Friday, November 30, 2018

PREIT CEO Says Sophisticated Consumer Attracted to Varied Mall Offerings (Video)

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)

Part 1 of 4 Part 2 of 4

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.

Global Capital Flows - Deloitte's 2019 CRE Outlook (Video)

Part 1 Part 2

Monday, November 19, 2018

PwC/ULI Emerging Trends in Real Estate 2019 - Top Markets to Watch (Video) Part 5 of 5

Eastern PA Industrial Markets Growing with Positive Absorption

by Steve Lubetkin,
The industrial markets in Central and Northeast Pennsylvania and the Lehigh Valley grew an average of four percent in the first nine months of the year and absorbed 8.5 million square feet of space.

“Eastern PA is on track to see another year of solid market growth. Of note this year is the scale and location of development and occupier activity. In the first three quarters of this year, there were 10 construction starts greater than 500,000 square feet, double the amount seen in 2017.”

Developers are moving to less developed areas in the Central Pennsylvania and Northeastern submarkets, but the appetite for space shows no signs of slowing down.

“The uptick was well-timed with above-average activity among occupiers seeking 800,000 or more square feet. Due to land constraints in the market’s historical core areas, new development has become more dispersed along I-81 & I-78 corridors, filling in the areas between established big-box neighborhoods in Allentown-Bethlehem, Harrisburg-Carlisle, and Hagerstown, MD. Even with the increase in large-format supply, year-end absorption will top last year’s and we’ve yet to see any downward pressure on rents.”

In the third quarter, 2.6 million square feet of new occupier deals were completed, bringing the year-to-date total to just under 10 million square feet. At this time last year, 13.6 million square feet of new deals had completed. Despite a relatively quiet third quarter, year-end transaction volume will top 15.6 million square feet.

In the Lehigh Valley submarket, deliveries and construction starts were notably above average during the third quarter, especially in Berks County. Current development in Berks is more spread out than in Lehigh & Northampton counties and almost exclusively large format, averaging 790,000 square feet in size. Construction commenced on four facilities, all larger than half a million square feet, bringing to ten the number of buildings under construction. About 2.4 million square feet of new speculative product delivered this quarter, including two facilities greater than 800,000 square feet in Berks County.

The two largest deals in the Central Pennsylvania/I-81/I-83 market were build-to-suit projects: Bayer Pharmaceutical’s 681,700 square-foot lease with DHL in Manchester, along the I-83 corridor, and Riviana Foods’ 714,598 square-foot lease with NorthPoint Development in Greencastle, along the southernmost stretch of PA’s I-81 corridor. Both facilities will include additional square footage on a speculative basis, for a total rentable building area greater than one million square feet.

In Northeastern PA, Exeter’s 1.1 million square-foot build-to-suit facility for American Tire Distributors in Blakeslee helped year-to-date absorption reach 1.3 million square feet. Mericle’s one million square-foot Pittston development is the only spec project currently underway, but Colliers says more speculative development will begin before the year is over. Of the 3.5 million square feet of existing or under construction availabilities, 2.4 million is new speculative product.

Friday, November 16, 2018

Multifamily Real Estate Market - Broker and Developer Strategies (Video)

Part 1 Part 2

Retail Real Estate Video Strategies (Video)

NAR Economic and Commercial Real Estate Outlook (Video)

Ivy Realty’s Acquires of 11200 Roosevelt Blvd. in Philadelphia

by Steve Lubetkin,
Ivy Realty’s acquired of 11200 Roosevelt Blvd. in Philadelphia with   $13.1 million in purchase financing. The 452,375-square-foot industrial asset will undergo a full rebranding under its new ownership.

“Ivy Realty capitalized on a value-add opportunity in a thriving submarket. Sustained high demand for industrial product in the Greater Philadelphia/Lower Bucks County region, coupled with our client’s institutional pedigree and track record for successful repositioning projects, led to a competitive marketing process and, ultimately, an excellent execution by RGA.”

The fully leased, multi-tenant 11200 Roosevelt Blvd. currently serves as home to the Philadelphia Charter School and a mix of industrial users. Ivy Realty will infuse $3 million in capital improvements to address deferred maintenance issues – including site work, roofing, painting, and system upgrades – and roll out general enhancements as part of the property’s rebranding as Roosevelt Industrial Center.

“11200 Roosevelt is located in a great area—just off Route 1 and adjacent to a shopping center. Ivy Realty will take advantage of existing North and South entrances to distinguish the campus’ educational and industrial components. In the firm’s signature style, new signage, landscaping and other improvements will serve to elevate this property’s image and competitive positioning.”

Lack of Quality Supply, Pent-Up Demand Driving Industrial Construction in Suburban PA

by Steve Lubetkin,
Speculative development of industrial properties is beginning to ramp up in response to a lack of quality supply in the construction pipeline.

Build-to-suit projects for Solar Manufacturing in Souderton and Global Packaging in Oaks began. Jacquet Mid-Atlantic and Force America have buildings planned in the Linfield Corporate Center.

Herring Properties’ 80,000-square-foot spec building in Bristol Commerce Center was leased to Hughes Enterprises prior to completion. The developer will be breaking ground in the fourth quarter on a 36-40’ clear +/- 300,000-square-foot spec building. Construction has commenced on the first 100,000-square-foot-plus buildings at Pennridge Airport Business Park and Park 309 in upper Bucks County. A 57,600-square-foot bulding is underway in Bristol Industrial Park and a 53,040-square-foot building in Valley View in Coatesville. Multiple other sites are in various stages of the development process in Quakertown, Hatfield, Chalfont, Blue Bell, Souderton, Harleysville, Chichester and Bensalem. There is the potential for 1.2 million of speculative development completions in 2019, the highest level since 2002.

“We are really seeing a lack of quality supply and pent up demand driving new development – and it’s expanding beyond the traditional distribution corridors. In Southern New Jersey, there has been consistent absorption of new product. Developers such as Whitesell, Dermody and Liberty are moving forward with spec projects.  In Philadelphia and suburban PA, there is potential for 1.2 million square feet of speculative construction in the coming year. Prospects seem good—there’s been strong interest in a proposed 300,000 square-foot spec building in Bristol by local developer Herring Properties.”  -

Key Market Trends – Suburban Pennsylvania

  • The vacancy rate remained at 5.2 percent in the third quarter.
  • Year-do-date absorption totaled just over 215,000 square feet, significantly behind last year’s third quarter level of 2.5 million.
  • The weighted average asking rent increased by 1.3% to $6.21 per square foot, triple net. Pro forma rents for new construction have topped $7.00 per square foot.
  • Investment activity was boosted by a large portfolio sale in Bucks County.

Key Market Trends – Southern New Jersey

  • The Southern New Jersey industrial vacancy rate increased slightly during the third quarter from 3.8 to 4.1%.
  • Year-to-date absorption is down year over year, but still strong at 2.5 million square feet.
  • Of the 2.3 million square feet of construction that is scheduled to be completed in the fourth quarter, two-thirds is still available.

Wednesday, November 14, 2018

Friedkin Realty Group Pays $53 Million for 156-Unit Philadelphia Apartment Building

The acquisition of The Isle, a 156-unit apartment building in Philadelphia's Manayunk submarket by San Francisco-based Friedkin Realty Group last month, represents a significant milestone as the highest price per unit ever paid for a major apartment property in Northwest Philadelphia.

The deal, for just over $53 million or about $340,000 per unit, was also the first sale of a large-scale apartment development completed in the Northwest Philadelphia area following the most recent recession. The sellers, Realen and Barings, wrapped up construction on The Isle in early 2017 and brought the property's occupancy to more than 85 percent.

The Isle’s $340,000 per unit sale price trounced the previous record of $223,000 per unit set by the 2015 sale of Madison Hill House, which was built in Chestnut Hill during the 1960s. And, more recently, Goldman Sachs Asset Management paid $170 million this past summer when it purchased two other Chestnut Hill properties, Chestnut Hill Village and Blossom Row, which totaled a combined 821 units and traded at approximately $207,000 per unit.

Philadelphia’s apartment development activity has continued to expand out from Center City into submarkets long devoid of new, large-scale developments. Other multifamily developers considering projects in Northwest Philadelphia are likely eyeing The Isle’s sale as a barometer for the level of pricing that newly-built apartment properties in the area can command following a initial lease-up period.

One such project, Grasso Holdings’ 142-unit Ridge Flats development at 4300 Ridge Ave. in Philadelphia's East Falls submarket, is less than two miles from The Isle. After recent design revisions the project completed Philadelphia’s Civic Design Review process in October and Grasso is aiming to break ground before the end of the first quarter of 2019.

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Clarifi Leasing at 1635 Market in Center City Philadelphia

by Steve Lubetkin,
Financial literacy nonprofit Clarifi has relocated its office to 1635 Market Street in Philadelphia, occupying 7,165 square feet on the fifth floor. Clarifi relocated from 1608 Walnut Street.

Clarifi provides counseling, education and coaching to help individuals and families achieve financial stability. For 52 years Clarifi has helped over 750,000 people improve their credit, reduce debt, prepare for homeownership and save money.
The building’s owner is Nightingale Properties.

1635 Market Street is a 19-story class A office and retail building in the middle of Philadelphia’s Central Business District. It is located between The Comcast Center and Liberty Place at the northeast corner of 17th and Market Streets. The property offers immediate access to Suburban Station’s concourse level, a major transportation hub, with connection to Amtrak’s Northeast Corridor rail and direct access to SEPTA Regional Rail, Subway Surface Line and Subway system.

Clarifi joins tenants Spector, Gadon & Rosen, MakeOffices and Magna Legal Services, among others.

ULI & Southwest CDC Get Grant for Grays Ferry Jumpstart Program

by Steve Lubetkin
Urban Land Institute Philadelphia and the Southwest Community Development Corporation received an implementation grant from the Urban Land Institute’s Building Healthy Places Initiative to support further expansion of the Jumpstart program in the Grays Ferry neighborhood.

The implementation grant builds on the work of a Grays Ferry Healthy Corridor Study completed in December 2017 and a 2018 grant from LISC Philadelphia that broadened the Jumpstart program from Germantown to include Southwest Philadelphia.
The Urban Land Institute’s National Health Corridor Project works with communities to develop and implement healthy corridor strategies to advance a new, healthier vision for urban and suburban corridors.

In 2017, Grays Ferry Avenue (from Washington Avenue to Woodland Avenue and including the Grays Ferry Bridge) was selected as a “Demonstration Corridor” by the ULI national organization and ULI Philadelphia received funding to host a study of the corridor and surrounding neighborhoods.

The project brought together a group of local stakeholders and a panel of national experts, who, after completing an intensive three-day research and stakeholder interview process, presented their recommendations for including health within future planning processes for the Grays Ferry corridor.
A key recommendation of the 2017 study was the creation of a housing assistance program offering training and access to capital for novice developers. In January of 2018, LISC Philadelphia awarded SWCDC a $5,000 grant to expand the Jumpstart program to Southwest Philadelphia.

Jumpstart, a new model for community development originating in Germantown, provides training, mentoring, networking, and financing options for aspiring local developers.

“Chairing the Grays Ferry Corridor initiative through ULI was a meaningful project in bringing together stakeholders and connecting two communities through the lens of health,” says Julie Donofrio, managing director of PennPraxis and ULI Chair for the Healthy Corridor Project. “The ULI study incited many great ideas, forged new partnerships, and created momentum for smart and inclusive planning in Grays Ferry and Southwest. It’s wonderful that ULI is continuing to show support for these recommendations and partners through this investment.”

Jumpstart program participants, referred to as Mentees, include Southwest community residents who are interested in learning about residential real estate development and are dedicated to making a positive difference in their community. Whether they are interested in renovating a house they want to move into or starting a career as a real estate developer, the program aims to connect Mentees to the training and financing they need to complete their projects.

“SWCDC is grateful to Urban Land Institute for supporting our Jumpstart Southwest program and we are excited to be able to continue to offer this program over the next year,” says Steve Kuzmicki, economic development program manager at SWCDC.  “We have learned that there is incredible demand for this kind of training in the community, and we look forward to reaching out to and working with the residents in the Gray’s Ferry Healthy Corridor target area”.

The overall objectives of Jumpstart are:

  • Create opportunities for residents to invest in and develop neighborhood residential development projects.
  • Build wealth locally.
  • Support scattered-site rehabilitation (as opposed to urban renewal).
  • Encourage a healthy mix of affordable and market-rate housing that lessens neighborhood gentrification.
  • Improve neighborhood safety and raise property values through blight reduction.
  • Help first-time investors become more attractive to traditional lenders.

The additional Healthy Corridors Implementation Grant will allow Southwest CDC to continue implementing this program. As part of their community efforts, Southwest CDC will make a concerted effort to reach out and recruit participants specifically from within the Grays Ferry study area.

PREIT Completes Sale of Land Parcel at Exton Square

by Steve Lubetkin,
PREIT completed the sale of a four-acre parcel at Exton Square to Hanover Company, generating gross proceeds of $10.3 million.

The sale will enable development of more than 300 luxury apartments on the site of Exton Square Mall, where a new Whole Foods opened earlier this year as a preliminary step in reimagining the property.
“We are pleased to have completed this transaction as part of our densification program, which serves to improve the value of our assets and our liquidity position to strengthen our balance sheet,” says Joseph F. Coradino, CEO of PREIT. “We will continue to redeploy the capital we raise into our successful anchor replacement program to drive traffic, sales and NOI and create value for shareholders.”

The transaction marks a critical step in PREIT’s high-priority densification program, designed to transform its properties into remarkable and innovative environments, with retail at the core. As previously reported by, PREIT has been working feverishly to reposition its mall properties, including its flagship assets in the South Jersey and Philadelphia markets, to relieve some of the occupancy pressures malls face as weaker retailers retrench. This has included an increase in the number of experiential tenants, restaurants, and even coworking space planned for the Cherry Hill Mall.

In May, the company announced that it would be looking for opportunities to develop residential components throughout its portfolio of well-located, mostly mall-style retail properties in high barrier-to-entry markets. PREIT said at the time it would seek to develop 5,000-7,000 residential units in the Philadelphia and Washington, DC, markets and 1,500-3,000 hotel units across a dozen properties. PREIT says it is in active discussions on three additional multifamily opportunities and three hotel opportunities.

Square Mile Capital Provides Financing for 1.1M SF NE PA Spec Industrial

by Steve Lubetkin,
Square Mile Capital Management originated a $54.4 million loan to finance completion of Interstate Distribution Center, a 1.1 million square foot bulk distribution warehouse facility being developed by a joint venture between affiliates of Endurance Real Estate Group and Blue Vista Capital, in Pittston, PA.

“Endurance and Blue Vista Capital are experienced, extremely well respected developers and operators of industrial properties in Pennsylvania and throughout the broader Northeast markets,” says Square Mile Capital principal Eric Cohen.  “We like the investment potential for financing distribution properties going forward and we will seek additional opportunities to deploy capital accordingly in markets across the country.”
Endurance is a Philadelphia-based real estate company specializing in industrial value-add and development projects, while Blue Vista Capital is a Chicago-based investment management firm.

Square Mile Capital originated the loan alongside senior financing provided by CIT Group. The financing was arranged by Ryan Ade of HFF’s Philadelphia office.

The development is located at the confluence of Interstates 81 and 476, providing convenient access to major metropolitan areas along the eastern seaboard. Nearly 33 percent of the U.S. population and 50 percent of the Canadian population are located within a 24-hour drive of the property. The submarket has experienced considerable growth in recent years with Amazon, Lowes, Walmart, and FedEx all occupying distribution facilities nearby.
“We are pleased to leverage our expertise to support the financing needs of Endurance and Blue Vista Capital by participating in this transaction,” says Chris Niederpruem, managing director and East Coast head of CIT’s Real Estate Finance group.

Monday, November 12, 2018

Exeter Property Group Pays $62.8 Million for Sears Distribution Center in Gouldsboro, PA

Exeter Property Group , a local full service investment, management and development firm, purchased a Class A, 1.03 million-square-foot distribution building in Gouldsboro, Pennsylvania, from Indianapolis-based Duke Realty Corporation. Sears Distribution Center sold for $62.8 million, or about $61 per square foot.

The single-story structure at 400 First Ave. comprises a 32-foot clear ceiling height. Built in 2007, the 5-Star building spans north of 76 acres less than 20 miles from Wilkes-Barre/Scranton International Airport.

Since 2006, Exeter Property Group has been entrusted to manage more than $5 billion in equity on behalf of its institutional clients across the globe, according to its website.

Duke Realty (NYSE: DRE), which has more than 149 million square feet of industrial properties in 20 major U.S. markets, originally purchased the building in May 2013.

NJ EDA Awards $39.1 Million in Tax Breaks for Philadelphia Firm to Open Gloucester County Hub

The New Jersey Economic Development Authority is offering a Philadelphia on-demand delivery service $39.1 million in tax incentives to open a nearly 300,000-square-foot distribution center in Gloucester County, bringing roughly 600 new jobs to the Garden State.

The EDA has awarded the tax credits to Gobrands Inc., which does business as goPuff and develops software that lets customers order items online or through the company's app, bringing products ranging from snacks and drinks to household items to people's doorsteps.

Gobrands, which serves 38 U.S. locations, is looking to centralize its logistics, research and development, warehouse and distribution operations, according to EDA documents. The company is weighing whether to build a 299,750-square-foot facility that would span the towns of Glassboro and Harrison, New Jersey, or go to a 327,044-square-foot building in Lansdale, Pennsylvania, the EDA said. The agency approved the incentives at its monthly meeting this past week in Trenton, New Jersey.

The potential New Jersey site is just off Route 322 in Glassboro, with only a small part of it in Harrison, according to Glassboro Zoning Officer Clark Pierpont. The portion in Glassboro is about 36 vacant acres that are owned by Rowan University, Pierpont said.

"The borough of Glassboro is extremely happy to partner with Harrison, [the town of] Mantua, Gloucester County, Rowan and the state to help bring Gobrands Inc. to our region," Joseph Brigandi Jr., Glassboro borough administrator and its executive director of economic development, said in an email. "The 600 new jobs will contribute significantly to the quality of life for our residents and businesses in Glassboro."

Mantua is a township across the street on Route 322 from the Gobrands site, according to Brigandi.

"Even though this particular project is not in their [Mantua] town, the partners I mentioned have been working together on developing all 600 acres that Rowan owns on their west campus location," he said.

The incentive winner said that it hasn't decided if it will come to the Garden State.

"GoPuff appreciates the support of the state of New Jersey EDA as we continue to transform the convenience and retail industries," Gobrands spokeswoman Liz Romaine said in an email. "This grant is a critical factor in our potentially locating our new tech and distribution hub in Gloucester County."

Gobrands, whose headquarters is at 454 North 12th St., Philadelphia, would make a $43 million investment in the New Jersey hub, which which would create 602 jobs, according to the EDA.

The new facility would be completed by February 2020, the EDA said, and the New Jersey tax incentives are granted over a 10-year period.

At its meeting, the EDA also awarded $8.25 million to Mesorah Publications Ltd., which prints Judaic books, $8.25 million to come to Rahway, New Jersey, and lease 130,000 square feet for a manufacturing facility at 313 Regina Ave., according to the EDA. The expansion would bring 110 new jobs to New Jersey. The Brooklyn, New York-based publisher is also considering expanding its manufacturing to a site in Yonkers, New York, instead of the Garden State, the EDA said.

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Liberty Property Trust Sells Malvern Office Properties for $173M

by Steve Lubetkin,
Continuing with its announced transition from office properties to a singular focus on industrial properties, Liberty Property Trust has sold four fully-leased office properties encompassing 568,658 square feet in Malvern, PA, for $173.1 million. The properties consist of: 50 Morehall Road, 117,000 square feet; 60 Morehall Road, 117,000 square feet; 425 Old Morehall Road, 201,658 square feet; and 1001 Cedar Hollow Road, 133,000 square feet. Liberty did not identify the buyers.

With this transaction, Liberty has executed $742.4 million in office sales in 2018.
In reporting Liberty’s financial results last month, Bill Hankowsky, chairman and chief executive officer, highlighted the REIT’s shift into industrial assets.

“Consistent with the opportunities we see in the marketplace, we intend to complete our strategic shift by monetizing our remaining, high-quality office assets and focusing our efforts and capital solely on our industrial platform,” Hankowsky says.

AmeriHealth Caritas Building New HQ in Newtown Square, PA

by Steve Lubetkin,
AmeriHealth Caritas, a national leader in Medicaid managed care and other health care solutions for those most in need, will expand its corporate headquarters and create two new campuses in the Philadelphia area.

“AmeriHealth Caritas is committed to investing in our Pennsylvania presence and will continue to contribute to the state’s growth and development with jobs, partnerships and investments,” says Paul Tufano, chairman and chief executive officer. “Our office expansion also aligns with our aim to be the employer of choice by creating work environments for our associates where they’re inspired to collaborate, innovate and achieve their fullest potential.”
The new location at Ellis Preserve in Newtown Square, PA, will provide AmeriHealth Caritas with approximately 378,000 square feet of newly constructed space and will accommodate approximately 2,000 employees at full capacity. Groundbreaking is scheduled to begin in late 2018 with an anticipated completion date of early 2021.

“We are thrilled that AmeriHealth Caritas will be expanding to Ellis Preserve,” says Dan DiLella, president and CEO, Equus Capital Partners. “They are a world-class company with a mission that matters and we feel very fortunate to welcome them to our campus, which is home to some of the region’s most distinguished employers.”

AmeriHealth Caritas is also planning a complete rebuild of its current location at Airport Business Center, Essington, PA, which will be the location for several key business units and the company’s operational functions. The renovated Essington location will provide 373,000 square feet of space and will accommodate approximately 2,000 employees at full capacity. Construction and renovation at Airport Business Center, owned and managed by Conshohocken, PA-based Keystone Property Group, will begin in 2021 with renovations expected to be completed by early 2022.
“As the anchor tenant at Airport Business Park, AmeriHealth Caritas is a longstanding and valued partner of Keystone’s, and we are extremely excited that they are expanding their operations in both Essington and their new location in Newtown Square,” says William Glazer, CEO of Keystone Property Group. “As one of the Philadelphia area’s major employers, the company’s success is vital to the entire region, and we look forward to creating a new, state-of-the-art venue where it can continue its tremendous success for years to come.”

AmeriHealth Caritas was among the first Medicaid managed care organizations to develop an integrated model of care, which addresses the physical health, behavioral health and pharmacy needs of Medicaid members in an integrated, holistic way in order to achieve the highest quality outcomes.

Over the past two years, the company conducted numerous studies to determine the best location for its new corporate headquarters, and space for Operations and Information Systems. The company analyzed considerations such as where associates live, access to transportation and future growth of the organization.

AmeriHealth Caritas’ focus on excellence will be reflected in the two campuses based on findings from these studies. Associates will collaborate in inspiring spaces, supported by amenities that will bring out their best work.

Amenities at both sites are anticipated to include:

Access to daycare resources
Fitness centers
A range of unique and healthy food service options
Access to public transportation
Hotel access

Tryko Partners Acquires Affordable Housing Complex in Chester, PA

by Steve Lubetkin,
Tryko Partners has added 150 affordable senior housing units to its portfolio with the addition of Robert H. Stinson Tower in Chester, PA. The private equity investment group this fall acquired the 13-story building at 1501 Arbor Drive.

“Tryko has a strong presence in the regional market, including Philadelphia, its suburbs and Southern New Jersey,” says Uri Kahanow, the firm’s director of acquisitions. “This includes multifamily – with a blend of senior and traditional, affordable and market rate – as well as skilled nursing and assisted living. Robert H. Stinson Tower was a logical fit in terms of both location and product type, as senior affordable housing continues to be an attractive sector for investment.”
Tryko’s planned improvements for the property include immediate upgrades to its elevator cabs, to be followed by additional renovations to systems, units and grounds.

Wells Fargo Multifamily Capital, through its Fannie Mae execution, provided financing for the Robert H. Stinson Tower acquisition.

Based in Brick, NJ, Tryko purchases multifamily properties, healthcare facilities and service entities, and tax liens along the east coast and in the Midwest. Today Tryko owns more than 7,200 residential units, including more than 4,425 affordable housing units and multiple age-restricted properties.
The organization has grown its real estate and healthcare portfolios by identifying recovering markets and maximizing investor returns through diligent acquisitions, hands-on management and value-added capital improvements.

Thursday, November 8, 2018

Philly’s Office Market Picking Up Steam

by Corina Stef, Commercial Property Executive Publication
Philadelphia’s office market is driven by strong job growth, a large number of startups, a deep talent pool and a diverse business ecosystem. That has helped fuel the re-emergence of Center City and redevelopment of outlying areas, exemplified by large-scale projects such as Brandywine Realty Trust’s up-and-coming $3.5 billion Schuylkill Yards development and Philadelphia’s tallest skyscraper, Comcast Center.

The number of degree-holding Millennials has grown in recent years, and the metro has become a catalyst for tech and life sciences firms seeking talent. Education and health services (13,700 new jobs) topped job growth over the past year. Spurred by a knowledge-based economy, office-using employment gained steam, led by the professional and business services sector, which added 3,900 jobs.

As the metro’s fundamentals continue to strengthen, demand for quality office product is high, leading to fierce competition for premium space, especially in downtown areas. Absorption in most submarkets is positive, and the vacancy rate was 12.3 percent in the metro as of June. Asking rents are rising moderately.

The development pipeline is strong, with 2.9 million square feet under construction as of June.

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Viking Partners Acquires Office Assets in Suburban Philadelphia, PA

by Steve Lubetkin,
Cincinnati, OH-based Viking Partners Fund, a private equity real estate investment firm focused on the acquisition, turnaround and disposition of value-add real estate and real estate related assets, has acquired Bucks Town Corporate Center in Langhorne, PA, and Forest Park 1 in Charlotte, NC. Financial terms were not disclosed.

The Bucks Town Corporate Center was previously owned by an affiliate of LNR Property Corp. in Miami, FL, which acquired the asset in March 2017 from Lingwood Partners. Lingwood acquired the property from Liberty Property Trust in September 2007 for $20 million, according to Real Capital Analytics, a proprietary research database that tracks commercial real estate transactions.
“Both Bucks Town and Forest Park fit well within Viking’s business model of uncovering value-add assets in key strategic markets and implementing well thought redevelopment plans,” says Bret Caller, principal with Viking Partners. “We feel there is tremendous upside opportunity with each of these assets.”

Bucks Town Corporate Center is a 142,000 square-foot, five-building office/flex complex located at Middletown Blvd. and Town Center Drive in Langhorne. Bucks Town is adjacent to Oxford Valley Mall and convenient to both I-95 and State Route 1.
Forest Park 1 is a two-building asset totaling 52,175 square feet located on Forest Park Circle in southwest Charlotte near I-77, I-485 and Charlotte Douglas International Airport.

Wednesday, November 7, 2018

2019 Real Estate Forecasts Pt 1 (Video)

Here + Now: 2019 Real Estate Forecasts - Part 1 from Metro Commercial on Vimeo.

Anchor Health Properties Pays $17M for Suburban Philadelphia Medical Office Buildings

Charlottesville, Virginia-based Anchor Health Properties purchased two medical office buildings at Wellness Center totaling 68,737 square feet in Hazertown, Pennsylvania, from New-York-based DWS. Crozer-Keystone Medical Office and Surgery Center sold for $17 million, or about $247 per square foot.

The Class B buildings at 2010 and 2050 West Chester Pike span nearly four acres less than eight miles from University of Pennsylvania. The three- and four-story structures are 93 percent leased and anchored by Crozer-Keystone Health System.

Anchor Health Properties has nearly 4 million square feet of space under management, more than 800,000 square feet in development and 12 offices in the U.S., according to its website.

MULTIFAMILY INFLUENCER: Post Brothers Apartments

by Steve Lubetkin,
Brothers Matthew and Michael Pestronk are co-founders of Post Brothers Apartments, a Philadelphia-based developer of luxury rental communities throughout the Northeast. Their venture established in 2006 and since then they have built an impressive portfolio valued well in excess of $2 billion.
The momentum created by the Post Brothers’ landmark projects has also fueled the development of thriving neighborhoods around these residential communities. Presidential City for instance, the 1,000-unit rental community that underwent a $200 million renovation under Post Brothers, was Philadelphia’s largest residential adaptive reuse project. Its impact on the neighborhood surrounding the Philadelphia City Avenue corridor—long known as a stretch of office parks—is evident in the influx of new restaurants, coffee shops and entertainment venues.

Presidential City is typical of the Post Brothers’ approach: revitalizing existing, outdated assets through massive-scale adaptive reuse construction to produce cash-positive projects. Not that they take a formulaic approach to development. Instead innovative, creative design tactics unique to each project are used to build a project that resonates with residents.
Post Brothers also incorporates a variety of sustainable and green features into their developments. The Goldtex building in Philadelphia, an ultra-lux community sprung from the redevelopment of a former shoe factory in the Center City loft district, was the city’s first LEED Gold certified residential high-rise. In general all residences within the company’s portfolio feature Energy Star appliances, 100% LED light bulbs, new high-efficiency heating and cooling systems, ceiling fans in every bedroom and living room, double-pane thermal insulated windows, and heavy insulation. Post Brothers has also used green wind power since 2011.

To handle its operations and execute on its projects, Post Brothers has structured corporate responsibilities along the following lines. Michael Pestronk is CEO, heading all property development and operational activities at Post Brothers, while Matthew Pestronk oversees all equity and debt financing, as well as identifying, structuring and executing acquisition opportunities, as president. Property management VP Yvette Stewart-Glimp oversees more than 35 employees across 1,100 units. And development VP Sarina Rose specializes in complex project planning, contractor negotiations and all aspects of project management for the company.

Tuesday, November 6, 2018

National Development Completes First Phase of Transformative East Market Project

by Steve Lubetkin,
National Real Estate Development has completed the first phase of its transformative $800 million, mixed-use East Market project in Center City.

Bounded by Market, Chestnut, 11th & 12th streets, East Market bridges Philadelphia’s historic and business districts. The $400 million first phase of the residential-retail-office project has reimagined an ageing and underutilized section along Market Street, the city’s primary east-west corridor, into a dynamic full block of leading stores and popular restaurants.
It also includes 175,000 square feet of new class A, LEED-certified creative office space and more than 560 luxury apartments in two towers; and is connected by a reinvented, pedestrian-friendly Ludlow Street streetscape and a 35-foot wide pedestrian walkway spanning Market Street to Chestnut Street.

Philadelphia Mayor Jim Kenney thanked National for its “signature investment in one of our city’s most important ongoing projects. East Market is helping redefine and enhance the entire district east of City Hall and turn the area into more of a magnet for working, living, and enjoying all of the benefits that our great city has to offer. And we look forward to this project’s next stage which will create more value and more jobs to benefit the city, our people, and our visitors.”

The first phase of East Market includes:

  • The Ludlow (1101 Ludlow Street), a 17-story, 322-unit luxury apartment tower and 130,000 square feet of retail space.
  • The Girard (1199 Ludlow Street), a 23-story, 240-unit upscale residential tower, currently in pre-leasing, above a two-story retail podium, which will offer 60 boutique apartments through ROOST Apartment Hotel.
  • 1100 Ludlow, a 200,000-square-foot office tower with 175,000 square feet of creative office space, the new home of the Design Center of Philadelphia and the award-winning architecture firm, Bohlin Cywinski Jackson.
  • Stores and Restaurants: Retail tenants are anchored by J. Maxx; gourmet grocer MOM’s Organic Market; Wawa, the popular regional convenience store; Iron Hill Brewery; City Fitness; AT&T; Little Baby’s Ice Cream; Federal Donuts; and District Taco.

“East Market is a dynamic new gathering place where Philadelphians can connect to all the city has to offer,” says Daniel Killinger, managing director of National Development, who oversees the project. “For our residents and tenants, it offers the benefits of its Center City location and all its immediate attractions, direct access to public transportation, and the convenience of shopping and restaurants all in one meticulously designed, pedestrian-friendly development.”

East Market is owned by National Real Estate Advisors, an investment manager specializing in build-to-core, developing and owning large-scale, urban commercial and multifamily projects for its institutional client accounts; Joss Realty Partners, a New York-based private real estate investment firm; Young Capital, a Philadelphia-based real estate investment firm affiliated with Classic Management; and SSH Real Estate, one of the largest privately held commercial real estate companies in the Greater Philadelphia Region. East Market is being developed by National Development, the full-service development arm of National Real Estate Advisors.

Thursday, November 1, 2018

CBRE CEO Weights in on the Commercial Real Estate (Video)

How To Spot a Region’s Next Emerging Hot Spot

Before it became one of the hottest neighborhoods in Pittsburgh, Lawrenceville was once a blighted community – “a blue-collar neighborhood more down-and-out than up-and-coming,” according to Pittsburgh Magazine. As blighted, economically depressed communities tend to be, it was overtaken by all the usual markers: overgrown weeds, busted sidewalks, boarded up storefronts, vacant residential properties, poverty, and run-down housing stock. And stretching for blocks, there were abandoned, obsolete steel mills and factories, once hallmarks of the area’s industry and prosperity, turning to rust and decay – a painful reminder of better times.

Now, Lawrenceville is the epicenter of “Robotics Row,” a strip of robotics-focused businesses spanning a stretch of about two miles that is quickly becoming the area’s new economic pillar. Some of these companies, which need large amounts of space and light manufacturing capabilities, have repurposed and reclaimed the vacant industrial facilities of the past to create locations of their own. The demand for such tech-flex industrial space is now so strong that it far outstrips supply. Restaurants and other businesses and support services that want to be in these tech companies’ orbits have also contributed to the influx of jobs and people into the community. This repopulation has naturally been a boon to the housing market, creating demand for both new and rehabbed housing.

Neighborhoods like Lawrenceville and small secondary cities are often overlooked, especially in juxtaposition to nearby hot central city locations. So the story of how Lawrenceville accomplished this transformation is something others should consider – it offers guideposts to real estate investors looking for the next regional hot spot.
What Makes a Location Attractive?
How do we identify these diamonds in the rough? And what steps can be taken to help polish them?

It’s a mix of tangible and intangible assets that makes a location attractive. Tangible attributes might include community “anchors” such as a research university, teaching hospital or major tech or manufacturing company that attracts and trains talent, as well as a legacy workforce with a relevant skillset. There also needs to be some semblance of place – an older downtown or business district that’s walkable, with buildings with good bones and housing stock that can be rehabbed into cooler space.

In the case of Lawrenceville, its proximity to Carnegie Mellon University and other universities gave it a competitive edge. The creation of the Robotics Institute at Carnegie Mellon in the 1980s, and the institute’s subsequent success in creating and locating the National Robotics Engineering Consortium (NREC) in Lawrenceville, played a critical role in putting the community back on the radar. It also translated the academic genius of Carnegie Mellon faculty into commercial applications with corporate partners that eventually resulted in spin-off companies that made their homes in Lawrenceville.

Before the robotics industry gained traction, the presence of design-oriented firms – like antiques shops, studios and galleries – preserved the community’s older buildings and rekindled its spark of life.

RIDC Plays a Role
The Regional Industrial Development Corporation of Southwestern Pennsylvania (RIDC), a unique, private nonprofit with an entrepreneurial vision of economic development, saw that the beginnings of a vibrant industry and community transformation could become stunted by a lack of suitable commercial real estate. That presented an opportunity – to create homes for businesses of the future by redeveloping the obsolete industrial sites of the past, which in turn led to investments in facilities including the Heppenstall Steel Mill and Geoffrey Boehm Chocolates Factory.

Out of those investments has been RIDC’s Tech Forge building, which is now home to Caterpillar’s Pittsburgh Automation Center and Aurora Innovation; RIDC’s Chocolate Factory building – home to HEBI Robotics, RedZone Robotics, nanoGriptech, and Helomics; and the former Heppenstall building, a 30,000 square-foot heavy industrial high-bay facility built out for Carnegie Robotics, a spin-off from NREC.

And then the capstone of the Lawrenceville’s turnaround was the location of UPMC’s Children’s Hospital.

Intangible assets are also crucial and include the facilitation of a certain type of community vibe. While difficult to define – you know it when you see it – it captures the authenticity and sense of place that cannot be manufactured. Lawrenceville’s long history as a walkable industrial/residential neighborhood gave it a feel that can’t be faked. Even its new buildings are not glamour and glitz but rather reflect the industrial history and character of the place. As a case study, Lawrenceville provides an interesting answer to what has become a major debate in real estate today: do people follow jobs, as it has been presumed for decades, or do jobs follow people? Do you invest in hard assets – buildings, infrastructure and land use policies that facilitate development – or do you invest in community amenities – bike lanes, parks and recreation – that the workforce is looking for? The answer, of course, is both.

In the Southwestern PA region, communities like Millvale, Etna and Sharpsburg, small secondary cities located in Pittsburgh’s periphery, are ripe with potential and poised to experience the same kind of explosive growth as Lawrenceville. These communities are surrounded by industrial reuse candidates and already have some amenities brewing – such as brewpubs, bakeries and music venues. Some in-migration of young talent reinforcing the value proposition in place and supporting housing and commercial development. They are also less bogged down by bureaucratic development rules and not all their industrial space has been converted into residential space.

These areas also have a vision or plan for their future and embrace growth and (re) development. Rather than constructing roadblocks to development, they help to remove hurdles. This openness to change is perhaps the key defining feature we look for.

So take a look outside the hot central city locations to secondary neighborhoods or cities. Locations such as these can be well positioned to transform their largely intact commercial districts and amplify some of what’s already located in their communities to create more flexible, less expensive, amenities-rich, walkable neighborhoods in which to live, work and play. Poised for explosive growth, they have the potential to become the next Lawrenceville or even the next Denver, Charlotte or Nashville.