Wharton Industrial sells Pennsauken portfolio for $195 million

 By Paul Schwedelson  –  Reporter, Philadelphia Business Journal

A joint venture between Wharton Industrial and Walton Street Capital has sold Twinbridge Industrial Park, a 1.3-million-square-foot industrial portfolio in Pennsauken, for $194.5 million, in one of the largest industrial deals in New Jersey this year.

An affiliate of New York-based DRA Advisors bought the 37-building portfolio. The average building is 35,000 square feet.

In 2020, New York-based Wharton and Chicago's Walton bought the portfolio from The Bloom Organization. At the time, it totaled 32 buildings and 1.16 million square feet. Wharton and Walton bought a few additional buildings since then to add to it. The site is 10 miles from Philadelphia's Center City.

“We really believed in the real estate close to Philadelphia,” Wharton Industrial Chairman Peter C. Lewis said. “It’s irreplaceable. You can’t build this anymore. There’s no more land left and you can’t get approvals. The proximity to Philadelphia is perfect."

The industrial park is close to routes 73,130, Interstate 295, and both the Betsy Ross and Tacony-Palmyra bridges into Philadelphia. PepsiCo leases space at 8275 N. Crescent Blvd. Rental car company Enterprise leases space at 9345 N. Crescent Blvd.

Properties also include three buildings totaling 153,400 square feet at 809 Hylton Road, 815 Hylton Road and 1045 Thomas Busch Memorial Highway that Wharton acquired with Walton Street in 2021.

Lewis declined to share how much Wharton Industrial paid for the Twinbridge Industrial Park portfolio. In recent years, the Philadelphia region’s industrial market has seen low vacancies and record rents, increasing the value of properties like the one Wharton just sold.

Wharton increased rents for tenants from $5 or $6 per square foot up to $12 per square foot, a testament to the high demand and low supply of the Philadelphia industrial market. The portfolio is now 97% occupied. On average, the 37 buildings were built in 1983.

Tenants include Lockheed Martin, Sprint, PepsiCo’s SodaStream and BlueTriton, which was previously known as Nestle Waters.

“It’s a mixture of credit, but a lot of it is decades-old companies or family businesses or small businesses that just pay their rent and they’re good tenants and they service the market,” Lewis said. “I love that kind of tenant.”

Wharton planned to sell the portfolio eventually, but Lewis wasn't sure of the timing. Given that high interest rates have limited buyer pools, Lewis initially thought of waiting. Once interest rates subside, there could be more potential buyers yielding a higher price.

But other sellers of comparable properties had a similar mentality. Since few comparable properties are selling, brokers convinced Lewis the portfolio could generate competition among buyers, making it an advantageous time to test the market. Lewis followed their advice and closed the deal despite the challenging financing environment. By being one of the few sellers in the market, Wharton was able to more easily attract the few buyers looking for deals.

Full story: https://tinyurl.com/3drcs5y2

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Despite Surge in Apartment Construction, Philadelphia Trails Other Major US Markets

By Brenda Nguyen Costar

Despite the unprecedented level of apartment construction underway locally, Philadelphia's multifamily development seems downright modest compared with several other top markets nationwide. As the seventh-largest metropolitan area in the U.S. by population, Philadelphia ranks 15th in total units completed in the past 12 months and units under construction.

The City of Philadelphia's rich history has shaped its core housing stock, largely comprised of row houses, townhouses and converted older buildings. The city’s density has limited the amount of land available for significant multifamily development. As a result, Philadelphia’s multifamily developments have mostly been limited to in-fill projects or warehouse-to-apartment conversions over the years.

Most cities leading in multifamily development nationally, including Dallas, Houston and Phoenix, also have a large inventory of available, developable land. Surging population growth has further fueled these Sun Belt metropolitan areas in recent years.

In the Philadelphia suburbs, it's not so much the availability of land that is impeding significant multifamily development so much as the prioritization of low-density residential development by many municipalities. These residential areas tend to focus on single-family homes on larger lot sizes, resulting in more restrictive zoning regulations. These regulations can be more confining compared to those in the city, making it challenging for developers to obtain permits and variances for large-scale multifamily projects.

The region’s slower pace of rental housing development is a decade-long trend that has led to a highly compressed multifamily market with a 5.7% vacancy rate – the fourth tightest of these 15 metropolitan areas. Only New York, Los Angeles and Miami have vacancy rates under 6% as of mid-2023.

Despite Philadelphia’s comparatively slow housing production, the record 22,000 units scheduled to be completed over the next 24 months should help to ease supply pressures stemming from decades of underdevelopment. Even with various efforts to increase construction levels and address the housing shortage, the market needs to work together to keep pace with other major markets. Moreover, balancing the need for affordable housing and the demand for higher-end units will be crucial in shaping the future of multifamily development in Philadelphia.

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Prologis to Acquire 14MSF Blackstone Industrial Portfolio in $3.1 Billion Deal

 Prologis, Inc. (NYSE: PLD) and Blackstone (NYSE: BX) today announced a definitive agreement for Prologis to acquire nearly 14 million square feet of industrial properties from opportunistic real estate funds affiliated with Blackstone for $3.1 billion, funded by cash. The acquisition price represents an approximately 4% cap rate in the first year and a 5.75% cap rate when adjusting to today's market rents.

"We're pleased to be working with Blackstone on this deal. These high-quality properties are complementary to our portfolio and fit perfectly into our long-term strategic plan for growth," said Dan Letter, president, Prologis. "The acquisition demonstrates our unique ability to add significant scale to our portfolio - expanding customer relationships and increasing opportunities for our growing Essentials platform."

Nadeem Meghji, head of Blackstone Real Estate Americas, said, "Where you invest matters, and this transaction demonstrates the exceptional demand for high-quality warehouses. With near record low vacancy, logistics remains a high conviction theme for us; we are proud owners of $100 billion of warehouses in North America and $175 billion in total around the world. And, of course, Prologis is a world-class company that knows this space as well as anyone."

Prologis and Blackstone have completed more than a dozen transactions together in the past 11 years. Leadership at each company values the relationship and the opportunities it creates to execute on their respective strategies across markets and cycles.

Prologis currently owns 1.2 billion square feet of logistics real estate in 19 countries. This acquisition expands the company's presence in key markets, including Atlanta, Baltimore/Washington DC, California (Southern California, Central Valley, SF Bay Area), Dallas, Las Vegas, New York/New Jersey, Phoenix and South Florida. The company plans to hold all of the properties acquired. This deal expands Prologis' relationship with 50 existing customers and adds 77 new customers.

The transaction is currently expected to close by the end of the second quarter.

Eastdil Secured, Barclays, BofA Securities, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, PJT Partners and Wells Fargo acted as financial advisors to Blackstone, and Simpson Thacher & Bartlett LLP acted as legal advisor.

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