Friday, December 28, 2018

Market Cycle and Commercial Real Estate Financing (Video)

Multi Family Apartments Trade in Francisville Section of Philadelphia for $4.55M

by Steve Lubetkin,
With the 2018 multifamily investment year drawing to a close, the sale of 22 units at 909 Corinthian Ave. trade in the Francisville neighborhood of Philadelphia, PA. The $4.55 million trade works out to $206,818 per unit sale price.

According to Real Capital Analytics, a proprietary research database that tracks commercial real estate transactions, the property last traded hands in June 2015, when Spina & Co. acquired it from Lasdon Real Estate for $2.5 million, or $131,579 per unit.
The turn-of-the-century elevator building is strategically located at the corner of Corinthian Avenue and Cambridge Street, within the city’s trendy Art Museum District alongside Fairmount Park.

“This entire 28-block district is undergoing sweeping revitalization and is literally on the frontlines of gentrification. It has tremendous appeal among the young-professional renter base, which accounts for 75% of the overall population and is attracted to the neighborhood’s direct connection to Center City via Ridge Avenue.”

The extremely well maintained, distinctive five-story property features a mix of one- and two-bedroom layouts, on-site parking and laundry facilities. Neighborhood amenities include an array of outdoor leisure opportunities at Fairmount Park. Girard College and Temple University are nearby.
The mass-transit-dependent population is served by SEPTA’s Broad Street Subway stations at Fairmount and Girard as well as trolley route 15 at Girard Avenue and bus routes 2, 33 and 61.

“Similar to so many of the cities in the Northeast, Philadelphia’s outer neighborhoods offer proximity and affordability to a thriving city center, which in this case is Center City. In turn, multifamily is benefitting from a rippling effect in terms of sound property-value fundamentals, steady asking-rent appreciation and the establishment of popular of lifestyle service providers and centers that meet the requirements of today’s young and established millennials, academics and even empty nesters.”

Exeter Property Group Conshohocken Buys 7 STAG Industrial Properties for $114M

by John Jordan
STAG Industrial, Inc. continues its aggressive acquisition and disposition activity in 2018 with the sale of seven industrial properties totaling 1.8 million square feet.

The deal for the portfolio secures the Boston-based firm gross proceeds of approximately $113.5 million. The properties are 100% leased to seven tenants. The portfolio was acquired by Exeter Property Group of Conshohocken, PA.
“This portfolio sale of seven individually acquired industrial buildings demonstrates the value created by the STAG platform. As was evidenced in our previous portfolio sale, we achieved significant cap rate compression through the aggregation of individual industrial assets,” says Ben Butcher, CEO of STAG. “This transaction provides attractive capital for STAG as we head into 2019.”

STAG’s portfolio currently consists of 381 properties in 37 states with approximately 75 million rentable square feet.

In an investor presentation on the company’s website, STAG states that it realized a gain on the portfolio sale of approximately $30 million based on a disposition cap rate of 6.2%.
The average building size in the portfolio was 250,494 square feet and the weighted average lease term was 6.5 years.

In November, STAG announced that for the three months ended Sept. 30, 2018, it had acquired 15 buildings for $194.5 million with an occupancy rate of 100% upon acquisition. For the three quarters, the company reported it had acquired 36 buildings totaling nearly 7.1 million square feet for approximately $458.7 million.

Through three quarters of this year, the company sold 11 buildings totaling nearly 2 million square feet for $92.07 million.

Wednesday, December 26, 2018

Is Investing in Commercial Real Estate a Good Idea? (Video)

Hersha Hospitality’s Repositioning Efforts Aimed at Driving Better Value (Video)

US Office Market May Soften in 2019 as Economy Slows

U.S. office demand may soften in the coming year as job growth slows and buildings now under construction open to tenants, pushing vacancy rates higher and reducing rent increases, according to analysts and economists for commercial property brokerages.

Leasing and sales that have remained robust and steady since reaching peak post-recession levels in 2015 may slow over the next two years along with price appreciation and rent growth. Commercial real estate industry companies are closely watching the two business sectors that have driven office demand for the past three years, technology and shared-office companies, to see how they will fare as some analysts expect economic conditions to weaken next year.

“We’re at an inflection point where office markets will be slowing. Although leasing picked up at midyear as economic growth and employment picked up, we’re expecting that to reverse in the new year, with slower job growth, which will reduce leasing.”

Shared office space provider WeWork and its many rivals have rapidly leased space for several years during the height of the economic expansion, but commercial real estate analysts and executives have said they are concerned that demand will ease when the inevitable downturn finally arrives.

“Tech has been strained in market downturns, but it has still remained very profitable. But coworking is untested in a downturn and as a concept, it still has yet to make money and show that it’s profitable, so there are questions about how that will trend as we go into a downturn.”

WeWork has consistently said it was born in the wake of the Great Recession, and that the platform is even more desirable in a challenging economy as companies strive to become more efficient with their use of office space.

"We don't look forward to a dip, but we also know that day will come. We don't have undue anxiety about that," said Dave McLaughlin, who heads up a region that includes Toronto, during a real estate conference in that city in September.

The consensus among some analysts is the overall office market, however, should weather the next downturn because construction has mostly remained in line with demand. Two-thirds of all construction is in New York City, San Francisco and eight other large cities where tech companies and other large corporations are still demanding space.

San Francisco, for example, still has a single-digit vacancy rate and increasing rents despite having 17 million square feet of new office construction under way. Major tech firms are pre-leasing entire buildings in the city before they break ground, and tech centers like Austin and Seattle also have low vacancy rates despite high construction levels.

Investors have expressed concern about the technology sector because of volatility in the stock market and slowing startup activity, but some analysts say those concerns are overblown.

“Tech markets will avoid falling off a cliff in 2019,” said CoStar Analytics consultant Robin Trantham during CoStar’s annual predictions and trends webcast. “We’re predicting tech is not in as much trouble as some might think.”

Google, Amazon, Apple and Facebook continue to invest in equipment and software development, hire new employees and lease space at very high rates.

Coworking and flexible office space, if it continues to be a cost-effective alternative for businesses, could turn out to be a buffer for the office market in the next downturn.

Leasing and sales remain robust and steady since reaching peak post-recession levels in 2015, may slow sharply over the next two years, along with price appreciation and rent growth, analysts and economists for several of the largest commercial property brokerages said.

Financing and Market Trends (Video)

28 Multi Family Units Sells in University City for Above $4M

by Steve Lubetkin,
The $4.2 million sale of University House Apartments, located at 801 South 47th Street in Philadelphia, PA traded earlier. The property features 28 apartments with a mix of studio, one-bedroom, two-bedroom, and three-bedroom units.

The property, originally built in 1923, was last acquired by Resource Real Estate in June 2017 as part of a three-property portfolio, for approximately $1.4 million of the portfolio’s $7 million sale price.
The buyer was not identified.

University House Apartments is situated in the highly sought-after Clark Park area of University City with convenient access to Interstates 76, 476 and 95.  It is situated on Baltimore Avenue, the neighborhood’s main thoroughfare, lined with restaurants and shops as well as a SEPTA trolley line that residents can take directly to Center City, Philadelphia.  This property is also within walking distance of the University of the Sciences Philadelphia, the University of Pennsylvania, and Drexel University.

“The seller was able to capitalize on strong market conditions and sell at a great price due to the demand of the University City submarket. The property was purchased by a local long-term holder that specializes in value-add opportunities in the University City market. They plan to renovate the kitchens and bathrooms to increase rents significantly at the property.”

Friday, December 21, 2018

Liberty Property Trust Trades Suburban Office Assets, Acquires More Industrials

by Steve Lubetkin,
Continuing its planned pivot to a singular focus on industrial properties, Liberty Property Trust says it disposed of suburban office properties near Philadelphia, while acquiring industrial assets in Southern California and financing of an industrial portfolio in the United Kingdom.

“We made a decision a number of years ago to become a major industrial player nationally,” Liberty’s CEO William Hankowsky said earlier this month at the Urban Land Institute of Philadelphia’s Real Estate Outlook meeting. “We really didn’t have a footprint to be an effective national operator, so we have worked over the last several years to increase that both that scale of that platform and the geography of that platform.”
Liberty sold five office properties totaling 335,866 square feet in Malvern, PA for $45.8 million. The properties consist of: 100 Chesterfield Parkway, 600 Chesterfield Parkway, 700 Chesterfield Parkway, 14 Lee Boulevard, and 12-16 Great Valley Parkway. Liberty executed $795.2 million in sales in 2018.

Liberty purchased two industrial properties totaling 447,570 square feet in Southern California for $60.2 million. The properties consist of 15025 Proctor Avenue, a fully-occupied, 128,581 square foot property in City of Industry, CA, and 520 E. Orange Show Road in San Bernardino, a 318,989 square foot development property acquired vacant.

Liberty’s in-service Southern California portfolio is 100% occupied. Liberty purchased $496.7 million in industrial properties in 2018.
“As we close out the year, Liberty has successfully executed on our strategy to reallocate capital from office to our growing industrial business,” says Mike Hagan, Liberty’s chief investment officer. “We have also secured permanent financing at very favorable terms on our UK industrial portfolio.”

In conjunction with Liberty’s previously announced £111 million acquisition of a 1.1 million square foot industrial portfolio in October, Liberty has financed a portfolio of 13 industrial properties located in the UK with a £129.5 million, 10-year, interest-only loan at 2.64%. This loan was used to repay short-term borrowings used to fund seven of the 13 properties acquired in October, as well as portions of Liberty’s existing UK industrial portfolio.

Thursday, December 20, 2018

Urban Outfitters takes spec warehouse in Bucks County

by Natalie Kostelni  – Reporter, Philadelphia Business Journal
Urban Outfitters Inc. has signed a lease to occupy a 309,000-square-foot warehouse-distribution center in Bucks County.

Construction of the building got underway earlier this month and will be built on 20 acres in the Bristol Commerce Center, which is located near the Pennsylvania Turnpike and I-95, making it ideal for a distribution hub.

Herring Properties, the landlord, was confident enough in its location that it had decided to build the structure without a tenant and had ordered construction materials.  They thought the building would get leased up before it was completed. He said two tenants — presumably Urban Outfitters was one of them — had been circling the property.

Developers have been bullish on the distribution market and have increased constructing such properties on speculation. Nearly 2 million square feet of the space has recently either broken ground or is expected to in the next couple of months. Much of the demand is being driven by retailers seeking last-mile distribution centers in densely-populated areas that are located near major highways. These last-mile distribution centers help with same-day and next-day delivery that many retailers offer consumers.
Fuly Story:

JV Acquires Eddystone Industrial Park Near Philadelphia

by Steve Lubetkin,
Foxfield Industrial, a joint venture between Novaya Real Estate Ventures and Foxfield Ventures, has acquired Eddystone Industrial Park, a four-building industrial park totaling 465,680 square feet in the Philadelphia-area community of Eddystone, PA.

 Foxfield Industrial arranged a $23.58 million acquisition loan with a regional commercial bank. Loan proceeds will be used to fund the acquisition, perform capital improvements and lease up of the property.
Situated on 43.7 acres at 1001 Industrial Highway, the property is in a last-mile distribution location near the major East Coast economic centers of New York, Philadelphia and Washington, DC. The property has easy access to Interstates 95, 295 and 476 in addition to the Pennsylvania Turnpike.

This strong logistical location is near the Port of Wilmington, the only major east coast port that is serviced by two Class 1 railroads, CSX and Norfolk Southern. Eddystone Industrial Park features clear heights ranging from 18 to 60 feet, has 52 dock doors and 16 drive in doors. An additional 150,000-square-foot building could be developed on 18.43 acres of the property that is currently undeveloped land, which provides an opportunity to expand the park.

Wednesday, December 19, 2018

Ports and Transportation - Keeping Industrial CRE Moving (Video)

Developers have big plans for Norristown

by Oscar Gamble Times Herald
During a special council session at Norristown Municipal Hall, developers and consultants laid out the groundwork for their plans and projects for Norristown.

Director of Planning and Municipal Development Jayne Musonye introduced new Municipal Planner Geoffrey Grace of Grace Planning Associates. Grace told council members he is looking forward to bringing great new developments to Norristown and Musonye said Grace’s experience and development acumen allowed him to “hit the ground running.”

New Century Builders, who are planning a townhouse complex at 200 E. Logan Street, was the first to give a presentation.

The development will consist of 30 units — in five, six-unit sections— facing inward along three sides of the trapezoid-shaped lot. Each three-bedroom home will feature driveway and garage access and basements are included in preliminary plans.

An existing large tree will be preserved in the central courtyard.

To address concerns about traffic, the development team plans to allow access only from Arch Street.

New Century Co-owner Michael Marchese said the market-rate houses will be styled in a similar manner to other projects the company has done throughout Philadelphia and the city’s Manayunk section, although the actual design has not been settled on, — “contemporary, but without trying to bring the city to Norristown, necessarily.”

Site work on the project is slated for next year and the developers are hoping to get some of the units built by 2020. Examples of New Century Builders’ projects can be viewed on its website,
Full story:

KoP apartment complex trades for $75M

by Natalie Kostelni Reporter Philadelphia Business Journal

One of the first apartment complexes to be built in the Village at Valley Forge has traded for more than $75 million, according to Montgomery County property records.

MetLife Real Estate Investors paid $75.33 million, or $221,238 a unit for Hanover Valley Forge, a complex with 339 apartments. The developer of the project was Hanover Properties and Realen Properties, which is the master developer of the Village at Valley Forge. The sale was recorded with Montgomery County in September.

While there have been land sales in the mixed-use community, this marks the first multifamily sale in the Village at Valley Forge and underscores the price points commanded by the premium properties located within the community.

The King of Prussia Town Center, the retail component in the Village at Valley Forge, sold in May 2017 for $183 million, or $700 a square-foot. The center totals 263,423 square feet.

Full story:

Monday, December 17, 2018

Kimco Eyeing Potential to Unlock Embedded Value in Sears/Kmart Locations

Norriton Medical Center Sold

by Steve Lubetkin,
The Norriton Medical Center, a 74,212-square-foot medical center anchored by Einstein Orthopedics and Moss Rehabilitation Hospital, at 160-190 West Germantown Pike in the Philadelphia suburb of East Norriton, PA sold for $12.35 million.

The name of the buyer was not disclosed. The seller is an indirect wholly owned subsidiary of Franklin Realty Development Corporation.

Located in Greater Philadelphia, home to one of the largest concentrations of healthcare institutions, teaching hospitals, R&D facilities, and life sciences hubs in the country, Norriton Medical Center is located near the area’s largest hospitals, Einstein Medical Center Montgomery (1.4 miles) and Suburban Community Hospital (0.8 miles).

The 7.31-acre, four-building complex is currently 92 percent leased and features the area’s only nationally ranked rehabilitation facility that operates under the Einstein Healthcare Network umbrella

Hunter Truck Signs 10-Year, 81K SF Flex Lease in Philadelphia, PA

by Steve Lubetkin,
Hunter Truck, a family owned and operated network of truck dealerships, has signed a ten-year, 81,226 square-foot office/warehouse lease with Charter Road Realty for a property at 2811 Charter Road in Philadelphia, PA.

Hunter plans to operate a full-service International/Navistar heavy- and medium-duty truck dealership and an Idealease heavy- and medium-duty truck leasing company at the location.  The company says it will employe 40–50 people within the first year of operation.

Hunter has been in business for more than 80 years, with locations that span over multiple states in the Northeast (Pennsylvania, New Jersey, New York and West Virginia).

ShopOne Purchases Southampton Shopping Center

by Steve Lubetkin,
ShopOne Centers REIT, a New York-based owner, operator and manager of high-quality grocery-anchored shopping centers, has entered the Philadelphia market with its acquisition of Southampton Shopping Center, a 150,457 square-foot shopping center located in Southampton, PA. ShopOne’s strategy is to own well-located grocery anchored shopping centers in densely populated, fundamentally strong markets across the country.

Southampton Shopping Center is anchored by a market-leading, 59,892-square-foot Giant grocery store. Giant enjoys the highest market share in the Philadelphia metropolitan statistical area with nearly twice the share of its nearest competitor.
Southampton Shopping Center provided us with an excellent opportunity to enter a key market with high barriers to entry,” says Michael Carroll, chief executive officer of ShopOne. “Philadelphia is a target market for ShopOne. I am fortunate to have a long-standing relationship with the Giant team and I am thrilled to partner with them with them to maximize the performance of this property. In a continually evolving retail real estate market, this purchase of this center adds another stable, well-performing asset to our portfolio.”

Located 3.5 miles from the city limits of Northeast Philadelphia, Southampton Shopping Center is supported by strong demographic and economic fundamentals. The 5-mile radius surrounding the shopping center contains a population of over 210,000 with an average household income of over $98,000. Over the last three years, 74% of the in-place shop space at the property has executed lease renewals at rental rates that are on average 9% higher.

Southampton Shopping Center features a unique mix of restaurants and shops including Saladworks, Robin Hood Restaurant,  Tuesday Morning, Pennsylvania Wine & Spirits, and three banks with total deposits in excess of $317 million.

Friday, December 14, 2018

Economic and Commercial Outlook-Investor Sentiment and Sector Outlook (Video)

Industrial: Still a Favored Sector? (Video)

Endurance Real Estate Group Breaks Ground on 125,000-SF Distribution Center in Pittston, Pennsylvania

Endurance Real Estate Group, along with Blue Vista Capital, a Chicago-based investment management firm, broke ground on a 125,125-square-foot build-to-suit facility adjacent to Interstate 81 in Pittston, Pennsylvania.

Plans for the single-story structure at 140 Industrial Drive call for 193 loading docks, two drive-in bays, 54- by 45-foot column spacing and a 40-foot clear ceiling height. Spanning 225 acres, the facility will be less than five miles from Wilkes-Barre/Scranton International Airport.

In addition to the build-to-suit facility, the first phase of the development plan for Interstate Distribution Center includes construction of a 1.08 million-square-foot building, which is currently underway. The second development phase includes a third building on the northern part of the site anticipated to be around 500,000 square feet.

Thursday, December 13, 2018

Hampshire Companies Doubles Down on Philadelphia Self-Storage

by Steve Lubetkin,
The Hampshire Companies continues to grow its self-storage portfolio with the opening of two facilities totaling more than 200,000 square feet of new, state-of-the-art self-storage space. The two locations, a 110,532-square-foot self-storage facility at 1240 Chester Pike in Crum Lynne, PA, and a 93,353-square-foot self-storage facility at 59 Leverington Avenue in the Manayunk neighborhood of Philadelphia, PA, mark Hampshire’s 32nd and 33rd self-storage developments projects completed since 2012 and the fourth and fifth developments in the Philadelphia area.
“With over 20 years of self-storage development, our team has been integral in the successful evolution of the asset class to better meet the needs of today’s customers and communities,” says James E. Hanson II, president and CEO of The Hampshire Companies. “Our extensive experience allows us to successfully deliver these best-in-class, modern self-storage facilities to a wide range of markets and bring an important community amenity to underserved areas while providing our investors, lenders and partners with strong returns.”

The Crum Lynne and Manayunk facilities feature modern architecture, climate-controlled storage units and state-of-the-art security systems. They will be professionally operated by Extra Space Storage, one of the nation’s preeminent self-storage REITs. Located at a lighted interchange in densely populated Ridley Township, the three-story Crum Lynne building features a strong retail orientation and is situated prominently with visibility from I-95.  The Manayunk facility is in one of the most well established, desirable and densely populated neighborhoods in the city of Philadelphia.

“While we have a long history in self-storage, we’ve been particularly bullish on development opportunities for the past few years,” says Don Engels, senior vice president of self-storage acquisitions and development. “We continually look to source deals in under-served, densely populated areas in an effort to deliver these increasingly in-demand assets and deliver them to local markets throughout the northeast. Crum Lynne and Manayunk are both excellent locations with strong demographics that fit extremely well within our self-storage investment strategy and we look forward to continuing to pursue opportunities in this market.”
The two ground-up development projects speak to Hampshire’s time-tested site selection and entitlement capabilities. Built around leveraging their experience in deploying capital into mature markets with high barriers to entry and populations underserved by self-storage, Hampshire has shown a unique ability to successfully deliver institutional quality self-storage projects on time and on budget in a wide variety of markets. As the second largest metropolitan area in the northeast, Philadelphia’s demographics and market fundamentals aligned perfectly with Hampshire’s successful self-storage investment strategy.

Since 2012 alone, Hampshire has built a robust portfolio of self-storage facilities along the eastern United States, having repositioned or developed 33 self-storage facilities with an aggregate value of more than $415 million. Presently, Hampshire has 12 self-storage development projects underway aggregating $217 million of investment across the eastern United States and is targeting another 14 additional projects with an aggregate value of $243 million in the pipeline.

Wednesday, December 12, 2018

Video- REIT Updates for Healthcare, Senior Housing, Affordable Housing, Assisted Living & Lodging

LTC Properties CEO Says Health Care Sector Discussing Affordable Options for Assisted Living Chatham Lodging Trust Focusing on Fast-Growth Markets

Industrial CRE Market Update (Video)

PAG Acquires 294K SF Williamsport, PA, Retail Center, Loyal Plaza

by Steve Lubetkin,
Loyal Plaza, a 293,607-square-foot, value-add shopping center anchored by GIANT Food Stores and Kmart in the northern Pennsylvania community of Williamsport, PA, has been sold to New York-based PAG Investments.

“In addition to a high-performing grocery anchor and value-add opportunities through re-tenanting, Loyal Plaza is positioned on strong fundamental real estate. The sale was a highly competitive process with a good depth of regional and national buyers.”

Blackstone acquired the property in May 2016 from RioCan REIT for $22.6 million. Financial terms of the current transaction were not disclosed.

“We were able to secure a short-term loan that enabled PAG to acquire Loyal Plaza and provide them with the necessary time and funds that will be required to unlock the value of this shopping center."

Anchored by GIANT and Kmart, the 94.1%-leased Loyal Plaza is also home to Dollar Tree, Verizon Wireless, Staples, Great Clips, BB&T Bank, Rite Aid and Red Lobster, among others.  Situated at 1915-1965 East 3rd Street, Loyal Plaza is visible to more than 23,000 vehicles per day.  The center is in Williamsport, the primary economic center of Lycoming County, and is less than one mile off Interstate 180, which provides easy access to Interstate 80.

Tuesday, December 11, 2018

Low Income Urban Areas Hold Untapped Potential, Retailers and Developers Say

Urban areas marked by lower income and higher population density have often been overlooked by retailers, according to executives at Starbucks and Nike, two national chains that are making a push into those markets. They say that beneath the surface, these areas represent an expanding opportunity with untapped and understudied buying power.

The characteristics of these areas require a unique business approach, executives say. U.S. consumer spending has increased 97 percent since 2000, with the highest levels of growth in underserved, minority markets, according to data from the International Council of Shopping Centers, known as ICSC. Hispanic Americans and African Americans held $2.8 trillion in buying power combined in 2018, while the buying power of Native Americas has grown to $115 billion in 2018, almost triple than in 2000.

“Not every retailer sees the spending power of urban environments, many have not figured out how to crack that egg,” Robin Zeigler, chief operating officer of Cedar Realty Trust, a landlord and developer of open-air shopping centers in the U.S. northeast. She made the comments during a panel discussion at the ICSC New York Deal Making conference in New York.

One category of retailer has picked up on the opportunity: the dollar store. Dollar General, Family Dollar and Dollar Tree, and low-price grocers.

"Aldi and Lidl combined will open 3,000 stores next year,” according to Nick A. Egelanian, president of retail real estate consulting firm SiteWorks. “The trend is income disparity and it is very real. It is a vastly growing portion of America that buys goods paycheck to paycheck, about 70 percent. Why do you think Walmart is the largest grocer in 65 percent of states?”

Athletic gear seller Nike and Starbucks, which typically carry higher-priced merchandise, are breaking into these markets in a different manner by developing a retail concept dubbed the community store. These stores hire most of their employees locally and work with nonprofit organizations, with a goal of spurring growth and fostering a deeper connection with their neighborhoods.

“Community stores are part of a special Starbucks initiative to support youth and economic development in diverse, underserved areas of the country. Each community store seeks to hire from the neighborhood and partner with local women- and minority-owned businesses. Community stores also feature classroom space to provide in-store job training for young people ages 16 to 24 who aren’t in school or working,” Starbucks wrote in a blog post about its 12th and newest community store, which opened in Dallas last week.

Rahel Fikre, store development manager for the mid-Atlantic region at Starbucks, said, “One thing we did differently in the last couple of years was start opening community stores. When we launched community stores we focused on areas of lower income in urban neighborhoods that lacked food services."

A similar idea on a smaller scale is furniture retailer Raymour and Flannigan, which hosts in-house community events like fundraisers and concerts in each of its 95 stores in the U.S. Northeast.

Nike and Starbucks are “the best examples of retailers in underserved markets, but they are an anomaly among retailers,” said Cedar Realty Trust's Zeigler.

These urban, low-income markets are underserved even though analysts say the United States as a whole has too much retail space. About 15.3 billion square feet of retail real estate exists within the U.S., of which 7 billion square feet are shopping centers, according to data from CoStar Market Analytics. The U.S. has about 24.5 square feet of retail space per person on average, compared to 4.5 square feet in Europe, Egelanian said.

To tap the opportunity, Nike Real Estate Manager Natalie Hooper said, "When we went into downtown Detroit, which at the time had negative growth, we went into a block with little going on and hired locally to be part of the community and to be authentic.” Its community store employees volunteer for initiatives such as the Boys and Girls Club, she said.

When building in lower-income urban markets, the importance of community engagement is critical, said Zeigler. For instance, when looking for untapped markets, Cedar Realty Trust focuses on “food deserts” or those areas in need of fresh food or close-by grocery stores, she added. As a byproduct of the structure of grocery-anchored shopping centers, they develop space for stores that provide food, sell convenience items and offer retail services.

“When you are a developer deciding to build in an urban community, you are really committing to that neighborhood,” Zeigler said. “To be successful, you have to reach out to key stakeholders in the community, local politicians, community leaders and residents, to hear their needs and wants and make sure the community is invested in what you’re building,” she noted. “You must make sure you are embracing that. That footwork is critical all the way.”

Dealing with a deteriorating state of buildings is also part of the footwork for developers or retailers going into some lower income markets.

“Space and capital is an issue in these markets, but we will put in the capital to make it work. We will invest in creative ways to make it work as a business case,” Hooper said. The Brooklyn community store opened in a former club and had to be gutted and retrofitted, for example.

Cedar Realty is in-development of a 1 million-square-foot, mixed use development in southern Philadelphia called South Quarter Crossing, which will have 800,000 square feet of retail, 27,000 square feet of office space and 210 apartment units. In Washington, D.C., it has built a 150,000-square foot shopping center called East River Park (pictured, above) and in August the company acquired an adjacent 62,000-square-foot retail property to expand the center.

“In our more urban centers where we have grocery-anchored shopping centers, there is protection from any digital divide,” Zeigler added, noting that Cedar Realty Trust’s developments are typically insulated from e-commerce. “This is not the consumer in suburban or wealthy urban markets doing online grocery shopping. In urban markets they don’t shop like that. They go at least once per week to the grocery store, sometimes more. In urban markets, they don’t shop on They take their kids to the shoe store.”

Small Leases Rise to Dominate New Jersey's Office Market

When it comes to office leasing in New Jersey, it's not a big deal anymore.

During the past five years or so, office leases for less than 10,000 square feet, relatively small deals, have increased so much that they now dominate that sector of the Garden State's real estate market.

"New Jersey has become a small deal market. The Incredible Shrinking Deal."

Last year marked a five-year low in the number of large-sized office lease transactions in New Jersey, and leasing through the third quarter in 2018 the number of big leases is pacing to drop even more this year. At the same time, the volume of small leases has been on an upswing since 2013, the report said.

CoStar data supports those findings, as well, with the average space leased declining from 2013 to 2018. In 2013 for New Jersey, there were 3,896 leases signed for an average of 4,375 square feet per lease, according to CoStar Market Analyst Adin Perera. This past year, there were 4,031 leases averaging less square footage, 4,047, he said. Year to date in 2018, the average square footage has dropped all the way down to 3,355 for the 3,142 leases signed so far, according to CoStar, which tracks office rentals as small as under 1,000 square feet, even 50 square feet.

Statistics vary from CoStar's, but support the same trend.

"The growing prominence of small deals can also be seen in the declining average transaction size in the market. The average deal size in the first three-quarters of 2018 was 11,950 square feet, a 37.5 percent drop from the high-point mark set in 2015. While the 2018 year-to-date figure is a slight uptick over 2017, the growing volume of transactions below 10,000 square feet suggests that the average transaction size will remain far below the peak level for the near term."

While New Jersey has enjoyed job growth and declining unemployment, the fundamentals of its office market have stayed the same. The state remains saddled with large outdated suburban office buildings and parks that millennial-seeking companies aren't interested in, leading to fewer large lease transactions of 50,000 square feet or more and less leasing activity, the brokerage said.

Fewer large companies appear to be relocating to the Garden State, in part because of its high cost to do business and its old office parks, according to Perera. Merck's former corporate campus in leafy Readington, New Jersey, remained on the market for years until IT provider Unicom Corp. bought it this year.
“The combined impact of too many large blocks and not enough large-block demand suggests that the market is likely to see the current availability and rent levels persist. Changing the trajectory of the market will require reducing the oversupply of space and realigning available inventory to better meet the demands of current and future tenants in the market.”

There have only been 16 office leases involving 50,000 square feet or more so far this year, according to CoStar. Last year, there were 33 such large deals. That was a drop from 53 large lease deals in 2016, and 65 in 2015, CoStar said.

There was "a mismatch" between supply and demand regarding the size of spaces available in the New Jersey market.

"On the one hand, there is an ample supply of spaces available in the larger size categories ... On the other hand, looking at the smaller space availabilities, there is a potential shortage. Our forecast indicates 194 potential new transactions to take place in the fourth quarter of the year, but only 277 currently available blocks of 10,000 square feet or below to accommodate that demand. Landlords are frequently reluctant to break up larger blocks of space for a variety of reasons and despite an obvious potential solution, small tenants may find themselves facing a dearth of desirable suites in the sizes that they need."

Based on that landscape,  landlords are advised to offer flexible lease terms, consider shared-space alternatives, upgrade properties to better compete for tenants, and to repurpose outdated office properties.

Small leases are not necessarily a bad thing since such tenants are sometimes start-ups or smaller businesses with potential for growth.

Local Investment Company Acquires 228-Room Hotel in Downtown Philadelphia

Pearl Properties, a local full service investment, management and development company, purchased a 288-room hotel in downtown Philadelphia from Pebblebrook Hotel Trust. The Embassy Suites Center City Hotel sold for $67 million, or about $233,000 per room.

Built in 1965, the recently renovated, all-suite hotel at 1776 Benjamin Franklin Parkway comprises 5,000 square feet of meeting space and a 150-space garage. The 28-story structure spans half an acre less than four blocks from the Race Vine subway station.

Reed Slogoff, principal of Pearl, said in a statement, “As the area continues to see significant retail, commercial and residential development, we are confident The Embassy Suites Center City Hotel will benefit from our renewed focus and is perfectly situated to cater to business travelers, conventioneers and tourists.”

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Center City District Sees Philadelphia Retail Transforming, Repositioning

by Steve Lubetkin,
From the changing retail mix along Rittenhouse Row to the expanding food and beverage offerings on East Market and Chestnut streets, Center City’s retail landscape is being transformed and repositioned to meet the needs of the growing millennial population in Center City, while continuing to serve Philadelphia workers, residents and visitors.

Center City’s retail market is experiencing the shifting dynamics affecting retailers everywhere but is faring far better: vacancy along prime retail corridors in Center City is just 5.4%. By comparison, Q2 2018 retail vacancies hit 10.2% nationally and 8.4% regionally, according to Center City District’s annual report on the state of downtown retail.
Center City’s 3,195 active storefronts in 2018 consist of 986 retail stores, 1,005 food establishments and 1,204 service providers. And despite the recent additions of well-known national retailers, Center City shopping remains distinct from everywhere else in the region: 743 of those 986 retail stores in the downtown—three out of four—are local businesses.

Center City’s long-established Rittenhouse Row shopping district has grown beyond its previous confines along West Walnut Street as rents have increased, transforming West Chestnut Street and the connecting numbered streets and expanding the boundaries of Philadelphia’s prime retail corridor.

Meanwhile, east of Broad Street in the burgeoning Market East district, strong demand is being driven by national retailers seeking larger floor plates and by local businesses seeking lower rents than what is found west of Broad.
With three major retail-driven developments completed since 2016, two more currently under construction and another in the pipeline, Market East will see the addition of 1.2 million square feet of retail in the next few years, representing a $910 million investment. This critical mass of large-scale mixed-use development will development will create a continuous shopping and dining district from Independence Mall to City Hall.

Affordable Apartments, with Space for Special Needs Adults, Launched in Gibbsboro, NJ

by Steve Lubetkin,
Freedom Village at Gibbsboro is getting underway, a new 72-unit affordable apartment complex for families, which will include 18 units for residents with special needs.

Freedom Village at Gibbsboro is the ninth project for which the New Jersey Housing and Mortgage Finance Agency has provided financing to developer Project Freedom, resulting in the development of over 500 affordable units throughout Mercer, Ocean, Burlington, Camden and Salem counties.
“People with special needs face extraordinary life challenges.  Finding an affordable place to live should not be one of them,” says Lieutenant Governor Sheila Oliver, who also serves as commissioner of the Department of Community Affairs and chair of the NJHMFA board. “This project upholds the administration’s promise to help residents most in need find an affordable, accessible, and permanent home in New Jersey.”

The development, to be built on a seven-acre tract on South Lakeview Drive (County Route 561), will include four L-shaped, three-story buildings and a community center.

Fifty-four apartments are targeted for families with low-to-moderate incomes up to 60% of the area median income. Ten units will be set aside for developmentally disabled residents, and eight apartments are designated for residents who are consumers of mental health services.
The one- to three-bedroom rental units will all be wheelchair accessible and feature wider doors and hallways, an open floor design, accessible kitchens, some bathrooms with bathtubs and some with roll-in showers.

“We are proud of our long partnership with Project Freedom to provide homes that are not only affordable to working families but especially to residents with special needs,” says NJHMFA executive director Charles A. Richman. “Project Freedom’s commitment to barrier-free living enables residents with special needs to fully integrate into the community.”

NJHMFA awarded the $19.1 million development competitive nine percent federal Low Income Housing Tax Credits, which are expected to generate $13.3 million in private equity. Additional funding comes from TD Bank, Federal Home Loan Bank and Investors Bank.

The development will be within walking distance of businesses and amenities and is encircled by the Gibbsboro Greenway. Project Freedom also provides scheduled bus trips to area shopping centers and other nearby amenities, and works with residents to secure transportation via NJ Transit’s Access Link.

Construction is expected to be complete by December 2019, with rents ranging from $681 to $945. Each developmentally disabled resident will have a service provider for necessary support. Service providers are selected by the consumer, and the services are individualized to meet the needs of each resident.  South Jersey Behavioral Health Resources will provide supportive services for residents with mental health disabilities. Project Freedom will be providing educational training and employment opportunities to all tenants at no cost through the Opportunities for All program.

Monday, December 10, 2018

American Equity Partners Acquires Northeast Philadelphia Industrial Properties

by Steve Lubetkin,
Edison, NJ-based American Equity partners has acquired a 195,205 square-foot portfolio of six industrial properties on 29.7 acres in lower Northeast Philadelphia for $17.5 million.

“Given the properties’ locations within minutes from center city Philadelphia as well as their proximity to last mile delivery locations in Pennsylvania and New Jersey, collectively the assets serve as strong additions to our growing portfolio,” says David Elkouby, president, American Equity Partners.
The featured property within the portfolio is a 164-door, 95,000 square-foot truck terminal located on about 14 acres at 3820 N. 2nd Street, which also includes 8,000 square feet of office space. The additional properties are located near The Port of Philadelphia and its airport. The portfolio offers easy access to last mile delivery locations not only to Pennsylvania, but to Southern New Jersey via U.S. Route 1, I-76 and I-95. Its current tenants include H&M, Fresh Direct, Amazon among others.

“Situated off the Betsy Ross Bridge, this unique portfolio served as an exceptional addition to AEP’s portfolio who was looking for a value-add investment in which to reinvest their capital via a 1031 Exchange. As more and more consumers turn to online shopping, fast ecommerce fulfillment expectations are a priority. The ‘last mile’ of delivery from the warehouse to the customer’s doorstep is the final step within the supply chain process. It is also the most vital, expensive and time-consuming part to same-day delivery. Located within Philadelphia’s 1.56 million demographic region, the amount of docks, fenced-in parking and its accessibility to multiple highways have prepared these facilities to be an essential part of that process, which is evident in its current tenant base.”

85K SF Industrial at 500 State Road, PA, Sold for $4.7M

by Steve Lubetkin,
The sale of the 84,953 square-foot 500 State Road, Bensalem Township, Bucks County, PA traded recently. The property, a modern one-story masonry and steel multi-tenant building situated on 4.15 acres was sold to 500 State LLC, a privately held real estate investment firm, on behalf of State Road Associates, the previous owner.

The building is presently divided into three units—Unit A (approx. 24,233 square feet), which is occupied by Easy Heat Wood Pellets, Unit B (approx. 18,710 square feet) and Unit C (approx. 42,010 square feet), which are occupied by Betz Plumbing and Heating Supply.  In addition, a portion of the site is also leased to Omnipoint for the location of a cell tower.
The building is heated and sprinklered throughout and offers ceiling heights from 24-feet to 24-feet, 9 inch clear, twelve tailgate docks, five drive-in doors, 42-foot by 30-foot column spacing, and about 8,600 square feet of office space, with parking for 62 cars.

Strategically situated between the Academy Road and Woodhaven Road Interchange of I-95, the property offers convenient access to the Pennsylvania Turnpike (Exit 351/Bensalem) as well as Route 1 and the Betsy Ross Bridge and Tacony–Palmyra Bridge to New Jersey.  The property is just 20 minutes from metropolitan Philadelphia, 30 minutes from Trenton, NJ and 90 minutes from New York.

Friday, December 7, 2018

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Stadium Casino Proposing $150M Casino at Westmoreland Mall in Hempfield Township, PA

by Steve Lubetkin,
Stadium Casino, an affiliate of The Cordish Companies, has presented plans to the Pennsylvania Gaming Control Board for a proposed Category 4 satellite gaming facility to be developed at the Westmoreland Mall in Hempfield Township, PA, located directly off Route 30, approximately 30 miles from downtown Pittsburgh.

The presentation for the new Live! Casino was made during a Public Input Hearing, where Cordish representatives gave an overview of the 100,000-square-foot gaming, dining and entertainment destination, which will take over a space formerly occupied by the Bon-Ton department store. The Live! facility will be part of the popular 1.3-million-square-foot Westmoreland Mall development.
The Live! project, which represents an investment of $150 million, will be a world-class gaming, dining and entertainment destination, featuring 750 slots and electronic table games and approximately 30 live action table games; plus, nationally-recognized restaurants and live entertainment venues.

Live! Casino is projected to generate $200 million in annual economic impact, with an additional $148 million in economic impact from construction, including approximately 960 direct and indirect construction jobs, plus more than 500 permanent new jobs for local and regional residents, Cordish says. In addition, the project will create numerous construction and operations vendor opportunities for local, minority, women-owned, and veteran-owned businesses, along with considerable support for local charities and non-profits.

Project plans are subject to the review and approval of the Pennsylvania Gaming Control Board. Once approved, a construction timeline will be determined.
“We look forward to working with the Gaming Control Board, Hempfield Township and Westmoreland County to create a first-class gaming and entertainment destination that will generate millions of new tax dollars and create hundreds of new jobs for the region,” says Joe Weinberg, partner in Stadium Casino.

Thursday, December 6, 2018

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Ocean Kingdom Acquires Island Avenue Industrial in Philadelphia

by Steve Lubetkin,
Ocean Kingdom, a seafood wholesaler headquarterd in Swedesboro, NJ, has acquired 3601 Island Avenue in Philadelphia, PA, a 84,400-square-foot industry facility. The seller was not identified, but according to Real Capital Analytics, a proprietary research database that tracks commercial real estate transactions, the property last changed hands in March 2015, when Kulp Car Rentals acquired it from Pennock Co., for $3.4 million.

“The industrial market in Philadelphia, and the surrounding region, is very strong and buyers are extremely attracted to acquiring quality facilities with excellent access to the highways like this building on Island Avenue, which is located just off I-95."
Ocean Kingdom will use part of the building and will lease the rest of the property to two existing tenants.

Located on six acres, 3601 Island Avenue is just minutes from Philadelphia International Airport, and offers immediate access to Interstates 95 and 76, as well as the Walt Whitman Bridge. The property is serviced by public transportation and features six-inch reinforced concrete floors, ceiling heights from 15 to 23 feet, six tailgates, 14 covered van-high loading positions and office street parking for over 250 vehicles.

Wednesday, December 5, 2018

Planet Fitness Inks Deal in New Castle, DE

Planet Fitness, franchisor and operator of fitness centers with more than 1,600 clubs, signed a 25,000-square-foot lease at Stat Organization’s Airport Plaza shopping center in New Castle, Delaware.

The single-story structure at 148 Sunset Blvd. was built in 1993. Spanning nearly 30 acres, the Class B center is less than 10 miles from University of Delaware.

CRG Starting Spec Industrial in Lehigh Valley

by Steve Lubetkin,
St. Louis, MO-based CRG has begun construction of The Cubes at Lehigh Valley – Airport Road, a 450,000 square-foot speculative industrial building in the Lehigh Valley. The 40-acre site is 60 miles west of the Port of Newark in East Allen Township, PA.

“CRG has looked for superior sites throughout the region and The Cubes at Lehigh Valley – Airport Road is our first foothold in the Lehigh Valley industrial market. We see significant opportunity along Route 22 and I-78 corridors,” says CRG senior vice president Frank Petkunas. “The Cubes is in a position to capture the future growth for large warehouse distribution and e-commerce fulfillment centers. This is one more step CRG is taking to enhance its industrial portfolio.”
With excellent access to US Route 22, I-78 and I-476, the site is strategically located 60 miles from the Port of Newark and close to FedEx’s largest ground hub in the United States at Lehigh Valley International Airport.

CRG has joint-ventured for the fourth time with USLF 1 for the development of The Cubes at Lehigh Valley – Airport Road. The completed 450,000 square foot warehouse will have high-efficiency LED lighting, generous dock doors and trailer storage as well as car parks associated with state-of-the-art industrial distribution centers seen throughout the country.

Clayco will serve as the design-builder on the project and its subsidiary, BatesForum Studio is the architect on the project.

Tuesday, December 4, 2018

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Aramark Inks 16,000sf Deal at Downtown Philadelphia Office Tower

Aramark, a food service, facilities and uniform services provider, signed a 15,857-square-foot lease at Nightingale Properties’ and Carlton Associates’ Class A office tower in Philadelphia.

The 686,503-square-foot, 29-story structure at 1835 Market St. was built in 1986 and renovated in 1997. The 4-Star property spans nearly an acre less than two blocks from the 19th Street light rail station.

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MCR Acquires Residence Inn Near Sesame Place in Langhorne, PA

by Steve Lubetkin,
MCR, the sixth-largest hotel owner-operator in the United States, has acquired the 100-suite Residence Inn by Marriott Philadelphia Langhorne less than one mile from the Sesame Place theme park.

The hotel embraces the Sesame Street theme with characters and activities familiar to fans of the famous TV show and theme park.
The Residence Inn by Marriott Philadelphia Langhorne is located at 15 Cabot Boulevard East and features: 100 pet-friendly suites with fully-equipped kitchens , free full American breakfast, free fast Wi-Fi, a convenience store, heated indoor pool and a whirlpool spa, 24-hour fitness center with cardio equipment and free weights, A 24-hour business center, On-site laundry service,

Pearl Properties Acquires Embassy Suites Center City Hotel at 1776 Benjamin Franklin Parkway

by Steve Lubetkin,
Pearl Properties, the Center City-based real estate investment and development firm, has added a second hotel to its portfolio in the heart of Philadelphia with the acquisition of 1776 Benjamin Franklin Parkway, The Embassy Suites Center City Hotel. This recently renovated, all-suite hotel features 288 suites, 5,000 square feet of meeting space and a 150-space garage, all located at the gateway of Center City.

The Embassy Suites Center City Hotel is one block from the newly completed Comcast Technology Center, part of Comcast’s three million square-foot campus, the Pennsylvania Convention Center and numerous tourist attractions along the Parkway, including The Philadelphia Museum of Art, the world-renowned Barnes Foundation, The Rodin Museum and many others.
“In early 2018, Pearl opened the Cambria Hotel Philadelphia Downtown Center City on Broad Street because we saw strong fundamentals in the Center City hotel market for assets in prime locations,” says Reed Slogoff, principal of Pearl Properties. “And, as evidenced by our recent purchase of the former United Way headquarters directly across the Parkway at 1709 Benjamin Franklin Parkway, we’re equally bullish on the Parkway transformation that is well underway. As the area continues to see significant retail, commercial and residential development, we are confident The Embassy Suites Center City Hotel will benefit from our renewed focus and is perfectly situated to cater to business travelers, conventioneers and tourists.”

The Embassy Suites Center City Hotel features numerous enhancements following a recent renovation that included complete renovations of all guest rooms, common space, the lobby and elevators. Pearl says it has plans for additional upgrades that will include new restaurant spaces.

Monday, December 3, 2018

Brandywine Plans 280K SF Trophy-Class Office Property in Plymouth Meeting, PA

by Steve Lubetkin,
Brandywine Realty Trust will construct Metroplex Two, a 280,000 square-foot, trophy-class office building it says will introduce world-class architecture and urban design to the Philadelphia suburbs.

Located in the heart of Plymouth Meeting, Metroplex Two will serve as the signature component of Brandywine’s 23-acre master-planned Metroplex campus, currently home to Metroplex One, a 120,000 square-foot trophy-class office building. Designed to be a workplace of the future, the immersive environment will center around wellness, productivity and creativity, while offering unparalleled amenities, social interactions, collaborative work settings and advanced technology.

“Plymouth Meeting is one of the Greater Philadelphia region’s most sought after suburban markets. Following the success of Metroplex One, we saw significant value in creating a striking and innovative ground-up development that could attract large, forward-thinking brands to the region,” says Jerry Sweeney, president & CEO of Brandywine Realty Trust. “As part of a well-designed, amenity-rich complex adjacent to growing residential areas and transportation hubs, Metroplex Two will be an inspired workplace that fosters innovation and fresh ideas.”

New York -based NBBJ, a globally-renowned architecture firm specializing in driving innovation through the creation of highly productive and sustainable spaces, was selected to bring Brandywine’s vision for Metroplex Two to life. Merging visually arresting design and functional elegance, Metroplex Two will boast the most desired attributes of a creative, modern office, including open and efficient floorplates, loft-style workspaces, floor-to-ceiling windows featuring stunning views and an abundance of natural light.

Metroplex Two’s amenity-rich environment features several gathering spaces and three terraces—including a WiFi-enabled outdoor Sky Terrace, expansive lawn, and a state-of-the-art conference center. The Sky Terrace includes ample seating, fire pits, televisions, and The Lawn, a sprawling courtyard and greenspace, is perfect for both private convening and community-wide activities. Additional amenities include a parking garage, a secure package delivery room, a fitness center, and immediate access to the Cross County Trail which connects to the Schuylkill River Trail. There is a designated spot for food trucks, and outdoor seating areas to eat or collaborate.

Targeting LEED Silver certification and an Energy Star rating, the functional design of tiered metal panels sheathed in 10-foot floor-to-ceiling Low-E glass will enhance Metroplex Two’s visual appeal while respecting the environment.

The Metroplex campus seamlessly blends urban sensibility with daily accessibility. Its location makes it highly desirable and strategically positioned at the convergence of the Pennsylvania Turnpike (I-276), the Blue Route (I-476) and the Northeast Extension of the Pennsylvania Turnpike (I-476). This Mid-County Interchange access makes commuting seamless for employees and acts as a quintessential logistical hub with more than 88 million vehicles per day. The campus is also served by public transportation via Chemical Road and offers an effortless connection for bike commuters by way of the on-site Montgomery County Trail system and nearby Schuylkill River Trail.

The suburb of Plymouth Meeting is home to a wide variety of personal and business conveniences including high-end shopping centers, numerous restaurants, multiple hospitality options, fitness clubs and daycare centers. These additional nearby amenities offer tenants an extraordinary live, work, play lifestyle.

Metroplex Two anticipates seeing the same resounding success as Metroplex One, which is fully leased and home to an array of tenants from prominent law firms to leading healthcare companies.

“Metroplex Two is sensational, as it checks many boxes for tenants between its accessible location, sustainable design, extensive list of amenities, and exceptional tenant branding opportunities. It will offer any corporation the ultimate office environment and one the Philadelphia market has yet to experience. It’s the kind of building that will not only attract talent but make them never want to work anywhere else. The suburban location removes the pains of parking and employees will reap additional benefits from the fitness center, ample outdoor space, and the wide range of retail and restaurant options in the immediate area.”

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Friday, November 30, 2018

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Deutsche Bank's Asset Manager Sells 636-Unit Apartment Complex in Philadelphia

Lakewood, New Jersey-based Chelsea Management, a full service investment firm, purchased a 636-unit apartment complex in Philadelphia from DWS Group, Deutsche Bank's asset manager. Lincoln Green sold for $102.6 million, or about $161,000 per unit.

The garden-style complex at 4000-4040 Presidential Blvd. comprises one- and two-bedroom units ranging from 588 to 960 square feet in 30, three-story buildings. Built in 1986, the Class B property spans north of 20 acres less than two miles from the Bala train station.

Chelsea Management secured $91.59 million in financing for the acquisition of Lincoln Green. Dan Sacks of Greystone orginated the Freddie Mac loan, which features a 10-year fixed rate and six years of interest-only payments over a 30-year amortization period with leverage at 80.3 percent of the purchase price.

"The execution all around was stellar, and an absolute homerun for our client. That is truly what being a mortgage banker is all about, and we are grateful to have such close working relationships with our clients and our agency partners," Sacks said in a statement.

Strong Economy Keeping All Asset Classes Riding High

Demand for industrial facilities for distribution of goods to consumers continues to rise and hit historic benchmarks across the board, according to William Hankowsky, CEO of Liberty Property Trust, which is in the midst of a portfolio rotation away from office properties to a singular focus on the industrial sector.

Hankowsky’s message of a strong economic lifting all sectors of commercial real estate was echoed by other speakers at the annual Real Estate Outlook sponsored by the Urban Land Institute Philadelphia Thursday.

“Obviously, it’s the most dramatic, strongest market industrial space has ever seen in its history no matter what statistic you look at,” Hankowsky told more than 500 attendees at the Union League Club. “You’ve had 34 consecutive quarters of positive net absorption in many markets, you’re seeing the highest rents you’ve ever seen, and the converse of that is in many markets you’re seeing the lowest cap rates you’ve ever seen. Properties are trading in Southern California starting with a three, or North Jersey, and even in secondary markets, most of the trade now starts with a five in terms of a cap rate.”

The strong demand is largely a product of an unusually strong economic recovery, but layered on that, Hankowsky says, is the rising need for distribution facilities for e-commerce retailers.

“E-commerce has been a unbelievable structural change element in terms of the industrial space,” he says. “Ten years ago, most of us didn’t know we needed something delivered to our house in two days. Five years ago, you didn’t even know you needed it in a day, and you didn’t know three years ago you needed it today in an hour. That change in the customer consumer expectation about delivery times has had a dramatic fundamental effect on industrial space.”

The design of warehouse buildings has also been affected by the rising demand for rapid delivery, Hankowsky says. Warehouses now tend to accommodate 40-foot heights for more efficient racking of stock, and tenants need more land under the buildings because of the increased need for employee parking at large distribution centers, he says. Another significant change in the market is a greater focus on correlation of location and labor, he says. Warehouses now need to be close to an accessible workforce, so much so that “the HR person is often on the first visit to the location,” he says. “That never happened five years ago.”

In the retail sector, Joseph Coradino, chairman and CEO of PREIT, highlighted changes in the product mix at his firm’s malls, which used to allocate as much as 75% of their space to apparel sales, but are now redeveloping more experiential retail like restaurants, entertainment, and fitness.

Contrary to the constant barrage of obituaries for traditional retail that he faces, even from family and friends, Coradino noted that traffic at PREIT malls so far this holiday season is running above last year. The company issued a press release on traffic—timed to coincide with Coradino’s appearance at the Union League Club gathering—indicating that traffic at its Viewmont Mall in Scranton, PA was up 11 percent, and at the Moorestown, NJ, Mall, traffic rose significantly, even though a large space once occupied by Macy’s has only been partially filled with smaller retailers HomeSense and FiveBelow.

“Those two small stores occupy about 50,000 square feet of that 260,000 square feet,” Coradino says. “Traffic is up 9 percent.”

Many mall retailers now offer a service Coradino described as “BOPUS,” which means “buy online and pickup in store.” The service has the added effect of encouraging additional purchases, too.

“When someone picks up something at one of our properties, there’s a 73 percent chance that they’re going to make an ancillary purchase at the property,” Coradino says.

In the hospitality sector, customers are looking for luxury and willing to pay for it, according to Jay Shah, CEO of Hersha Hospitality Trust.

“We find that lifestyle and luxury today are the two segments where we have the greatest ability to drive rate and pricing power,” he says. “They seem to differentiate themselves in a way away from the commodity hotel products, and that’s what we’re finding that the markets are really seeking and willing to pay for.”

Hersha acquired the Philadelphia Westin about a year ago, Shah noted, and the property is fulfilling its promise, with the third quarter showing especially good performance, he says.

“That was driven primarily by continued strength in Philadelphia’s life science sector and the corporate sector, and leisure visitation to Philadelphia continues to be very strong,” he says.

Expansion of the definition of the modern office is one of the biggest adjustments taking place in the office sector, says Jerry Sweeney, president, CEO and trustee of Brandywine Realty Trust.

“In office, it used to be that you went to a definitive place to work,” Sweeney says. “With technology and other alternatives, the city really has now become the workplace, not one specific location.”

Brandywine’s portfolio today has less square footage but a higher quality overall product today compared with five years ago, Sweeney says.

“Our internal focus in our company right now is on preleasing some of our development pipeline and perfecting all of our approvals, including running all of those developments completely through the design development process,” he says. “Unless we fully price out our deals, it puts us at a real disadvantage in terms of attracting a corporate client, because we need to know—in this environment of rising construction costs and pricing volatility—what we can actually deliver.”

Real estate markets across the country are being driven by the search for talent, according to Lauren Gilchrist, senior vice president of research for Jones Lang LaSalle Philadelphia.

“Unemployment in the US right now is 3.7 percent, unemployment for people with a bachelor’s degree or more is two percent,” she says. “This is far beyond the conditions of full employment at this point in time, which means that competition for people is fierce.”

The talent pool is one of the factors that led to the Amazon decision to locate part of its HQ2 project in Long Island City, NY, she says. New York and Washington, DC are graduating students trained in technology fields at a much higher rate than the Philadelphia market, she says.

“When you look at the fact that New York and DC have graduated 31,000 advanced degree holders in one year, and you think about the fact that this company is looking for 50,000 people in technical occupations, you begin to understand, despite everything else, why our 6,000 STEM degree holders might not cut it,” she says.

The event also serves as the launch every year for the Emerging Trends in Real Estate Report jointly produced by ULI and PricewaterhouseCoopers, now in its 40th year.

Mitch Roschelle, PwC partner and business development leader, says this year’s report ranks Philadelphia in the top five cities for both hotel and industrial investment.

Building on Gilchrist’s remarks about the talent search, Roschelle expressed concern that job openings are going unfilled.

“We have seven million job openings, we have just under six million unemployed,” he says. “So there are a million people that we don’t have, for the job openings that we do have.”

Top trends from this year’s report include:

  • The rise of the “18-Hour Suburb” and that the millennial question is starting to be answered: many are looking for suburbs with urban amenities and good
  • Retail space is not dead, and it is a good time to repurpose space for alternative
  • New office buildings and multifamily assets are going above and beyond to meet a range of tenant needs through “amenities gone wild”.
  • Disruptors ranging from package delivery to autonomous vehicles are forcing redesign and amenity shifts for residential and commercial
  • Environmental, Social and Governance Practices are important to investors. Sensitivity to these issues has increased and funds with these strategies in mind could see an
  • Last mile industrial development is in high demand with the expansion of e-commerce far from over and the need for facilities to accommodate a dense distribution network

“ULI Philadelphia is proud to share this national research and bring together a high-level discussion and projection about the local real estate market led by our industry leaders in hotel, industrial, office, multifamily and retail development,” says Paul Commito, chair of ULI Philadelphia, a senior vice president at Brandywine Realty Trust. “Building on last year’s record-breaking program and attendance, today’s speakers gave our community a lot to think about as we tackle a fascinating year in development. I am proud of the progress we have made the ULI Philadelphia District Council and look forward to continuing to engage with new and established members, growing committees and serving the broader industry through our ULI Philadelphia advisory and impact projects.”

Wednesday, November 28, 2018

Seavest, Trammell Crow Developing Hospital for Allegheny Health Network

by Steve Lubetkin,
Patients of Allegheny Health Network, a subsidiary of Highmark Health, will soon have a new convenient, state-of-the-art care option in Hempfield Township, Westmoreland County, about 30 miles southeast of Pittsburgh.

Real estate investment firm Seavest Healthcare Properties and its development partner, Trammell Crow Company, are building new, class A, 75,000-square-foot care facility for AHN, a leading integrated delivery care system in Western Pennsylvania.

The new Hempfield facility—consisting of an emergency department and 10-bed, small-format hospital; a full-service cancer center; and medical office space—is part of a neighborhood hospital complex the network is building at the intersection of Route 30 (Lincoln Highway) and Agnew Road.

The small-format AHN hospital is a joint venture of AHN and Emerus, the nation’s largest operator of small-format hospitals. Emerus Holdings, a Texas-based company, operates more than 20 neighborhood hospitals across the country, and recently surpassed the one million patients treated milestone.

“With this neighborhood hospital and community cancer center, we are bringing to Westmoreland County an innovative, patient-centered model that will provide the best possible experience, quality and outcomes for those requiring emergency care, short hospital stays, cancer care and other outpatient services,” says Cynthia Hundorfean, AHN president and CEO. “We have taken a number of important steps over the past year to expand access to AHN physicians and programs in Westmoreland County, and this wonderful new facility will further ensure that the people who live here have exceptional choices close to home for their healthcare needs.”

“Seavest is privileged to be a part of this project, helping to bring expanded healthcare services to Westmoreland County,” says Jonathan Winer, senior managing director and chief investment officer of Seavest Healthcare Properties. “Not only will the project bring expanded emergency services, cancer care and medical specialists to the area, there is the potential to add more services in the future.”

“Trammell Crow Company is honored to be a part of making this project a reality for the community,” says Davis Griffin, a principal with Trammell Crow. “Speed to market is essential for this project. Relying upon our top-notch team in place and our long-standing relationship with Seavest, we will be able to accelerate our construction timeline in order for AHN to meet its goals for opening the facility.”

Construction of the Hempfield project commenced in July, with completion of the cancer center anticipated by late summer 2019 and the remainder of the building in November 2019.

Trammell Crow Building 1M SF Spec Industrial in Scranton Opportunity Zone

by Steve Lubetkin,
Trammell Crow Company has purchased a 90-acre site in the Valley View Business Park from the Scranton Lackawanna Industrial Building Company, for construction of Valley View Trade Center, a new, one million-square-foot speculative distribution facility. SLIBCO is the industrial development affiliate of the Greater Scranton Chamber of Commerce.

“We are very pleased that a renowned developer like Trammell Crow Company has chosen to invest in our region—with our quality workforce, prime location and access to major markets— to create jobs and address the demands of the growing e-commerce industry,” says Bob Durkin, president, The Greater Scranton Chamber of Commerce. “We thank Jessup Borough, Valley View School District and Lackawanna County for approving the LERTA tax abatement program in order to make this deal possible.”

The state-of-the-art building is scheduled to be completed in the third quarter of 2019 and will feature 40-foot clear height, 190-foot deep truck court with opposing trailer storage, ESFR fire protection, 311 trailer parking spots, 277 car parking spots, and 159 dock positions, expandable to 209.

The project will also provide economic and tax incentives, qualifying as a Keystone Opportunity Expansion Zone and for the Local Economic Revitalization Tax Assistance program. In addition, the project will serve as a Qualified Opportunity Zone to encourage long-term investment in the area.

“We are pleased to be working on this exciting project in Jessup Borough,” says Andrew Mele, managing director of TCC’s NE Metro Business Unit. “In addition to best-in-class design quality, the project will enjoy proximity to a strong, vibrant labor force and a strategic location with access to over 80 million consumers within an overnight drive.”

Tuesday, November 27, 2018

Banks Put the Brakes on Commercial Real Estate Lending

U.S. banks are reining in their commercial real estate lending across most property types as they get squeezed between rising interest rates and competing nonbank lenders offering low-cost loans.

The overall decline in total mortgage loans made by banks in the third quarter helped slow the buildup of commercial property loan portfolios on their books, according to the Mortgage Bankers Association.

It's the first sign of a slowdown in real estate lending by banks this year following the end of an extended period of ultra-low interest rates as the Federal Reserve has steadily increased borrowing costs and signaled it plans to keep raising rates.

"Borrowing and lending backed by commercial and multifamily properties decreased 3 percent during the third quarter, and was 7 percent lower than a year ago. Rising interest rates took some wind out of the market's sails," said Jamie Woodwell, vice president of commercial real estate research for the Mortgage Bankers Association in a statement accompanying the group's quarterly survey of commercial/multifamily loan originations by its members.

The rising cost of borrowing money is damping some demand for new loans. Investors are also taking advantage of low projected rates of return on commercial real estate and higher prices to sell properties and pay off their loans before rates rise and property price growth softens, banking officials said.

Woodwell said the commercial mortgage-backed securities and bank lending markets were the hardest hit, while lending backed by multifamily properties and government sponsored enterprises Fannie Mae and Freddie Mac grew. Some rating agencies now project commercial mortgage-backed securities loan volume will be lower than in 2017.

Compared to a year earlier, a decline in third-quarter loans for health care and retail properties led the overall decrease in commercial/multifamily borrowing volumes, according to the association.

By property type, there was a 55 percent year-over-year decline in the dollar volume of loans for health care properties; a 28 percent decrease for retail properties; a 19 percent reduction for hotel properties; and a 17 percent drop for office properties.

One of the few bright spots in the quarter for finance companies was that lending for multifamily properties from both banks and the government sponsored enterprises grew, as did lending for industrial properties. Loan originations last quarter increased 19 percent for both multifamily and industrial property loans.

Among investor types, the dollar volume of loans originated during the third quarter increased for life insurance companies, which were up 4 percent, and for Fannie Mae and Freddie Mac, which were up 3 percent.

In contrast, originations for commercial mortgage-backed securities loans slid 53 percent, while commercial bank portfolio lending dropped 22 percent from a year earlier.

The buildup of commercial real estate loan portfolios on bank books also slowed, according to a CoStar analysis of third-quarter bank data released last week by the Federal Deposit Insurance Corp. Those portfolios had been growing at an annual rate of 4.5 percent through the second quarter. That rate slowed to an annualized rate of 3 percent in the third quarter.

The lending slowdown was particularly noticeable among some of the largest banks. Half of the 10 largest U.S. banks by commercial real estate loan holdings actually shrunk their portfolios, including the largest, Wells Fargo, which holds about $134 billion in commercial property loans. Wells Fargo's portfolio value shrunk by $2.7 billion from the previous quarter.

Other banks increased real estate lending, though they too signaled a change in strategy. Signature Bank, which holds the 10th-largest commercial real estate loan portfolio among U.S. banks with $27 billion, grew its portfolio at an annualized clip of 11.2 percent. Notably, however, even Signature signaled in its third-quarter earnings conference call that it intended to slow future real estate lending in favor of a shift to more floating rate lending, which Signature sees as giving it more flexibility as interest rates rise.

In addition to lower originations, part of the decline in commercial real estate mortgage loans at banks and commercial mortgage-backed securities lenders resulted from pay-downs on existing and acquired loans as borrowers take action in anticipation of further boosts to interest rates into 2019, according to Fitch Ratings. Fitch expects loan refinancing volume to slow through 2019 in reaction to additional interest rate increases.

During this shift in interest rates, several banks reported this past quarter that they were priced out of deals with loan terms that would never meet their underwriting guidelines.

"While [overall bank] results this quarter were positive, the extended period of low interest rates and an increasingly competitive lending environment have led some institutions to 'reach for yield,' " said Jelena McWilliams, chairwoman of the Federal Deposit Insurance Corp., noted in announcing third-quarter performance numbers for FDIC-insured banks just before the Thanksgiving break.

"Additionally, the competition to attract loan customers has been strong, and it will remain important for banks to maintain their underwriting discipline and credit standards. These factors have led to heightened exposure to interest-rate risk and credit risk," she said.

Office Market Insights and Opportunities (Video)

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ASB Acquires 476K SF Bristol, PA, Industrial Portfolio for $42M

ASB Real Estate Investments  has acquired a 475,910-square-foot industrial portfolio in the Keystone Industrial Park in Bristol, PA for $42 million. Consisting of eight warehouse buildings, the portfolio is 95%-leased to 14 tenants, including international distributors and local service providers serving the Philadelphia metropolitan area and New Jersey.

ASB acquired the assets on behalf of its Allegiance Real Estate Fund, a $7.3 billion core investment vehicle.

“The portfolio is strategically situated adjacent to one of the region’s most important interstate arteries, with direct access to both Philadelphia and New York City, as well as points west,” says Brodie Ruland, ASB senior vice president and Northeast region head. “This acquisition continues the expansion of our nationwide industrial portfolio, which seeks to secure strong, income-oriented returns at this mature stage of the current real estate cycle.”

Located in the southeast corner of Lower Bucks County, the complex is approximately 20 miles northeast of Center City Philadelphia and 70 miles south of New York City, and is within a mile of the new Pennsylvania Turnpike/I-95 Interchange. The interchange provides immediate connections to the primary north-south and east-west interstate corridors in the region, including the heavily trafficked New Jersey Turnpike. Few development sites exist in the submarket providing for high barriers to entry and minimizing new supply.

The portfolio consists of two buildings of 110,000 square feet each, and six other buildings varying in sizes from 30,000 to 60,000 square feet. Combined, they offer an array of functional spaces with clear ceiling heights up to 26 feet and truck court depths typically 95 to 100 feet.

Monday, November 26, 2018

Blue Stone Capital Pays $20 Million for Suburban Philadelphia (Norristown) Office Building

Brooklyn, New York-based Blue Stone Capital, a full service investment firm, purchased a 136,918-square-foot office building in Norristown, Pennsylvania, from Regional Real Estate Investment Corp. for $20 million, or about $146 per square foot.

The three-story structure at 1001 Adams Ave. is fully leased to Optum 360. Built in 2001, the Class A property spans 12 acres less than 20 miles from downtown Philadelphia.

The property offered investors an opportunity to acquire a well-maintained, modern office property with a credit tenant in the highly desirable health care industry.”

Maculogix Signs 17,000-SF Office Lease in Harrisburg

Maculogix, a company that develops tools for early diagnose, monitor and treatment of age-related macular degeneration patients, signed a 17,400-square-foot lease for its new headquarters at Triple Crown Corporation’s office building in Harrisburg, Pennsylvania.

The 145,700-square-foot, three-story structure at 3721 Tecport Drive was built in 1966. The Class B building spans north of 11 acres less than seven miles from Harrisburg International Airport.

Penn Medicine Breaks Ground on $200M Advanced Outpatient Center in Radnor

by Steve Lubetkin,
Penn Medicine, the health system of the University of Pennsylvania, has begun construction of a four-story, 250,000-square-foot multispecialty outpatient facility in Radnor, PA, that will expand options for patients to receive advanced care close to home.

“More than half of our activity comes from outpatient care today, and we’re committed to investing in the very best facilities which can offer our patients more options to get the best possible care close to their homes,” says Ralph W. Muller, CEO of the University of Pennsylvania Health System. “Our mission is to offer Penn Medicine care to patients where it’s most convenient to them and their families, so we’re making more cancer, women’s health, and cardiac services available to patients at Radnor to ensure they can receive a more comprehensive suite of care without having to travel downtown.”

Brandywine Realty Trust has entered into an agreement with University of Pennsylvania Health System to purchase and serve as the designated developer and manager of two premier sites in Radnor where the new outpatient facility will take shape (145 King of Prussia Rd. and 250 King of Prussia Rd.). Brandywine will transform the new buildings into high-quality facilities—including office space and a hotel—and will serve as the development manager of the medical office building, allowing Penn to expand its network and offer even more locations to deliver the level of care for which the health system is renowned.

Set to open in Spring 2020, the site will be home to the new Penn Medicine Radnor, replacing the existing facility in the township, which has operated on King of Prussia Road since 1997.

The new location will provide comprehensive cancer care, including newly available radiation oncology services and chemotherapy provided by the Abramson Cancer Center, as well as primary care, heart and vascular, orthopaedic and neuroscience care. Additional services will include same-day surgery, with six operating rooms and four endoscopy suites, along with full radiology and laboratory services. Patients will also have access to cutting-edge Penn Medicine clinical trials, expanding access to more patients without having to travel into Philadelphia.

“This facility will provide exemplary outpatient care and contains all of the services you would find in a hospital setting with the exception of beds for overnight stays,” said Rob Cottone, president and CEO of IMC Construction. “It is a ground-up building, easily accessible by car or public transportation and highly energy efficient.”

The new LEED Silver certified building will feature natural light throughout, and a building design which wraps around a courtyard will bring nature views to patients, families, and staff inside.

The western section of 145 King of Prussia Road will introduce 150,000 square feet of office space and a hotel component comprising 75,000 square feet, with a projected 100 rooms—which Penn Medicine officials say will help make the new Radnor facility a destination for patients traveling for specialized outpatient services from outside the area. The eastern portion of 145 King of Prussia Road will serve as a medical office parcel. The health center and adjacent 994-car parking garage are located at 145 King of Prussia Road, on the former BioMed site and within walking distance of the Radnor train station. Clad in brick masonry and high-performance glass, the building has abundant natural light and views of nature.

“The University of Pennsylvania has been a long-time, valued partner of ours, and together we have created transformative projects that have helped to shape the city of Philadelphia that we know today, most notably FMC Tower at Cira Centre South,” says Jerry Sweeney, president and CEO of Brandywine Realty Trust. “As Penn Medicine continues to expand its footprint, we are proud to work alongside them to bring new, high-quality offerings to their patients and help fuel the great work that they continue to deliver.”

“We are excited for our partnership with Brandywine, which will develop this area of Radnor into a state-of-the-art mixed-use campus that will build on Penn Medicine’s longstanding support of health and wellness for residents of the Township and beyond,” says Kevin B. Mahoney, executive vice president and chief administrative officer for the University of Pennsylvania Health System.

The new Radnor facility, which is double the square footage of the current Penn Medicine Radnor building, is the latest among a growing list of Penn Medicine multispecialty ambulatory centers. Other sites include the Perelman Center for Advanced Medicine, Penn Medicine University City and Washington Square in Philadelphia, as well as facilities in Bucks County, Valley Forge, Southern Chester County (West Grove) and, in Southern New Jersey, Cherry Hill and Woodbury Heights.

The Penn Medicine at Radnor team includes construction manager IMC Construction; architect Ballinger; site/civil engineer Pennoni; m/e/p engineer Stantec; and structural engineer Tim Haahs.

Tuesday, November 20, 2018

CanAm Enterprises $35M EB-5 Partnership Loan Funds Copper Tubing Plant in Reading, PA

by Steve Lubetkin,
A copper tubing manufacturing facility expanded recently with a $35 million loan funded by a CanAm Enterprises EB-5 partnership loan.

CanAm is one of the leading sponsors of EB-5 investments, which are funded by qualified foreign investors who earn “conditional” or temporary two-year visas in return for investing $500,000 in businesses located in high unemployment areas that create or retain at least ten permanent full-time jobs for US workers.

The manufacturing industry, once the backbone of the American economy, has played an especially important role in Pennsylvania’s history.

“CanAm and DCED, the Commonwealth of Pennsylvania’s economic development agency, were very proud to support retaining and growing an important manufacturing company to the region,” says Tom Rosenfeld, CanAm’s president and CEO.

The EB-5 Immigrant Investor Program is administered by the United States Citizenship and Immigration Services. With three decades of experience promoting immigration-linked investments in the United States and Canada, CanAm has a long and established track record.

CanAm has financed more than 55 project loans and raised more than $2.7 billion in EB-5 investments. The firm exclusively operates seven USCIS-designated regional centers in the city of Philadelphia, the commonwealth of Pennsylvania, the county of Los Angeles, the Metropolitan Region of New York, the states of Hawaii, Florida and Texas.