Thursday, December 30, 2021

KKR Expands Pennsylvania Industrial Portfolio With Lehigh Valley Purchase

By Rachel Whaley CoStar Research 

KKR, a New York-based global investment firm, has purchased a two-building, about 1.5 million-square-foot distribution complex in Allentown, Pennsylvania.

KKR acquired the two-building portfolio through its core plus real estate strategy from GLP Capital Partners. Financial terms of the sale were not disclosed.

Completed in 2019 and 2020, the two buildings feature a 36-foot clear height, 190-foot truck courts and large loading areas. Both buildings are fully leased by Keurig Dr Pepper, according to CoStar data. Both the tenant and prior ownership had invested significant capital into the two-building complex.

The property is located off Industrial Boulevard in the heart of the Lehigh Valley adjacent to Interstate 78, providing access to major East Coast metropolitan areas; New York, Washington and Philadelphia are within a one- to three-hour drive.

This purchase bolsters KKR's industrial real estate portfolio in Pennsylvania to just over 3 million square feet.

"We are excited to grow our portfolio in one of the country’s top distribution markets with this high quality asset," Ben Brudney, a director in the real estate group at KKR who oversees the firm's industrial investments in the United States, said in a statement. "We believe that state-of-the-art distribution centers in highly infill locations with strong demand and barriers to new supply will continue to benefit from the acceleration of e-Commerce penetration."

KKR has acquired about 47 million square feet of industrial space in strategic locations across major metropolitan areas in the United States across its funds. Since launching a dedicated real estate platform in 2011, KKR has grown real estate assets under management to about $36 billion across the U.S., Europe and Asia as of September 2021.

What Are the Top 3 Real Estate Assets to Invest in 2022? (Video)

Thursday, December 23, 2021

Spark Therapeutics To Build $575 Million Gene Therapy Center on Drexel's University City Campus

 By Carlos Likins CoStar News

Spark Therapeutics plans to invest $575 million to build a new gene therapy innovation center on Drexel University's campus in Philadelphia's University City neighborhood.

Through a 99-year ground lease of Drexel University's F Lot, the new gene therapy center will be located at the intersection of 30th and Chestnut streets. The 500,000-square-foot, multistory facility is set to be a part of Spark's now projected 1 million-square-foot campus in Philadelphia.

"Through this significant investment and plans to more than double our physical footprint, we’re poised for continued growth as we seek to develop the next generation of genetic medicines as a member of the Roche Group," Jeff Marrazzo CEO and co-founder of Spark Therapeutics, said in a statement. "Since founding Spark eight years ago, Philadelphia has been part of our company’s DNA and we’re proud to continue to call Philadelphia home for many years to come."

Spark Therapeutics is currently headquartered at 3737 Market St. in University City. Spark was acquired by Swiss multinational pharmaceutical company Roche in 2019, but it continues to operate as an independent company in Philadelphia.

"Since founding Spark, we knew Philadelphia had the potential to be the life sciences hub it is becoming today," said Marrazzo. "From our prestigious universities and hospitals, to the investments poured annually into scientific research and the sheer volume of medical professionals that receive training here, Philadelphia has every ingredient necessary for life sciences companies to succeed. We’re honored to be part of Philadelphia’s success story and proud to feature the city in the next chapter of Spark’s story with our colleagues at Roche."

In addition to its physical expansion, Spark Therapeutics is entering a long-term partnership with Drexel University to advance life sciences research and innovation in University City, according to the university's president, John Fry.

"This partnership will generate unparalleled opportunities for our students and faculty to participate in groundbreaking research and to help create and sustain the workforce that will make West Philadelphia a leader in the life sciences revolution," Fry said in a statement.

Construction on Spark's new gene therapy innovation center is anticipated to begin in the fourth quarter of 2022.

Wednesday, December 22, 2021

Demand for commercial real estate over the longer-term appears to be pretty favorable (Video)

MM Partners planning $31M mixed-use development in heart of Norristown

 Natalie Kostelni Reporter Philadelphia Business Journal

MM Partners, a Philadelphia real estate company known for its development in Brewerytown, is planning a $31 million apartment complex in the heart of Norristown.

It will stand as an unprecedented amount of private investment in the Montgomery County seat and could prompt other developers to explore opportunities in the borough, which is trying to undergo a revitalization.

The development will consist of a seven-story building with 111 market-rate apartments and 12,000 square feet of commercial space at the intersection of Main Street and DeKalb Street.

“What’s intriguing about Norristown is its location,” said David Waxman, co-founder and managing partner at MM. “It’s well served by transportation, the courthouse is being redone with a massive park and you have a history there. Like Brewerytown, it’s surrounded by good neighborhoods and it’s a hole in the doughnut. We think we can take some of the plays from the same playbook we used in Brewerytown and apply them here.”

MM Partners ventured into Brewerytown roughly 20 years ago when the neighborhood wasn’t attracting much investment. The firm converted old factories into apartments and bought buildings along West Girard Avenue, renovating the upper floors into residential and leasing the retail space to tenants. It used both the residential and retail along with other placemaking efforts to activate the neighborhood.

Rebecca Swanson, executive director at the Montgomery County Redevelopment Authority (RDA), was familiar with MM Partner’s work in Brewerytown, having served six years with the Philadelphia Department of Licenses and Inspections. About a year ago, the RDA issued a request for proposals for developers to respond with ideas for the highly visible site in Norristown.

“It’s a big opportunity,” Swanson said. “We wanted someone who has familiarity with vertical and urban development. We really wanted active ground floor commercial space with retail, restaurants and amenities for everyone who lives and works in Norristown.”

The RDA received four proposals, of which three were strong and from Philadelphia developers who have done large projects, said Swanson. She declined to disclose the names of the other developers.

For MM Partners, though Norristown was outside of Philadelphia, where it had focused much of its development activity, it didn't seem like too much of a stretch. “When I reviewed the RFP, I fell in love with it,” said Joe Zimatore, a partner at MM Partners. Waxman and Zimatore walked the site and the surrounding area in November 2020 with Swanson and other Norristown officials, who wanted hear what they envisioned for such a high-profile location in the community.

“Norristown is a great opportunity,” Zimatore said. “From a location standpoint, you can’t get a better location. Its proximity to King of Prussia, Conshohocken and even Philadelphia. It’s close to SEPTA. It’s next to a distillery and the county buildings.”

Full story:

Friday, December 17, 2021

Equus Capital Partners sells Microsoft-anchored office building in Malvern for $36.3M

 Natalie Kostelni Reporter Philadelphia Business Journal

Equus Capital Partners Ltd. has sold 45 Liberty Blvd., a three-story, 136,977-square-foot office property in Malvern, for $36.3 million.

FLD Group, a real estate company from Lakewood, New Jersey, bought the property that was 95% occupied and Microsoft Corp. is an anchor tenant. This is the second building FLD has purchased in the Great Valley Corporate Center. In 2019, it bought 100 Deerfield Lane, a 91,190-square-foot office building, for $15.5 million.

Full story:

Warehouse Tenants Face Price Shock as US Industrial Rents Soar

 By Randyl Drummer CoStar News

Warehouse tenants are bracing for the kind of sticker shock already familiar to shoppers buying everything from ribeye steaks to used cars.

Logistics tenants that signed five-year leases with standard 3% annual rent increases in 2016 are at the end of their terms and are facing a situation in which they must renew or move at a time when rents are on average 25% higher across the country than they were a half-decade ago. Research also shows steep increases in rents.

The rent increases are significantly more pronounced in some coastal markets, ranging from 50% to 64% higher than five years ago in Southern California's Inland Empire, Philadelphia and Central Jersey. It said the highest increases were in Central Jersey, where rents were on average 64% higher in that time.

In all, eight California markets are experiencing rent increases above the national average. Rents are up significantly over the past five years in industrial markets in the Inland Empire, with a 61.7% increase, as well as Sacramento's 52.9%, Orange County's 46.6%, the Central Valley's 43.6%, Oakland's 39.4%, Walnut Creek's 36.6% and greater Los Angeles' 33%.

That data is roughly in line with findings by CoStar research, which tracked rent increases of 52.7% over the past five years in the Inland Empire, including a year-over-year gain of 11.3% this year. Industrial rents rose 7.2% in 2020, the first year of the pandemic.

The increases come as the construction of new warehouse and logistics space has failed to keep pace with demand during the pandemic, sending vacancy rates to all-time lows. In the Inland Empire, which has an industrial base of 700 million square feet, landlords have reacted by increasing asking rents nearly 16% in the third quarter from the same point in 2020. New space is either preleased or occupied within a few weeks of being finished, the brokerage reported.

"The bottom line is that rents have doubled within the last 18 months. With construction not keeping up with demand, tenants are realizing that their first priority is securing space at almost any price."

Demand Drives Prices

The increase in demand comes as logjams in global supply chains have slowed delivery of a range of products, from microchips used in automobiles to the steel used to construct warehouses. As a result, consumer prices have been on the rise, with used car prices climbing 40% since the early days of the pandemic in March 2020 and the price of steak rising 25% over the past year.

A lack of available buildings is affecting even the world's largest warehouse landlord and developer. Thomas Olinger, chief financial officer for San Francisco-based Prologis, recently said the firm's buildings are “effectively sold out” as businesses race to lease a diminishing supply of warehouse space during a global supply chain bottleneck.

Tenants that once began renewal negotiations six months before their leases were to expire are now starting talks up to two years in advance for some large buildings in the Inland Empire.

"We're seeing our tenant clients or others in the market get out in front of lease decisions far earlier than they used to in order to navigate the challenges of limited supply of existing and new buildings," who has represented such industrial occupiers as Millennium Distribution and Smart Turn Logistics.

"With the exorbitant rent growth we're seeing, landlords don't want to commit to an agreed-upon rent too early, because they're concerned they may leave income on the table."

"Owners and tenants are finding that the market blows by them as soon as they sign a lease. The owner feels regretful and the tenant feels lucky to have made the deal, even though they thought they were paying through the nose."

Wednesday, December 15, 2021

Gattuso Development Begins Construction on New Life Science Facility at Philadelphia’s Navy Yard

 By Spencer Billups CoStar Research

Gattuso Development Partners has started construction on a flex production facility in Philadelphia's Navy Yard as it responds to the skyrocketing demand for life science development, particularly for cell and gene therapy research and manufacturing space.

Located at 2500 League Island Blvd., the 130,000-square-foot facility is set to feature 30-foot clear heights,14 loading bays and 360 surface parking spaces. The new building, which follows earlier Gattuso-led life science Navy Yard projects including WuXi AppTec, Adaptimmune and most recently Iovance Biotherapeutics, is the latest indication of the city's emergence as a leader in the life science industry, particularly for cell and gene therapy.

"There is incredible demand for space, and companies are conducting national searches for new locations as this sector expands," John Gattuso, principal and founder of Gattuso Develoment Partners, said in a statement. "As a result, this facility is designed to help meet the pressing need for current Good Manufacturing Practices (cGMP) lab and production space that will allow this ecosystem to grow."

Gattuso Development secured construction financing from Citizens Bank and joint venture equity with Boston-based The Baupost Group for the project . JLL's Ryan Ade and Brett Segal arranged the financing and equity.

"The evidence is clear that if we can meet the demand for cGMP lab and production space, Philadelphia can become a critical epicenter for an industry that many see as the future of modern medicine," Segal said in a statement. "Thanks to the research and innovation cultivated at Penn, Jefferson, Temple, Drexel and Children’s Hospital of Philadelphia, we are clearly positioned for significant growth in the years to come – if we can provide the research, lab and production space that the life sciences industry is demanding."

The project is set to deliver in the fourth quarter of 2022 and is targeting LEED Silver certification. Sitio designed the facility.

Thursday, December 9, 2021

Cordish to Sell Live! Casino Philadelphia and Two Other Casinos for $1.81 Billion

By Mark Iovanisci CoStar Research

The Cordish Cos. has agreed to sell three of its casinos to Gaming and Leisure Properties in a $1.81 billion deal it said will also establish a binding partnership between the two firms on future casino developments.

The Baltimore company behind the Live Casino brand, Cordish said it will sell Live Casino & Hotel Maryland, Live Casino & Hotel Philadelphia and Live Casino Pittsburgh, as well as the long-term ground leases, to GLPI.

Concurrent with the sales, Cordish will lease back the properties and continue to own, control and manage all gaming operations at each casino, the company said. Cordish will enter into a new triple-net master lease for Live Casino & Hotel Philadelphia and Live Casino Pittsburgh, and a single-asset lease for Live Casino & Hotel Maryland.

The Maryland sale is expected to close by year end, while the Pennsylvania transactions are expected to close early next year. All three deals still must receive state regulatory approvals and clear other financing and closing hurdles before being finalized.

David Cordish, chairman of the global real estate development firm that dates back to 1910, said the partnership will provide opportunities for Cordish to grow the Live brand while aligning two recognized leaders in their respective industries. The firm has developed and operates destination resorts and entertainment spots across the country including the Hard Rock Hotel & Casino Hollywood, Hard Rock Hotel & Casino Tampa, Power Plant Live in Baltimore and Bally Sports Live in St. Louis.

For GLPI, the pending acquisitions and subsequent leases will provide strong rent coverage at an accretive capitalization rate, or rate of return, while continuing to expand and diversify its portfolio, Peter Carlino, chairman and CEO of Pennsylvania-based GLPI, said in a statement.

GLPI disclosed in a separate release on Monday that it plans to sell 7.7 million shares of common stock that has been valued at about $344.6 million to partially finance the purchase of the three casinos, though it will use the proceeds as working capital, including to buy and develop other properties, if the Cordish deal were to fall through.

The deal will include $323 million in newly issued operating partnership units that GLPI said will economically align the two companies for future collaboration and potential financial partnerships in other areas of Cordish’s property and business portfolio. 

The awaiting transactions set up a larger partnership between the two companies after the firms agreed to collaborate on a range of future real estate and development opportunities. That includes a partnership where GLPI would co-invest with Cordish on any new gaming development project for a period of seven years following the sale of the two Pennsylvania properties. As part of the agreement, GLPI would invest in 20% of Cordish’s portion of the equity in the project throughout the life of the development.

Additionally, GLPI would also have a right of first offer and right of first refusal on any sale-leaseback or similar transactions that Cordish pursues.

Following the sale of the three casinos, Cordish will enter into the new leases that are set to have an initial term of 39 years with a maximum term of 60 years. The initial annual rent for all three properties will be $125 million, representing an implied capitalization rate of 6.9%, GLPI said. The leases also have a 1.75% fixed yearly escalator that will start in the second year.

Wells Fargo Securities is acting as financial adviser to GLPI on the transaction.

How Was Commercial Real Estate Sales Activity in 2021? (Video)

Global Commercial Real Estate Outlook 2022 (Video)

Monday, December 6, 2021

Philadelphia Based Five Below Sticks to Target of More Than Doubling Store Count to 2,500

 By Linda Moss CoStar News

Five Below, the hands-on retailer that caters to kids, tweens and teens, said it's keeping to its target to more than double its number of stores to 2,500.

The Philadelphia-based chain now has 1,190 brick-and-mortar retail locations in 40 states as it continues its national expansion, moving westward from the East Coast. The company has also been bolstering its distribution network with new warehouses in Arizona and Indiana.

Counting store debuts in the fourth quarter, Five Below completed 170 net new openings for the year, CEO Joel Anderson said during a fiscal third-quarter call.

“As we look ahead, we are confident that we will continue to drive sustainable long-term growth while realizing our 2,500-plus store potential in the U.S.,” he said in a statement.

While some retailers that serve the younger set have struggled — most notably Toys R Us, which is attempting yet another comeback after the chain was liquidated — Five Below has been in a super-growth mode. The retailer’s stores offer children and tweens — generally considered those 9 to 12 years old — an array of toys, candy, sports items and other merchandise that they can play with and “experience,” priced from $1 to $5. Officials boast that Five Below offers parents a place to take their kids to have a fun time at a minimal cost.

"You shouldn't expect our growth engine around new stores to slow down," Anderson told Wall Street analysts. “There is no other national retail out there that is specifically targeting teens and tweens and kids, and Toys R Us went out three years ago. And we do it with a great shopping experience, and it's all about value. [And] as long as I'm here, we're going to keep investing for the future.”

Five Below's competition may be heating up, as WHP Global, now majority owner of the Toys R Us brand, recently said it was opening up a flagship for the once-defunct toy store at the American Dream mega mall in East Rutherford, New Jersey, later this month. Toys R Us shop-in-shop locations are also open in Macy's.

Five Below is experimenting with two new store prototypes, including one that incorporates higher-priced items in a section called "Five Beyond," according to Anderson.

"I will tell you that we're extremely bullish about Five Beyond," he said. "It's in about 30% of the chain today. It will be in roughly about half the chain at the end of next year."

Rapidly expanding its store fleet — particularly into California, Florida and Texas — means that Five Below has had to open more logistics facilities, according to Christopher Giannini, the retailer's senior director of property management and development.

It has more than 5 million square feet of distribution space, with almost 4 million square feet of that developed over the past three years, he said during a panel last month at NAIOP I.CON East, the nation’s largest gathering of industrial real estate professionals, in Jersey City, New Jersey.

Five Below's first major distribution center was in Pedricktown, New Jersey, and the company has since opened warehouse facilities outside Macon, Georgia, and in Conroe, Texas, according to Giannini. It also recently debuted one in Buckeye, Arizona, one of the country's fastest-growing suburbs, and has construction of one underway in Indianapolis, he said.

Five Below typically owns its warehouses rather than leases them, and they are generally 700,000 to 1 million square feet, with the ability to expand, Giannini said. For example, the one being built in Indianapolis will be 1 million square feet, but it is on an 85-acre site, which will permit the building to expand to 1.3 million square feet, he said.

Referring to Five Below's retail openings, Giannini said, "We want to double the amount of stores and then some, so we built in some flexibility [in warehouses] to continue to grow that.”

For its stores, Five Below leases space, taking on average 9,000 square feet with a 10-year lease with options to extend the deal.

The company’s net sales rose 27.5% to $607.6 million from $476.6 million in the third quarter of fiscal 2020, while comparable sales increased by 14.8% versus the third quarter of fiscal 2020.

Friday, December 3, 2021

Real Estate Cap Rates Explained (Video)

REIT Acquires Two Shopping Centers Along I-95

 By Ingrid Tunberg

United Hampshire US REIT, a Singapore REIT sponsored by UOB Global Capital and the Hampshire Cos., has acquired two grocery-anchored shopping centers along the Interstate 95 corridor.

The acquired properties comprise the 258,494-square-foot center, Penrose Plaza, located at 2900 Island Ave. in Philadelphia, PA, and the 168,326-square-foot center, Colonial Square, located at 3107 Boulevard in the Richmond, VA suburb of Colonial Heights.

The two transactions serve as UHREIT’s first post-IPO acquisitions, and represent UHREIT’s first acquisitions in the respective states.

The transactions bring UHREIT’s total number of assets to 24, representing more than 3.6 million square feet. The REIT currently has 20 grocery-anchored and necessity-based properties and four modern self-storage facilities along the Interstate 95 corridor.

Penrose Plaza is currently 94% leased and is anchored by ShopRite. The shopping center is tenanted by an array of tenants including dd’s Discounts, Dollar Tree and Citi Trends. The property offers access to More than 20,000 businesses and 581,000 residents are located within a five mile radius of the property.

Colonial Square is currently 99% leased and is anchored by Publix. The property is also leased to Locke Supply Co., Wells Fargo and Dollar General, and is situated near 87,400 residents in the immediate vicinity and Richmond metropolitan area.

“Strong annual GDP growth and an improving economy have continued to power a robust necessity-based retail real estate market across the eastern U.S.,” says Robert Schmitt, UHREIT’s CEO. “The acquisition of these two properties represents a significant opportunity to tap into this continued strength by adding two high-quality, resilient and stable income-producing grocery-anchored and necessity-based properties to our already robust portfolio of high performing assets.”

Derek Gardella, Head of Investments of the UHREIT added, “With highly favorable demographics, strong population density and strong buying power in the eastern portion of the U.S., the overall grocery-anchored real estate market has shown remarkable resilience throughout all stages of the pandemic,” states Derek Gardella, UHREIT’s head of investments.

“As we look to 2022, we remain optimistic about the broader market’s long-term prospects and look forward to identifying further opportunities to acquire grocery-anchored and necessity-based retail properties in the eastern half of the country to continue to grow the UHREIT and tap into continued demand.”

Thursday, December 2, 2021

Deloitte's Commercial Real Estate Outlook 2022 (Video)

Kohan Picks Up 1.1 Million-Square-Foot Montgomery Mall Near Philadelphia

 By Mark Heschmeyer CoStar News

Kohan Retail Investment Group, a specialist in investing in troubled malls and shopping centers, has acquired the six-property, 1.1 million-square-foot Montgomery Mall in North Wales, Pennsylvania.

The purchase starts a new chapter for the mall that was owned by Simon Property Group through the first half of 2021.

Kohan bought the mall from LNR Partners, a commercial mortgage-backed securities special servicer that took possession of the property in July through a negotiated foreclosure with Simon, according to CoStar CMBS data. LNR then put the mall up for auction in August.

Kohan was selected as the preferred buyer and paid $55 million, or about $56.50 per square foot, in late November. The mall was appraised at $195 million when it was refinanced with $100 million in CMBS financing in 2014.

The super-regional mall located halfway between Philadelphia and Allentown, Pennsylvania, was among the centers nationwide hard hit by the COVID-19 pandemic. Simon defaulted on loan repayments in summer 2020 and worked with LNR for a year on the eventual outcome, according to CMBS data.

Bond rating analysts from DBRS Morningstar visited the mall twice in July and noted on both occasions that there was minimal activity, except near a Wegman’s supermarket and a Dick’s Sporting Goods store.

“The exterior is dated, and parts, especially around the now-vacant Sears, are fairly desolate. Foot traffic in the inline space was virtually nonexistent,” DBRS analysts noted in a surveillance report published July 30. “There are large swaths of vacant space along the inline space and among the kiosks. A number of the vacant inline spaces now have vending machines stationed in front of them.”

Tuesday, November 23, 2021

Giant Opens New E-Commerce Fulfillment Center in Philadelphia

 By Javon Roach CoStar Research

The Giant Co. has opened a new Giant Direct e-commerce fulfillment center at 3501 Island Ave. in Philadelphia. The facility is set to serve more customers in Philadelphia and, for the first time in its 98-year history, in southern New Jersey.

The 124,000-square-foot facility features state-of-the-art technology, such as robotics, machine learning and vertical integration, according to Giant, which notes it is the first Ahold Delhaize USA company to implement this new fulfillment technology. Within the facility, two space-saving, 3D grids contain totes filled with fresh and non-perishable groceries. When a customer places a Giant Direct order, employees work alongside a team of robots that quickly gather items for bagging. After bagging, the employees place orders into temperature-controlled totes and onto trucks for delivery to customers.

The facility includes a selection of products that mirrors a traditional Giant store, stocking more than 22,000 items, to help meet increasing demand. The center is expected to fulfill up to about 15,000 home delivery orders per week, according to Giant.

"The opening of this facility is an exciting step forward as we continue to collaborate to evolve the supply chain network for the future," Ahold Delhaize USA Supply Chain President Chris Lewis said in the announcement. "Solutions like micro-fulfilment centers will be an important part of the self-distributed network, positioned to serve customers whenever, wherever, however they want to shop."

Starting Nov. 16, the facility will also provide Giant Direct delivery to the South Jersey towns of Camden, Cherry Hill, Gibbsboro, Haddonfield, Marlton, Medford, Mount Laurel and Voorhees. Giant plans to introduce Giant Direct to additional South Jersey towns over the next several months.

The new Giant Direct Philadelphia facility currently employs 125 workers. Giant is looking to hire an additional 125 workers with the busy holiday season approaching.

The Giant Direct brand was launched in February 2019 when Giant opened its first e-commerce hub in Lancaster. Giant now has more than 150 pickup locations and customers across 90% of the company's footprint have access to online grocery ordering and delivery services. Giant also launched Choice Pass earlier this year to its Giant Direct customers, providing unlimited free delivery and pickup for $98 a year.

Giant's new facility bolsters its presence in Philadelphia, which is set to grow from one store in 2018 to 10 by the end of 2023. In addition to three Giant Heirloom Markets and its new Philadelphia flagship Riverwalk store, Giant will open a new store on Cottman Avenue on Nov. 12, followed by a Giant on Columbus Boulevard and a Heirloom Market in the Fashion District by the end of the year.

Why Investors are Aggressively Pursuing Commercial Real Estate? (Video)

Thursday, November 18, 2021

Getting Back to Business and the Office (Video)

Monthly Economic Outlook —November 2021 (Video)

Equus Capital Partners Divests Suburban Philadelphia Office Buildings

 By Melannie Skinner

MLP Ventures acquired two office buildings at 2201 and 2100 Renaissance Blvd. in King of Prussia, Pennsylvania, for $41.8 million, or about $180 per square foot, from Equus Capital Partners.

The two office buildings total 232,644 square feet in the Renaissance Park business center.

There is 98,764 square feet of contiguous space available for lease across all three floors at 2100 Renaissance, while the four-story, 133,880-square-foot office at 2201 Renaissance is fully leased to Hibu,

Rockefeller Group Starts Industrial Project in Central New Jersey

 By Linda Moss CoStar News

Developer Rockefeller Group is building a 345,600-square-foot distribution center in Burlington County in New Jersey.

The New York real estate firm has started construction of the Rockefeller Group Logistics Center at 2575 Route 206 in Easthampton. It will be located on a 27.64-acre parcel roughly 8 miles from Exit 7 of the New Jersey Turnpike.

Rockefeller Group purchased the property in September, and the project is slated to be completed in the fall of next year.

The Exit 8A market near Exit 7 “has seen record growth and absorption over the past five years,” Zachary Csik, director of real estate development for Rockefeller Group’s New Jersey-Pennsylvania region, said Wednesday in a statement. He said tenants are looking south to the area surrounding Exit 7 in Burlington County for Class A distribution space.

The property will include 96 trailer spaces, 384 auto parking spaces, and a 185-foot truck court with a 60-foot concrete apron. The state-of-the-art facility will also include 54 dock doors with two drive-in doors, 36-foot-clear ceiling heights, 4,000 square feet of speculative office space, and LED lighting.

Burlington County has been attracting industrial development because of its accessibility to the New York and New Jersey ports, southern New Jersey and Philadelphia.

Wednesday, November 17, 2021

Despite The Numbers, It Could Be Smooth Sailing for Harrisburg's Office Market

 By Ben Atwood CoStar Analytics

Over the past 12 months, real estate professionals from across central Pennsylvania have kept a wary eye on Harrisburg's office market, waiting with bated breath for the signs of strain seen in so many cities across the country to appear in the state's capital city.

To an outsider, it might look as though those cracks surfaced in the first quarter of 2021. The market has posted negative net absorption, meaning more tenants vacated space than took occupancy of, for three straight quarters, and annualized net absorption is over 500,000 square feet in the red.

Harrisburg's problems were further compounded in September. That month, in the span of two weeks, both Rite Aid and Harsco announced they would be relocating their corporate headquarters to Center City Philadelphia.

The two companies have deep roots in the area and their departures are certainly a stinger for the office market. Rite Aid occupies over 200,000 square feet of space, and the Fortune 500 company has been open on the fact that most of its corporate employees will be working out of Philly.

The loss of two major employers, plus the negative net absorption, certainly isn’t a good look. But in spite of all the dark prophecies floating around the future of the office market, it’s too early to panic.

In fact, despite those numbers, Harrisburg might still be the most stable office market in the state.

And that's largely because of the state.

"Anyone that deals with the government or gets funding from the government or need to interact with the government in some way, they still need to be here and that’s just not going anywhere," said Sarah Rietmulder Gates, portfolio manager at Linlo Properties.

Linlo is one of largest office owners in central Pennsylvania, and she told CoStar that her group was becoming cautiously optimistic about the sector’s future.

"Compared to our worst fear expectations and what we are reading and hearing about in other markets, our area isn't reeling in the same way," she said. "When it comes down to the straight numbers, Linlo's technically having one of the best years ever."

Gates said her firm pays close attention to renewal metrics, particularly lease term length. Those numbers fell in 2020, but she says they have normalized in 2021, with more tenants signing for leases at pre-pandemic lengths.

She also said that Rite Aid and Harsco's departure were not catastrophic events. Harsco only employed about 100 people in the area and Rite Aid wasn't entrenched in the local economy. In other words, it wasn't good, but its not like Hershey's is rolling out.

There's nothing cautious about Dan Alderman's level of optimism. Alderman is a broker at NAI CIR and has been active in the Central Pennsylvania real estate game since 1983. He says that 2021 has been a great year for him and his firm, and not just because it came after the mayhem of 2020.

"Our office market is just amazing right now; it's just been a fantastic year by any measurement," he said.

Now that's not a sentiment you hear every day from a Pennsylvania office broker. If fact, that take might be unique to Harrisburg.

Alderman also pointed out the region’s negative absorption numbers are mainly due to the closure of a few call centers and said he would not be surprised if office demand picked up quickly because of the federal infrastructure bill and pandemic-related relief funds.

That's an interesting thought, and one that could have ramifications for state capitals across the country.

If you are an entity in Pennsylvania and you wish to receive some of these funds, you likely need to convince someone in Harrisburg to give them to you. That creates an incentive for all industries across the entire state and beyond to have an office presence within this market.

So, despite the recent turbulence, it's still far too early to ring the alarm bells for Harrisburg office. Instead, this might be a market worth monitoring in the coming months.

The 4 Things NOT To Do in Commercial Real Estate (Video)

Tuesday, November 16, 2021

The Top 10 Markets for Investing in Smaller Industrial Properties

By Lauren Shanesy LoopNet

Industrial properties have emerged as a premier asset class with the surge in online shopping; e-commerce companies like Amazon are opening new distribution centers at an unprecedented pace. Chasing this swell in leasing and construction activity, international investment companies like Blackstone have made headlines by pouring more capital into the industrial space than ever before.

The industry was seeing a clear, strategic shift by institutional owners to prioritize industrial assets even before the pandemic. Since 2007, multi-asset investors owning more than $500 million of property have decreased their office ownership by 28% and increased their industrial share by 18%.

But with money rushing into the logistics sector from the world’s largest financial institutions, where should smaller investors looking to enter the space focus their attention?

Analyzing markets with an abundance of property sales priced under $20 million, CoStar's commercial real estate marketplace LoopNet, along with CoStar Analytics, developed a list of the top 10 markets that smaller investors should consider when purchasing industrial properties.

We based our analysis on three key factors for industrial investment:

Liquidity: The percentage of properties valued at less than $20 million that have sold since 2019.

Rent Growth: Year-over-year rent increases from the third quarter of 2020 to the third quarter of 2021.

Vacancy Rate: The portion of each market’s industrial inventory that is currently unoccupied (markets with low vacancy rates rank higher).

The 10 markets we selected are rife with opportunities, as a lot of them are located between major delivery ports for distribution access, yet removed enough from major markets to offer affordability. Moreover, that affordability will likely attract residents seeking a lower cost of living, leading to population growth and creating further demand for last-mile logistics facilities.

Based on our analysis, LoopNet identified these 10 markets as offering the most promising opportunities for smaller investors seeking industrial properties:

  1. Inland Empire, California
  2. Salt Lake City
  3. Phoenix
  4. Sacramento, California
  5. Philadelphia
  6. Atlanta
  7. Los Angeles
  8. Memphis, Tennessee
  9. Las Vegas
  10. San Antonio
... Philadelphia

Philadelphia has deep roots as a manufacturing hub, and its location right in the middle of the I-95 corridor stretching from Washington, D.C. to New York City make it a compelling choice for small- and mid-sized investors, said Adrian Ponsen, CoStar’s U.S. director of industrial.

The Philadelphia market has experienced the largest rent growth of any of the markets on our list, at 12.02% year-over-year. And it ranks among the fastest growing industrial markets, in terms of rental rates, in the United States.

While there is a lot of new construction underway in the metro area, smaller investors might find opportunities in the older industrial properties located throughout Philadelphia proper that are being acquired, renovated and successfully re-leased to tenants that run the gamut from local contractors to Amazon.

Liquidity: 11.83%
Rent Growth: 12.02%
Vacancy: 4.07%

Hard Earnest Money, Back-up Contracts & Lease Renewal Options (Video)

Friday, November 12, 2021

Audubon Land Development buys Happy Days Farm in Exton for $18M

 Natalie Kostelni Reporter Philadelphia Business Journal

Audubon Land Development has paid Nelson Realty Trust, an entity affiliated with Vanguard Group, $18.1 million for what is referred to as the Happy Days Farm, which fronts the Pennsylvania Turnpike and Route 100 in Exton, according to Chester County property records.

Records show that roughly 240 acres were purchased by the Lower Providence-based real estate company.

The Uwchlan planning commission has approved a plan in which Audubon Land will develop 1.93 million square feet of warehouse-distribution centers in three buildings and a 30-acre passive park with trails. Audubon Land told Uwchlan officials that work could begin on the largest of the buildings, a 1.1-million-square-foot structure, and the park in 2022.

Full story:

Praxis Modular Opens Factory in Wilkes Barre

By Connor Steele CoStar Research

Praxis Modular has opened a volumetric modular factory in Wilkes Barre, Pennsylvania.

The company leased 275,000 square feet at the 1.06 million-square-foot facility at 1055 Hanover St. for its new factory. The factory is set to bring in 120 new jobs.

This is the largest volumetric modular factory in North America, Praxis said in a statement announcing its new facility. The 275,000-square-foot factory is four- to five-times larger than most modular manufacturers and the output will be five- to six-times greater than the conventional modular manufacturers, according to Praxis.

Praxis will produce wood, light gauge steel or structural steel modules for its projects throughout the Northeast at this location. The factory will feature two production lines and state-of-the-art technology, including automation and robotics.

Thursday, November 11, 2021

Tried and True Defense Against Inflation *Hint Commercial Real Estate (Video)

Treeco Pays $28 Million for Philadelphia Multifamily Portfolio

 By Carlos Likins CoStar News

Treeco has purchased a portfolio of six apartment complexes in Philadelphia's Fairmount and Brewerytown neighborhoods for $28 million.

The Englewood, New Jersey-based investment, development and management firm acquired the residential properties from Philadelphia-based Stamm Development Group.

The 78-unit portfolio includes The Fairmount Flats at 745-751 N. 20th St., 726 N. 19th St., 711 N. 16th St., 714 N 19th St., The Fairmount Greenery at 817 N. 20th St. and The Porter at 2940 W. Thompson St.

"One of Philadelphia’s leading private real estate development firms, SDG builds impeccable residential properties that warrant a very high price per unit. As a result, we were able to market the portfolio in its entirety and arrange the sale to a single buyer. We are extremely pleased with the result that met the high expectations of our client."

Endurance Sells Phillips Pet Food & Supplies' Lehigh Valley Facility for $62.3 Million

 By Carlos Likins CoStar News

An affiliate of Endurance Real Estate Group has sold a fully leased distribution facility in the Lehigh Valley, Pennsylvania, region for $62.3 million.

The Radnor-based owner and developer sold the property to RLIF Hecktown SPE LLC, an entity that shares the same address as real estate investor Realterm, according to Northampton County real estate records.

The 307,290-square-foot facility was built in 1986 and expanded in 2013. It is located on 28.5 acres at 3747 Hecktown Road in Easton off Route 33 on the eastern edge of the Lehigh Valley. The facility is fully occupied by Phillips Pet Food & Supplies, serving as the company's corporate headquarters and primary distribution location in the Northeast.

"Demand on this asset was very strong as buyers continue to seek well-located stabilized assets throughout Eastern Pennsylvania, particularly in the Lehigh Valley." 

This marks Endurance's fourth sale this year. Over the last 90 days, the company purchased and began construction on a 1 million-square-foot speculative distribution center in Olyphant, commenced construction a 251,200-square-foot speculative distribution center in Middletown, purchased a 1.6 million-square-foot building in York and completed construction on a two-building, 330,000-square-foot speculative industrial park in Berks County.

Commercial Real Estate Has Changed Forever (Video)

Saturday, November 6, 2021

Morgan Properties drops $780.5M for two large apartment portfolios

 Natalie Kostelni Reporter Philadelphia Business Journal

Morgan Properties has grown to own 95,000 apartment units across the country with a $780.5 million acquisition of two portfolios throughout the fast-growing South, a region that it has been targeting.

The King of Prussia company, which focuses on Class B multifamily properties, bought what is referred to as the Middle Street Partners and Northland portfolios, which consisted of 18 communities with 4,724 apartment in Georgia, Florida, North Carolina and South Carolina.  

The Middle Street Partners portfolio involved 15 apartment communities with 4,102 units and the Northland portfolio had 622 units focused in West Palm Beach. Morgan Properties plans to spend $47.5 million on renovations to the communities.

Full story:

Thursday, November 4, 2021

Accesso Partners Buys Westlakes in Berwyn, PA from Keystone for $297/SF

Keystone Property Group has sold Westlakes, a 455,183-square-foot office park in Berwyn, for $135 million, or $297 a square foot.

Accesso Partners, a Hallandale Beach, Florida, real estate company that also owns 1515 Market St. in Center City, bought the four-building complex on 40 acres off Swedesford Road at Route 202. At the time of the sale, Westlakes was 92% occupied with PNC Bank, Brinker Capital, Montgomery McCracken, Chartwell Investment Partners and Amring Pharmaceuticals among its tenants.

“What surprised us was how robust the demand was for Westlakes,” said Bill Glazer, CEO of Keystone. “It was such a hotly contested bidding process. There was not only the demand but the price point, which is really compelling for the market and a major statement for office properties.”

Glazer and Accesso declined to confirm the sale price though market sources indicated it was $135 million. 

Keystone bought Westlakes in 2013 as part of its $233 million acquisition of a Mack-Cali Realty Corp. portfolio totaling 1.66 million square feet. Keystone then spent about $5 million on a range of upgrades to the property including creating indoor and outdoor gathering spaces and caf├ęs.

Full story:

Investors Remain Shy, but There’s a Lot To Like in Scranton’s Multifamily Market

 By Ben Atwood CoStar Analytics

There’s a curious lack of investment in Scranton, Pennsylvania’s white-hot apartment market.

While a dearth of sales is not abnormal for this northeastern corner of the commonwealth, the strength of its apartment market could put Scranton in the spotlight.

Local multifamily vacancies currently hover around 2%, some of the lowest figures in market history. The strong demand and limited supply have driven year-over-year rent growth to an unprecedented 9%, which is nearly three times the market's 10-year historic average.

Despite such transcendent numbers, investors have remained cautious. Just over $10 million have been spent acquiring Scranton apartments in the past four quarters, and these were mainly transactions involving locals buying and selling small assets.

No doubt the market's historic issues are suppressing investor interest. Both Lackawanna and Luzerne counties have been losing residents for a generation. The latest census data shows this outmigration has not stopped, and the relatively tepid economy would give many outsiders pause.

However, the coronavirus pandemic may have changed things, particularly for multifamily.

As a result of the shutdown, Scranton's warehouse sector is absolutely booming. The surge in online shopping brought about by the pandemic has exponentially increased demand for shipping facilities and last year, Scranton led Pennsylvania’s secondary markets in demand. This year has been equally strong, as its warehouses have seen over 5 million square feet of net absorption in the past four quarters alone.

Major retailers are moving in to take advantage of its prime location on the North Atlantic Trade Corridor. This growth is creating thousands of construction, trucking and warehousing jobs.

The region has also seen an uptick in interest from international manufacturers, and the advent of remote working could be bringing people back into the market. Scranton is just two hours from Philadelphia and New York. A hybrid or remote schedule would allow workers in those markets to pay Scranton rents on a big-city salary.

These factors could all produce a slight increase in demand for apartments, which is all it would take to keep this region's multifamily sector rock solid. This is because very little institutional level projects have been built here over the past decade.

Few people take a chance building supply in such a challenged region, and the elevated construction prices the pandemic has caused will likely keep inventory tight for some time.

Wednesday, November 3, 2021

Conshohocken, PA Based - EQT Exeter Portfolio Sale One of Largest on Record

 By Mark Heschmeyer CoStar News

The real estate arm of global investment firm EQT has sold a warehouse portfolio for $6.8 billion in one of the largest U.S. industrial real estate deals on record.

The high price for the 70.5 million-square-foot portfolio, which consists of 328 supply-chain and e-commerce facilities assembled through more than 100 transactions over three years, signals still increasing demand for industrial properties as more Americans shop online.

The portfolio is composed mainly of logistics properties that serve the supply chains of major corporations, including facilities for big-box regional distribution, e-commerce fulfillment and so-called last-mile package handling that moves deliveries in the last leg of the journey to consumers’ homes.

The portfolio spans the top five U.S. distribution markets of New York, Dallas, Atlanta, Chicago and Los Angeles, and the key e-commerce and air cargo hubs of Memphis, Tennessee; Indianapolis; Columbus, Ohio; and Louisville, Kentucky.

While EQT Exeter didn't name the buyer and declined to comment to CoStar News beyond a statement issued Wednesday, a new commercial mortgage-backed securities offering on the market identifies affiliates of GIC Realty Private, a global investment firm established in 1981 to manage Singapore’s foreign reserves, as a buyer of a 99.2% interest in 142 properties from EQT Exeter.

That deal is part of EQT Exeter’s recapitalization of a larger platform of more than 300 industrial properties for about $6.8 billion that has occurred over the course of the past 12 months, according to bond analysis by DBRS Morningstar. GIC is contributing roughly $2.7 billion in connection with the broader recapitalization.

EQT Exeter completed the latest sale on behalf of a private real estate fund and related investment vehicles. The company plans to continue managing the properties.

Ward Fitzgerald, CEO of EQT Exeter, said in the statement that “today’s transaction is the fourth multibillion-dollar portfolio sale for EQT Exeter."

EQT Exeter said it raised the portfolio’s occupancy from 55% to 95% at the time of sale while increasing the average yield from the properties to 6.9% from 4.8%.

The CMBS deal, ELP Commercial Mortgage Trust 2021-ELP, involves a $1.75 billion loan offering used for the acquisition of 142 properties. Providing the loan are Citi Real Estate Funding, JPMorgan Chase, Deutsche Bank and Morgan Stanley Mortgage Capital.

Investor and Broker Perspectives on Medical Sector 2021 (Video)

Commercial Property Sales and Prices Rebound in 2021 | U.S. Economic Outlook: November 2021 (Video)

What a REIT Looks for When Buying Commercial Real Estate (Video)

Monday, November 1, 2021

Commercial real estate sales skyrocket amid the coronavirus pandemic (Video)

Netflix To Bid for 300-Acre Parcel for Studio in New Jersey

 New Jersey, the site of the first U.S. movie studio, may be on its way to becoming a hub for film and TV production again.

That's because West Coast video-streaming powerhouse Netflix has officially said it plans to bid on a nearly 300-acre parcel at a former U.S. Army base in the Garden State, where it would build a state-of-the-art studio.

Netflix, based in Los Gatos, California, confirmed it's interested in the so-called Mega Parcel at Fort Monmouth, land that the state of New Jersey recently put on the block. If the entertainment company in fact does come to New Jersey, it would be a win for Gov. Phil Murphy, whose administration has focused on luring "Innovation Economy" businesses to the state, including TV and movie makers, with tax incentives.

The rise of streaming services — stand-alone brands such as Netflix and spin-offs from media giants like Walt Disney Co., Amazon, Apple and Discovery Communications — has created a voracious demand for TV and film production space to create original content. In fact, Netflix already has studio facilities in places like New Mexico and Brooklyn, New York. But that need for production sites comes as e-commerce is competing for industrial space, eating up warehouses and other facilities.

In New Jersey, that's playing out in the form of bids for the 289-acre parcel, which is located in Oceanport and Eatontown, being due Jan. 12. They are being solicited by the Fort Monmouth Economic Revitalization Authority, FMERA, which oversees development at the 1,126-acre former military installation. The site has been appraised at $54 million, but would likely fetch much more than that.

"That's highly desirable real estate," said John Boyd Jr., a principal of relocation consultant Boyd Co. "This Fort Monmouth site is very, very attractive, because of the IT skill sets in the region, [and] obviously its proximity to Manhattan. And the real estate itself is really a crown jewel when you look at available industrial parks in the Northeast. And it's land in a very attractive environment. You have proximity to the coast line. Housing options that are diverse and desirable. You've got the new tax credit."

In the Los Angeles region, sound stages have consistently been about 95% occupied since 2015, a trend likely to continue, according to a September report by the brokerage JLL.

To help meet the demand, just last week King Street Capital Management, Canada’s Alberta Investment Management Corp. and East End Studios announced they plan to spend up to $500 million to acquire and develop sound stages in the Los Angeles region and other U.S. and international film centers.

Tax Breaks Back

New Jersey for several years didn't have a tax-incentive program in place to lure TV and movie production, after then-Gov. Chris Christie in 2015 suspended the initiative because of his anger over MTV's "Jersey Shore" hit show, which depicted youths drinking and carousing at the Garden State's beaches. But the tax incentives for the industry were reinstated three years ago by Murphy, and expanded earlier this year as part of an $14.5 billion overhauled tax-incentive plan.

Still, there's lots of competition to draw TV and film producers from states that have aggressively courted the industry such as Georgia, New York, New Mexico and Louisiana. But Murphy has also proactively wooed the entertainment industry. In April, after Georgia passed a law criticized as restricting voter access, Murphy sent a letter to the major Hollywood studios — including Netflix — that touted New Jersey new tax incentives, which offer "a subsidy for brick-and-mortar studio development of up to 40%."

According to Boyd, "This is an example of New Jersey leveraging its diversity and inclusiveness for an economic development project. In the wake of the Georgia voting bill, Murphy was proactive and went out and approached Netflix."

The Garden State is having a good year so far in terms of TV and movies. Overall in-state production spending from film-making will exceed $500 million this year, following "a very busy spring and summer and an unprecedented amount of production taking place this fall," according to the New Jersey Motion Picture and Television Commission.

In July, the The Two River Times, a local media outlet, reported that Netflix was eyeing Fort Monmouth as a site for a production facility. At the time, the governor's office and FMERA declined to comment. But on Tuesday, a week from the day voters will decide whether to re-elect Murphy, The New York Times reported that Netflix planned to bid on the Fort Monmouth parcel.

“America's first movie studio was in New Jersey, and today it's home to many talented people working in entertainment," a Netflix spokeswoman said in an email to CoStar News on Wednesday. "Gov. Murphy and the state’s legislative leaders have created a business environment that's welcomed film and television production back to the state, and we’re excited to submit our bid to transform Fort Monmouth into a state-of-the-art production facility.”

Murphy also issued a statement.

"New Jersey has become a leader in new, innovative industries from offshore wind to sports betting to film and digital media, and today's announcement by Netflix is another sign that companies around the world are taking notice,” he said.

Economic Development Trophy

If Netflix has the winning bid, "this will be the trophy on his [Murphy's] mantle in respect to economic development — the prestige of Netflix, the synergies with other sorts or skill sets related to IT, multimedia media production," according to Boyd.

As a state agency, FMERA has to sell property through a competitive public bidding process and can't comment on any prospective bidders or the status of any potential bids, according to a spokeswoman for the authority.

"This is a unique development opportunity in the state," the FMERA spokeswoman said in an email. "Until such time as the proposal period closes on Jan. 12, 2022, proposals are reviewed and scored by our evaluation committee, and our board endorses the proposed purchase and sale agreement and redevelopment agreement between FMERA and the selected potential purchaser, we cannot provide any additional insight or feedback with regard to what is being proposed for the Mega Parcel (following the receipt of bids), by any of the prospective bidders."

Netflix has been in the news recently because of its oft-times cutting-edge programming. Its most-viewed show ever, "Squid Game," is a Korean TV show that became a global hit. And the service's comedy special, "The Closer" by David Chappelle, sparked outrage from the LGBTQ community, and led to an employee walkout in protest.

Netflix's largest production facility, ABQ Studios, is in Albuquerque, New Mexico. The streaming service paid $40 million for it in 2018, according to CoStar data, and said it planned to invest $1 billion in the area. In December last year, Netflix vowed to expand and double that investment, by spending another $1 billion.

The company has also recently acquired a 170,000-square-foot former steel factory in the Bushwick section of Brooklyn, which converted to sound stages. It is one of a number of production facilities now clustered in New York City, which include Silvercup Studios in Long Island City, Queens, and Steiner Studios at the Brooklyn Navy Yard.

New Jersey has also seen some recent development of TV and film production space, although on a much smaller scale. Cinelease Studios Caven Point in Jersey City and Palisade Stages in Kearny opened earlier this year, and 10 Basin Studios in Kearny will open its doors in November, according to the state film commission. Insight Equipment, a lighting and grip supplier, opened facilities in Secaucus and Carlstadt in July, and other developments are on the way including further expansion from Cinelease, the commission said.

The film industry has deep roots in New Jersey, starting with Thomas Edison and his facility in West Orange. Fort Lee is credited with being where the commercial U.S. film industry was born, with silent films such as "The Perils of Pauline" filmed on the Palisades, the cliffs of the "cliffhangers," on the Hudson River. Many studios, including Fox and Universal, got their start in Fort Lee.

Some marquee movies have been shot in the Garden State recently, including "The Many Saints of Newark," the prequel to HBO's series "The Sopranos," and Steven Spielberg's version of "West Side Story," scheduled for release in December.

TV shows and movies bring money into the state. Universal Television spent close to $100 million in New Jersey while producing Season One of CBS’s "The Equalizer," which stars Newark, New Jersey, native Queen Latifah, according to the state's film commission.

Netflix's real estate investments have gone beyond just production facilities. The streaming service has acquired three theaters, most recently one in the upscale Pacific Palisades in California.

Monday, October 25, 2021

The Top 5 Real Estate Markets For 2022 (Video)

The 5 Best Commercial Real Estate Investment Strategies (Video)

Multibillion-Dollar Philadelphia Redevelopment Project Gets Dubbed ‘Bellwether District’

 By Linda Moss CoStar News

The multibillion-dollar redevelopment of a former oil refinery site in Philadelphia, a project touted as what will be one of the largest and most strategically located U.S. logistics hubs, now has a moniker that reflects the times.

Developer HRP, formerly known as Hilco Redevelopment Partners, on Monday announced the 1,300-acre South Philadelphia property it acquired for $225.5 million in June 2020 will now be called the Bellwether District. The company, based in Chicago, purchased the site of the former Philadelphia Energy Solutions refinery at 3144 W. Passyunk Ave. in a bankruptcy auction.

"This is a poster child of environmental and social justice, let's call it that," Justin Dunn, HRP senior vice president of development, told CoStar News. "The amount of remediation, the amount of development that is going to go into this site — that was 150 years a refinery — and now turning that into an economic and environmental sustainable engine for this region I think is really, really powerful. And we're future-proofing this as much as possible, everything from the energy to the environmental, to the types of buildings, the types of life-science products. ... And those jobs are sustainable for generations to come."

HRP described the refinery as a symbol of the Industrial Revolution for more than a century in Philadelphia — and a factory that polluted its site. Now it has become the latest U.S. brownfield set to be transformed into a new kind of industrial use, mainly distribution, in an environmentally friendly fashion. HRP, the real estate development unit of Hilco Global, is spending hundreds of millions of dollars to decommission, demolish and clean up the property for actual construction, which is expected to start the end of 2022 or early 2023, according to Dunn.

HRP is removing 35,000 tons of asbestos, 850,000 barrels of hydrocarbons, 100 buildings, and 950 miles of pipe from the refinery.

The redevelopment of the Bellwether District is expected to take up to 15 years, "resulting in one of the largest and most strategically significant multi-modal logistics hubs in the country that leverages the site's unparalleled infrastructure and location," according to HRP. The parcel is within an eight-hour drive of one-third of the nation's population, the developer said.

The property encompasses 2% of the land mass of Philadelphia, will create an estimated 19,000 permanent jobs and aspires to be home to global leaders in e-commerce, logistics and life sciences. Roughly 10 million square feet of the project will be devoted to Class A industrial uses, according to Dunn, and 4 million to 5 million square feet is slated for life sciences firms.

Its full tenant roster will include e-commerce, warehouse and distribution companies, as well as light manufacturing, rail and marine operations at the site, in addition to life science, which will take up over 250 acres of the site.

Innovator Role

The Bellwether District name, with its tag line of “Next Starts Here,” was the end result of extensive research, according to HRP, "and reflects Philadelphia’s role as an innovator and achiever of many firsts for the country from the first library, hospital, and medical school to the birthplace of a new nation."

"A bellwether is really a meter or an indicator of trends," Melissa Schrock, HRP senior vice president of mixed-use development, said. "And we see the redevelopment of a very large piece of property as an indicator of what's to come in the future for Philadelphia, so that's why we selected this name."

There's already been inquiries from potentials tenants, according to Dunn.

"There's been a lot of interest in this site based on its location itself and its proximity to New York, the city, Philadelphia, New Jersey and that region," he said.

As part of the project four new city streets are being created, with two of them paying homage to historic Black Philadelphians: James Forten, a Philadelphia businessman and abolitionist, and Frances Harper, one of the first Black women to be published in the United States.

The new Bellwether District name will be featured on buses and various billboards on Interstate 95, Penrose Avenue, the Schuylkill Expressway and other major commuting routes.

Why Is Commercial Real Estate Outperforming? (Video)

Wednesday, October 20, 2021

Investor Buys Amazon Facility Near Scranton

 By Rachel Whaley CoStar Research

Preylock Holdings has purchased a recently built distribution center fully leased by Amazon in Jessup, Pennsylvania, a borough located about 7 miles from Scranton.

The Los Angeles-based investor acquired the 1.03 million-square-foot facility from a joint venture between Trammell Crow Co. and Diamond Realty Investments Inc., which developed the distribution center. Preylock paid $127.7 million for the facility, according to a Pennsylvania Department of Revenue realty transfer tax statement of value.

Located at 45 Valley View Drive, the joint venture broke ground on the speculative distribution center in November 2018 and wrapped-up construction on it in August 2020. The facility features a 40-foot clear height, 190-foot-deep truck courts with opposing trailer storage, ESFR fire protection, 311 trailer parking spots, 277 car parking spots and 159 dock positions.

The joint venture announced in March 2021 that it leased the entire facility to "a major ecommerce tenant," which was later reported to be Seattle-based retail giant Amazon. The distribution center serves as one of Amazon's XL facilities, where the company packs and ships large items such as mattresses, grills and exercise equipment, according to local media reports.

Monday, October 18, 2021

ASB and Endurance Joint Venture Acquire 1.5-Million-Square-Foot Industrial Complex in Central Pennsylvania for $90.96 Million

 ASB Real Estate Investments (ASB) today announced the acquisition of a 1,525,000-square-foot industrial facility, York Business Center, located in York, PA for $90.96 million in a joint venture with Endurance Real Estate Group. ASB made the investment on behalf of its Allegiance Real Estate Fund, a $7.4 billion core vehicle.

The three-building warehouse facility is situated on 119 acres near the intersection of I-83 and Route 30 and located in the core of the Central Pennsylvania industrial market. This prime location provides easy access to exceptional highway infrastructure that places approximately 40% of the US population, six of the top 10 U.S. MSAs and 51% of the Canadian population within a one-day truck drive. In addition, companies are attracted to the Central Pennsylvania region for its ample blue-collar labor pool—236,000 working-aged people are within a 30-minute drive of York.

The property is 94.2% leased primarily to Harley-Davidson for just-in-time manufacturing and pre-assembly which supports the nearby Harley-Davidson York manufacturing plant,  LSC Communications, a multinational commercial printing company, and WellSpan, a non-profit healthcare delivery company.

The two primary buildings in the complex—787,600 square feet and 686,000 square feet—feature up to 32-foot clear ceiling heights, ample column spacing and a combined dock ratio of one per 7,000 square feet. The overall site provides parking for 1,600 cars and 400 trailer spaces. The asset also includes 53,670 square feet of office space, that WellSpan utilizes as a mission critical operations center.

Brodie Ruland, ASB Managing Director and Co-Head of Acquisitions, said: “The York Business Center investment expands ASB’s industrial portfolio into a strategically important regional distribution and manufacturing corridor. We are continuing to grow and diversify our industrial portfolio across the country meeting the significantly increasing tenant demand for well-located assets that facilitate rapid delivery of parts, products, and consumer goods in and around the nation’s major population centers.”

ASB’s industrial nationwide portfolio, comprising nearly 10 million square feet of space, is 99% leased. The company has invested $1 billion in 17 industrial assets since 2018.

The investment is ASB’s fourth with Endurance Real Estate Group, a diversified real estate developer and management company in the Mid-Atlantic States. The joint venture bought the asset from Equity Industrial Partners.

UDR Acquires Apartment Complex in King of Prussia Suburbs Outside Philly

 By Cara Smith-Tenta CoStar News

UDR Inc., one of the nation’s largest real estate investment trusts, has acquired an apartment complex in King of Prussia, Pennsylvania, outside Philadelphia.

The Denver-based REIT spent $115 million, or $370,968 per unit, on The Smith at Valley Forge, a 310-unit apartment complex at 580 S. Goddard Blvd. next door to the King of Prussia Town Center, according to CoStar research and UDR’s public filings.

Woodfield Development, a South Carolina-based development firm, sold the property and the property was 92.8% occupied at the time of sale, according to UDR’s filings.

 In UDR's second-quarter earnings release, the company said it was under contract to close on an apartment complex in King of Prussia for $115 million.

UDR paid nearly twice the average price per unit that most buyers pay for Philadelphia apartments. The average multifamily property in the city trades for $192,000 per unit.

UDR is also developing The George Apartments, a 200-unit project at 140 Valley Green Lane on the other side of Goddard Boulevard, which should be complete in the third quarter of 2022, according to the company.

The outlook for Philadelphia’s suburban landlords is positive at the moment. Thanks to record completions of new apartment projects in 2020 and the pandemic’s shock to construction lending, the number of properties under construction in the city’s suburbs has been cut almost in half since late 2019.

That could translate to less demand — and therefore the ability to charge higher rents — for landlords in the suburbs in the coming years.

2 Reasons Why Commercial Real Estate Could Die in the Next Few Years (Biden’s Proposed Tax Plan) Video

Wednesday, October 13, 2021

Tilted 10 To Take Over Former J.C. Penney Space in Willow Grove Park

By Mannie Rivera CoStar Research

Paying homage to Willow Grove Park's roots as an amusement park, indoor family entertainment center Tilted 10 and Tilt Studio will be opening a new location in the former J.C. Penney space at the Montgomery County, Pennsylvania, mall in 2022.

The entertainment center, operated by Texas-based Nickels and Dimes Inc., will span two floors and occupy the entire 104,000-square-foot J.C. Penney space. Tilted 10's first location in the Philadelphia region is set to feature over 200 games and attractions, including a bowling alley, multi-level laser tag arena, black light mini golf course, bumper cars, virtual reality games, a pinball arcade, a prize redemption center and a restaurant.

The addition of Tilted 10 is part of a strategy by the mall's landlord, Pennsylvania Real Estate Investment Trust, to expand offerings at Willow Grove Park to meet the changing needs of today's consumer.

"PREIT continues to lead the charge in proactively transforming our properties to create sought-after community centerpieces that serve a multitude of purposes," Joseph F. Coradino, CEO of PREIT, said in a statement. "Tilt is a trusted partner across our portfolio, and we’re excited to bring this unique entertainment experience to the Philadelphia region."

Willow Grove Park was originally an amusement park that opened in the late 1890s. The park operated until the mid 1970s and was later converted into the Willow Grove Park Mall in 1982.

REITs: How higher interest rates and hybrid work trends could impact the REIT sector (Video)

Tuesday, October 5, 2021

How Long Will It Take To Sell My Commercial Property? (Video)

Northeast Philadelphia industrial building trades for $33.5M

 Natalie Kostelni Reporter Philadelphia Business Journal

A 454,456-square-foot industrial building in Northeast Philadelphia has sold for $33.54 million after attracting a dozen offers.

A joint venture between two New York firms, Ajax Advisors and Brickman Associates, bought the property from Ivy Realty. The building at 11200 Roosevelt Blvd. sits on 25 acres and was fully occupied at the time of the sale to such tenants as Philadelphia Delivery Systems, IK Marketplace, Philadelphia Academy Charter School and Dependable Distribution Services.

Ivy Realty of Greenwich, Connecticut, bought the building in the fall of 2018 for $17.75 million.

Though some of its characteristics can be unattractive to investors — it was built in 1960, is adjacent to a shopping center, and a charter school is a tenant as is a cocoa bean distributor — it still garnered 12 offers.

Full story:

What is Usable Square Footage vs Rentable? (Video)

Monday, October 4, 2021

GSK moving out of Philadelphia Navy Yard to smaller space at FMC Tower

 Natalie Kostelni Reporter Philadelphia Business Journal

GlaxoSmithKline is relocating corporate operations now based at the Philadelphia Navy Yard into FMC Tower at Cira Centre South in University City, joining the University of Pennsylvania, Spark Therapeutics in the building and bringing it closer to one of the city's burgeoning life sciences hubs.

The global pharmaceutical company will be leasing 46,000 square feet at the skyscraper and shrink from 207,779 square feet it occupies at a four-story building at Five Crescent Drive at the Navy Yard. Prior to the pandemic, GSK had 660 employees working each day from the Navy Yard and it expects up to 330 employees to work from FMC Tower.

GSK (NYSE: GSK) will occupy floors 16 and 17 at FMC Tower that Brandywine Realty Trust has occupied for the last four years as its headquarters. Brandywine will relocate into space that had been occupied by Dechert, a law firm, in Cira Centre. Brandywine, which built and owns FMC Tower and Cira Centre, declined comment.

In 2011, GSK signed a 15-year lease on the Navy Yard building, which was designed for it, and completed its move there in early 2013. It was a big deal for the company when it decided to move to the South Philadelphia site and considered pioneering to relocate from offices it had been in for decades in Center City.

Along with its move to the Navy Yard, GSK redefined how office space was used and eschewed many of the traditional ways companies had used space. Gone were dedicated desks and cubicles and a hierarchy that designated expansive offices for executives that were located around the perimeter and often with the best views. Spaces at its Navy Yard building were designed to be open with some break out rooms for meetings and private conversations, and furniture was mobile and benching commonplace.

Many companies, viewing GSK as on the vanguard, mimicked the style of open office and space for employees on a per-square-foot basis shrunk and kept getting smaller. While there was growing backlash against open offices and smaller work spaces, the pandemic threw many of those design elements into question.

GSK expects to complete its move to FMC Tower early next year and, once it vacates the Navy Yard, will seek to sublease the space. Its lease runs until September 2028.

Five Crescent Drive was sold in 2018 for $130.5 million, or $628 a square foot, to an affiliate of Korea Investment Management Co. Ltd.

Full story:

Hybrid Working vs Intellectual & Cyber Security (Video)

A Simple Guide to Buying Your First Apartment Complex (Video)

Friday, October 1, 2021

IRR vs. NPV - Which To Use in Real Estate [& Why] Video

Dermody Properties Breaks Ground on 154-Acre Logistics Park in South Jersey

 By Amber Valentine CoStar Research

Dermody Properties has broke ground on a 154-acre logistics park in South Jersey, a region where industrial space remains in high demand.

The three-building, 1.2 million square-foot logistics park, called LogistiCenter at Woolwich, is located at the intersection of Route 322 and Locke Avenue in Woolwich Township in Gloucester County. Dermody plans to make significant improvements to the intersection in conjunction with the development of the park.

LogistiCenter at Woolwich includes a 262,200-square-foot facility at 2062 U.S. Route 322, a 552,585-square-foot facility at 2120 U.S. Route 322 and a 336,700-square-foot building at 2057 U.S. Route 322. Each building is set to feature a 36- to 40-foot clear height, build-to-suit office space, ESFR fire protection systems, 50 to 110 dock-high doors, drive-in doors and ample trailer and car parking.

The logistics park is less than 2 miles from Interstate 295 and less than 3 miles from Interstate 95. Because of its proximity to Philadelphia and Wilmington, the park's direct highway will give tenants the ability to reach 33% of the U.S. population in a single day's drive and 3 million people within a 40-minute drive, Dermody said in a press release announcing the start of construction.

Demand for industrial space had been skyrocketing, driven by e-commerce, in New Jersey even before the pandemic last year. Stay-at-home orders and store closures at the onset of the coronavirus pandemic gave online buying another boost, and the need for logistics space exploded. But there is scant vacant space available to build such projects in North Jersey, so distribution and warehouses are being constructed farther south in the Garden State.

Gloucester County's industrial vacancy rate is 2.1%. Annual net absorption, which measures the difference between the sum of space tenants physically occupied and the sum of space tenants vacated over the past 12 months, sits at 2.5 million square feet.

"The region continues to attract top-tier companies looking for Class A warehouse space that has become too rare to find or too expensive in Central and Northern New Jersey," Rob Borny, partner at Dermody Properties, said in the press release. "We believe that Southern New Jersey will continue to flourish and we’re extremely grateful that our past success in the region has afforded us the opportunity to grow along with it."

Friday, September 24, 2021

Why Every Business Owner Should Own Their Real Estate (Video)

JV Plans 611-Unit Multifamily Project in Philadelphia's Navy Yard

 By Chris Sangiuliano CoStar Research

A joint venture between Ensemble Real Estate Investments and Mosaic Development Partners is planning to build a residential complex in the Philadelphia Navy Yard as part of its $2.5 billion development plan for the high-profile redevelopment project.

The complex, called Chapel Block, is located at 1200 Normandy Place and will comprise a seven-story building and two connected six-story buildings. Chapel Block will include a mix of luxury and mixed-income apartments, 75,000 square feet of indoor and outdoor resident amenity space and 26,000 square feet of space for restaurants and retail.

The seven-story building will be developed on the north end of the Chapel Block site in partnership with Korman Communities under its residential real estate brand, AVE. Called AVE Navy Yard, the building will include 265 luxury units, a portion of which will be reserved as flexible-stay, fully furnished apartments offered on a monthly basis for people who need a temporary living option. The building's amenities will include a pool, media theater, fire pit lounge, grilling stations, meeting spaces, golf simulator, music studio and pet spa.

On the south end of Chapel Block, the two six-story buildings will contain 346 market-rate and affordable units. The two buildings will be connected on the ground floor by shared amenities, including a fitness center, business center, lounge areas, game area, party room with gourmet kitchen, pet spa and bike storage.

Chapel Block was designed by a partnership between Philadelphia-based DIGSAU, the design architect, and Columbus, Ohio-based Moody Nolan, the architect of record.

"Ensemble/Mosaic is on the cusp of reaching a longstanding, identity-shifting objective — to evolve the Navy Yard into a fully functioning Philadelphia neighborhood," Brian Cohen, senior vice president at Ensemble, said in a statement. "We are incredibly excited at the prospect of creating a vibrant and diverse residential community so people may further enjoy this unique location and all it has to offer.

Earlier this year, PIDC, the public-private economic development corporation and master developer of the Philadelphia Navy Yard, executed an an agreement that provides Ensemble and Mosaic with the exclusive development rights for 109 acres in the Navy Yard. That agreement launched a $2.5 billion development plan by Ensemble and Mosaic that's set to create thousands of construction and permanent jobs. Ensemble and Mosaic were selected as the co-development team for this project in July 2020 after PIDC put out a call for prospective partners through a request for qualifications in September 2019.

Ensemble and Mosaic is working with PIDC and the Navy to complete the technical steps necessary to lift the residential deed restrictions on the parcel where Chapel Block will be developed.

The joint venture plans to break ground on the project in 2022 and open the complex in 2024.