Tuesday, November 22, 2022

Two Philadelphia Developers Propose $3 Billion Mixed-Use Project in Atlantic City, NJ

 By Linda Moss CoStar News

Philadelphia developer Bart Blatstein isn't finished putting his mark on Atlantic City, now proposing to build a $3 billion mixed-use complex, featuring canals inspired by Venice and Amsterdam, on the site of a former airport.

Bartstein, the CEO of Tower Investments and owner of the Showboat Resort & Convention Hotel in the New Jersey gambling destination, unveiled his plan for "Casa Mar" at a news conference with his joint-venture partner, fellow Philadelphia developer Post Brothers, on Monday. The waterfront project would be constructed on the former Bader Field airport, the last large parcel of undeveloped land in Atlantic City. But it is vying with another development proposed for that long-vacant historic site, a plan supported by the city's mayor.

Blatstein's project, aiming to create a walkable neighborhood, "is designed to embrace the water, inspired and modeled after the canals of Venice and Amsterdam," according to a statement from Tower. Planned for 140 acres, the project will include 10,000 residential units, 400,000 square feet of office and retail space and 20 acres of trails, parks and amenities, which will all be open to the public.

Atlantic City, a seaside resort, has had more than its share of ups and downs, and many of the areas off its storied Boardwalk, with its flashy casino hotels, have dilapidated buildings and little quality housing stock. Residents are also much poorer than those in other parts of the state. The Casa Mar project would be a boost to the city, according to Blatstein.

Because Atlantic City is devoid of any significant swaths of new housing, Bartstein said in an interview, Casa Mar would help fill that void. To build the development, the site will have to be raised 6 feet to be above the 100-year flood mark, according to the developer. The dredging necessary for the canals will supply fill to raise the site, Blatstein said.

The developer, who said he's been coming to Atlantic City since he was a child and knows it "inside out," already has investments in the municipality. He owns the Showboat, which doesn't have a casino. He's been making improvements to the hospitality property to make it a family-friendly destination, including adding a large gaming arcade and indoor go-kart track.

"This is a once in a lifetime transformational opportunity for Atlantic City and together Tower and Post will make this happen,” Blatstein said in a statement.

He added that he and Matthew and Michael Pestronk, who lead Post Brothers, have created billions of dollars of development over the years and have over a billion dollars in joint-venture residential development in Philadelphia.

Monday's news conference was held at the construction site of Island Waterpark, a $100 million indoor facility scheduled to open next year that Blatstein is building next to the Showboat.

Blatstein's proposal for the former airport has competition: one from DEEM Enterprises. Its $2.7 billion proposal would be a recreational, residential and retail development targeted to car lovers. It would include a 2.44-mile auto course. Atlantic City Mayor Marty Small supports that auto-centric project, and its developer has been before the city council and other officials on its proposal.

In a statement, Small said the city is near reaching an agreement with DEEM.

"I'm a huge supporter of Bart Blatstein," the mayor said. "I'm just excited Bart and others have their eye on Atlantic City. I let him know [a memorandum of understanding] between the city and the other project is imminent."

Blatstein touted his proposal for the former airport as "inclusive." He said he will request that the city issue a formal request for proposals for the site, to ensure that its developer is chosen through an "open and transparent process." Atlantic City owns the former airport property. But in 2016 the state of New Jersey took on oversight of Atlantic City, and now has control over most of city's major decisions.

The Casa Mar project would be developed in five phases over 12 years, and create more than 44,000 construction jobs and 8,000 permanent jobs, which will include the training and employment of a local workforce.

Tower, based in Philadelphia and founded in 1978, is a privately held development company. Post Brothers, started in 2006, has acquired or developed more than 30 properties, with over 8,000 apartment units and totaling over $4 billion in total project cost.


Wednesday, November 9, 2022

PA Based PREIT Works Out Extensions on $300 Million NJ Mall Loan

 By Mark Heschmeyer CoStar News

For the second time in three months, Pennsylvania Real Estate Investment Trust has bought itself more time to sort out its options for $300 million in debt due on its Philadelphia-area Cherry Hill Mall.

Life insurers New York Life Insurance Co. and the Teachers Insurance and Annuity Association of America have extended the repayment of their loans of $150 million each backed by the 1.3 million-square-foot regional mall in the Philadelphia suburb of Cherry Hill, New Jersey, according to a PREIT filing with the Securities and Exchange Commission.

The new due date is February 2023, having been extended from its previous due date of this month. The November date was already an extension of the original due date in September. And the new agreement gives PREIT the option to extend one more time until May 2023.

The extensions point to lenders’ willingness to work with retail borrowers whose malls are rebounding from the initial impact of the coronavirus pandemic. They also buy both the borrower and lenders more time to see where interest rates end up as the Federal Reserve continues to fight off inflation with higher borrowing rates.

The total of the two loans represents the largest near-term individual property debt maturity that PREIT is dealing with, according to its latest quarterly report.

The extensions have cost PREIT more than $3.5 million in fees, according to the SEC filing.

PREIT representatives did not immediately respond to request for additional information on the Cherry Hill debt negotiations.

Late this summer, PREIT announced several new tenants at Cherry Hill Mall, including eyewear retailer Warby Parker, women’s fashion chain Marc Cain, a Levi’s store and menswear brand Psycho Bunny.


Tuesday, November 8, 2022

QVC Sells Headquarters, Studio and Distribution Centers for $443 Million to Oak Street

 By Linda Moss CoStar News

Home shopping giant QVC has sold five properties, including its headquarters and main studio facility, for $443 million to Oak Street, a private equity firm that's made several similar acquisitions from retailers facing a tough economy.

QVC in a third-quarter earning release reported that it had sold sites in Pennsylvania, South Carolina, Tennessee and Virginia to Chicago-based Oak Street, which is owned by Blue Owl Capital of New York. QVC, which operates a video TV channel and also sells goods online, plans to lease those properties back.

The location in Pennsylvania that traded was QVC Studio Park, the company's 585,000-square-foot global headquarters and studios, at 1200 Wilson Drive in West Chester, CoStar data shows. That facility is located on a 48-acre campus, according to CoStar.

The other sites that CoStar identified as being sold to Oak Street were: 2200 TV Road, a 1.1 million-square-foot distribution center in Florence, South Carolina; 1 QVC Drive, a 1 million-square-foot distribution center in Suffolk, Virginia; and 857 Mountain View Drive, a 1 million-square-foot distribution center in Piney Flats, Tennessee.

QVC and Englewood, Colorado-based Qurate Retail, which owns both the No. 1 home channel and St. Petersburg, Florida-based HSN, didn't immediately respond to emails seeking comment Monday. Blue Owl declined to comment on behalf of Oak Street.

Oak Street has been involved in several sale-leaseback deals with struggling retailers that were looking to raise capital by cashing in their real estate holdings after facing a troubled economy. In December 2019, beleaguered home goods chain Bed Bath & Beyond sold roughly half its real estate portfolio, some 2.1 million square feet that included its Union, New Jersey, headquarters and some stores, to Oak Street for $267.3 million in such a transaction.

Oak Street has also done sale-leasebacks with Delaware, Ohio-based Franchise Group, whose $8 billion offer to acquire retailer Kohl's chain was rejected in July. Franchise Group in November last year purchased the Badcock furniture chain for roughly $580 million. The next month, Franchise Group said it would repay $400 million of debt with the proceeds from the sale of Badcock's consumer-credit accounts receivable portfolio. Then it put Badcock's owned stores, headquarters and distribution centers on the block.

In March it completed the sale-leaseback of 35 Badcock stores for $94 million to National Retail Properties, saying it would use the cash proceeds to repay part of the remaining $175 million of its acquisition financing for the chain. Then in June, Badcock closed a sale-leaseback deal for three Badcock distribution centers, with Oak Street buying them for about $150 million.

There were several media reports that Franchise Group planned to finance its planned acquisition of Kohl's by doing a sale-leaseback deal with Oak Street for the retailer's real estate.

For the third quarter QVC reported that it posted a $277 million gain on its property sales in the third quarter, and will use the those proceeds to pay down its revolving credit facility.

"We do have several additional material properties," Ben Oren, Qurate executive vice president and treasurer, told Wall Street analysts on the earnings call. "I think the interest in doing additional sale-leasebacks will be opportunistic and dependent on market conditions, but we will continue to look at opportunities across the portfolio."

North Carolina Fire

Qurate, and QVC and HSN, are still reeling from last year's North Carolina warehouse fire, where an employee died. That 1.3-million-square-foot fulfillment center at 100 QVC Blvd. in Rocky Mount, which served both QVC and HSN, was destroyed by a blaze last December.

That facility won't be rebuilt by Qurate, and nearly 2,000 workers were let go as a result. In the aftermath of the fire, Qurate said that facility was the company’s second-largest fulfillment center, processing 25% to 30% of the volume for both its QVC and HSN businesses. And it was the primary returns center for hard goods for the networks.

"While the company has taken steps to minimize the overall impact to its business, it experienced elevated warehouse and logistics costs during the three months ended Sept. 30, and anticipates these increased warehouse and logistics costs to continue during 2022," Qurate said in a statement.

QVC received an additional $180 million in insurance proceeds stemming from the fire in the third quarter. In total, QVC has received $380 million of insurance money since December 2021 and recorded a net gain of $137 million in restructuring and fire-related costs during the first nine months of this year.

In the third quarter, QVC also incurred an additional $2 million in fire-related costs, net, primarily related to personnel costs and legal fees, that are not expected to be reimbursed by the company's insurance policies, as well as $12 million of other fire-related costs that it expects to receover from insurance.

In addition, QVC submitted a business-interruption claim with its insurer.

"QVC expects to continue to record additional costs and recoveries until the insurance claim is fully settled," according to Qurate.

Overall revenue for QVC and HSN combined dipped 8% in the third quarter, dropping to $1.66 billion.


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Thursday, November 3, 2022

1M SF Logistics Center to be Completed in Chambersburg, PA 4Q 2023

 By Linda Moss CoStar News

Endurance Real Estate Group and its partner Guardian Life Insurance Co. of America have started construction on a 1 million-plus-square-foot logistics center in Chambersburg, Pennsylvania.

The Chambersburg Logistics Park is slated for a 93-acre site immediately off of Exit 10 on Interstate 81. Radnor, Pennsylvania-based Endurance over the past two years has obtained the necessary entitlements for the development. The $115 million project will be the first joint venture between Endurance and New York-based Guardian, according to Guardian President Benjamin Cohen, and is expected to be completed in the fourth quarter of next year.

“This project is a continuation of our long-term strategy to acquire and develop sites that offer superior access, proximity to abundant labor, and the ability to provide best-in-class design features to attract a variety of high-quality users,” Jared Newman, Endurance senior vice president and partner, said in a statement.

Endurance will oversee the construction of the cross-dock warehouse-distribution facility, which will include state-of-the-art features such as tilt-wall panel construction; 40-foot clear heights; 60-foot deep speed bays; high-bay LED lighting with motion sensors; 166 overhead dock door positions, 101 equipped with 9-by-10 doors with mechanical levelers, bumpers, seals and dock lights; four 14-by-16 drive-in doors; 213 trailer stalls and 375 car parking spaces; and 4,000 amp, three-phase main electric service.

The location is near major East Coast markets and regional seaports and has access to multiple air, rail and highway systems.


PREIT Sells New Jersey Mall for $45 Million to Kohan Retail Investment

 By Linda Moss CoStar News

Pennsylvania Real Estate Investment Trust has sold one of its New Jersey malls for $45 million to Kohan Retail Investment Group, that landlord's second recent purchase in the Garden State.

The sale of the Cumberland Mall in Vineland, New Jersey, is part of Philadelphia-based PREIT's effort to raise capital and improve its balance sheet. PREIT didn't disclose the buyer, but according to CoStar data it was Kohan Retail of Great Neck, New York. Kohan Retail didn't immediately respond to to an email and phone call seeking comment Wednesday.

The sale price is a significant discount from the $59.5 million that PREIT paid for Cumberland Mall in February 2005.

This isn't the first time Kohan Retail is buying a New Jersey mall. Known for picking up distressed properties, Kohan Retail acquired Livingston Mall from Simon Property Group in June for $60.5 million.

PREIT, which emerged from Chapter 11 bankruptcy protection in December 2020, has been trying to get its financial house in order. It has been selling some malls and redeveloping others, adding uses such as multifamily housing and medical facilities.

"As a result of completed asset sales, the company has applied proceeds and excess cash from operations to pay down debt by $148 million through Oct. 31," PREIT said in a statement on Wednesday.

The firm also has an additional $127 million of properties under contract or negotiation for sale, deals that are expected to close in the coming months.

With the completion of the sale of the Cumberland Mall and several outparcels, PREIT said it will have raised $110 million in capital this year. The REIT also "has a robust pipeline of additional asset sales in various stages," according to its statement.

Back in August, PREIT officials said they had over $200 million in property sales either completed or pending, capital it planned to use to pay down more of its debt.


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Tuesday, November 1, 2022

KKR Buys Philly's Presidential City Apartments for $357M

 By Jack Rogers Globest.com

Private equity giant KKR cast a resounding vote of confidence in Philadelphia’s apartment market—at least the part of it with a tenant base of well-paid professionals—with its purchase of the Presidential City apartment complex for a record $357M.

The purchase price for the venerable 1950s-era complex of four 12-story buildings—built by Pentagon developer John McShain—tops the previous record for an apartment sale in Philly by more than $100M.

Prior to this mega-transaction, the most expensive sale of an apartment complex in Philadelphia was 1500 Locust St., a 45-story apartment building that sold for $233M in December.

KKR’s Real Estate Select Trust fund, a non-traded fund aimed at individual investors, made the purchase in partnership with Mack Real Estate Group.

Post Brothers bought Presidential City in 2012; in 2017, Post renovated the entire complex in a $100M spruce-up that included the installation of outdoor swimming pools.

KKR’s big move comes in the midst of a national cooldown in apartment transactions. Apartment transactions totaled $74B in the US in the third quarter, a YOY drop of 17%. Buyers are pulling back on the residential market because of the rising cost of debt and a likely slowdown—possibly even a pullback—in rent growth.

KKR told the Wall Street Journal the lucrative deal for Presidential City made sense because the buyers assumed an existing fixed-rate mortgage held by Post Brothers, a loan with a much lower rate that current levels that are topping 7%.

KKR COO Billy Butcher told WSJ that the occupants of Presidential City are primarily high-wage professionals who spend less as a percentage of their income on rent compared with similar tenants living in properties closer to downtown.

Rents for one-bedroom apartments at Presidential City start around $1,800 per month, compared to average rents in the city center, which generally start above $3,000.

Butcher suggested this puts Presidential City in a strong position to weather a recession. “It provides a lot of stability,” he told WSJ.

McShain originally intended to build 48 apartment towers at Presidential City—and keep naming them after US presidents. The four that were built are named for the first four presidents.

KKR Real Estate Select Trust has invested about 19% of its fund in residential buildings, including a 365-unit apartment complex in Brooklyn that it purchased for $190M in July.