1000 Continental KOP office building trades for $63M

by Natalie Kostelni Staff writer for Philadelphia Business Journal

A King of Prussia, Pa., office building has traded for $63 million.

KBS Realty Advisors bought 1000 Continental Drive, a 205,424-square-foot building from Equus Capital Partners Ltd. of Philadelphia. The building was 99 percent occupied at the time of the sale.

The LEED silver building was constructed on speculation in 2008 by Equus development affiliate, BPG Development Co. Tenants include Hartford Insurance, Nationwide, FT Services, Sedgwick Services, Farmers Insurance, UNUM and Guinan Financial Group.

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Greiner Packaging Int'l Inks 114,000-SF Lease

Greiner Packaging International has pre-leased 113,871 square feet at 225 Enterprise Way in Pittston Township, PA. 

The Austrian firm will house its US headquarters here starting in April 2014, creating as many as 128 full-time jobs over the next three years and investing $17 million in manufacturing and equipment at the facility where it plans to package cups, lids, and other items for the food industry. The deal was made possible thanks to funding and grants from the Department of Community and Economic Development, Pennsylvania First Program, Job Creation Tax Credits, and Gov. Tom Corbett's Governor Action Team. 

The 223,000-square-foot industrial warehouse is currently under construction on 24.3 acres in the I-81 Corridor Industrial submarket of Philadelphia's Luzerne County. When completed in March, the warehouse will feature 29 loading docks and a drive-in, 33-foot clear heights, and 800-amp heavy power. 
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Philadelphia's Retail Deliveries, Construction and Inventory

During the fourth quarter 2013, 15 retail buildings totaling 252,369 square feet were completed in the Philadelphia retail market. 

Over the past four quarters, a total of 1,008,403 square feet of retail space has been built in Philadelphia. In addition to the current quarter, 17 buildings with 436,926 square feet were completed in third quarter 2013. 

There were 282,479 square feet of retail space under construction at the end of the fourth quarter 2013. 

Some of the notable 2013 deliveries include: Wegmans, a 125,000-square-foot facility that delivered in fourth quarter 2013 and is now 100% occupied, and 3450 Fox St, a 124,900-square-foot building that delivered in third quarter 2013 and is now 90% occupied. 

Total retail inventory in the Philadelphia market area amounted to 490,015,456 square feet in 39,257 buildings and 2,552 centers as of the end of the fourth quarter 2013. 

This trend is compared to U.S. National Retail deliveries and construction, which saw 563 buildings totaling 10.42 million square feet complete construction, with an additional 46.5 million square feet of retail space still under construction at the end of the fourth quarter. A 747,500-square-foot retail facility delivered in the fourth quarter at 75 W. Rte 59 in the Northern New Jersey market, and a 628,000-square-foot building delivered in the Phoenix market back in the third quarter. Total retail inventory in the U.S. market totaled 12.4 billion square feet in more than 1.05 million buildings at the end of the fourth quarter 2013, including almost 97,000 shopping centers 
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Great American Pub to open in iconic Phoenixville building

Natalie Kostelni Staff writer for Philadelphia Business Journal

The family that owns the Great American Pub has put the Columbia House in Phoenixville, Pa., under agreement with an eye toward bringing the popular eatery to the Chester County borough.

The Hemchers anticipate closing on the Victorian building at 148 Bridge St. in a month and has plans to spend roughly $500,000 to renovate the structure on the inside and out.

The 13,555-square-foot property, a landmark in Phoenixville, was put up for sale last year as part of a Chapter 11 bankruptcy proceeding filed by an entity that owned it. The property was initially listed for $1.8 million and then lowered to $1.6 million. The asking price was dropped to $1.4 million and the Hemchers are reportedly paying close to that amount.

This will be the fourth Great American Pub for the Hemchers. Other locations of the popular dining spot include West Chester, Pa., Wayne, Pa., and Conshohocken, Pa.

“It’s going to be magnificent,” Tom Hemcher said.

Plans call for restoring a decorative bar, installing new flooring and booths, putting up new stucco on the exterior among other interior and exterior improvements.

“It just needs a good cleaning,” Hemcher said.

The family had looked in Phoenixville 15 years ago but couldn’t find a property that worked for them. Someone recently mentioned to Hemcher that the Columbia House was on the market and he reached out to West, who had the listing. She told him the property was already under agreement. Then, three weeks ago, West called to tell him that the original deal had fallen through. The Hemchers seized on the opportunity.

“We all fell in love with it,” Hemcher said about the building. “It’s going to be the talk of the town.”

The location was also appealing because of the “good vibe” that Phoenixville has, he said.

“The town is really up and coming,” he said. “There’s a lot of energy there.”

Hemcher expects what will be called the Great American Pub and Hotel to open by summer. (It's not set to be a hotel, it's just borrowing the name from the building's past use.)

Full story: http://tinyurl.com/p53z5xk

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Troutbrook Development Co Purchases Hampton Inn Allentown

Yamunaji Corporation sold the Hampton Inn Allentown at 7471 Keebler Way in Allentown, PA to Troutbrook Development Company for $9.3 million, or $75,000 per room. 

The 56,280-square-foot hotel consists of 124 rooms and was built in 1988. The buyer is expected to invest millions to renovate the property. 
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Linden Court Apts Sell for $5.6M

M & M Management has acquired the Linden Court Apartments at 9181 Academy Dr. in Philadelphia, PA from private investors for $5.6 million, or $70,000 per unit. 

The 80-unit, 85,000-square-foot multifamily building was constructed in 1962 on 1.4 acres in the Torresdale submarket of Philadelphia County. The unit mix is comprised of 32 studios, 32 one-bedroom and 16 two-bedroom apartments that are fully occupied. 
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Bellevue Park Corp Ctr Bldgs Sold for $61.5M

Metzler North America sold its three office buildings in the Bellevue Park Corporate Center at 200-400 Bellevue Pky. in Wilmington, DE to the Buccini/Pollin Group (BPG) for $61.5 million, or about $201 per square foot. 

The seven-building, 4-Star, master-planned suburban office park was built in the late 1980s on 52 acres in the North New Castle County submarket of Philadelphia. It is currently 99 percent occupied by multiple tenants such as CIGNA, Blackrock, BNY Mellon, and MasterCard. The three buildings that transferred in this sale include: 

Bldg 200: five stories totaling 98,667 square feet; 

Bldg 300: three stories totaling 90,106 square feet; and 

Bldg 400: four stories totaling 117,277 square feet. 

The properties have been institutionally-owned and maintained since its recent upgrades in 2005, when Metzler acquired the three-building portfolio for $69.4 million, or about $227 per square foot, according to CoStar data. See CoStar COMPS #1095255. 

"The acquisition of the Bellevue Park Corporate Center further cements our commitment to the State of Delaware and the Greater Philadelphia office market," said Christopher F. Buccini, co-president of the Buccini/Pollin Group. "We are very focused on owning best-in-class assets whether they are in the office, hotel, residential or entertainment sector. With so many world class corporations calling Bellevue home, this is an extraordinary addition to our portfolio." 

BPG's portfolio now tops six million square feet of commercial office space in the Greater Philadelphia MSA. The group also has more than $350 million in new projects under construction across the Northeast, including the 316-room Westin and Hilton Garden Inn hotels and the 116-unit Harlan Flats residential community, both in the Wilmington area. 

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Kimco is Cautiously optimistic for retail (Video)

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Federal Govt. Getting Out of Warehouse Business

The federal government’s main acquisitions and supply services group is revamping the way it does business, a move that could see it exit millions of square feet of warehouse distribution space. 

The move comes as the U.S. General Services Administration’s Federal Acquisition Service (FAS) has been coping with reduced budgets. 

“In this new environment, GSA must find new ways to provide better, faster and more efficient services to our military and civilian customers,” said Tom Sharpe, Commissioner, FAS. “To that end, we are preparing to make important changes to our business model which will transform the way we provide supplies and services to the government.” 

“We are shifting to a model that uses the capabilities of our vendors to directly support GSA’s customers, simplify federal acquisition, and over the next five years save taxpayers a half billion dollars,” Sharpe said. 

“In recent years, we have operated a wholesale supply business that relied on warehouse distribution centers serving U.S. customers as well as customers in Europe, Africa, the Middle East and around the Pacific Rim,” he said. “Along with the distribution centers, GSA also manages several retail stores around the world that stocked inventory from those warehouses. This model is costly, cumbersome and no longer the most efficient or effective approach to supporting our federal partners.” 

Changing this system will mean an overhaul of FSA's wholesale and retail supply chain business models. Instead of routing federal agency orders to its distribution centers for fulfillment, the FSA will have its commercial suppliers ship directly to customers and retail stores. 

“We will transition out of the warehouse business and GSA will no longer buy, store and ship those retail items,” Sharpe said. 

While it is not clear just how much of the federal government’s warehouse inventory is used by the FAS, the GSA controls a total inventory of 25.56 million rentable square feet. It leases 16.1 million square feet and owns the remainder. 

Its largest leased facility is a 1 million-square-foot facility at 1900 River Road in Burlington, NJ, which is used for the federal supply service. Its lease expires in December 2020. 

The largest facility it owns and classifies as a warehouse is a 1 million-square-foot building at 9700 Page Blvd. in Overland, MO, the Charles F. Prevedel Bldg. 100. At present,, the building has considerable vacancy. The federal government considers about 863,000 square feet of the building available, which would make its vacancy rate about 86%. 

FAS provides federal agencies more than 12 million different products and services, and more than $55 billion in information technology solutions and telecommunications services, assisted acquisition services, travel and transportation management solutions, and motor vehicles and fleet services annually. 

FAS manages more than 210 thousand leased vehicles, more than 3 million charge cards, and provides personal property disposal services facilitating the reuse of $1.1 billion in excess/surplus property. 
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Philadelphia's Office Deliveries, Construction and Inventory

During the fourth quarter 2013, five office buildings totaling 374,040 square feet were completed in the Philadelphia market area. This compares to four buildings totaling 24,500 square feet that were completed in the third quarter 2013. 

There were 797,349 square feet of office spaceunder construction at the end of the fourth quarter 2013. 

Some of the notable 2013 deliveries include: Endo Pharmaceuticals, a 300,000-square-foot facility that delivered in first quarter 2013 and Five Crescent Dr, a 207,779-square-foot building that delivered in first quarter 2013. 

The largest projects underway at the end of fourth quarter 2013 were 3737 Market St, a 340,000-square-foot building and Great Valley Corp Center, a 205,836-square-foot facility that is 100% pre-leased. 

Total office inventory in the Philadelphia market area amounted to 400,032,971 square feet in 20,506 buildings as of the end of the fourth quarter 2013. The Class-A office sector consisted of 128,600,713 square feet in 950 projects. Within the Office market there were 910 owner-occupied buildings accounting for 35,631,708 square feet of office space. 

This trend is compared to U.S. National Office deliveries and construction, which saw 177 buildings totaling 11.7 million square feet complete construction, with an additional 86.9 million square feet of office space still under construction at the end of the fourth quarter. 4 World Trade Center, a 2.85 million-square-foot facility delivered, while the 3.04 million-square-foot One World Trade Center in New York City is still underway. Total office inventory in the U.S. market totaled 10.37 billion square feet in almost 498,000 buildings at the end of the fourth quarter 2013, including almost 20,000 owner-occupied buildings accounting for 884.5 million square feet. 
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Work Begins at the Science Ctr. Apts.

By Antoinette Martin  

Southern Land Company  broke ground WEdnsday on a $110 million project that will transform a parking lot at 3601 Market St. in the Science Center into a 364-unit apartment tower.

It will be the first residential building in the University City Science Center’s 50-year-plus history.  

The 28-story residential tower, slated for completion next year, will include 14,600 square feet of retail space on the ground floor. The high-end apartment complex will have a resort-style rooftop pool, yoga and fitness center and a game room. The building will also provide parking for 200 cars and 140 bicycles.

“3601 Market St. is a signature Southern Land project that we are excited to begin constructing,” said Tim Downey, CEO of the Nashville-based firm. “We take the opportunity to shape a neighborhood’s appearance and bolster its sustainability very seriously. The building will be a modern jewel for West Philadelphia.”

Southern Land has created similar mixed-use multi-family developments in Nashville and the Dallas-Ft. Worth area, including the first sustainable mixed-use community in the state of Texas. It has several others in various stages of development in North Carolina, Colorado, Texas and New York.

BLT Architects has designed the Philadephia project to extend the “neighborhood experience” along 36th Street. “We envisioned a modern building that would be both practical and appealing to the local community,” said principal Michael Prifti.

The Science Center is a long-established incubator for start-up companies and technologies.  Its president & CEO Stephen S. Tang noted that, “The most successful innovation centers like Cambridge, MA., and San Francisco’s Mission Bay have woven into their communities places for people to live and play. “ He said, “3601 Market is a pivotal project for the Science Center as we transform our campus into a 24/7 innovation community.”

Full story: http://tinyurl.com/ny8evn8

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Security Storage Co Sells New Castle Industrial for $4M

Calumet Enterprises LLC acquired the industrial building at 705 Morehouse Dr. in New Castle, DE for $4 million, or about $37 per square foot, from Security Storage Company. 

The 108,000-square-foot warehouse was built in 1980 in the New Castle County Industrial submarket. It contains 15 loading docks and three drive-ins, 21-foot ceilings, and heavy power. 
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Paradise Property Pays $22.8M for Lafayette Hill Multifamily

Paradise Property LLC acquired The Glen at Lafayette Hill multifamily community at 555 Andorra Glen Ct. in Lafayette Hill, PA from AEW Capital Management for $22.77 million, or about $163,813 per unit. 

The three-story, 208,527-square-foot apartment building was constructed in 1999 on 18.1 acres in the Conshohoken / Plymouth Meeting submarket of Montgomery County. The 139 units are a mix of one-, two- and three-bedroom apartments were 91 percent occupied at the time of sale. 

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Montgomery County Human Services Ctr Sells for $17.5M

The County of Montgomery, PA sold the Montgomery County Human Services Center office building at 1430 Dekalb St. in Norristown, PA to Silverang Hallowell Development Company for $17.5 million, or approximately $51 per square foot. 

The five-story, 346,000-square-foot office building was constructed in 1958 on 3.1 acres in the Norristown / Valley Forge submarket of Philadelphia. Montgomery County Health Department executed a 15-year leaseback for 125,000 square feet there. 
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Interview with Sam Zell on Bloomberg TV

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Liberty Closes Second Half of $697.3M Disposition

Liberty Property Trust  has closed on its disposition of 48 properties totaling roughly 2.6 million square feet of office and flex space along with 19 acres of land to Connecticut-based Greenfield Partners LLC with Somerset Properties for $329.6 million. 

The sale marks the final part of the previously announced sale that saw Greenfield take 49 properties from Liberty in December 2013 for $367.7 million. 
See CoStar COMPS #2920492 

The second half of this 97-property disposition for Liberty included 2.1 million square feet of office properties and 468,000 square feet of flex properties spread across the Mid-Atlantic. The portfolio was more than 88 percent leased at the time of sale.

The largest property in this sale is the three-building Longview Executive Park (pictured, above) in Hunt Valley, MD. The 256,961-square-foot office campus was built in 1988 at 309-311 International Cir. on 14.1 acres in the Route 83 Corridor North submarket of Baltimore County. 

The two sales mark the latest step in Liberty's ambitious asset repositioning program, under which it plans to increase its ownership of industrial property and reduce its exposure to office space in non-core markets. 

Analysts noted the Liberty portfolio included properties with significant capital improvement requirements and near-term lease expirations. They expect the REIT's earnings to ramp up over the next several quarters as asset sale proceeds are reinvested. 
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SEPTA Details $500M King of Prussia Rail Project

by Jared Shelly Digital Producer- Philadelphia Business Journal

SEPTA updated citizens today on its plans for the King of Prussia Rail project that could cost as much as $650 million. It plans to add stops to the Norristown high-speed line to serve a community now consumed by traffic.

At its public meeting at the Radisson Hotel at the Valley Forge Casino, Byron Comati director of strategic planning for SEPTA, laid out three possible routes for the new extension: a PECO utility corridor, along Route 202 and along the Pennsylvania Turnpike. (Check out the accompanying map to see all the route alternatives.)

"There is so much automobile traffic in that neck of the woods," said Comati, "and getting there from Center City Philadelphia and other points in region is challenging if you have to use the Schuylkill Expressway."

The total cost of the project is estimated to range from $500 million to $650 million and is still about eight years away from being completed, said Comati in an interview before the event. Plans call for half of the money to come from federal dollars while the other half should come from state or local sources, he said.

The project would add about three to four stops to the Norristown line to extend it into King of Prussia and Upper Merion Township. The new stops would most certainly include the King of Prussia Mall and are likely to include Valley Forge National Historical Park and the Valley Forge Casino Resort.

A SEPTA line that extends into King of Prussia is sure to be welcomed by the mall's 30,000 workers, many of whom spend long bus or car rides on the Schuylkill expressway to get to work.

"You are talking about a lot of delay, congestion and inefficacy for workers to get to jobs," said Comati.

In the last public meeting about a year and a half ago, citizens were concerned about the aesthetics of the new rail lines and wondered if they should be at ground level or elevated in the air.

Full story: http://tinyurl.com/l865l5a

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Philadelphia's Industrial Vacancy Decreases to 8.6%

The Philadelphia Industrial market ended the fourth quarter 2013 with a vacancy rate of 8.6%. 

The vacancy rate was down over the previous quarter, with net absorption totaling positive 6,776,750 square feet in the fourth quarter. That compares to positive 1,105,038 square feet in the third quarter 2013. Vacant sublease space decreased in the quarter, ending the quarter at 1,463,921 square feet. 

Tenants moving into large blocks of space in 2013 include: Walmart moving into 1,200,000 square feet at 2785 Commerce Center Blvd, Subaru moving into 526,050 square feet at Subaru, and Harley Davidson moving into 438,000 square feet at York Business Center. 

Rental rates ended the fourth quarter at $4.52, an increase over the previous quarter. 

A total of four buildings delivered to the market in the quarter totaling 764,000 square feet, with 5,023,394 square feet still under construction at the end of the quarter. 

This trend is compared to the U.S. National Industrial vacancy rate, which decreased to 8.0% from the previous quarter, with net absorption totaling positive 78.93 million square feet in the fourth quarter. Average rental rates increased to $5.36 this quarter, and 150 industrial buildings delivered to the market totaling more than 18.5 million square feet. 
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Health Care Center Breaks Ground in North Philly

By Michael Boren, Inquirer Staff Writer

Promising to restore a North Philadelphia neighborhood known for dilapidated buildings and a lack of medical resources, city and state officials helped break ground Wednesday on a $15 million health-care facility near the Strawberry Mansion area.

The Stephen Klein Wellness Center, named for the developer, is expected to offer primary care, dental, and behavioral health services - as well as 50 job openings - when it opens near 21st Street and Cecil B. Moore Avenue. More than 100 people jammed inside a heated tent Wednesday for the ceremony.

High rates of obesity have been a problem in the area. In the 19121 zip code, where the center will be built, for example, more than 50 percent of adults were estimated to be obese, according to the 2012 Southeastern Pennsylvania Household Health Survey released by the nonprofit Public Health Management Corp.

Residents say they have to travel long distances for doctor's appointments or treatment.

"This is something that's really needed," longtime resident Valeria Chalmers, 67, said after the ceremony.

Project HOME, which takes on homelessness and poverty, will direct the nearly 29,000-square-foot center, which is also slated to include a pharmacy and YMCA-managed fitness area. Sister Mary Scullion, executive director of Project HOME, hefted one of the shovels to officially break ground Wednesday.

Residents and advocates point to the center as a sign of a neighborhood in transformation. Problems - abandoned properties, spurts of violent crime - still exist. But signs of improvement, such as a renovated bus hub near 33d and Dauphin Streets, are there, too. City officials said they hoped the wellness center could accelerate that trend.

"This community hung in there," Mayor Nutter said. "They never gave up on themselves, and we have a responsibility to stand with you."

Gov. Corbett, who also hefted a shovel at the ceremony, called the center "the right thing to do for the community."

"We do have an obligation," he said, "to help those who can't help themselves."

The center is the result of a collaboration among the city, Project HOME, Thomas Jefferson University Hospitals, and Phillies partners Leigh and John Middleton, among others. The Middletons; Stephen Klasko, Jefferson president and chief executive; and Stephen Klein were among the biggest funders. The center is expected to be completed in early 2015.

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First Hotel Opens at Philadelphia Navy Yard

Courtyard Philadelphia South has opened its five-story, 172-room Navy Yard location. This project, developed by Ensemble Hotel Partners, is the first hotel to be constructed at The Navy Yard. 

Erdy McHenry Architecture designed the Marriott-branded hotel, which features LEED certification, lounge, dining and fitness facilities, as well as office meeting space. The hotel, located at 1001 Intrepid Ave., is just four miles from Center City. 

"We are thrilled to open the first hotel at The Navy Yard," said Kam Babaoff, managing director of Ensemble Hotel Partners. "It's an honor to introduce this unique hotel, featuring a design that reflects the progressive campus in which it is located."
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Lannett Co Acquires Two Philadelphia Industrial Bldgs for $9M

Lannett Company, a Philadelphia-based manufacturer and distributer of affordable generic medications, acquired the industrial building at 11501 Roosevelt Blvd. in Philadelphia, PA from Bridgeblocks Partners II LP for $5 million, or about $26 per square foot. 

The 196,000-square-foot distribution building was constructed in 1969 with renovations in 2000. The building is situated on 15.3 acres and contains three loading docks and 32-foot ceiling heights. 

In a separate transaction, Lannett Company also purchased the adjacent industrial building at 11601 Roosevelt Blvd. in Philadelphia from Inrevco Associates LP for $4 million, or about $9 per square foot. 

This 452,262-square-foot manufacturing building was constructed in 1963 on 23 acres in the Greater Northeast Industrial submarket of Philadelphia. It features five loading docks, 15-foot clear heights, and A/C. 
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Horsham Seeks Master Developer For Willow Grove Base Redevelopment

The Horsham Land Redevelopment Authority (HLRA) has put out a call for proposals from developers for the redevelopment of the former Naval Air Station/Joint Reserve Base Willow Grove in Horsham, PA, into 862 acres of residential, retail, office, and community space. 

The HLRA's redevelopment plan calls for 1,486 residential units of various types,1.8 million square feet of commercial space, including a hotel and conference center; and 452,000 square feet of other uses that would include a regional recreation center, school, historical aviation museum, along with parks and open space. 

The agency this week issued a request for proposals to prequalify developers, which will then be invited to participate in a request for proposals expected to begin in the second quarter. 

Redevelopment of the former base in Montgomery County, PA, is expected to generate nearly $930 million in construction spending, create 10,000 jobs and generate $15.6 million a year in new tax revenues for Horsham Township, according to a report by the U.S. Navy, which departed from the base in 2011. 

The government transferred control of the base to the Pennsylvania Air National Guard and the name changed to the Horsham Air Guard Station. 
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Nordstrom to Open Fulfillment Center in Elizabethtown

Nordstrom, Inc. will open its third fulfillment center at Conewago Industrial Park on Zeager Rd. in Elizabethtown, PA. 

The 1.14 million-square-foot distribution building will be comprised of 672,000 square feet in addition to a 470,000-square-foot mezzanine. The project will break ground this month as weather allows, and is expected to deliver in mid-2015. Nordstrom said the center will create nearly 400 full-time jobs in the area in the first three years, and may ramp up to 700 full-time jobs plus additional seasonal employees as the business grows. 

"Today's announcement continues Pennsylvania's steady economic progress with another company expanding and more jobs for our citizens," said Governor Tom Corbett. "It's a testament to why Pennsylvania is built to advance - our keystone location, our talented and hardworking people - all contributed to Nordstrom bringing hundreds of new jobs to Lancaster County." 

The new fulfillment center will enable faster delivery for Nordstrom.com and catalog orders from customers on the East Coast. The company's other two centers are located in Cedar Rapids, Iowa and San Bernardino, Calif. 

"Speed of delivery is simply just part of our customers' expectations of what good service means today," said Jamie Nordstrom, president of Nordstrom Direct. "This is an ideal location to add to our fulfillment capabilities and improve the delivery experience for our customers. E-commerce is the fastest growing area of our business and this is another example of how we're investing in people and capabilities to help us support this growth and responding to our customers' changing definition of service." 

Martin and William Murray own the Conewago Industrial Park, offering a wide range of distribution and light industrial facilities with access to air, rail and interstate highway systems. H&M Company will construct the build-to-suit property on 92 acres on Lot #4 in the park, located in the Lancaster County Industrial submarket of Philadelphia. 
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Why Tenants AND Landlords Should Love Tenant Rep Brokers

by Kristian Lee

I have recently completed a transaction where I was the representative for the Landlord on a property and executed a lease with a tenant who did not understand the talent (Tenant Rep) AND time required to open a new location! Although the tenant was a very smart medical doctor, they had no experience in commercial real estate nor any experience in opening a new office location for the very first time!

At our first initial meeting they wanted to move quickly and get their practice up and running in short order. Negotiating the general lease terms through to the final proposals happened over a course of a few days, keeping on track with their fast pace desires.

Things started to stall once the lease was drafted and they brought in their general contractor to determine what needed to be done to the vanilla box suite.

At this time it was evident the process of commercial real estate was now taking over the speed of the transaction.

Since this tenant prospect was new to commercial real estate, AND they had no tenant representation (cringe) they had no clue how much time building-out their space would really take; the players necessary to execute the task; nor the cost and time needed to do it properly. For me, it was so very hard to watch this prospective tenant with no clue and the fact that my obligation was to the landlord. In my capacity, I was only able to advise them of the process, but not fully assist.

This is where a tenant representation broker can really ease the pain. A tenant representation broker is not just there to assist in finding the right space and negotiating a marketable deal, they are also there to hold the tenant’s hand and assist with the entire process and work hand in hand with the landlord’s broker.

Note to Tenant:

If believe you can go it alone (not advisable), please be aware of how long this stuff really takes and what professionals you need as an integral part of your team!

Note to Landlord:

If you want the process to go smoothly and have a great experience with your new tenant, who you will be living with you for the next 5 years, appreciate those tenant representation brokers who are at the frontline!

Blog Bonus: I want to share my take on what a typical timeline looks like. In this particular case, the tenant really had no idea how long and drawn out this process could be.

Typical Timeline

Step 1:

Allow a few weeks time to identify and meet a good broker to represent you. 

Step 2:

When evaluating a new location one must consider how it will best function for their needs. If construction is needed, it is advised to bring in a general contractor to discuss the layout, and obtain a budget. This could take a week or more depending on the build-out needs.

Step 3:

For a total renovation or building from a vanilla box an architect will be needed. The architect will put together the demolition plans, new construction plans, MEP (mechanical, electrical and plumbing plans) and prepare all the necessary documents for permit. This process is estimated to take 2-3 weeks.

Step 4:

Architect shall file for permit. Permit time ranges for every municipality but one can expect 4-6 weeks for issuance of permits.

Step 5:

During the permit filing, your general contractor will facilitate subcontractors and quotes. Once you have selected the trades they can start ordering materials.

Step 6:

Construction. This time frame varies based on the scope of the work. Most permitted jobs take anywhere from 4-8 weeks.

Step 7:

Final walk-through with the municipality to provide occupancy permit.

As you can see from the above list of the time and talent involved, from broker selection to lease execution to actual business opening, the entire process can take you 18 weeks or more.

Of course, the entire process is subject to many variables, such as, size of the deal, specific build-out needs, equipment vendor schedules, and building-specific issues, such as work schedules and other unforeseen conditions. No matter what, you should go in with your eyes wide open as far as the potential timeline and the impact on your business, when trying to find new space. Always remember that the tiniest detail overlooked, can throw your schedule off course and cause delays.

Based on the complexity of finding new space and preparing the space for your unique needs, it is vital to have the right team in place to assist you through the entire commercial real estate process from selection to opening and you need to have a realistic understanding of how long it really takes!

Full story: http://tinyurl.com/px4tj4r
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CRE in the Philly Suburbs Isn't Dead

Summary of the Biz Now event on January 15, 2014

They're not even undead. That was the message our record-turnout crowd heard at our first-ever Future of the Suburbs Summit in King of Prussia. (Though the thought of undead soccer moms is itself epic.)

For one, the 'burbs are finally shedding their image of sprawl, says Pennoni SVP Joe Viscuso (left, with JLL managing director Mike Morrone, Keystone SVP Rich Gottlieb, and Hayden REI's CEO Tony Hayden). Joe sees more clustering around urban nodes that are transit-oriented, like West Chester to Doylestown, with projects such as the renovations to the Malvern train station having positive impacts on growth.

Gen Xers with kids and downsizing Boomers are the key demographics for these nodes. Rich says Keystone is pursuing mixed-use developments along City Avenue in Bala Cynwyd to give people a live/work/play locale, and rezoning single-use properties will be a necessary component of that. Plus, having restaurants and other retail outside the 9-to-5 window helps a lot in easing traffic congestion.

Hayden Real Estate Investments hosted us at 150 South Warner Rd, in 32k SF of third-floor space. To get it ready for lease, Tony says the floor is getting a full renovation. He and the panelists agree that the new office economy looks a lot different. Tenants are seeking leases for smaller spaces and ditching cubicles for open-floor plans and collaborative spaces. (Mike, our moderator, quipped that this event was the first time brokers were actually paying a landlord to see their property.)

While homeownership dominates, at least a third of the population will continue to rent, Morgan Properties CFO Patrick O'Grady says (left, we snapped him with Liberty VP Tom Sklow). Indeed, Fannie and Freddiehave been good for multifamily in the suburbs by providing loans at the same rates as the city. It's true that job growth post-recovery has been less than robust, but Pat believes that long-term population patterns favor a rising tide that will lift all boats. (Double great news for multifamily house boats.)

What about demand for amenities? Tom says it's great for larger developments like Liberty's 700-acre Great Valley Corporate Center, which includes daycare, fitness centers, and shopping to go with over 3MSF of office space. But for buildings under 100k SF, these things may be harder to sustain. Still, Brandywine SVP Jeff DeVuono says people expect a high-end product: “A lukewarm approach to amenities doesn't have the samepayback,” Jeff says. He also sees the end of low interest rates, with Tom predicting more M&A activity before rates angle upward. (It's like junior prom: Everyone looks for a dance partner before they play Green Day's "Good Riddance.")

Hayden acquired 150 South Warner (aka Walnut Hill Plaza) through a partnership with MIM last August. (Pictured: VP Tara Hayden, founderTony Hayden Sr., CEO Tony Hayden Jr., and Stephanie Hayden.) The four-story building includes over 45k SF in leasing opportunities and is getting brand new elevators, restrooms, and lighting. Located just off the Turnpike and the 202 corridor—not to mention right by a fancy Wegman's—the team sees 100% occupancy as a realistic achievement.

Full story: http://tinyurl.com/k9qlfsl
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Philadelphia's Retail Vacancy Stays at 6.3%

The Philadelphia retail market did not experience much change in market conditions in the fourth quarter 2013. 

The vacancy rate stayed at 6.3% in the current quarter. Net absorption was positive 616,052 square feet, and vacant sublease space decreased by 109,997 square feet. In third quarter 2013, net absorption was positive 416,003 square feet. 

Tenants moving into large blocks of space in 2013 include: Wegmans moving into 125,047 square feet at 500 Montgomery Mall; Restaurant Depot moving into 72,643 square feet at 2950 Roberts Ave; and ShopRite moving into 71,900 square feet at 3450 Fox St. 

Quoted rental rates decreased from third quarter 2013 levels, ending at $13.75 per square foot per year. 

A total of 15 retail buildings with 252,369 square feet of retail space were delivered to the market in the quarter, with 282,479 square feet still under construction at the end of the quarter. 

This trend is compared to the U.S. National Retail vacancy rate, which decreased to 6.6% from the previous quarter, with net absorption positive 21.28 million square feet in the fourth quarter. Average rental rates increased to $14.59, and 563 buildings delivered to the market totaling more than 10.4 million square feet. 
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Australian Energy Firm Leases at Navy Yard

by John Jordan, Staff Writer for GlobeSt.
PHILADELPHIA-City officials announced on Thursday that Ecosave Inc., an Australian energy efficiency firm, will occupy 20,000-square feet at a building to be constructed at the Philadelphia Navy Yard.

The lease deal culminated a two-year effort to bring the firm to the Navy Yard, city officials state. “We are delighted to welcome Ecosave to Philadelphia,” said Philadelphia Mayor Michael Nutter. “Increasingly, companies from around the world are choosing to start, stay and grow in Philadelphia as we offer a very competitive business climate, unrivaled quality of life, and world class leadership in sectors such as energy efficiency. I want to thank all of the partners involved in the effort to bring Ecosave to Philadelphia.”

Ecosave is Australia’s largest independent energy services company offering free energy and water savings assessments, guaranteed savings, fixed fee proposals, and funding solutions. Ecosave has delivered savings to more than 3,000 sites in Australia and internationally since 2002. In 2013, Ecosave purchased a Bristol, PA-based energy efficiency firm and in January 2014 moved to the Navy Yard.

“Ecosave carried out a two-year search, considering six potential cities in the northeastern U.S., to select the best city in which to base our North American head office,” said Ecosave CEO Marcelo Rouco. “The two key factors in our decision were being among thought leadership in green buildings at the Energy Efficiency Buildings Hub in the Navy Yard, and the welcoming we received from the local commercial community that made it much easier for a new entrant into the market to do business here.”

Ecosave will occupy approximately 20,000 square feet of a new, 75,000-square-foot building to be constructed in the Commerce Center of the Navy Yard, developed by Liberty Property Trust and Synterra Partners.

Full story: http://tinyurl.com/jvgg28g
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Blackstone 'actively' investing in real estate: CEO (Video)

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West Park Distribution Center Trades for $36.8M

Walsh Construction Company sold the West Park Distribution Center at 6974 Schantz Rd. in Allentown, PA to Gramercy Property Trust, Inc. for $36.83 million, or about $75 per square foot. 

The 480,000-square-foot distribution building sits on almost 28 acres and is fully occupied by Amcor Rigid Plastics on a new 15-year, triple-net lease. The facility contains 70 loading docks and 30-foot clear heights. 
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Crowdfunding: Changes and Impact on CRE

Crowdfunding is the collection of funds from multiple parties to finance a particular project or venture. I concluded by stating that technological and social pressures gradually rendered the regulatory regime from the 1930s obsolete and impractical. This forced the SEC to relax its once black-and-white advertising restrictions and turn them into a gray mess of guidance.

In 2012, Congress recognized this problem and finally put an end to the old advertising restrictions for private deals and created a regime for “crowdfunding.” The new regulatory framework would empower market participants on both sides of the equation, thereby providing much-needed relief to startups and smaller investors alike, removing some of the old barriers to entry and access to capital.

So, what precisely did the JOBS Act do? Here is an overview of the changes that are most likely to affect private real estate fundraising:

1. Gimme an “A”! New Reg.  “A+,” which was proposed by the SEC last December, would expand the scope of the seldom-used Reg. A and allow sponsors to raise up to $50 million in capital (currently capped at $5M) with a simplified registration process. Unlike current Reg. A, this new exemption would preempt state securities laws. This means sponsors would advertise and sell their deals in all 50 states without having to look up each state’s securities laws. The price to pay: registration and reporting with the SEC, investment limits (10% of investor’s net worth or income), and audited financials. The impact of this new rule on real estate will be highly dependent on the amount one hopes to raise. For smaller deals, it could be unworkable due to legal and audit costs.

2. For the ballers. Rule 144A offerings, which are limited to qualified institutional buyers (“QIBs,” which include financial institutions and other big players), can now be generally advertised. Perhaps market conventions will change, but don’t expect these sophisticated institutional markets to change radically anytime soon.

3. For the lesser ballers. Rule 506 offerings can now be marketed to the general public. The price to pay: issuers lose the ability to sell to anyone other than accredited investors ($200K in income or $1M+ in net worth) and have to verify that investors are in fact accredited. Bingo: as I will explain in future articles, this one is already changing market dynamics and is destined for glory.

4. For everyone else. Proposed crowdfunding regulations are exhaustive and cumbersome. For now, let’s just say that the impact of these regulations on real estate will likely be minimal due to the overwhelming complications that they bring (e.g. requirement to use a registered intermediary, yearly $1M limits per sponsor, audit requirements for offerings larger than $500K, and ongoing reporting requirements).

Stay tuned! I will expand on these new rules in future articles and explain how I see them affecting real estate fundraising in the years to come.

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Big retailers to close stores: Switch to REITs? (Video)

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U.S. Property Markets Post Strongest Sales Volume Since 2007

For buyers and sellers of commercial property, 2013 was a very good year. By the time all CRE sales are tallied, total commercial real estate sales are expected to be more than 18% higher in 2013 from the previous year as U.S. property fundamentals and the economy continued to improve and investors in all property types fanned out into smaller markets in search of higher returns. 

According to CoStar COMPs data based on property transactions of all sizes that closed by Dec. 31 and were recorded as of Jan. 15, sales of office, industrial, retail, multifamily, hospitality and land totaled $366 billion in 2013 -- 17% higher than the $312.4 billion in property that changed hands in 2012. CoStar continues to track down and tabulate additional 2013 property transaction activity, which is expected to boost total sales for 2013 to nearly $370 billion when all deals are counted. 

In any case, the preliminary figures clearly reflect the strongest year for CRE investment since 2007, when $489.6 billion in total transactions were recorded. 

As of the second week of January, property sales totals for the fourth quarter of 2013 were below the record-setting volume of a year ago, with a preliminary $106.3 billion in sales tallied as of Jan. 15, though that number is almost certain to rise in coming days and weeks. Property sales spiked in December 2012 as investors hustled to close deals prior to year-end, driven in part by concern over anticipated tax hikes and the restoration of previous tax rates for capital gains. The rush helped drive total CRE sales volume to $115.86 billion in fourth-quarter 2012. 

In national market reports, vacancy rates decreased and net absorption continued its strong pace in the U.S. office, industrial and retail markets. 
For commercial property sales tallied as of Jan. 15, investors were especially active in the hotel property sector, with hospitality investment seeing a 40% increase to lead all major property categories in 2013, followed by sales of industrial property, which increased 23%. Office sales rose 18% and led all building types in dollar volume, followed by multifamily sales, which rose 14%. 

Retail property sales rose 10% over 2012, while land sales increased 5%. 

Rebounding Investment Activity Evident in Major Markets

The rebound in activity in the Manhattan office market helps tell the story of the U.S. office investment market last year. More than a half-dozen building sales and partial equity stakes in buildings were valued at more than $1 billion in 2013, all located in Manhattan. In 2012, no single-property CRE sales eclipsed $1 billion. Similar blockbuster transactions closed in the industrial, retail, multifamily, hospitality and land markets around the U.S. during 2013. 

Another hallmark of 2013 was the spread of activity into secondary and tertiary markets in all property types as rising prices and diminishing supply compelled investors to seek higher yields outside of New York City, Chicago, Washington, D.C., Los Angeles and San Francisco. 

The booming Texas economy and the recovery in other Sun Belt markets has sparked investor demand in such non-gateway markets as Austin, Dallas, Houston, Denver, Phoenix, Miami and Atlanta, according to Steve Pumper, executive managing director of capital markets for Transwestern. 

"In our estimation, this recovery will continue into 2014 and beyond," Pumper said. "For the Sun Belt markets that have not yet experienced rent spikes, we expect them to see increases within the next 12 to 18 months." 

Interest Rates Remain Top Concern

The main question facing commercial property investors in 2014 is what will happen with interest rates. The 10-year Treasury bond yield, currently around 2.88%, could increase to 3.25 to 3.50%, possibly impact property pricing and development costs, Pumper said. 

The improving economy also translated into stronger investment volumes around the world, with a solid fourth quarter pushing global 2013 investment volumes up 18% to $549 million, according to preliminary figures from Jones Lang LaSalle. 

"The desire of experienced investors to look at opportunities which require additional asset management or more creative solutions has helped push 2013 volumes past our initial expectations," said Arthur de Haast, lead director with JLL's International Capital Group. "With this trend expected to continue into 2014, we are confident that investment volumes will continue to grow." 
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Sunoco Acquires Two Office Buildings

NEWTOWN SQUARE, PA-In connection with its move out of Center City in Philadelphia, Sunoco has acquired two office buildings at Ellis Preserve here totaling 233,000 square feet.

Sunoco announced it would relocate from its offices at Mellon Bank Center in Philadelphia in December. No terms of the transaction were reported.

Sunoco plans to commence renovations of the existing buildings immediately, with the scheduled completion estimated for the second quarter of 2015. 

“This is a great opportunity for Sunoco to unify many of its employees as they move forward with their exciting future. Ellis Preserve is an ideal location for them, not only is it a beautiful spot, but it sits centrally relative to their locations."

“Sunoco’s internal considerations created deadlines and confidential issues that are not always experienced on these types of searches. We followed a somewhat unique process in order to accommodate their needs, but ensured that they found the kind of facility that they required.”

Full story: http://tinyurl.com/mmm25nc

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Lifestyle Health Project Under Way in Bucks County, PA

BENSALEM, PA-Perhaps the name of a future $120-million healthcare development in Bucks County, PA—Lifestyle Healthcare Center—explains the goal. The developer, Newtown, PA-based Lifestyle Healthcare Group, says it has a goal of changing the way people in the area northeast of Philadelphia receive medical services.

It also sounds as if the company is setting up a mini health system at the complex, recruiting affiliated physicians and group practices and providing central appointment-making, central billing, electronic medical records and comprehensive healthcare services in a hospital-without-beds setting. According to Lifestyle Healthcare Group officials, the future 200,000-square-foot outpatient campus under construction on an 11-acre site near the Neshaminy Mall in Bensalem will try to provide everything patients need in one location.

So far, services and specialties lined up include a women’s center, orthopedics, general surgery, ophthalmology, cancer treatment, plastic surgery and several other medical services, including primary care. A surgery center will have eight operating suites, with an adjacent nursing facility for surgery patients who need to recover on site. Plans also call for the complex to feature in-house labs and a separate sports complex for training and rehabilitation.

“We are truly revolutionizing healthcare in the greater Philadelphia area with the Lifestyle Comprehensive Healthcare Center,” said Fred Rappaport, CEO and chairman of Lifestyle Healthcare Group, in a statement. “We have successfully developed a healthcare model that allows primary care physicians to easily interact with specialists who can deliver a superior level of care at one convenient location.” According to the company, the center is scheduled to open in 2015.

Rappaport refers to the project as a “field of dreams,” saying he knew it would not come to fruition unless the company could receive commitments from enough doctors and practices. As of recent weeks, it had received signed agreements from more than 100 physicians, well on its way, officials have said, to meeting a goal of bringing in anywhere from 300 and 400 doctors.

As more and more doctors and practices commit, the scope and variety of services offered will most likely evolve and expand, officials say. Rappaport believes the outpatient healthcare campus will be able to address two key goals of the country’s overall healthcare system—cost savings and patient satisfaction—by providing medical treatment in a less costly and more convenient setting. “Hospitals are fighting to fill beds now and really most of these procedures can be done in outpatient centers.”

The center’s labs will be equipped with what company officials call the latest in medical technologies and equipment for performing tests and procedures.

In order to provide cancer treatments, Lifestyle Healthcare Group has signed a letter of intent with Palo Alto, CA-based Varian Medical Systems, which will use its TrueBeam radiotherapy system at the site. TrueBeam is designed to address more complex cancer cases of the head, neck, liver, lungs and prostate.

Havertown, PA-based GS Architects Inc. designed the facility; Philadelphia-based P. Agnes is managing construction.

Full story: http://tinyurl.com/l9zg633
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