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Middle Market Digest – The Northeast

Here is a roundup of the latest leases, sales and other transactions in the Northeast middle markets.

This week by the numbers

CommercialCafé has been looking at office investment trends over the past ten years since the recession, and highlights these statistics:

Top Markets for Office Investment

  • New Jersey office investment experienced a cool-off as the market recorded a 20 percentdrop since 2007, pushing it down to number 13 from number 9 on CommercialCafe’s list, with a $3.77 billion volume difference compared to the one recorded in 1997-2007;
  • Striking differences at market-level include Chicago’s fall from the top 3 to the 6th position with a $12 billion investment drop since 2007, and the Houston and Dallas markets’ ascension by 5 and 6 positions, respectively with a $4and $6 billion uptick respectively; this is also testament as to how top investment destinations have shifted in the past decade;

Buyer Landscape Shifts

  • The top buyer outlook has changed almost completely as well, not only regarding investment companies but also in terms of top tier investment volumes which registered a roughly 80 percent drop compared to the decade before the recession;
  • Long-heralded top player on the real estate market Tishman Speyer took a serious hit after the crisis and from 1st placeup until 2007, didn’t even make the top 10 after 2008; first place was nabbed by institutional investor JPMorgan Asset Management;
  • From the 1997-2007 top 10 buyer list only 3 companies have remained in the post-recession top 10 – Equity Office Properties Trust, Hines Interests and Beacon Capital, with considerable adjustments in their position (EOPT from #2 to #7, Beacon Capital from #3 to #10 and Hines Interests from #5 to #8);

New Lending Status Quo

  • Lending standards have also morphed, leaving behind the risky practices of the early 2000s; at the market’s post-crisis peak in 2015 loan issuance was up to 583 from 259 in 2009, the lowest issuance in 20-years;
  • The credit risk-retention rule of the Dodd-Frank Wall Street Reform and Consumer Protection Act has endeavored to reign in high-risk financial practices stipulating a five percent minimum shared credit risk between both the investors and lenders;
  • Interest rates have also aligned with the Dodd-Frank and starting in 2010 investors and banks kept it in check, the average interest rates reaching a 20-year low of 68 percent in 2016;
  • Average maturity has also increased peaking in 2015 at 11 years while in 2008 investors were taking out loans with only seven-year maturities;

Deal Tracker Daily

LAWRENCE TOWNSHIP, NJ—Billtrust, the payment cycle management software company that received Grow NJ tax credits in August to keep its headquarters in New Jersey, has decided to lease 90,000 square feet of space at 1009 Lenox Drive in the Princeton Pike Corporate Center in Lawrenceville. Vision Real Estate Partners arranged the lease. Earlier, Billtrust said it would construct new office space. Since early 2016, VREP has orchestrated a multi-million-dollar revitalization of the eight-building, 817,000-square-foot campus, which is focused on fostering productive workplaces and personal fulfillment in a distinctive work/play environment. VREP was represented by Steve Tolkach, executive managing director with Newmark Knight Frank. Bradford Fenlon, executive managing director with Colliers International, represented Billtrust.

Brett Beyer photo

NEW YORK, NY—Fisher Brothers signed a new 28,316 square-foot lease with Varagon Capital Partners at 299 Park Avenue, one of the firm’s signature Midtown Manhattan office towers. Varagon, an asset manager that focuses on direct lending to middle market companies, will occupy the entire third floor of the tower in a relocation from its current offices at 488 Madison Avenue. Varagon is expected to occupy its new space by the end of 2017. Fisher Brothers is set to initiate a major capital improvement program at the iconic Plaza District tower in early 2018. The project, which is being designed by David Rockwell and the Rockwell Group, will include a reimagined lobby with a high-end design and more open feel; a transformation of the entrance that will allow natural light to fill the lobby; and an illuminated plaza backed by a new exterior lighting system.

RIVERDALE, NJ—The CBRE Tri-State Investment Properties team of Charles Berger, Elli Klapper, Mark Silverman and Donald Sperling has completed the sale of two contiguous medical condominium units at 44 Route 23 North, Riverdale, NJ. The CBRE team arranged the $1.6 million transaction on behalf of the seller, and procured the buyer, a private investment company. CBRE is the exclusive advisor in the sale of the commercial condominiums units totaling approximately 6,400 square feet. Both spaces are currently fully-occupied by The Dermatology Group, a tenant with more than 30 physicians and 16 medical locations throughout New Jersey. The tenant is one of the largest dermatology practices in the United States offering an integrated suite of services, including medical and surgical dermatology, cosmetic surgery, and a diverse set of aesthetic services and products. The new ownership of the two triple-net leased condominium units will benefit from a stable cash flowing asset in a building with historical high occupancy and credit-worthy tenants.

PHILADELPHIA, PA—Holliday Fenoglio Fowler brokered the sale of Gilbertsville Shopping Center, an 85,576-square-foot, grocery-anchored shopping center located in Gilbertsville, an affluent Philadelphia suburban community in Montgomery County, PA. The HFF team, managing director Chris Munley, director Michael DiCosimo and senior managing director Jose Cruz, marketed the property on behalf of the seller, Brixmor Property Group. The Westover Companies purchased the asset on an all-cash basis. Gilbertsville Shopping Center is anchored by Weis Markets, which has been a tenant since the center was constructed in 1976. The 95.6-percent-leased center is also home to Anytime Fitness, T-Mobile, Pet Valu, Dairy Queen, National Auto Stores, Great Clips, Quest Diagnosis, Key Bank and Fine Wine & Good Spirits. The center is at 1050 East Philadelphia Avenue (Route 73).

YORK, PA—Cushman & Wakefield’s Pennsylvania industrial team arranged the sale of 2925 East Market Street in York, PA. STAG York, a wholly owned subsidiary of STAG Industrial, purchased the 390,000-square-foot industrial property from Alliance Partners HSP for approximately $19 million. Cushman & Wakefield represented the seller. Cushman & Wakefield has been engaged by the buyer to market the remaining 135,000 square feet, which is well-suited for warehousing and distribution. The building is home to Stauffers Biscuit Co., which has a long-term lease totaling more than 250,000 square feet. Recently completed capital improvements include a new roof, upgraded loading docks and enhanced truck circulation.

Rutgers Plaza Franklin Township, NJ Levin Management

FRANKLIN TOWNSHIP, NJ— Flame Kabob House has signed a 1,500-square-foot lease at Rutgers Plaza in Franklin Township. The new location represents the second New Jersey restaurant for the family-owned and operated Afghan/Middle Eastern concept, according to Levin Management Company, exclusive leasing and managing agent for 266,000-square-foot retail property. Flame Kabob House provides a full menu of affordably priced authentic Afghan and Middle Eastern food, along with a variety of other choices, including burgers, sandwiches, wings, salads and more. Anchored by Stop & Shop and Kmart, Rutgers Plaza features an evolving dining component. Another ethnic restaurant, Moral’s Village Hot Pot, is set to open there soon. The property features a complementary lineup of national and regional tenants including Crunch Fitness, Dollar Tree, GNC, GameStop, Burger King, T-Mobile, Plaza Cleaners and Chase Bank.

SUMMIT, NJ—Cushman & Wakefield exclusively represented Normandy Real Estate Partners and MRY Associates in their recent $110 million sale of two high end office buildings in Summit, NJ, at 466 Springfield Avenue (pictured, which sold for $19 million) and 25 Deforest Avenue ($60 million). The team is currently under contract to sell an additional office building at One Deforest Avenue, expected to sell for about $31 million. Cushman & Wakefield’s team of chairman Douglas Harmon, chairman Adam Spies and executive managing director Kevin Donner, with the firm’s New Jersey based Capital Markets team, including executive managing director Gary Gabriel and vice chairman David Bernhaut, represented the seller in the transaction. The three properties, totaling 225,513 square feet, have been modernized and renovated with up-to-date amenities.

LAWRENCE TOWNSHIP, NJ—Holliday Fenoglio Fowler arranged the sale of Avalon Run East, a 312-unit, Class A garden-style apartment community in Lawrence Township, Mercer County, NJ. The HFF team of senior managing director Jose Cruz, managing director Kevin O’Hearn and senior directors Michael Oliver and Stephen Simonelli marketed the property exclusively on behalf of AvalonBay Communities. A joint venture between Rockpoint Group and The Brooksville Company purchased the property free and clear of existing debt. Avalon Run East is located at 100 Avalon Bay Drive within the Princeton submarket. Situated less than one mile from Route 1, the property encompasses 16 three-story buildings on 69 acres of land.

Money Moves

PHILADELPHIA, PA—Binswanger has been named exclusive agent for the sale of one of the most iconic buildings on the Benjamin Franklin Parkway, the headquarters of United Way of Greater Philadelphia and Southern New Jersey. The 60,000 square-foot, eight-story building was built in 1970 and overlooks Logan Circle with unobstructed views down the Parkway towards the Philadelphia Museum of Art.

 

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