Philadelphia Commercial Real Estate Wrap-Up – August 2020

Center City office project gets $187 million. PES refinery redevelopment loses tax break. Read our August selection of Philadelphia must-knows.
Rendering of 2222 Market St. Image courtesy of Meridian Capital Group

Philadelphia entered its modified green phase of reopening in August as the number of new COVID-19 cases diminished in the metro. Gyms, indoor malls, libraries and museums and more opened with safety rules in place, but indoor dining was postponed until Sept. 8.

The metro’s commercial real estate sectors showed signs of increased activity, with office and industrial sectors as main drivers. However, trouble could be brewing for Philadelphia’s suburban office assets: An analysis by The Philadelphia Inquirer showed that the market’s outlying inventory is at greater risk of delinquency or default. Here’s our August selection of Philadelphia must-knows:  

1. FINANCING – Parkway Corp. lands $187 million for Center City office project.

The financing package included construction loans from balance sheet lenders as well as mezzanine debt and equity from ACORE. The developer plans to starts work on the $200 million development this fall. Designed by Gensler, the 305,000-square-foot building will rise 19 stories at 2222 Market St., less than 1 mile from City Hall. Morgan, Lewis and Bockius will anchor the property, which will be constructed to LEED Gold standards.

2. DEVELOPMENT – Hilco’s refinery redevelopment loses tax break.

The Philadelphia school board refused to extend the 1,300-acre site’s Keystone Opportunity Zone designation, leaving it set to expire in 2023, according to The Philadelphia Inquirer. The board’s approval is needed, as the KOZ designation could influence school district funding by allowing businesses to pay little to no state and local business taxes. Hilco Redevelopment Partners purchased the former PES site for $225.5 million in June and plans to transform it into a multi-modal logistics hub.

3. DEAL – 32-building Pennsauken industrial portfolio changes hands.

The Bloom Organization sold Twinbridge Industrial Park and Veterans Industrial Park, two fully leased properties totaling 1.2 million square feet, to a joint venture between Walton Street Capital and Wharton Equity Partners. According to Commercial Observer, the partners financed the acquisition with a $60 million bridge loan from Nuveen Real Estate. The neighboring assets are close to routes 73 and 130, less than 10 miles from downtown Philadelphia. The parks’ tenants include Nestle Waters, Lennox Industries, SodaStream and Sprint.

4. LEASING – Amazon expands metro footprint with Bensalem distribution center.

The online retailer will occupy the entire I-95 Trade Center, according to Philadelphia Business Journal. Completed in 2019, the 235,240-square-foot warehouse at 3750 State Road features 36-foot clear heights, three grade-level and 49 dock-high doors, Yardi Matrix shows. At the time of closing, Amazon’s metro presence included six distribution facilities. The firm also plans to lease a 207,500-square-foot warehouse at 3025 Meetinghouse Road in Northeast Philadelphia.

5. OPERATIONS – Lee & Associates lands industrial management assignment.

Principals Bruce Gordon and Michael Kelly, together with Property Administrator Jessica Lynch, will oversee management at the 12-building, 600,000-square foot property in Langhorne and Trevose. The Arden Group acquired the asset in 2018 through its AREP II investment fund. Lee & Associates also handles leasing at the property, which was approximately 80 percent occupied at the time of the agreement.