady demand for both traditional distribution requirements and direct to consumer fulfillment operations."

Baltimore-based MRP Industrial, an affiliate of MRP Realty, has quickly become one of the largest industrial developers in the northeastern U.S. having built or started 27 buildings totaling over 10.3 million square feet across Maryland, Pennsylvania and New Jersey.

Texas-based Hillwood has been active in the I-78 market for several years.

Ware Malcomb is the project architect with The Conlan Co. serving as the general contractor. Snyder Secary & Associates, a civil engineering firm based in Harrisburg, PA, developed the master plan.

Endurance Buys Bucks County Industrial Park

An affiliate of Endurance Real Estate Group, LLC (“Endurance”) and Thackeray Partners is pleased to announce the acquisition of the Penn Warner Industrial Park, a four (4) building warehouse/distribution portfolio totaling 240,358 SF in Fairless Hills (Bucks County), Pennsylvania (“Portfolio”). Endurance acquired the Portfolio from an undisclosed institutional seller.

The Portfolio of buildings was constructed between 1968 and 1970, and features brick & block facades, 24’-25’5” clear ceiling heights, and an excellent dock door ratio of one door per 6,000 SF. The Portfolio is strategically situated near the intersections of Route 1 and Route 13, providing easy access to Interstate 95, Interstate 195, 295, and the NJ Turnpike. These optimal logistical connections provide unique access to New York City and Philadelphia metropolitan areas and the affluent consumer base of the northeastern corridor, attracting a number of employers to the surrounding industrial market of Lower Bucks County. Existing users within the area include Rite-Aid, Estee Lauder, Pitney Bowes, XPO Logistics, Tara Tape, and Future Foam.

“The opportunity to acquire this Portfolio at pricing that is well below replacement cost attracted us to pursue this transaction. Our attractive basis will provide the new ownership group with flexibility to invest speculative capital. These strategic investments in base building upgrades are anticipated to expedite stabilization from the current occupancy level of 62%”, stated Albert J. Corr, Senior Vice President of Endurance. “Given the strength of the Lower Bucks distribution market as well as Endurance’s hands-on management platform and local ownership presence, this opportunity was a natural fit given our recent value-add acquisition of buildings in the King of Prussia and Mount Laurel, New Jersey markets.” Endurance previously owned this Portfolio from 2003 to 2007.

Current vacancies range from 20,012 SF up to a full building availability of 60,223 SF.

Law Firms And Banks Confront Changes To Traditional Office Layouts

by Steve Lubetkin,
Demographic and working style changes are creating strong pressure for radical changes in office space buildouts, and these changes are moving rapidly into the legal and financial sectors, according to experts in the design requirements for those professions.

Law firms are seeking new ways to build consensus and affect change to adjust to this evolving reality. Philadelphia law firms are likely to feel the effects of an office space shakeout currently underway in New York.

“New York is going through a legal sector transformation, with some megafirms like Skadden [Arps], Millbank [Tweed], Boies, Schiller [& Flexner] breaking out of the traditional mold of downtown markets,” she says. “All of a sudden they’re saying, ‘the product is old, the floors are inefficient, they don’t have the good window lines, and if we want to reinvent ourselves, we just can’t do it in existing product.’ Hence, we’re seeing a flight to quality in markets all across the United States.”

Philadelphia will feel the impact because many major national law firms are headquartered in New York, and when those firms make office design changes, “it has a domino effect in their other locations. It’s going to influence what’s required by the firm moving forward. If they’re doing something very progressive, they’re going to look to their other locations to do something progressive too.”

Law firm clients are increasingly demanding that law firms drop billable hours and move toward fixed fees for legal services, and that is having an impact on how law firms look at their costs, she says. Adding to that evolution, by 2025, more than half of the lawyers in the US will be Millennials, she says, most of whom view success differently than previous generations, and are less-influenced by the traditional trappings of success such as large private offices.

“When you have a fundamental workforce change, people now are not making decisions for their partners of today, they are making them for their partners of tomorrow. In Philadelphia, where we are going to see development opportunities is west [of the CBD] toward the train station, and we do believe there will be, in the coming years, some firms that are either gutting and renovating their current space, or potentially committing to a new building or two.”

Technological advances are making it possible for law firms to reimagine their space requirements in radical ways. She cites Marshall Dennehy, a large insurance litigation firm, as an example of this kind of forward-thinking.

“They moved from 1845 Walnut Street to 2000 Market Street,” she says. “Two years before they moved, they invested in the technology and developed the protocol, that when they moved, they got rid of 80 percent of their paper. And their goal is to go completely paperless. That’s an insurance litigation firm, that has the most paper of anybody.”

Office floor layouts are changing to a more open design, with core support teams in the center of the floor in open spaces, with attorney offices on the perimeter of the floor completely enclosed in glass so that natural light reaches the entire floor.

“It has a transparency that creates better vitality, better collaboration, better energy, better morale." Even with rising space rates, firms can save money on the per-attorney space cost by reducing the amount of space allowed. “They’re actually determining each partner’s pro-rata share of the space costs.".

Bright Insight, the 2017 National Legal Sector Benchmark Survey, conducted in partnership with ALM Legal Intelligence, polled more than 1,500 individuals from law firms across the United States.

“With real estate being the biggest expense for firms, excluding salaries, we are seeing a continued shift to rightsizing and incorporating new workplace strategies that help firms lower the cost of their footprint, while improving operations and client services."

In Philadelphia, about one-quarter of law firms reduced their overall space when they renewed leases, adding that future space design is likely to embrace

“Philadelphia is a little more parochial than some of the other markets, so we lag a little bit on some of those trends, such as single-sized offices. We’re seeing law firms increase their density, and firms that are able to pick up and relocate are looking at doing that. Not all firms can do it, but within the next three years I anticipate some of them to do that.”

Meanwhile, banks are finding that the space requirements for branches are changing as well.

As bank customers become more comfortable with remote transaction opportunities, including online banking, smartphone apps that even permit check deposits, and standalone ATM machines, banks are moving away from large space requirements for the traditional bricks-and-mortar branch, and even changing the way that space is used.

“Our clients are now building branches of less than 2,000 square feet, but it’s a full-service branch,” says Tim Quinn, branch solution sales specialist for NCR Corporation, a major supplier of financial equipment to the banking industry. Quinn described NCR’s vision of the future of branch banking at the New Jersey Bank Marketing Association’s October meeting in Clark, NJ.

“I actually have a client at the University of Maine, on the college campus, they built a new branch that was 264 square feet,” he says. “That was one office and one interactive teller.”

Quinn says remote interactive teller machines, where clients can make deposits and withdrawals like an ATM machine, but can also interact via two-way video with a live bank teller sitting at a central location, are going to replace many branch interactions in bank branches of the future. Other branch space is being reconfigured to emphasize collaborative meetings between financial specialists and customers, with less space devoted to teller transactions, he says.

Tuesday, December 5, 2017

Super Value Signs Full Bldg Industrial Lease in Carlisle

Super Value, a retailer, has signed a full-building lease for the new 422,400-square-foot industrial building at 192 Kost Rd. in Carlisle, PA.

The warehouse facility sits on 38.8 acres in the Harrisburg Area West Industrial submarket of Cumblerland County, within the New Kingstown Business Park. MRP Realty, Inc. developed the property on spec in June 2016 and sold it to Industrial Property Trust, Inc. before delivery.

Black Creek Divests Centerton Square Shopping Center

Prestige Properties & Development Company, Inc. has acquired the Centerton Square shopping center at 2 - 74 Centerton Rd. in Mount Laurel, NJ from Black Creek Diversified Property Fund Inc. for $129.6 million, or about $304 per square foot.

The shopping center delivered in 2004 and totals 426,415 square feet. It is anchored by a Wegmans, with in-line and outlot space fully leased by multiple tenants including TJ Maxx, DSW, PetSmart, Chipotle, Starbucks, Five Below and JoAnn Fabrics. Target and Costco stores are a part of the center but were not included in the sale.

H&R Block Leases Space on Walnut Street

H&R Block, a tax consulting company, has signed a retail lease for 18,934 square feet in the storefront at 1422-1424 Walnut St. in Philadelphia, PA.

The two-story, 145,750-square-foot retail and office building delivered in 1927 and is currently owned by ASI Management.

Spark Therapeutics Signs 108,000-SF Office Lease on Market Street

Spark Therapeutics, Inc. has leased 107,669 square feet in the 1 Drexel Plaza office building at 3001-3025 Market St. in Philadelphia, PA.

The six-story office building was built in 1953 and renovated in 1997. It is currently owned and managed by Academic Properties, Inc. Other tenants in the building include UPENN Health System Information Services and Drexel E Learning.

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Monday, December 4, 2017

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StayWell Leases 17,500SF in Yardley

StayWell, a national health solutions company, has leased 17,500 square feet at 800 Township Line Road in Yardley, and moved its headquarters locally within the Lower Makefield Corporate Center.

Equus Capital Partners sold Madison Willowyck Apartments

by Steve Lubetkin,

Equus Capital Partners sold its 308-unit apartment community, Madison Willowyck, in suburban Philadelphia, PA, to Gibbsboro, NJ-based Friedman Realty Group for $62.5 million. At the time of the sale, the community was 96-percent occupied.  Built in 1972, the garden style apartment community offers residents a mix of one-, two-, and three-bedroom units with private entrances in a low-density setting. An affiliate of Equus acquired Madison Willowyck in 2007 from UBS.

Wednesday, November 29, 2017

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Henderson Group Purchases Newtown Square Portfolio

Natalie Kostelni Reporter Philadelphia Business Journal
Henderson Group has paid $42 million for a portfolio of five office buildings in Newtown Square, Pa., that had been owned by Brandywine Realty Trust.

The properties total 250,000 square feet at 11, 14, 15, 17 and 18 Campus Blvd. One building, 17 Campus Blvd., totals 48,565 square feet and is vacant. The other four properties are occupied. The buildings were developed between 1990 and 2002.

Henderson has historically banked land and developed ground up projects and this transaction, which involved buying existing buildings, marks a shift for the company.

“This breaks our mold with acquiring large tracts of vacant land and going vertical,” said Brian Coyle, president and CEO of Henderson, which is based in Media, Pa. “This is our first foray into acquiring existing product and I think it will be the model we will deploy in the future.”

Full story:

Tuesday, November 28, 2017

Siemens Renews 185,000-SF Office Lease in Malvern

Siemens Medical Solutions Health Services Corp. has renewed its lease for 184,872 square feet in the Great Valley Corporate Center office building at 51 Valley Stream Pky in Malvern, PA.

The four-story building totals 235,000 square feet. It was developed in 1982 by Rouse & Associates, and is currently owned by Cerner Corporation. Siemens' lease spans all four floors of the building.

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Thursday, November 16, 2017

Cold Storage Becoming a Hot Property Investment

The Blackstone Group (NYSE:BX), which reportedly attempted to buy one cold storage warehouse operator earlier this year, has found a willing partner in another.

Sioux City, IA-based Cloverleaf Cold Storage has agreed to a recapitalization that will see private equity funds affiliated with Blackstone make a majority investment in Cloverleaf alongside the firm's existing Feiges and Kaplan family shareholders, who will continue to operate the business post-closing. Terms of the transaction were not disclosed.

Meanwhile, Atlanta-based Americold Corp., the worlds largest owner and operator of temperature-controlled warehouses, filed an initial public offering this week to form a new REIT called Americold Realty Trust. It was previously reported that Americold turned down a $3 billion buyout bid from Blackstone this past September, according to Frozen & Refrigerated Buyer magazine and other news reports.

Goldman Sachs is funding Blackstone's Cloverleaf investment. The Wall St. financial firm is well versed in the cold-storage real estate sector having partnered with JPMorgan earlier this yeat to sell a $1.3 billion CMBS offering backed by loans on 54 cold storage facilities operated by Lineage Logistics Holdings LLC.

The Global Cold Chain Alliance, an industry trade group, recently forecast that, beginning next year, owners and operators of U.S. temperature-controlled warehouses as a whole will see a five-year compounded annual growth rate in revenues of 4% based on the group's view that U.S. demand from food producers, distributors, retailers and e-tailers exceeds currently available temperature-controlled capacity in the U.S.

The alliance further posits that an owner with a large-scale network of high-quality temperature-controlled warehouses will be well-positioned to take advantage of these trends.

Market capitalization rates in the temperature-controlled warehouse sector for triple net leased temperature-controlled facilities have ranged from 6.25% to 7.25% and for owner operated temperature-controlled facilities ranged from 7.5% to 8.25%, according to a recent report on temperature-controlled warehouses by Cushman & Wakefield.

The higher capitalization are attributed rates of owner-operated facilities to the net operating income derived from the handling and other services provided by the owner to customers at the facility. The report further said that temperature-controlled facilities have benefited from the same capitalization rate compression that has helped drive values in the warehouse sector since the global financial crisis.

Cloverleaf Cold Storage
Cloverleaf is the eighth-largest public refrigerated warehouse company in North America, as reported by the International Association of Refrigerated Warehouses. It operates a network of 19 warehouses across eight states in several Midwest and Mid-Atlantic markets, providing a variety of food grade storage, handling, and freezing services to food producers.

"Our partnership with a world-class firm such as Blackstone provides us with significant capital and operating resources to invest for growth and continue to expand our platform," said Daniel Kaplan, co-president of Cloverleaf, in a statement announcing the recapitalization with Blackstone.

Wells Fargo Securities served as financial advisor and Katten Muchin Rosenman LLP served as legal advisor to Cloverleaf during the transaction. Barclays and Goldman Sachs served as financial advisors to Blackstone and Kirkland & Ellis LLP and Simpson Thacher & Bartlett LLP served as legal advisors. Committed debt financing for the recapitalization was provided by Goldman Sachs.

Americold Files IPO for REIT
Meanwhile, Americold Realty Trust filed for an IPO of an undisclosed number of common shares. The company has a global portfolio of 160 warehouses spanning about 945.3 million cubic feet. Of this number, it owns or leases 134 warehouses in the U.S. and manages another eight. Its other warehouses are located in Australia, New Zealand, Canada and Argentina.

It listed the value of its assets at $2.39 billion as of Sept. 30 and reported $1.14 billion in revenue first nine months of 2017.

"We consider our temperature-controlled warehouses to be 'mission critical' real estate in the markets we serve from 'farm to fork' and an integral component of the temperature-controlled food infrastructure supply chain, which we refer to as the 'cold chain,' " Americold said in its filing.

The company plans to use capital from the common stock offering to take advantage of the market opportunity from the combination of tight warehouse capacity and increased demand for a range of handling and other warehouse services.

Wednesday, November 15, 2017

Fall 2017 Real Estate Economic Forecast (Video)

New coworking operator enters Philadelphia market

Natalie Kostelni Reporter Philadelphia Business Journal

Another coworking operation is entering Philadelphia and offering its own twist on the growing shared-office concept.

Bond Collective, which is based in New York, has signed a 10-year lease on 22,000 square feet on the top floor of One Penn Center where it plans to open next spring a coworking space called Bond Station House. Bond Collective attempts to differentiate itself in the increasingly crowded coworking market with its “high design,” said Shlomo Silber, CEO and co-founder of Bond Collective.

“Our model is boutique, hospitality driven space with high design,” he said. “We don’t see enough high-design space in the market.”

That may be a product of the cost it takes to build out such fancy space and the narrow margins produced by the memberships and other services provided by a coworking operation. Bond Collective has based it business model on it and believes it fills an unmet niche in the realm of coworking.
Full story:

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Monday, November 13, 2017

Philadelphia's office market slides while the suburbs take off

Natalie Kostelni Reporter Philadelphia Business Journal
The office markets in Philadelphia’s Central Business District (CBD) and the suburbs are a tale of contrasts, according to various third-quarter research reports.

The suburban market had its strongest quarter in terms of demand for office space than it has had in the last 12 years and the vacancy rate nearly dropped to its lowest point last seen in the first quarter of 2008, according to CBRE Inc. data. That’s when the vacancy rate stood at 14.9 percent. It is now at 15.1 percent.

Activity was so robust in the suburban office sphere that there was 935,538 square feet of absorption, or space occupied by tenants and taken off the market. The submarkets that saw the most leasing activity were Fort Washington, King of Prussia, Conshohocken, and the Malvern-Exton area, according to JLL.

That was not the case in Philadelphia where there were signs that the CBD is on the wane. The CBD logged its highest vacancy since the third quarter of 2014, climbing to 13.7 percent as tenants such as PNC Bank, Wells Fargo and Verizon gave back space and tenants haven’t backfilled the spaces that have been thrown back on the market, according to Newmark Knight Frank research. Savills Studley’s research showed the vacancy rate nudging up for the third consecutive quarter and now is 15.0 percent compared with 13.8 percent.

Full story:

Life Time Athletic ventures into co-working space

Natalie Kostelni Reporter Philadelphia Business Journal
Life Time Athletic, which has expanded during the last two years into the Philadelphia area with locations in Wayne, Pa. and Mount Laurel, N.J., has decided to venture into co-working.

As part of its 80,000-square-foot fitness facility in the former Macy’s in Ardmore, Pa., Life Time will dedicate 12,000 square feet to a co-working space called Life Time Works. This is the first time the Minnesota company has decided to add a work area for small business owners, freelancers and others can use. In addition to its membership to its fitness facility, it will be offering memberships and different pricing to this space as well. 

In addition to typical cardio and weight lifting rooms, Life Time provides professional fitness, family recreation and spa treatments. It often provides indoor and outdoor swimming pools, basketball and racquet courts, personal training and group fitness, yoga, child care, hair cuts and boot camp fitness. An area that is assigned to co-working is a natural extension to its business, company officials say.

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Friday, November 10, 2017

The Westover Companies purchased Gilbertsville Shopping Center for Cash

The sale of Gilbertsville Shopping Center, an 85,576-square-foot, grocery-anchored shopping center located in Gilbertsville was traded. It is an affluent Philadelphia suburban community within Montgomery County, Pennsylvania.

The seller was Brixmor Property Group.  The Westover Companies purchased the asset on an all cash basis.

Gilbertsville Shopping Center is anchored by Weis Markets, which has been a tenant since the center was constructed in 1976.  The 95.6-percent-leased center is also home to Anytime Fitness, T-Mobile, Pet Valu, Dairy Queen, National Auto Stores, Great Clips, Quest Diagnosis, Key Bank and Fine Wine & Good Spirits.  The center is at 1050 East Philadelphia Avenue (Route 73).

“The Gilbertsville Shopping Center has been a successful asset since its development due to its market positioning and Weis grocery anchor. Grocery-anchored retail in the Philadelphia suburban markets continues to price aggressively, and Gilbertsville was no exception with multiple competitive offers throughout the marketing process.”

“Gilbertsville is a strong suburban market with access to multiple employment hubs. Weis is ideally positioned within the local marketplace, which has enabled it to be a successful store and enhance the property’s ability to attract and retain tenants.”

United Way Puts Philly Headquarters Up For Sale

The United Way of Greater Philadelphia and Southern New Jersey has put its headquarters building on the market. The international charity built the eight-story office building at 1709 Benjamin Franklin Parkway overlooking Logan Square in 1970 and has occupied it ever since.

 "Together with our Board, we ultimately determined that owning the building is not central to our mission of ending intergenerational poverty, and that, if sale of the building could generate significant revenue, the opportunity cost of investing in a building versus investing in the community and in our initiatives is too great," United Way interim President and CEO Mike DiCandilo said in a statement.

 There is expected heavy interest in the 60K SF office building, and expects to complete a sale early next year. Situated across Logan Square from the Franklin Institute and a few blocks from the nearly complete Comcast Innovation Center, the property is zoned for a variety of uses, including multifamily. DiCandilo said the United Way will remain in the City of Philadelphia, though he did not disclose plans to move out or find a new location when the building is sold.United Way also declined to disclose an asking price for the property.

Thursday, November 9, 2017

Brandywine Starting $3.5B Schuylkill Yards Project In Philadelphia

by Steve Lubetkin,
Brandywine Realty Trust, in partnership with Drexel University, is beginning Phase I construction of the mixed-use, master-planned Schuylkill Yards development in the University City submarket of Philadelphia, PA.

The first phase of the $3.5 billion, multi-year project will create a 1.3-acre community park at the corner of 30th and Market Streets to be known as Drexel Square, followed by a redesign of the former Philadelphia Bulletin Building, and the development of two towers at 3003 JFK Boulevard and 3025 JFK Boulevard. This first phase of development will produce 4.6 acres of entrepreneurial space, educational facilities, research laboratories, corporate offices, residential and retail spaces, hospitality venues and open public spaces.

Schuylkill Yards is the next chapter in Brandywine’s commitment to West Philadelphia, which began more than 15 years ago.

Brandywine built West Philadelphia’s first office tower—Cira Centre—in partnership with Amtrak, followed by the historic renovation of the new IRS Philadelphia Campus. Brandywine then began construction of Cira Centre South in partnership with the University of Pennsylvania—a two-tower development comprised of FMC Tower—Philadelphia’s first “vertical neighborhood”—and evo—the nation’s tallest, luxury student apartment tower at the time of completion. Cira Green, Philadelphia’s first “park in the sky” creates a bridge between the two towers. The park serves not only as an amenity for tenants, residents and guests of Cira Centre South, but as an open-to-the-public destination for community gathering and relaxation.

“Today we take the first steps in making this large-scale innovation community a reality,” says Jerry Sweeney, president & CEO of Brandywine Realty Trust. “As Brandywine continues to expand the West Philadelphia skyline, we do so with a forward-thinking, inclusive approach to the future. We embrace the changing habits of how people are living, creating, working and spending their time. We are proud that our first project in Schuylkill Yards will deliver a green public gathering space where the community can connect, interact and share experiences.”

As a priority of Brandywine’s curated neighborhood experience, Drexel Square will include 1.3 acres of public space directly across from Amtrak’s 30th Street Station. The space was designed in partnership with planning and design firms SHoP Architects and West 8 Landscape Architects, and will serve as a four-season destination with community programming throughout the year. Drexel Square is just one portion of the 6.5 acres of greenspace and improved streetscape planned for Schuylkill Yards, and is expected to be completed in Q4 2018.

“All great cities have great public spaces. Drexel Square will be Philadelphia’s next signature square – a sixth square adding to the five originally created by William Penn. Drexel Square is the keystone to the larger transformative development project at Schuylkill Yards, conceived by Drexel University and brought to life through a partnership with Brandywine Realty Trust,” says Drexel University president John Fry. “Drexel is proud to have chosen Jerry Sweeney and his team at Brandywine for this project that will benefit all of University City and Philadelphia.”

In conjunction with Schuylkill Yards’ groundbreaking, Brandywine will implement a $5.6 million neighborhood engagement program focused on small business development, job creation, and affordable housing. This initiative emphasizes Brandywine’s commitment to improving Philadelphia’s neighborhoods, and ensuring Schuylkill Yards serves as a bridge to West Philadelphia communities.

“Thanks to Brandywine’s thoughtful community building, this project will help us expand opportunities to many Philadelphians in need of jobs that pay family-sustaining wages and provide them with the security of affordable, permanent housing,” says Philadelphia Mayor Jim Kenney. “Brandywine was a great partner in helping the city develop our PipelinePHL, which will also help us diversify the building jobs and provide people with barriers to employment a life-long career in the trades. What Philadelphia truly needs is long-term inclusive growth and this project serves as a model for how we can make that happen going forward.”

Schuylkill Yards will, over the next 15-20 years, bring to Philadelphia a next-generation innovation community defined by thoughtful place-making, civic engagement, and quality execution, Brandywine says. The project will be strategically designed to emphasize thoughtful collaboration, inspiring spaces and dynamic movement. When completed, the site will host a combination of repurposed buildings, new high-rises with world-class design, and a diverse network of public spaces regularly programmed for community engagement and enjoyment.

As master developer of Schuylkill Yards, Brandywine leads an experienced development team that includes residential developer, Gotham Organization and life-sciences developer, Longfellow Real Estate Partners. SHoP Architects is responsible for the district planning and development of architectural standards, and West 8 Landscape Architects has designed the public realm plan and overseen development of landscape standards.

Commercial Real Estate Development at NAR 2017 (Video)

Wednesday, November 8, 2017

Tax Reform Bill Draws Cautious Support from CRE Industry Leaders

CRE industry leaders who worried that the largest rewrite of the U.S. tax code in more than three decades would eliminate like-kind 1031 exchange transactions or curtail the ability of businesses to write off interest and debt expenses breathed a collective sigh of relief last week after House Republican leaders outlined the major components of their long-awaited bill.

The Tax Cuts and Jobs Act (H.R. 1), released last week by the U.S. House of Representatives Ways and Means Committee, also retains existing rules for writing off depreciation of commercial property, while reducing the tax burden on all businesses.

Real Estate Roundtable President and CEO Jeffrey DeBoer, who led efforts to keep those provisions, said the proposed bill, by reducing barriers to private-sector capital formation and business investment, "will boost economic demand and job growth."

"If the final bill is similar to the one introduced today, our industry will put more people to work modernizing and improving existing properties - office buildings, shopping centers, apartments, industrial properties - to meet the changing and growing needs of American businesses and consumers," DeBoer said in a statement.

The proposal reduces the corporate tax rate from 35% to 20% for tax years beginning after 2017 and repeals the corporate alternative minimum tax.

The legislation provides for a special maximum 25% tax rate on ordinary income that would apply to the "qualified business income" of individuals engaged in business activities through sole proprietorships, tax partnerships and S corporations. Business income not qualifying as such would remain subject to the normal ordinary income tax rate.

Current law generally treats those entities as "pass-through" entities subject to tax at the owner or shareholder level. Net income earned by an individual owner or shareholder of one of these entities is reported on the individuals income tax return and is subject to ordinary income tax rates up to the top individual marginal rate of 39.6%.

In a bulletin, the CRE Finance Council (CREFC) described the retention of interest deduction, 1031 exchanges and existing cost recovery and depreciation rules as "major steps in the advocacy effort to allow for continued CRE market liquidity and supply/demand balance."

While CREFC remains skeptical that House leadership can meet its aggressive goal of getting the bill to the Senate before the Thanksgiving holiday due to its size and complexity, the group expects a flurry of Congressional activity up until the holiday.

"We caution that uncertainty will be the order of the day until the bill either advances to the Senate (which is working on its own legislation) or gets stymied by member opposition," the group said.

The U.S. apartment industry's main lobbying groups, the National Multifamily Housing Council (NMHC) and National Apartment Association (NAA), said that while they are still reviewing the legislation, the proposal as written "looks to encourage economic growth and job creation."

"Critically, the Tax Cuts and Jobs Act would preserve interest deductibility, like-kind exchanges and other provisions important to the apartment industry," the groups said in a joint statement.

NMHC/NAA said it would work with lawmakers to safeguard those provisions and others, including the capital gains treatment of carried interest and the Low-Income Housing Tax Credit (LIHTC), during the "long process ahead before tax reform becomes law."

While capital markets, CRE and small-business interests generally lauded the proposal, the residential real estate and mortgage industry cited serious concerns about how the provisions will impact U.S. housing markets, including the production of affordable housing.

"We believe that the proposed changes to the mortgage interest deduction, deductibility of state and local real estate taxes and the exemption for capital gains treatment when families sell their principal residence would have a negative impact on the housing market and potentially the national economy as a whole," said David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). "We are also concerned about the potential impact of certain provisions on the production of affordable housing, which is vital."

Millennials ready to buy homes? Changes in Multi Family? (Video)

Millennials ready to buy homes? from CNBC.

The Harman Group has opened Vue32 in University City

by Steve Lubetkin,

The Harman Group has opened Vue32 in University City. The 176,000-square foot, 16-story residential tower and mixed-use development caters to Drexel University faculty, staff, and graduate students, as well as non-Drexel professionals living in the area. The development meets one of the tenets of Drexel’s master plan to reduce the pressure on off-campus housing in Powelton Village. The residential tower at 32nd and Race Street offers 164 junior one-and two-bedroom apartments, as well as a three-bedroom apartment on the top floor. The units all feature nine-foot ceilings and full-height windows that provide sweeping views of the Philadelphia skyline. The development has many community amenities, including a roof-top deck with outdoor cooking facilities, a community room with a full kitchen, a billiards and game room, a conference room, a fitness center, and a secure parking garage under the building.

Monday, November 6, 2017

Aulder Capital Pays $44.5M for Foxwood Apartments

Aulder Capital acquired the 414-unit Foxwood Apartments in Newark, DE from Fairfield Residential for $44.5 million, or about $107,000 per unit.

The apartment complex , located at 15 Fox Hall in Newark, DE, sits on 27 acres and was delivered in 1989. It totals 357,635 square feet across 31 three- and four-story buildings. It is currently 96 percent leased.

The buyer secured a new $34.3 million mortgage on the acquisition. HFF arranged the financing on behalf of the borrower.

One & Two Pitcairn Place Sells for $12.1M

by Steve Lubetkin,
The sale of One & Two Pitcairn Place, a two building, Class A office complex was completed in Jenkintown, PA. Joss Realty Partners purchased the 98,057 square-foot complex from Pitcairn Properties for $12.1 million. There was $9.225 million in acquisition financing from Beneficial Bank.

Thursday, November 2, 2017

F&S Produce Acquires Vineland Manufacturing-Warehouse Facility From General Mills

by Steve Lubetkin,
F&S Produce Co. acquired 500 W. Elmer Rd., a 580,000-square-foot manufacturing-warehouse facility on 65 acres in Vineland, NJ.

Terms of the sale and the seller were not disclosed, but according to, a website that aggregates publicly available property data, the site was transferred for $10 in September from General Mills Corporation to a related company, GM Cereals Properties.

The property was previously listed as being owned by Progresso Foods, which is also a division of General Mills. says the property is assessed at $13.993 million for tax purposes.

The new location satisfies F&S Produce’s manufacturing needs and cuts six months from the company’s original expansion plan of building another facility in Cumberland County, NJ, to increase its production capacity. The manufacturing and warehouse facility at 500 W. Elmer Rd. offers four times the space of the current facilities to accommodate F&S Produce’s future expansion.

F&S Produce has a longstanding manufacturing presence in Southern New Jersey including two production facilities in Rosenhayn, NJ, as well as a trucking operation and freezer warehouse.

“This significant facility sale to F&S Produce represents a successful outcome of job retention and economic growth in the City of Vineland and for the state of New Jersey.”  The New Jersey Economic Development Authority recognized the importance of F&S Produce’s move to job creation and retention in the region with $21.7 million in state tax credits. According to the economic development organization Choose New Jersey, the Garden State is home to a $105 billion food industry and agriculture sector that continues to grow, with 1,900 food manufacturing companies employing nearly 44,000 people in total and, earning New Jersey Saveur magazine’s moniker of “most edible” state in America.

Wednesday, November 1, 2017

Investor Appetite for Center City Apartments Reaffirmed in Q3

As Philadelphia gradually shook off the damage of the 2008 - 2009 financial crisis, affluent millennials and empty nesters began to converge on Center City's rental market. A boom in apartment acquisitions by major investors such as JPMorgan Chase and BlackRock quickly followed.

By 2015, Center City's annual apartment acquisitions had surged to an all-time high of more than $470 million, more than double the sales volume that was recorded during even the best years of the economic high of 2005 - 2007.

The boom in Center City apartment sales has lost some steam, and investments have slowed noticeably in recent quarters. While more than 1,600 apartment units changed hands in 2015, sales dropped by more than 70% in 2016, and less than 400 units have traded during the first three quarters of 2017.

There are a few reasons why investors hit the pause button on Center City apartment transactions. With booming development activity increasing Center City's stock of multifamily units by more than 5% per year, newly-completed apartment towers are increasingly offering one - or in some cases even two - free months of rent in order to lease up on schedule. Furthermore, at the end of 2016, Philadelphia's City Council voted to close loopholes that had previously allowed many large real estate investors to circumvent the city's hefty 3.1% realty transfer tax.

After the drop off in Center City apartment sales activity and the elimination of tax loopholes, some market participants are wondering, do prices need to decline significantly for apartment sales to pick back up again?

The September 2017 sale of the Pepper Building at 1830 Lombard deserves a close look from Philadelphia apartment investors. It was the first Center City apartment deal with a price over $50 million that has closed in more than 18 months. The Pepper Building, built in 1927 but renovated in 2009, sold for $53.3 million. The 4.75% cap rate on the deal reflects robust investor demand for the asset. Furthermore, the per-unit price tag, at $288,000, came closely in line with the price of $294,000 per unit that 1930 Chestnut and 400 Walnut traded for during 2015. Like the Pepper Building, both of these properties were originally built in the 1920's but offer a modern amenity set.

The Pepper Building's sale did reveal some signs that investor demand for Center City apartment has moderated in recent years. This same building sold in 2011, and when the Pepper Building changed hands in that transaction, it spent only two months on the market before selling.

This time around, the building spent about three months on market, and another two months in escrow while the buyer arranged financing. Nonetheless the sale was a largely positive sign for the market. As the first large Center City apartment sale to close in several quarters, the deal reaffirmed investors' willingness to acquire large center city apartment assets at sub-5% cap rates.

Braeburn Pharma Leases 24,000 SF in Plymouth Meeting

Braeburn Pharma, a pharmaceutical company, has leased 23,805 square feet in the Interchange Corp Cntr Plymouth Mtg office building at 450 Plymouth Rd. in Plymouth Meeting, PA.

The four-story building totals 91,305 square feet and was developed by Leggat McCall Properties LLC in 2000. Braeburn Pharmas lease includes the entire fourth floor. Other tenants in the building include Granite Telecommunications and ESSA Bank & Trust.

Workhorse Leases Space in King of Prussia

Workhorse, a work vehicle manufacturing company, has signed a lease for 62,000 square feet at the industrial building located at 250 King Manor Dr. in King of Prussia, PA.

The warehouse totals approximately 127,000 square feet and delivered in 1970. It is currently owned by Ingerman-Ginsburg Partnership and managed by Equivest Management, Inc.

I-81 Industrial Portfolio Trades For $30M

by Steve Lubetkin,
NorthPoint Development has acquired a three-building industrial portfolio in the dynamic Northeastern PA submarket from Endurance Real Estate Group for $30.1 million.

The buildings, 7 Alberigi Drive and 15 Alberigi Drive in Jessup, PA, and 32 Earth Conservancy Drive (also known as South Preston Avenue) in Wilkes-Barre, total 544,974 square feet.

According to Real Capital Analytics, a proprietary research database, 15 Alberigi Drive, a 130,000 square foot property, sold for $7.2 million; 7 Alberigi Drive, a 167,000 square-foot industrial, represented $9.2 million; and 32 Earth Conservancy Drive, a 249,000 square-foot warehouse, represented $13.7 million of the portfolio price.

The transaction represents the largest portfolio of industrial real estate that has traded in Northeastern Pennsylvania in several years.

“This was a great opportunity for both the buyer and seller.” The portfolio was 78 percent occupied at the time of the sale. “Endurance Real Estate Group added tremendous value through thoughtful renovations and tenancy, while the remaining vacancy provides further value add opportunity for the purchaser.”

All three buildings are class-A facilities that were initially developed as part of a joint venture partnership between MetLife and Chicago-based Versus Development. They feature market-leading functionality including 30-foot clear height ceilings, T-5 lights and the potential to expand car and trailer parking as well as loading positions.

The properties are strategically located within one of the most densely populated areas in the region, which boasts a strong local labor pool. The surrounding highway network of I-81, I-84, I-80, I-380 and the Pennsylvania Turnpike provides easy access to major Northeast Corridor cities including New York, Philadelphia, Pittsburgh, Washington, DC, and Baltimore.

So far this year, the Northeastern PA submarket of the I-81/I-78 distribution corridor has been one of the most dynamic leasing markets in the entire Northeastern U.S. “There has been approximately 3 million square feet of net absorption year to date with over 3 million square feet of new construction underway, much of it pre-leased. The current vacancy rate of 3.8 percent is the lowest throughout the eastern part of the state, and we expect demand will continue to outpace supply.”

Monday, October 30, 2017

Providence Place breaks ground on assisted living facility at former Collegeville Inn

by Gary Puleo, Times Hearld
The Collegeville Inn’s new lease on life may not be the culinary comeback many folks were anticipating, but as a senior living facility, much of its legendary history will live on.

Providence Place Senior Living at the Collegeville Inn, which underwent a groundbreaking on the 20-acre site recently, even embraces the long gone smorgasbord’s legend in its name — a first for the company, noted Ashley Uhler, vice president of marketing, whose collection of postcards and prints showcase the restaurant’s heyday in the 1950s and ’60s.

“We usually use the name of the town in the name,” Uhler said, referring to a string of Providence Place Senior Living locations throughout the state. “But because the Collegeville Inn was so well known we thought it would be a nice tie-in. Providence Place is proud to be the company that is resurrecting the nostalgic Collegeville Inn.”

Debuting sometime in the post-World War II years, The Collegeville Inn had been shuttered for years when it was purchased in 1994 by Nutrition Services Management Co. of Kimberton. It reopened in 1997 as the Marketplace Restaurant, which closed in the early 2000s, ultimately landing the property under the ownership of M&T Bank.

Although the restored Inn building overlooking Perkiomen Creek will serve as a private dining room for the 113 units’ residents and their guests, the public will be welcome to attend certain functions, said David Leader, president of Providence Place.

“We’ll certainly have occasional public events where we’ll open our doors to the public with hor d’ouevres and things like that,” noted Leader, who said he is pleased to be retaining so much of the building’s character, which is partly attributable to its “Swiss chalet” beginnings decades ago and partly to its 1990s mountain lodge-style makeover as a food court and training center.

“I had heard of the Collegeville Inn but was not familiar with it. As we explored the project we talked to a lot of people and almost everyone in the area had a story about the Collegeville Inn,” he said. “That’s what captivated us to preserve the integrity, the look, the feel and as much of their memories as we could. We’re keeping some of the most memorable aspects … the cathedral ceiling lobby, the pub barroom with the beautiful woodwork. It really has some exquisite wood carvings.”

Providence Place will provide a continuum of care, ranging from minor assistance to significant daily aid, with a separate memory support component.

“Our philosophy is to try and offer seniors options that are a little more affordable than some that are out there today. We’re excited to be coming to the Collegeville area with our unique philosophy of aging in place. The whole building will be licensed by the state of Pennsylvania as assisted living, but some of the people won’t need much assistance besides meals and transportation, while some will need greater amounts of assistance. If you don’t need assistance, great, you pay less. As you need assistance you can take on more. We’ll have people that will stay five or 10 years, and others who come in active and maybe still driving and will stay until the end of their days,” explained Leader. “This will not be a skilled nursing facility but we will have nurses around the clock. Most people now don’t stay in nursing homes very long anymore. They go for a week or two and then they come home. If I were a resident who had an injury I might recuperate for a few weeks in a nursing home and then return here. So that’s how we will function.”

Leader’s father, George Leader, who served as Governor of Pennsylvania from 1955 to 1959, founded the forerunner to Providence Place, Leader Nursing Centers, back in the 1960s, his son allowed.

“Leader Nursing Centers was a public company that was acquired by another company in the 1980s. My family then decided that in the future we would no longer have companies that could be acquired by someone else, so Providence Place is a private company. We have five other Providence Place Senior Living facilities and also run Country Meadows Retirement Communities. Between the two we have properties across the state.”

Leader noted that the relevance of his company’s name to Lower Providence Township was purely coincidental.

“I often joke that who would have guessed we’d be calling ourselves Providence Place in a township where everything is called ‘providence something’?” he said, laughing.

Before Horst Construction begins erecting the building that will house 113 apartments of varying sizes adjacent to the Inn, a wall will be built to address the property’s longstanding flooding issues.

Full story:

Emerging Commercial Real Estate Trends 2018: Best Bets (Video)

Checkpoint Extends So. Jersey HQ Lease 10 Years

by Steve Lubetkin,
With a $10 million capital improvement commitment from Sky Management Services, inventory control and security firm Checkpoint Systems has extended the lease on its global headquarters for another ten years. Located at 101 Wolf Drive in Thorofare, NJ, the asset is located a few miles from the Philadelphia CBD.

Through its affiliate company, Sky Power, the company will also be installing a renewable solar energy system to help Checkpoint reduce its carbon footprint and produce nearly all its own electric power from non-polluting solar energy.

“This project allows us to create a State of the Art Technology Development Center for Intelligent Retail Solutions,” says John Dargan, president of Checkpoint. “It also allows us to significantly reduce our carbon footprint through the installation of a solar energy system.”

Checkpoint’s global headquarters, which facilitates its North American distribution, research and development, and office operations, was designed and built for the company in 1994.

According to Alex Dembitzer, Sky’s founder and CEO, renovations are scheduled for completion in 2018.

“The renovations at Checkpoint will modernize the facility, and the renewable energy solar project will reduce the carbon footprint while converting the property into a sustainable facility,” says Dembitzer.

Dembitzer has made reducing the environmental impact of Sky’s buildings an increasing priority as part of what he calls his personal social mission.

At New Jersey’s Wedgewood Waterford US corporate headquarters, for instance, Sky installed a 1.5 MW solar energy system which is expected to provide 90 percent of the facility’s electricity.

Additionally, Sky Management made the proactive decision to purchase an adjacent land parcel, making it possible for Checkpoint to expand in the future if needed or for Sky Management to pursue additional development opportunities.

The long-term extension and modernization will preserve more than 150 jobs in Southern NJ and create an estimated 100 construction jobs, supporting Sky’s core values of creating and providing a substantial positive social and environmental impact in the communities in which it is active.

Industrial Vacancies Falling In Philadelphia, Spec Builds Up In Lehigh Valley

by Steve Lubetkin,

The market for industrial property tightened in the third quarter as industrial real estate vacancy declined in Philadelphia, but the continued frenzy of speculative construction along the PA I-81 and I-78 Corridor in the Lehigh Valley region led to an increase in vacancies there.

In the Lehigh Valley, 1.5 million square feet of speculative construction added during the third quarter remained largely vacant.

“Both the Philadelphia Metropolitan Area and the industrial, warehouse and manufacturing markets along the major Interstates of I-81 and I-78 continue to benefit from job creation in the Pennsylvania economy,” Statewide unemployment rate declined by 60 basis points over the past year to 4.9 percent.

“Philadelphia’s manufacturing index has been positive for 14 consecutive months and rose 4.9 points to 23.8 in September,” he says.

Overall vacancy for industrial property in the Philadelphia Market ended the third quarter at 3.4 percent, down 150 basis points from a year ago. The market includes six Pennsylvania counties as well as Philadelphia, three southern New Jersey counties and northern Delaware. Overall asking rental rates declined slightly, 1.3 percent, in the past year to $4.59 per square foot for all industrial property types. “Strong activity in class A facilities is leaving more class B and C product available for lease, which is dragging the overall rental rate average down. Still, the Philadelphia market absorbed 4.6 million square feet year-to-date in 2017, even with 2.7 million square feet of new construction this year.”

The southern New Jersey market, with both Burlington and Gloucester counties already topping one million square feet in total year-to-date leasing, led the region in both leasing and new construction. Major Philadelphia Market transactions in the third quarter included:

Amazon signed the largest lease, taking 652,411 square feet being built at 240 Mantua Grove Rd. in West Deptford, Gloucester County, for fall 2018 delivery.

In Burlington County, PFG Customized Distribution renewed for 127,340 square feet at 500 Highland Drive in Westhampton.

National Powersport Auctions leased 112,000 square feet at 2578 Pearl Buck Rd. in Bristol for the Lower Bucks County submarket’s largest deal in the third quarter.

Prologis executed the largest investment sale of the quarter with its sale of the 936,000-square-foot warehouse and distribution center at 3000 AM Drive, in Quakertown, to WPT Industrial REIT for $74.3 million or $79 per square foot.

Two-thirds of the 7.1 million square feet of speculative industrial space delivered to the PA I-81 and I-78 corridor this year remained vacant at the end of September, including much of the 1.5 million square feet that came onto the market during the third quarter. “The vacancy in that new space is the primary reason that year-over-year overall vacancy has increased 140 basis points to 5.3 percent. Still, rent growth remains strong in the PA I-81 and I-78 industrial market, increasing by 5.5 percent year-over-year to $4.76 per square foot. Lehigh Valley produced the largest increase with asking rents, up 11.8 percent, to an average rate of $5.31 per square foot for warehouse and distribution space.”

The Lehigh Valley submarket leads in construction, with nearly 5.8 million square feet. Leasing activity has been strong in all three PA I-81 and I-78 submarkets this year.

Central PA leads the region with nearly 6.3 million square feet of new leasing activity this year, including the largest lease of the third quarter when Syncreon signed for the one million square-foot building under construction at 100 Goodman Drive in Carlisle.

The Northeastern PA submarket’s year-to-date leasing activity of 4.5 million square feet already surpassed 2016 totals and is on pace to top the previous annual high of 4.6 million square feet in 2007. American Tire leased 1 million square feet under construction in the Northeast Logistics Center in Tobyhanna for the quarter’s largest lease.

XPO Logistics signed the Lehigh Valley submarket’s largest lease of the third quarter for 628,475 square feet at 1611 Van Buren Rd. in Easton.

The largest investment sale of the third quarter took place when Northpoint Development acquired Endurance Real Estate Group’s portfolio of 544,975 square feet of warehouse-distribution space in Northeastern PA for nearly $30.1 million, or $55 per square foot.

Asking rental rate annual average growth are forecast to 1.7 percent for the next five years in the Philadelphia industrial market. In the short-term, however, the delivery of more than 1.1 million square feet of speculative space probably will cause overall vacancy to rise for the next six to nine months. Meanwhile, the researchers also forecast healthy construction activity continuing throughout the PA I-81 and I-78 market with 14.3 million square feet under construction set to deliver over the next year.

Wednesday, October 25, 2017

Tracking STEM jobs to invest in commercial real estate #STEMdex

Post Brothers Complete Largest Residential Redev in Philadelphia

by Steve Lubetkin,

Post Brothers has completed the largest residential redevelopment project in Philadelphia, the $100-million redesign and renovation of Presidential City, the iconic, four-building apartment community located at the foot of City Avenue. Post Brothers began full gut renovations to Presidential City in 2014, transforming each of the complex’s 1,000 apartments into luxurious, high-efficiency residences. The redevelopment of Presidential City culminated with the completion of The Adams, the fourth and final building to be redeveloped at the complex. Post Brothers tapped internationally renowned architect Philippe Maidenberg for his first US project.

Tuesday, October 24, 2017

Demand For Workforce Housing Drives Camden, NJ, MF Trade For $35M

by Steve Lubetkin,
As Camden, the poorest city in New Jersey, experiences a business transformation, demand for workforce housing is driving attractive pricing for multifamily properties.

With the relocation of Subaru’s North America Headquarters here from nearby Cherry Hill, a $1 billion Brandywine Property Trust office complex under development on the waterfront, and more companies expanding through state tax incentives, the Crestbury Apartments, a 392-unit multifamily property in Camden, NJ, has been sold for $34.45 million, just under $88,000 per unit.

The seller was Brick, NJ-based Tryko Partners. The asset was purchased free and clear of debt by an affiliate of New York-based Lincoln Avenue Capital, owner and developer of low-income housing properties nationwide.

“The property was part of the RAD (Rental Assistance Demonstration) program and received a new 20-year subsidy contract. The seller recently upgraded the flooring, windows, roofs, and boilers throughout the property, which made the asset attractive and a great long-term investment.”

After purchasing Crestbury Apartments in 2013, Tryko Partners invested $3.6 million in capital improvements. This included the incorporation of an innovative, high-tech security initiative in conjunction with the Camden Police Department; a playground; updated lighting, landscaping and sidewalks.

“We are seeing a tremendous amount of interest in well-maintained, workforce housing both market-rate and affordable in South Jersey due to solid economic drivers and its proximity to Philadelphia."

The apartments are a mixture of one- and two-bedroom units. The Crestbury is situated on over 18 acres at 2552 South 8th Street in Camden. The property is minutes from the Walt Whitman and Ben Franklin bridges, Cooper Hospital, Campbell’s Soup headquarters, and the Camden Waterfront.

Tuesday, October 17, 2017

Medical Office Investments (Video)

Workspace Property Trust Files for IPO to Raise $100 Million

A year after acquiring a nearly $1 billion portfolio of suburban office properties, Horsham, PA-based Workspace Property Trust on Monday filed to raise up to $100 million through an initial public offering.

Workspace Property, which first filed a confidential S-11 registration statement on June 30, plans to list on the New York Stock Exchange under the symbol WSPT, selling an undisclosed number of common shares in the IPO at a to-be-determined price. Goldman Sachs, J.P. Morgan and BofA Merrill Lynch are the joint book runners on the deal.

The company, led by former Mack-Cali Realty executives Tom Rizk as CEO and Roger Thomas as president, will use the IPO proceeds to purchase common units in its operating partnership, Workspace Property Trust, L.P., from Safanad Suburban Office Partnership, LP, an affiliate of Safanad Ltd.

The operating partnership will in turn use a portion of the net proceeds to repay the company's existing loan with KeyBank NA, repay a senior mortgage loan and three mezzanine loans in relation to the purchase of its second portfolio, and pay about $63.9 million in cash to redeem the preferred equity issued by the operating partnership as part of the second portfolio acquisition.

The operating partnership expects to use any remaining proceeds for general corporate purposes, including capital expenditures and future acquisitions.

Workspace Property hopes to capitalize on the outperformance of suburban office properties relative to CBD properties in recent years, with company executives telling CoStar in October 2016 "the prediction of the death of the suburbs is greatly exaggerated."

A year ago this month, the company acquired 108 office and flex buildings and 26.7 acres of land in five markets from Liberty Property Trust (NYSE: LPT). 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, was the company's second major transaction with Liberty Property and expanded Workspace's holdings to 149 properties totaling 10 million square feet.

In the first half of 2017, 72% of U.S office leasing activity was concentrated in suburban markets, despite suburban markets representing only 69% of inventory.

The spread between average suburban office and CBD vacancy rates is at its lowest point since 1999. Construction as a percentage of inventory continues to increase in the CBD, even though suburban office vacancy rates have declined significantly faster than CBDs since 2011.

Meanwhile, construction has been constrained in the suburban office markets relative to the CBD, while downtown asking rents have been more volatile than suburban rents. Demand for suburban properties has ramped up recently as investors have begun to recognize the widening spread between suburban and CBD valuations, driven in part by investors' willingness earlier in the recovery to pay more for CBD trophy buildings and other assets with a perceived lower risk.

As the largest landlord in the Horsham/Willow Grove, PA submarket, Workspace has 536,994 square feet of flex and tech-flex space and 1.8 million square feet of low-rise office space in 40 properties, with retail development and other amenities providing opportunity for growth near several Workspace assets.

Workspace Properties is further positioned to benefit from continued demand and rent increases for its properties in the King of Prussia/Valley Force submarket, where the company owns 30 properties totaling about 2 million square feet of office and flex space.

The company also owns assets in South Florida, Tampa, Minneapolis and Phoenix.

Thursday, October 12, 2017

Faster Growth of Amazon Fashion Could Rock Retail Real Estate

Lost in the coverage of Amazon's very public search for a second, multi-billion dollar national headquarters, was the barely-noticed lease the company signed in New York City last month. Yet that lease could signal billions of dollars in losses coming for retail commercial real estate across the country.

Amazon signed a 15-year office lease for 360,000 square feet at Brookfield Properties' recently-renovated 5 Manhattan West building. Amazon will take the entire sixth and seventh floors of the 2.15 million-square-foot tower as well as part of the eighth and 10th floors in a move that is expected to bring 2,000 jobs to the Penn Plaza / Garment District submarket of Manhattan.

Amazon Fashion has also previously invested $9 million in a 40,000-square-foot fashion photo studio in Brooklyn (pictured).

"We're excited to expand our presence in New York - we have always found great talent here," said Paul Kotas, Amazon's senior vice president of worldwide advertising.

Those jobs will be coming primarily in the Amazon Fashion and advertising divisions, and that signals the online retail behemoth is getting more serious about advancing its fashion and apparel sales. In the past year alone, it has introduced seven private apparel brands to its Prime members, including Goodthreads, Amazon Essentials, Paris Sunday, Mae, Ella Moon, Buttoned Down and Lark & Ro.

A hypothetical rapid rise in Amazon's U.S. apparel market share could have significant credit implications for existing retailers, REITs and CMBS transactions, according to Fitch Ratings in a 'shock scenario report' published last month.

Worst-Case Scenario
Sharp declines in retailer revenue and margins, along with accelerated store closings, would likely drive significant cash flow erosion and weaken credit profiles for apparel-focused retailers, mall REITs and retail-heavy CMBS deals in such a scenario.

This shock would likely fan out broadly across much of the retail real estate sector, with large credit profile effects on mall REITs and retail-heavy CMBS transactions. Large-scale store closures, going well beyond previously announced cuts, would likely follow, Fitch projected.

"REITs owning regional malls with high exposure to troubled anchor stores and a less diverse tenant base would face heavy cash flow pressure," Fitch analysts said. "We estimate that as many as 400 of approximately 1,200 U.S. malls could close or be repurposed as a result of retailer liquidations and square footage reductions."

The Fitch shock scenario assumes an accelerated three-year apparel market share shift to as a price-competitive and convenient alternative to traditional in-store purchases. The hypothetical rapid growth in Amazon's apparel market share to 25% by 2020 could cut apparel retailer margins by around 300 basis points, pushing several retailers toward financial distress.

In addition to weaker cash flow, many mall owners would face reduced access to capital due to negative lender and investor sentiment. Attempts to re-tenant or repurpose underperforming malls with high vacancy rates would likely take considerable time and capital. Efforts by REITs to reposition mall properties in this scenario would be difficult given constraints on capital spending and liquidity in a tight financing environment.

"Widespread defaults on loans backed by malls would have a significant impact on credit quality for Fitch-rated CMBS transactions," the rating agency said. "Given the accelerated timeframe of this retail shock scenario, special servicers would be forced to sell lower tier malls at significantly distressed values rather than undertaking normal stabilizing efforts."

Assuming Amazon's share gains are concentrated in lower price points, low- to mid-tier apparel retailers, including JC Penney, Kohl's and Dillard's, would face intense competitive pressure in such a scenario, Fitch said.

Amazon's Road into Fashion Isn't Assured
The Fitch stress test does not explicitly factor in retailers' responses to a more challenging operating and financing environment. Many of these responses, including cost reduction initiatives, asset sales and secured debt issuance, could mitigate the impact of such a severe competitive shock, particularly for companies that have ample liquidity to respond to accelerated competitive threats.

And let's face it, fashion and apparel margins and sales are thin and thinning out, and could present a tough market for Amazon to break into. Competitive pressures on in-line apparel retailers have been building for at least a decade. Younger apparel consumers have demonstrated less interest in traditional department store fashion offerings, and shifted more toward 'fast fashion' and off-price retailers.

Retail real estate brokers operate in dual worlds when it comes to shopping. They are both consumers of merchandise online and brick and mortar sales people. As such, their take on Amazon is interesting.

Going into fashion is nothing new to Amazon, said Soozan Baxter, principal of Soozan Baxter Consulting, a New York-based, landlord-focused retail advisory firm. "They own Shopbop and Zappos. Shopbop is a phenomenal collection of contemporary brands with a loyal customer, while Zappos is a favorite for anyone who likes to buy shoes online."

However, shopping on Amazon is like being in an online market place without a point of view, she said. The chaotic experience doesn't resonate.

"If they can execute a bricks-and-mortar experience that is more like Shopbop and perhaps even use that name, they will be very successful," Baxter said. "If they execute more retail stores under the name Amazon, do customers get confused: is it the bookstore? Is it a Macy's? Is it an Intermix? Is it a car showroom? Is it a grocery store? The point of view gets confusing."

"The bottom line is that the margins in retail are challenging. As they want to delve further into bricks and mortar, can they create a different experience? Furthermore, Amazon has been richly rewarded by Wall Street without making a 'real profit.' As Amazon morphs into more of an omni-channel player, how will Wall Street respond to them?" Baxter asks.

Jason Polley, managing leasing director of StoneCrest Investments in Germantown, TN, says Amazon clearly has retailers scrambling to evolve and better integrate their brick and mortar stores with their online presence.

"Apparel has always seemed to be an area of retail that requires a brick and mortar presence for the customer to see, touch and try on merchandise before a purchase, as on-line purchases of apparel have a much higher return rate compared to other products sold online," Polley said.

But the problem is not all Amazon.

"Despite Amazon's clear impact, I do believe some apparel retailers have lost touch with their customer base and their core mission to deliver what their customer wants to buy," he added.

Paul Schloss, an associate broker at NAI Horizon in Tucson, also says the onus is on traditional retailers.

"Conventional apparel retailer's inventory models demand velocity of inventory turn-over to generate absolute gross margin/profit to recover fixed occupancy costs," Schloss said. "As traffic migrates to the internet, and those logistical efficiencies drive down competitive prices and margins, we are witnessing the implosion of mall retailing: reduced consumer traffic and turns, obsolete structural inventory models. How these retailers re-construct, narrow and innovate their inventory profiles, merchandise offerings, and tactical offerings will define site base retailer's demise or survival."