Fine Print: Trenton China sells old site in Old City Read more: Fine Print: Trenton China sells old site in Old City | Philadelphia Business Journal

Trenton China Pottery, or what is commonly referred to as “TCP,” sold its Philadelphia property at 2nd and Arch streets in Old City.
A group of undisclosed local investors bought it for $1.4 million and plans to convert the nine buildings that comprise the structure totaling 55,000 square feet. The properties run from 127-37 Arch St. to 101-107 N. 2nd St. The plan is to have residential units on the top floors and retail on the bottom, street-level floor.
TCP, which sells restaurant equipment, put the property on the market eight years ago. The company started in 1927 and had operated out of the Old City building ever since. It is located on Memphis Street in the Port Richmond section of Philadelphia and operates under a new name: Trenton China. Mallin Panchelli Nadel had the listing and sold it in conjunction with Coldwell Banker ...
Brandywine Realty Trust reported a tad more than 1 million square feet in leasing activity for the first quarter. That figure includes signed leases, deals that have commenced and those that will go into effect later this year. Some of the transactions in Pennsylvania include First Niagara Bank with 63,096 square feet at 401 Plymouth Road in Plymouth Meeting; Thomas Publishing in 31,976 square feet at One Progress Drive in Horsham; Urdang Capital Management in 22,661 square feet at 630 Plymouth Meeting Executive Campus in Plymouth Meeting; and Triumph Group taking 19,177 square feet at 400 Berwyn Park in Berwyn.
In Center City, Brandywine just lists two deals: Pepper Hamilton renewing 17,085 square feet at Two Logan and Hunter Roberts Constructing re-upping on 11,163 square feet at Three Logan. No word yet on Janney Montgomery Scott taking some floors over at Three Logan. Bradywine saw some activity in South Jersey. The biggest listed was Verizon renewing for 44,078 square feet at 15000 Midlantic Drive in Mount Laurel, N.J. ... The Community College of Philadelphia completed a $31 million newly expanded and greened Northeast Regional Center, a 120,000-square-foot project at 12901 Townsend Road in Northeast Philadelphia ...
An undisclosed buyer bought the Pearl Pressman Properties around 900 N. 5th St. in Philadelphia for $1.05 million. The properties included a two-story, 31,188-square-foot building and a single-story 9,560-square-foot building. Seamark Associates bought the properties as an investment. Colliers International arranged the transaction ... Philadelphia Aids Thrift, a group that raises research money, leased 10,500 square feet of the Kroungold’s Furniture building at 710-718 S. 5th St. in Philadelphia. The furniture store will continue to occupy the remainder off the space. Colliers handled the lease.

Read more: Fine Print: Trenton China sells old site in Old City | Philadelphia Business Journal

Philadelphia Business Journal - by Natalie Kostelni

Date: Monday, April 25, 2011, 10:19am EDT

Read more: Fine Print: Trenton China sells old site in Old City | Philadelphia Business Journal

Net Lease Conference and S & P Commercial Real Estate in NYC

News from Net Lease Conference and S & P Commercial Real Estate in NYC last week.

Role of Non-traded REITs in Net Lease Sector; Inflation; Debt Rates were all hot topics.

It was clear, both statistically and anecdotally, that the emergence of non-traded REITs is now confirmed since they effectively control 50 % of the net lease market acquisitions.

So if you have been a Buyer, like many of our client base, and have been getting out bid in the last 6 quarters, there is good reason……these REITs see real estate differently than the traditional savvy investor. 

Like many investors, today, they are seeking “yield” and now Net lease properties, as an  asset class, are really coming into their own since they can afford:

• Stable, predictable income streams;
• A partial hedge against inflation (subject to lease structure);
• Depreciation as a tax benefit;
• Appreciation and residual value  (if you don’t over pay in the 1^st place)

That last point is a major current issue when you are, effectively, competing with these REITs in an almost “Auction Environment” in recent months for product.

Cap rate is one comparative reference point; but we think a hard look at the risk-adjusted return is critical.  Your ability to secure acceptable debt ratios and rates, combined with addressing the re-financing risk, as we perceive it, is paramount.  Less so, in the review of these REITs who are fee-based operations.  We utilize a 62,000+ NNN national data base + our network of net lease practitioners and owners to identify “Best-of-Breed” NNN assets that match client-specific criteria for:

• Tenant Credit for secure income streams;
• Remaining lease term and scheduled increases to address inflation fears;
• Debt and re-financing risk;
• Location; location; location……not all Walgreens are the same;

All of theses issues need attention; not merely a cap rate debate.

Call us to produce results for you that match your investment objectives.

Recap and Forecast of the hottest sectors of commercial real estate.

Feature Article, January 2011
Net Lease: Recap and Forecast
Net leased properties are among the hottest sectors of commercial real estate. With 2010 ending on a
high note, all signs are pointing to a positive 2011.
Randall Shearin

One of the healthiest sectors in commercial real estate remains triple-net leased retail properties. Drug stores,
banks, auto parts stores, discount retail stores and restaurants built and leased on a triple-net basis remain popular with private investors and funds, and both groups are keeping demand incredibly strong in the sector.
Build-to-suit developers, investment funds, corporate sale-leasebacks and franchise sale-leasebacks continue to feed buyers’ appetites, says Barry Silver, principal of San Rafael, California-based The Silver Group. During the second half of 2011, and especially so in the fourth quarter as fears loomed about future tax issues, buyers came on strong, compressing cap rates on triple-net properties. In December 2010, Marcus & Millichap’s Mark Theil acquired a Walgreens under construction in Hollywood, California, on behalf of a client who paid $10.71 million for the 7,830-square-foot property, making it the highest priced per square foot deal for a single tenant net leased drugstore in 2010. That year-end sale is a good milestone for a quarter that has been good to the net lease sector.

Read Entire Article

2010 LOOKING BACK… 2011 TARGETING FORWARD OPPORTUNITIES

“Money (resources + market intelligence) Talks, BS (broker/salesman hyperbole) Walks!”

This has been one helluva year for real estate investors who have been seeking risk-adjusted returns in the net lease sector just this past week, we received a call from a seasoned NYC investor inquiring whether a particular investment grade asset with a shorter term lease priced at $5,274,000 or a 7.5% cap could be bought at an 8.25% cap, all cash/short due diligence/quick closing of escrow.  We respectfully responded, “this would have been a real conversation/negotiation with the seller, if it was taking place in Q4 2009; not Q4 2010.”   What a difference a year can make.

While we were trained in the “everything is negotiable” market psychology and real estate practice, we submit that there needs to be a practical real-time market condition rather than battling egos or some mythologies about the NNN market pricing informed by internet listings.  We have a seasoned approach combined with current market intelligence that has allowed us to outperform the market on a consistent basis for 30+ years in many major markets around the country. 

Nonetheless, in the last six months, we have tendered a number of “all cash, full asking price” offers in this new 2010 world order of cap rate compression in low-mid 6 caps only to find ourselves and our clients in an auction environment. 

This did not happen once or twice, but no less than twenty-four times in dealing with sellers’ reps, listing brokers, and direct deals with sellers.  What a sobering reality for buyers and an unanticipated windfall for sellers.

We encountered sellers and their brokers attempting to sell NNN assets in Q3 and Q4 2010 based on the NOI of 2013 with the next rental bump included.  In one case they graciously offered to provide a rental income credit of the $16,000 annual rent disparity for the three (3) years amounting to a $48,000 seller’s credit off the price.

At the very same time they were attempting to charge our investor/buyers a low 6 cap rate based on the 2013 NOI which jacked up the pricing by $320,000. “Nonsense on the face of it”, you might say. Oh no, they were sold on that basis to another retail buyer who presumably had other broker representation and able counsel. 

“Absolutely nuts” from our perspective!

So, now more than ever, a keen sense of the market and deal-making skills that calibrate where a deal can be secured on a range of terms in addition to the new pricing metrics discussed above, is how we add value.

Our net lease advisory practice is based in Los Angeles but national in scope and as is our client base.  We have spent years attempting to provide the most accurate and credible market intelligence to our prospective clients.  We do not play favorites with sellers or listing brokers. Instead we present our Best-of-NNN-Breed candidates that match our investor/buyers’ client-specific criteria and objectives.  While we are highly attuned to sellers’ objectives, our loyalty and fiduciary responsibility is with the investor/buyer, as we define it.  We disclose all known data points and fees in a transparent manner with our investor/buyers and valued net lease brokers.

As we have for many years, we recently attended Net Lease Conference in New York. This is an annual event at which the would-be Brahmans of Net Lease Sector assemble to confer and do deals. It was noteworthy to us that many retail investors had come out of the shadows if they could secure a 7% coupon on net lease assets of varying shapes and sizes.  Current yield was king as an alternate to money market accounts and bond-type investments.  Closing deals that actually require an exit strategy were very difficult to reconcile in the current market.

 

We observed that a number of net lease acquisition funds that have been prominent in the acquisition arena have been financed with short term“IO debt to achieve these 7%+/- returns due to cap rate compression and accessible debt. Other debt structures at low rates have aided the cap rate compression as well.

So, where do we go from here? What will be the impact on real estate valuations and debt availability of the Fed’s QE2?  Will there be new waves of commercial foreclosures for underperforming assets in the next year? Is it safe to come out of the shadows to acquire new assets or re-balance your portfolios?  Yes, but with sound and credible data to guide you.

Your ability to secure stable and predictable income streams that outperform alternate investments can in fact be achieved in the net lease sector.  It requires a sober and sanguine study of real time options and competitive market conditions.  Our 60,000+ data base of net leased assets allows us to add value to our clients’ investment decisions by providing common sense, tried and true real estate investment principles.

The Impact of voting on the NNN sector

What impact will today’s voting around the country have on the NNN sector of the real estate investment business?

None.

The real issues for this sector are the availability of cheap debt on reasonably acceptable terms; the access to quality net leased properties; and the emerging expectations on inflation and tax policy.

We anticipate that rates will stay relatively low in the 5.5-6.75 range for the next 4 quarters; and that with the scarcity of quality assets that the recent cap rate compression throughout the country in NNN assets will continue, as well, until this time next year.

We can add value with our 60,000+ national data base of NNN properties; combined with valued relationships have allowed us to secure the ‘best-of-breed net properties in this auction environment for our clients.

How can we be of service to help you meet your objectives at this critical time?

Multifamily Distress Leads to Dispositions

PLAINFIELD, NJ-The economic aftermath of over-leveraged multifamily properties continues to yield a number of bankruptcy sales throughout Northern New Jersey, including two recent local portfolio dispositions for more than $22.1 million involving a total of 409 units. Gebroe-Hammer Associates, a leading commercial real estate brokerage firm specializing in the sale of apartment-rental buildings as well as office and retail properties, orchestrated the complex bankruptcy sales as the exclusive court-approved brokerage firm.
The larger portfolio package, acquired for $16.082 million by a private investor who is a longtime Gebroe-Hammer client, includes 108 units at Netherwood Village (825 E. Front St.); 102 units at Watchung Gardens (802 E. Front St.); and 58 units at Greenbrook Village (733 E. Front St.). Offering a mix of one-, two- and three-bedroom units, the garden-apartment complexes are well situated in the heart of the city. As the US Bankruptcy Court-approved broker, Gebroe-Hammer’s Steven Tenenbaum, assistant vice president and Plainfield market specialist, identified the buyer who owns several apartment-rental buildings in the surrounding area.
Nearby, executive vice president Joel Schwartz was retained by the owner, who was in Chapter 11 Bankruptcy, to market a three-property portfolio, Cornell Apartments, Pingry Arms and Executive Arms, comprised of 141 units. Again, as the US Bankruptcy Court-approved exclusive broker, Schwartz conducted a Section 363 sale in accordance with the court’s order. After receiving several non-contingent bids with non-refundable deposits, the Gebroe-Hammer veteran broker closed the sale in 35 days with the winning bidder.
The buyer, Plainfield Park LLC, had previously owned the two mid-rise buildings and single garden-apartment complex located at 735 Park Ave., 606 Crescent Ave. and 315 W. 8th St., respectively, several years ago. The all-cash transaction required the cooperation and approvals of numerous involved parties, including the existing lender and other unsecured creditors and their respective attorneys.
“Both buyers seized the opportunity to acquire these distressed assets and add value in order to bring them up to competitive market standards through substantial exterior and interior upgrades,” says Ken Uranowitz, managing director of Gebroe-Hammer. “The use of 363 Bankruptcy Sales has become more prevalent because it streamlines the sale transfer process free and clear of liens, claims and other encumbrances associated with a Chapter 11 Bankruptcy.” Gebroe-Hammer closed these Plainfield bankruptcy transactions within a few weeks of finalizing the $10.5-million bankruptcy sale of an East Orange multifamily portfolio comprised of four buildings with 270 total units.
Legal counsel for the Netherwood Village, Watchung Gardens and Greenbrook Village portfolio was provided by Edward Bortz, Esq. of Englewood Cliffs, NJ on behalf of the buyer. Representation for the Cornell, Pingry and Executive Arms sale was provided by Allen Popowitz, Esq. of Brach Eichler LLC on behalf of the seller/debtor; Timothy Duggan, Esq. of Stark & Stark on behalf of the buyer; and Thomas Walsh, Esq. of Trenk, DiPasquale, Webster, Della Fera & Sodono, PC, who represented the seller’s bankruptcy interests.
 http://www.globest.com/news/1780_1780/newjersey/303913-1.html

FASB 13…Transparency good; Accounting upheaval Bad… “a wait ‘n’ see” approach is operative strategy

FASB 13…….is not just for Accounting Professionals…we all need to pay attention.  What are the practical implications for real estate investors?

We have come through a number of years of synthetic leases and off-the-balance-sheet corporate strategies and some abuses.  The IASB and the Federal Accounting Standards Board (FASB) have proposed a working paper draft which essentially will provide more accounting transparency for corporate liabilities.  As drafted, “operating leases” which have often been off the balance sheets, after 2012, if adopted, will be characterized as “capital leases”, whose rental obligations and term will have to be capitalized.  The impact will be significant.  In simple laymen’s language, a rental obligation of $100,000 per year on a modest five (5) year base lease term would have to be accounted as a $500,000 corporate liability on their balance sheet and disclosures.  The same commercial occupancy, same tenant, same location, for a $100,000 rental stream with a twenty (20) year base term would translate into a $2,000,000 liability.  Further, a $100,000 per year lease for five (5) years with three (3) five year renewal options would, also, be accounted as a $2,000,000 liability.  i.e. ($100,000 x 5 = $500,000; plus 3 x 5 years or 15 years x $100,000, producing the same $2,000,000 liability since option periods, if reasonably anticipated, must be included per the current draft.  Looks like shorter term leases will be the order of the day in this Brave New World of Real Estate Lease Accounting.

The Rent vs. Own debate will be back in full force.