By Paul Schwedelson – Reporter, Philadelphia Business Journal
Two years after buying a 305,706-square-foot industrial building in Northeast Philadelphia for $31.5 million, Greek Real Estate Partners knocked it down and is replacing it with a new warehouse.
The 287,000-square-foot building at 2121 Wheatsheaf Lane is expected to cost about $50 million to build, Greek Real Estate Partners Managing Partner David Greek said. The East Brunswick, New Jersey, developer secured a $44 million construction loan from First Citizens Bank.
The cost of land and construction adds up to an $80 million bet that a modern industrial building in a dense part of Northeast Philadelphia will yield a high return.
“I have to have a pretty strong belief in the overall market to make this sizable investment at this time,” Greek said. “We remain really confident that there is a significant amount of demand for this space.”
Demolishing the building was part of the plan all along, Greek said. It was knocked down over the summer and the new one is planned to be ready for tenants in about a year. The industrial building had been leased to cocoa bean distributor Dependable Distribution Services, and a neighboring 25,000-square-foot office building was leased to Amazon, which used the site for parking.
Having those tenants in place bought time for Greek Real Estate Partners to gain approvals to redevelop the site. The initial purchase came with a short due diligence period, Greek said, so the approvals weren’t in place at the time.
“With that open-ended risk, the fact that we had two leases in place and that the asset was producing cash flow actively from the day we bought it, allowed us to say we can spend this $30 million and if we are not successful, the worst that can happen is we continue to collect rent checks,” Greek said.
What happened, though, was the best case for Greek Real Estate Partners. The firm gained the necessary approvals and both leases had termination clauses so the leases could end as long as the tenants were given 18 months notice.
“If the property was just land and didn’t have any leases in place, we would not have been able to afford the purchase price we paid,” Greek said.
While the existing buildings offered short-term cash flow, Greek said a new building can command “significantly higher” rent. Since the developer plans to be a long-term owner and hold the property for 15 to 20 years, Greek can further justify the construction costs.
The previous industrial building was built in the 1950s and added onto in the 1970s. While leasable when the property was purchased, Greek didn’t think that value would last over the next 15 to 20 years.
The previous building had 22-foot heights and 10 dock doors. The new building is planned to have 40-foot heights, 36 dock doors and two drive-in doors. It’ll also have 65 trailer parking spaces and 258 car parking spaces, another sizable upgrade.
The building is being built without tenants in place and could be specialized for specific uses like cold storage, data centers and e-commerce distribution. It could also accommodate multiple tenants, although Greek said it’s likely it’ll be leased to one. He anticipates leasing activity picking up next year once the walls and roof are built and a lease signed potentially around next summer.
“One of the things that holds up my confidence is the lack of other options in this market,” Greek said.
Greek touted the site as one that could be popular with e-commerce distributors who want to be close to population centers. The density of Philadelphia and challenge of replicating a site like this help Greek believe in the project.
Full story: https://tinyurl.com/3st345ta
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.