Is the office setting dead?

The Office vs Work from Home:
http://www.cnbc.com/id/15840232?video=1455649343&play=1

Commercial Real Estate Outlook & Picks:
http://www.cnbc.com/id/15840232?video=1455422162&play=1

GSA Leases 12,676 SF at 280-288 Boot Road in Downington

"Aggregate rental of the lease was $550,000. GSA is a division of the Federal Government that offers products, services and facilities that federal agencies need to serve the public. In this particular facility, the Coatesville Veterans Administration Hospital will utilize warehouse space to support its renovation projects at its main campus."

"Within the first year of ownership, First Eastern has increased occupancy at the property from 0% to 89%", Newton said. We are very proud to have helped generate these results in such a difficult economic climate."

"280-288 Boot Road is a 48,817 square foot building containing three two-story flex suites ranging in size from 12,869 SF to 18,865 SF. Each suite has its own outside entrance, first and second floor office space, large warehouse facility and two tailgates. Drive-in loading is also available. Other features include natural gas heat, central air conditioning and parking for 64 cars. GSA will join Jimmy Duffy & Sons, Inc. and Delicious Bite, LLC as long term tenants in the building. This building is centrally located within 1.5 miles from the Route 30 Bypass with easy access to Routes 100, 322 and 202."

25,000 SF of Leasing Activity Brings Occupancy of South Broad Office Tower to 96%

"230 South Broad Street, a 22-story historic office tower prominently located in the heart of Philadelphia s Avenue of the Arts, has recently experienced a flurry of leasing activity resulting in a 96% occupancy rate. The four renewals, including one expansion, and five new tenants, including a café on the ground floor, total 24,614 SF.

* PNC Bank has signed a long term lease renewal for its ground floor bank branch, (on the corner of Broad & Locust Streets), and office suite consisting of 2,878 SF.

* Philadelphia Futures, a nonprofit organization that prepares students from low-income families to enter and succeed in college, has renewed its 4,250 SF lease.

* In another renewal, Pasquarella, Kunnel & Pomo, PKP, a personal injury law firm, decided to remain in its 4,128 SF, 19th floor suite.

* In the building s newest renewal/expansion, Perspective Consulting is now leasing 2,179 SF.

* Tuscany Café has opened its third Center City location in a ground floor suite of 230 South Broad, adding a great amenity to the building.

* ABM Industries Incorporated, one of the largest facilities services contractors in the United States, has signed a new lease for 2,743 SF in a relocation from 1528 Walnut Street.

* The Law Firm of Todd M. Berk, Esq. has entered into a new long term lease, taking 3,701 SF in a relocation from 1429 Walnut Street.

* Philadelphia International Records, led by Kenny Gamble and Leon Huff, the legendary producers of Sound of Philadelphia, were forced to leave its 309 South Broad Street home of over 40 years due to a fire and has leased 2,682 square foot lease in the building.

* In another new lease, DelCasale Inc., a court reporting company, has signed for 1,815 square feet.

230 South Broad Street is a 215,000 SF, 22-story office building located on the Northwest corner of Broad and Locust Streets. The historic building is at the center of the Avenue of the Arts, offering fabulous views looking South and East over the Academy of Music. The building features direct access to The Bellevue parking garage and Sporting Club, and contains a PNC Bank Branch, the upscale seafood restaurant, Estia, and the recently opened Tuscany Café on the ground floor."

Habitat for Humanity of Montgomery County, Inc. Acquires 19,861 SF Flex Building in Norristown

"Habitat for Humanity of Montgomery County, Inc. has purchased a 19,861 SF flex building at 533 Foundry Road in Norristown. Sale price of the property was $1,210,000.

Habitat for Humanity Montgomery County, Pennsylvania is a non-profit, ecumenical Christian housing ministry that seeks to eliminate poverty housing in our country. According to their website, "Their mission is to build simple, decent houses in partnership with people from all walks of life."

Built in 1973 and renovated in 2006, 533 Foundry Road is situated in the West Norriton Industrial Park and is a one-story flex building containing a total of 19,861 SF of flex space. The property features private offices, powder rooms, conference room, assembly facilities and a warehouse. This building has a new roof and contains 3 phase 120/208 volt primary power with a 1,200 amp main service."

WorldGate makes a move within Trevose, PA

"Tiny WorldGate Communications Inc., maker of video phones, will move its operations but remain in Trevose.

According to a filing with the Securities and Exchange Commission, WorldGate will lease 18,713 square feet in the Horizon Corporate Center. Its current 17,000-square-foot offices are about a mile away at 3190 Tremont Ave.

The new space will cost more, despite an initial five-month abatement in rent. The basic rent will be $24 per square foot, up from $7.06 per square foot for its current location, according to regulatory filings.

So while WorldGate spent about $250,000 on total rent expense in 2008, the new lease calls for the company to spend $449,112 on its initial annual base rent.

WorldGate, which was rescued by a North Carolina telecommunications reseller a year ago, said it expected to make the move in August."

A bright sign: Some RE firms get financing

"Signs have emerged in recent weeks that money is headed back into commercial real estate in Philadelphia as properties and companies were able to arrange the financial infusions they sought.

The transactions range from mega to small, and point to a subdued return of capital to the market.

For example, Pennsylvania Real Estate Investment Trust closed on a $670 million loan and line of credit and Berkadia Commercial Mortgage in Horsham helped refinance $17.5 million on a shopping center in Northeast Philadelphia and $3 million for an industrial building in Delaware County. The owner of 1601 Market St. managed to line up a $61 million loan for the Center City office building, and Keystone Property Group refinanced $53.5 million on an office complex through one of the first commercial mortgage-backed securities (CMBS) deals to get done in two years.

“We’re seeing a lot of lenders who were active on the capital market side come back in if they didn’t get out or go out of business,” said Matt Pestronk, managing director at Ackman-Ziff Real Estate Group, which helped arranged the Keystone Property transaction. “A lot of people see the world isn’t coming to an end. People are making loans but on things they are able to live with.”

That means stable properties in good locations and little to no vacancy exposure.

Northmarq Capital, a real estate investment banking firm, has seen an uptick in activity with most of its refinancings and smaller transactions, said M. Walter D’Alessio, vice chairman of the company.

“Generally speaking, this has been a pretty attractive turnaround year for us,” D’Alessio said, noting the dearth of deals during the past two years. “There’s more optimism.”

While there may be more confidence in the market, these deals aren’t easy to get done. Keystone’s deal took five months to close. PREIT’s got done but with stricter terms than the company had before.

For example, what was once an unsecured credit facility has now became secured, and the Philadelphia company that owns regional shopping malls must make $33 million payments on its borrowings each year for the next three years. Where the company previously had more term loan and less revolving credit, that also changed.

“We did extraordinarily well and have the financial flexibility to weather this stormy market,” said Ed Glickman, president of PREIT.

Glickman attributed the company’s ability to line up such a large transaction to its longstanding relationships with its lenders and PREIT’s track record.

“It’s better to stay with and support the borrower than end up with foreclosed assets, especially when the markets are illiquid as they are today,” he said.

While PREIT and the others were able to refinance, not everyone is as successful.

Orleans Homebuilders Inc. voluntarily filed March 1 for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Delaware, after failing to successfully negotiate an extension on a $350 million line of credit. And just because Keystone Property managed to get a CMBS deal doesn’t mean bond financing is back to where it was before the recession.

“I think it will come back slowly, but it’s going to be baby steps,” said Brad Krouse, who heads the real estate department at Klehr Harrison law firm and was involved in the transaction. “It’s not going to come back the way it was. The world has changed a bit.”

Developer Dranoff building on past success

"With his 777 South Broad Street project making its debut yesterday, it was to be expected that developer Carl Dranoff would have Center City on his mind.

But more condos in an already-saturated market? In Camden?

"I've already got 700 names on a waiting list - many Victor renters who want to own - and the market will be different when Radio Lofts opens in two years," Dranoff said.

Radio Lofts is a 10-story, 86-unit condo venture Dranoff Properties Inc. has planned near the Camden waterfront, a stone's throw from the Victor, the 341-unit rental project crafted six years ago from the old Victor Talking Machine Co. cabinet factory.

Crews are doing environmental-remediation work inside the 154,000-square-foot industrial building, to meet state requirements for residential occupancy. Dranoff received $40 million in financing necessary for the project late last year.

The work should be done by September, said Dranoff, 62. He expects the New Jersey Department of Environmental Protection permit by year's end, with construction on Radio Lofts to start in 2011.

It's another in a growing list - six residential and one commercial (World Cafe Live/WXPN studios) - of "calculated risks" that Dranoff, a Philadelphia native, has embraced.

When you add them up, the cost of Dranoff Properties' projects in the Philadelphia region since 1999 is close to $510 million, and he has added more than 1,200 high-end housing units to the market, with rental and for-purchase ventures rolling to completion through the recession and its tight-credit issues.

"Carl has created interesting real estate in locations that many people did not consider," said one of Dranoff's more formidable Center City competitors, Realtor/developer Allan Domb. "His developments have changed and impacted for the positive the neighborhoods he has touched."

Dranoff has figured out how to do business in one tough town for developers.

"At first glance, you'd have to wonder why anybody would want to be a home builder in Philadelphia," said economist Kevin Gillen, vice president of Econsult Corp. "Our construction costs, taxes, and regulations are among the most burdensome of any U.S. city, while our house prices, rents, and incomes are among the lowest. Unions and their work rules can be both costly and inflexible. The permitting and zoning-variance process can be both time-consuming and confusing."

Once a builder learns how to navigate Licenses and Inspection requirements successfully, win a neighborhood's support, and design a project that comes in at a reasonable cost, Gillen said, he has a template for success here that can be repeated for future projects.

Dranoff's 777 South Broad Street originally was to have been condos, a midrise version of his high-rise and first for-sale project, Symphony House, a few blocks northwest on Broad Street.

But when the condo market soured with the economy in 2007, the $80 million project, designed by JKR Partners, became high-end apartments with rents starting at $2,100 a month.

It was easier to make that shift before construction began in 2008 than after, as Dranoff did with his condo-turned-rental Venice Lofts in Manayunk.

"It was like turning a battleship around in a river," Dranoff said. "It was a hard call. We had many agreements of sale in place and had to buy two units back. We were lucky that everyone seemed to understand."

What makes 777 distinctive - other than its "eco-consciousness" and a huge rooftop Sky Deck - is that it was started and completed during the economic downturn. Other projects have struggled as financing has dried up.

It wasn't all that easy to come up with the $80 million in financing he needed for 777, Dranoff said, even though he tends to pay off his construction loans less than a year after a project is finished, instead of over the seven-year term.

"It's given me a lot more credibility with banks," he said, acknowledging that lenders still don't let go of money easily.

And although he won't say how much, Dranoff put a lot of his own skin (equity, that is) in the game to get 777 built the way he wanted, even as high-end apartments.

"I put more money into this instead of less," he said.

Symphony House and 777 were new construction, yet Dranoff said he tried to create the same kind of loft feel that his rehabs - Locust on the Park, Left Bank, the Victor, and Venice Lofts - have, because tenants and buyers seem to like it.

"It's a continuation of everything I've done before," he said, the last 13 years in Center City and Camden by himself and, in the 1980s, in Old City with Steve Solms as Historic Landmarks for Living.

"It doesn't end with the end of construction," Dranoff said, "because we learn new things that we introduce into old buildings - hospitality suites, for example. That's the advantage of building-owning-managing and being small and focused on this area.

"We're nimble," he said. "Our left hand always knows what the right hand is doing."

Over the next year or so, both hands will be busy.

Radio Lofts, with the Victor, will form the gateway to the $500 million Cooper's Crossing on the Camden waterfront, which will feature 1,500 residential units, as well as retail and office space.

Dranoff's $190 million Two Center Street project in Newark, across from the New Jersey Performing Arts Center, will be a 40-story, 328-unit rental building. His Ardmore Station will be a $180 million, 335-unit rental project that also will create a rail station.

And in Center City? "We're committed to the Avenue of the Arts," Dranoff said, adding that he was looking at "two or three sites" for the next project. He wouldn't say where because it could boost land prices.

What makes a builder successful here, Econsult's Gillen said, is "you have to be shrewd, patient, persistent, realistic, but most of all, local,"

Dranoff knows his market well, it seems."