April 2023

ISSUE HIGHLIGHTS Volume 35, Issue 4 April 2023

Monumental sale is the largest office transaction year-to-date in the US Cushman & Wakefield and CBRE broker $420M sale of Harborside 1, 2, and 3

will include a conference and lounge facility, a tenant-only gym, and a spectacular rooftop with green space and pickle ball court. Financing for the property was secured from three highly qualified lenders—Citigroup, BMO and Meritz Securities. Dunne commented, “We are proud to have negotiated this iconic transaction. This deal marks the largest office sale in the United States in 2023. We expect new ownership to ride the tailwinds of Veris’s signifi - cant capital investment over the past few years in the lease-up of Harborside 1, 2 & 3’s highly desirable space. This process has been a year in the making, through many twists and turns in the economy and capital mar - kets. Getting the transaction across the finish line was truly a team effort.” MAREJ Corp. , who provided the loan, which carries favorable loan terms including 5-year I/O. “This is a high-quality, well positioned office product in a dynamic marketplace and a great investment. I’m pleased to have taken part in helping my client accomplish his busi - ness goal.” -– Brad Domenico The property’s campus-like setting is situated at the inter - section of Rte. 28 and the Dull - es Toll Rd., directly adjacent to Dulles Airport and a short walk to the Silver line Innovation Center Metro station. In historic Herndon you’ll find small town charm while maintaining all the ameni - ties of big city life. The area has beloved farms to explore, historic sites, local parks, a couple breweries, and some of the best restaurants in the area. Modern day Herndon has roots as a railroad town, and the rail station depot in downtown pays homage to this history - and often is the center - piece for community events and festivals that take place within the town. MAREJ

ERSEY CITY, NJ — Cushman & Wakefield and CBRE announced that the real estate ser-

SPOTLIGHTS

vices firms have arranged the $420 million sale of Harbor - side complex, a 2,010,201 s/f mixed-use portfolio located at 150 Hudson (Harborside 1), 200 Hudson (Harborside 2) and 210 Hudson Street (Har - borside 3) in Jersey City. This monumental transaction, the largest office sale year-to-date in the United States (by nearly $150M) and the largest mult - itenant office sale in the history of New Jersey, is remarkable given the capital market chal - lenges facing office buildings and the increase in interest rates since Q3 2022. CBRE’s Jeffrey Dunne, Bill Shanahan, and Roland Mer- chant , along with Cushman & Wakefield’s Andy Merin,

SPRING PREVIEW

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APPRAISAL

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Harborside complex aerial

A+ location and ownership’s recent capital improvements and renovations including Harborside 1 being completely stripped down to its original structure and reskinned. New ownership will invest significant new equity into the common areas, retail plaza and outdoors, designed by Gensler . These new amenities

David Bernhaut and Frank DiTommaso , co-arranged the transaction. The new owner - ship acquired the properties from Veris Residential . Closing a transaction of this size and complexity in the cur - rent environment required cre - ativity and motivation from all parties. CBRE and Cushman & Wakefield highlighted the

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UPCOMING CONFERENCES & WEBINAR

9th Annual Industrial Real Estate Development Conference Thursday, July 13, at the Sheraton Edison 9th Annual Capital Markets Conference Thursday, August 17, at the Sheraton Edison For speaking & sponsorship info., please contact: Lea at 781-740-2900 or lea@marejournal.com

Domenico of Progress Capital arranges $60M acquisition loan for Virginia business park

VERNDON, VA — Prog- ress Capital’s partner, Brad Domenico secures $60.5 mil -

lion in acqui - sition financ - ing for Fred Arena , CEO of Vision Properties to purchase South Lake at Dulles Cor - ner Business

Brad Domenico

Directory ROP (Front Section) ........................................... Section A Retail Development Reimagined...............................3-4A Spring Preview........................................................5-12A Financial Digest featuring Appraisal......................13-16A The Professor’s Comedy Corner..................................18A CRE Organization’s Events Calendar ............................ 20A New Jersey..............................................................1-12B Pennsylvania........................................................13-BC-B Owners, Developers & Managers....................... Section C www.marej.com

South Lake at Dulles Corner Business Park

Park, a 270,000 s/f, class A office building located in the McNair neighborhood of Herndon. 13820 Sunrise Valley Dr. fea - tures a 10-story office building with waterfront views. Built in 2008, the building underwent a full, $42 million renovation in 2020 to customize the site for Amazon’s occupancy. A new fitness center, full-service

café, conference facilities with cutting-edge technology and equipment, tenant gaming rooms, outdoor dog park, bicy - cle room, and 921-space park - ing garage with EV charging stations were all constructed as part of the renovation. On behalf of his client, Do - menico negotiated with the lender, Societe Generale

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M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman AVP, Conference Producer ...........................Lea Christman Conference Producer .........................................Matt Wolpe Editor/Graphic Artist ......................................Karen Vachon Contributing Columnists... Daniel Axson, P.E., ECS Mid-Atlantic, LLC; Alicia Mynarska, Withum; Professor Ron Shaw

Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 35, Issue 4

ushman & Wakefield released a new report highlighting the im - portance of employee experi - ence and amenities in driving office space decisions. The report shows that the flight to quality trend among office oc - cupiers has accelerated since the beginning of the pandemic, with a focus on differentiated office space, highlighting the importance of amenities in creating engaging and expe - riential office environments that attract employees to the workplace. “The research is clear – the most engaged employees are those with autonomy over when and where they work. In flexible and hybrid workplace ecosystems, employers want to create engaging, experiential office environments where their employees will find value in attending the office in per - son several days a week,” said David Smith , vice president and global head of Occupier Employee Experience and Amenities Driving Office Space Decisions David Smith C

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Insights. The most popular amenities include: • Spaces for experience, col - laboration, and socialization • Supporting employees in their full and busy lives • Providing easier com - mutes and parking or proxim - ity to public transit • Increasing ESG and well - ness initiatives around inclu - sion, health, sustainability, etc. • Providing security for oc - cupiers, safety and/or techno - logical security • Increasing technology in infrastructure to tenant expe - rience apps

“Leading companies are attracted to buildings with a variety of available ameni - ties—in other words, no one, or two, amenities are going to change the perception of a building. The most attractive buildings have a selection of amenities that activate the space, offer convenience and elevate employee wellness,” said Marissa Huber , director, total workplace at Cushman & Wakefield. Across the buildings ana - lyzed the average was 14 amenities in each one, with 10 buildings having 18 or more (out of 27 amenities tracked). continued on page 11A

Firmly Rooted in the Law and in the Community We are well grounded in every facet of real estate law, from acquisition to construction. We are committed to serving the needs of our clients and our communities.

Contact: NEIL A. STEIN • nstein@kaplaw.com 910 Harvest Drive, Blue Bell, PA 19422-0765 • 610-941-2469 • kaplaw.com Other Offices: • Cherry Hill, NJ 856-675-1550 • Philadelphia, PA 215-567-3120 Kaplin Stewart Attorneys at Law

R etail D evelopment R eimagined

M id A tlantic Real Estate Journal — Retail Development Reimagined —April 2023 — 3A

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Cindy McDonnell Feinberg, CCIM of Feinberg Real Estate Advisors represents tenant Larken negotiates long-term lease with ortho- pedic specialty practice in South Whitehall, PA

S OUTH WHITEHALL, PA — Larken Associ- ates , one of the regional leaders in real estate building, development and manage - ment, announced it has nego - tiated a new, long-term lease with OAA Orthopaedic Spe - cialists at Tilghman Square Shopping Center located at 4680 Broadway Rd. in South Whitehall. Larken Associates was represented by Derek Zerfass and Scott Horner of Colliers and the tenant was represented by Cindy McDonnell Feinberg, CCIM of Feinberg Real Estate Advisors . OAA Orthopaedic Specialists’ suite will be lo - cated at 4652 Broadway Rd. Located near the intersec - tion of Interstates 78 and 476, Tilghman Square Shopping Center is a 35.75-acre com - mercial shopping center with 248,533 s/f of retail, medical, office and restaurant space.

new location promises each pa - tient easy access and allowed us to design a space tailored around our unique physician- led and provider/therapist team-based therapy model – the only offering of its kind in the Lehigh Valley.” Victor Kelly , executive vice president of Raider Realty , the in-house brokerage division of Larken Associates added, “Securing a new, long-term lease to bring such a well- respected and sought-after medical practice to The Tilgh - man Square Shopping Center aligns perfectly with our goals of positively impacting the communities where we work. Tilghman Square is a proven one-stop-shop for the surround - ing community and beyond, so we’re thrilled to welcome OAA Orthopaedic Specialists to our tenant roster as they expand their excellence in care to such a convenient location.” MAREJ

Tilghman Square

lives of every patient under its care. “OAA Orthopaedic Special - ists was founded to provide high quality and affordable care to patients in easily ac - cessible locations across the Lehigh Valley” said David Bittner, MBA, CEO of OAA Orthopaedic Specialists. “This

high-quality, comprehensive orthopedic care to individuals of all ages throughout the Le - high Valley. Driven by a physi - cian-led and patient-centered approach that is focused on convenience, cost effectiveness and quality for over 50 years, OAA Orthopaedic Specialists has made a deep impact in the

Anchored by AMC Theatres, Staples and Grocery Outlet Bargain Market, the shop - ping center has tremendous visibility with 32,000 vehicles passing per day and is easily accessible from Rtes. 22, 309 and Interstates 78 and 476. Since 1970, OAA Orthopae - dic Specialists has provided

Alan Cafiero, David Cafiero & Dean Matuszewicz of Marcus & Millichap broker sale of a 10,070 s/f Essex County Shopping Center for $7 Million

Inn & Suites by Marriot in Chincoteague, VA. The hotel sold for $18.1 million. “Located on Chincoteague Island, this beautiful wa - terfront hotel has a fran - chise agreement that runs through December 2032,” said Catherine O’Brien, first vice president investments in Marcus & Millichap’s Encino office. “The offering was well received by the marketplace and changed hands smoothly.” O’Brien represented the seller and procured the buyer. Brian Hosey , first vice president and division manager is Marcus & Millichap’s broker of record in Virginia. Built in 2013 on three acres, the property is easily accessible from Virginia State Route 175/Chincoteague Road. Downtown Chincoteague is a short walk away and Chincote - ague Island National Wild - life Refuge, NASA’s Wallops Flight Facility and the famous Chincoteague ponies are all close by. MAREJ

SHORT HILLS, NJ — Marcus & Millichap, a com - mercial real estate brokerage firm specializing in invest - ment sales, financing, re - search and advisory services, announced the sale of Morris Turnpike Strip Center, a 10,070 s/f retail property lo - cated in Short Hills. The asset sold for $7 million “There was significant de - mand for this asset as it sits in the heart of one of the wealthi - est zip codes in the country,” said Alan Cafiero , senior managing director invest - ments. “There were multiple offers, and the final buyer was completing a 1031 tax-free exchange.” Alan Cafiero, David Cafiero, and Dean Ma- tuszewicz, investment spe - cialists in Marcus & Millic - hap’s New Jersey office, had the exclusive listing to market the property on behalf of the seller, a local limited liability company. The buyer, a New York-based limited liability

Morris Turnpike Strip Center Morris Turnpike and Cleve - land Place. Tenants include T-Mobile, Mattress Firm, and Alpha Fit Club, all of which are on triple net leases. Built in 1959, the retail center sits on a 0.8-acre parcel and has

company, was also procured by Alan Cafiero, David Cafie - ro, and Matuszewicz. Morris Turnpike Strip Cen - ter is located at 688 Morris Turnpike and has great vis - ibility at the T-Intersection of

44 parking spaces. Nearby national retailers include Shoprite, Bed Bath & Beyond, Panera Bread, and AT&T. In other Marcus & Millichap news, the company announced the sale of a 92-room Fairfield

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R etail D evelopment R eimagined Pizzola of Keller Williams Preferred Properties represents tenant in 1,192 s/f lease Azarian Realty Co. details recent deals in Middlesex County, New Jersey

IDDLESEX COUN- TY, NJ — Azari- an Realty Co . an - Inspire Physical Therapy has leased 1,192 s/f on the 2nd floor of The Shoppes at North Brunswick in North Brunswick. The space will serve as the office’s first loca - tion. James Azarian of Az - arian Realty Co. represented the landlord and Ginamarie Pizzola of Keller Williams Preferred Properties rep - resented the tenant in this M nounced two recent deals with office users in the Middlesex County area.

The Shoppes at North Brunswick

Plaza K Shopping Center

transaction. The Shoppes at North Bruns - wick is a 147,000 s/f Premium Lifestyle Center located on Rte. 1 & 130 in North Bruns - wick. It is home to over 35 national brands and 2nd floor office space. One more, fully built out, 2nd floor office space remains available, in addition to select ground-level retail. In January, Azarian Realty Co. completed a lease with Dr. Anuj Kapadia who leased 2,736 s/f on the 2nd floor of Plaza K Shopping Center, located in Woodbridge. Kevin Pelio of Azarian Realty Co. represented the landlord and Matthew Amato of Shire Realty and Reed Wrisley of Practice Real Estate Group represented the ten - ant in this transaction. Plaza K Shopping Center is a 30,000 s/f shopping center centrally located on Rte. 1 South in Woodbridge. MAREJ Rose Commercial Real Estate handles sale of Yates Plaza TABERNACLE, NJ — Af - ter 50+ years of ownership, the Yates family heirs made the difficult decision to sell Yates Plaza and engaged Alan Suss- man , director of investment sales with Rose Commercial Real Estate . Located on the heavily traveled Rte. 206 be - tween Rte. 70 and Medford Lakes Rd., the 13,656 s/f retail strip center was an attractive investment drawing a number of potential buyers and ulti - mately selling to a local South Jersey restauranteur. At the time of sale, Yates Plaza was approximately 70% occupied with many tenants having been in place for 20+ years. The deal closed for $1,150,000. MAREJ

M id A tlantic Real Estate Journal — April 2023 — 5A

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Mid Atlantic R eal E state J ournal ’ s S pring P review

FEATURING:

Brenner Green RPC

Alessandro (Alex) Conte, CCIM, SIOR The Blau & Berg Company

Barbara Gross Sheldon Gross Realty

Leor Hemo Vantage Commercial Real Estate

Jason Moss, PE AKF Group

Ken Richardson Vantage Commercial Real Estate

Jason Wolf WCRE/Corfac International

Will McKenna Progress Capital

Inside: AKF..................................................................................................................................................................9A The Blau & Berg Company..........................................................................................................................11A Progress Capital...........................................................................................................................................10A Real Property Capital.....................................................................................................................................7A Sheldon Gross Realty....................................................................................................................................8A Vantage Commercial Real Estate................................................................................................................12A WCRE/Corfac International............................................................................................................................6A

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C ommercial R eal E state N etwork

Office leasing treads water, retail stages a comeback, long-mighty industrial sees signs of trouble Southern New Jersey & Philly Markets Improve Moderately, But Face New Headwinds

in leasing and sales volumes in Q4 were still at work as 2023 began. While office sales and leasing improved slightly from the lows of the previous quarter, industrial, though still strong, may be coming down from years of strong growth. “There was good financial news in the first quarter, with the stock indexes going up, strong hiring, and fears of a recession easing somewhat, but the pressures of higher borrow - ing costs and persistent infla - tion continued to drag on CRE,” said Jason Wolf , founder and managing principal of WCRE.

In the first quarter there were 252,720 s/f of new leases and renewals executed in the three counties surveyed (Bur - lington, Camden and Glouces - ter). This is an increase of about 1.5% over the previous quarter, and still a double- digit decrease compared to Q3 2022. However, leasing dropped steadily through 2022, so an improvement of any amount is welcome news. New tenant leases comprised 164,306 s/f, or about 65% of all deals for the three counties - both of which are increases. Prospecting re - mains on track, with a pipeline

of 400,000 s/f of pending lease deals expected to close in the near term. Other office market high - lights from the report: • Overall vacancy in the market is now 16.2%, a slight increase over the previous quarter. • The life sciences sector has become a strong player in the area’s office leasing market. • Total cost and s/f of completed sales increased well above fourth quarter lows, with $36,653,000 in completed sales comprising 207,740 s/f. • Average rents for class A & B product remain unchanged, as

they continue to show strong support in the range of $10.00- $15.00/sf NNN or $20.00- $25.00/sf gross for the deals completed during the quarter. These averages are essentially unchanged and have hovered near this range for more than a year. WCRE has expanded into southeastern Pennsylvania, and the firm’s quarterly re - ports now include a section on transactions, rates, and news from Philadelphia and the suburbs. Highlights from the fourth quarter in Pennsylva - nia include: • With net absorption of nega - tive 1.8 million s/f for the past 12 months, Philadelphia’s of - fice leasing market is actually improving, though there is a long road ahead. The metro area’s office vacancy rate of 10.6% for Q1 is the second low - est among the top 15 markets. • The industrial sector in Philadelphia continues its incredible run. Over the past 12 months, the sector absorbed 10.3 million s/f even while some 16 million new s/f was delivered to the market. Rents grew an average 12.5%. • Retail has become an area of gathering strength in the region. Average retail net absorption in Philadelphia is strong, at 2 million s/f for the 12 months just concluded. Re - tail vacancy for Philadelphia improved slightly to 4.4% for the quarter. WCRE also reports on the Southern New Jersey retail market. Retail highlights from the report include: • Retail vacancy in Camden County posted another im - provement, to 7.6%, while average rents fell again, to $15.54/sf NNN. • Burlington County retail vacancy dropped to 7.1%, while average rents nearly a full dollar, to the range of $16.06/sf NNN. • Gloucester County improved more than a point, to 9.9%, with average rents dropping to $16.97/sf NNN. The full report is available upon request. WCRE/CORFAC Inter- national is a full-service commercial real estate bro- kerage and advisory firm specializing in office, re- tail, medical, industrial and investment properties in Southern NJ and the Phila- delphia region. MAREJ

ARLTON, NJ — Commercial real estate brokerage

WCRE/COR- FAC Inter- national re- ported in its analysis of the first quar - ter that forces affecting the wider econo - my are affect -

Jason Wolf

ing large swaths of commercial real estate, as well. The same high inflation, rising interest rates, and fear of a recession that caused a significant drop

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L ending

By Brenner Green, Real Property Capital, Inc. The Current Commercial Mortgage Market

he current lending envi - ronment is as fragment - ed of an environment

is Wall Street paper. By that I mean CMBS and non-recourse bridge loans that are sold into CLO’s. For quality multifamily, 10 years interest-only is possi - ble at as high as 70% LTV. This goes a long way to deal with some of those debt service cov - erage issues people are having on their multifamily projects coming to stabilization. Cash out for short-term ownership is also no problem for strong deals and while the market is volatile in terms of rate, rates in the mid 5% range are en - tirely possible, there is strong demand and strong execution

happening in the market. Office loans are still possible, for now, but are conservatively under - written. As predicted by the author last year, bank spreads have widened based on cost of funds and CMBS spreads have run in after a six-month credit freeze last year and the fact that we are in a functioning economy where investors need to buy this paper, eventually. It is as strong of a market as well, maybe 2006. This type of volatility is where money is made in any market, and a shakeup was needed in commercial real es -

tate to keep the massive influx of money from spiraling the market into a giant bubble (as opposed to a small one). How deep it goes will depend on how long rates take to adjust to sustainable levels. I don’t know what the definition of “sustain - able” is, but it is definitely not a 450-basis point premium be - tween the Prime Rate and the 10-year Treasury (8% to 3.5%) which is where we are pres - ently. This becomes less within the control of the Federal Re - serve as the yield curve stays inverted, despite coming down recently. The cost of money

for many banks is very high relative to the 10-year treasury yield. In all, this makes it a great time to shop around for a loan and a great time to take advantage of market volatility in commercial real estate, even if only in the financing side as property values remain in a period of price discovery. R. Brenner Green is a 20-year veteran in commer- cial real estate finance and President of Real Property Capital, Inc., a full-service commercial mortgage bank- ing firm based in the Phila - delphia suburbs. MAREJ

as I have experienced in nearly 25 years in the real es - tate finance business. It is complete - ly different than both the post 9/11 dot.

Brenner Green

com crash and 2008, although there are some similarities to the later which we will get to shortly. So far this year, we have seen a frenzy of activity in construction loan requests and permanent refinancing requests, and we have heard from clients we haven’t spoken to in some time. The reason for this is simple and it’s because there is a game of musical chairs going on in the lend - ing world. In net terms more lenders are exiting the market than entering it, and there is an enormous spread in terms of rates at which different banks are willing to lend. This spread could be as much as 2% for a five-year loan if you take into account a swap rate that could be offered at bank A and a portfolio rate offered at bank B. 5.25-7.25%. Several months ago, there were far more lend - ers willing to lend than there were borrowers looking to bor - row. That range has narrowed quite a bit, with lenders exiting the market or pricing them - selves out of the market daily, and the ones hanging around are looking for deposits. Some of the money center banks are flooded with deposits and need to lend. We are likely at the peak or near the peak in terms of lender pullback. Construction financing for net leased single tenant deals, or suburban multifamily and even for-sale housing is very hot. Price points are key and we are seeing a half dozen or more term sheets for value-oriented projects. Urban luxury multi - family loans are slow to dead and this is as much because of the low cap rates needed to make these deals work, as it is that there is fear of an oversup - ply despite record unit deliver - ies in many cities. To pick on a place, look at the Inner Harbor. Does Baltimore need a dozen cranes in the sky at this stage of the cycle? There will be some issues for sure. The other thing that is hot,

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N ew J ersey B roker

By Barbara Gross, Sheldon Gross Realty It’s a once-in- a-century moment

we strive to put the pan - demic’s im - pact behind us. With - out a prec - edent for guidance, we have all manner of W

situation varies based on geography, industry, and also the type of property with which we’re dealing. My customers have a range of perspectives and attitudes. Fortunately, many have leases, which limits their overall exposure and enables them to be somewhat nimble. But, even leasing presents pitfalls – many of my custom - ers still aren’t quite ready to make longer-term com - mitments. That said, when work’s required to build out their spaces, they quickly

discover it can’t be amortized over the shorter term, and is instead added to their base rent. Compounding this, in - terests rates are increasing, impacting the cost of work landlords finance. Just 3-5 years ago, build - ing owners could sell with relative ease. Interest rates were low, as was inventory – particularly for industrial and flex buildings. A new phenomenon is that while the current industrial market re - mains relatively tight, we’re now seeing office buildings

sell for less than industrial properties … a situation that, just a decade ago, would have seemed impossible. In fact, we’re even seeing office struc - tures leveled and the land rezoned. I wonder if the pen - dulum will swing so far the other way that office space inventory again tightens and prices increase once again. So, what am I seeing with my current customers as they address their real estate needs? • Two law firms, both ex - panding – with one adding

a new satellite office. Both continue to provide private offices for each attorney; li - braries are gone. Conference rooms abound, and they’re often showplaces, while file rooms are shrinking as all records are digitized. And, as with other industries, kitchens have become cen - ters of collaboration, with gourmet snacks and coffee. • A couple of companies are being acquired providing great sublease opportunities, with emphasis on below- market rents, decent lengths of time remaining, and new furniture available for free. • A shipping customer with international contracts recognizes the world’s chang - ing – including a radically different layout, reflecting hybridization in office versus home schedules – resulting in a reduction of its office footprint. • A customer, listening to his golf buddies’ tall-tales about how much they got for their buildings, continues rejecting appropriate offers for his own. And, his building continues to sit, unsold. • In a “B” building I’m marketing, we’ve signed leases with three new ten - ants in six months, with a fourth in negotiation. Why this success? Low rent, plus the landlord’s willingness to offer short-term leases. This is important to assuage the economic fears of companies. And as we’ve all seen, once ensconced in a building, ten - ants are disinclined to move unless motivated by space- related considerations. These are scary times for everyone, from brokers to owners to banks to corpora - tions. I do believe that “this, too, will pass,” but we need more creative marketing, persistence, and careful lis - tening to our customers’ new and very different needs. Fortunately, we’re in a business that continues on through thick and thin. To quote Gone With The Wind’s Gerald O’Hara, “Why, land is the only thing in the world worth working for, worth fighting for, worth dyin’ for, because it’s the only thing that lasts.” Barbara Gross is executive vice president of Sheldon Gross Realty. MAREJ

e’re experiencing a once-in-a-cen - tury moment, as

Barbara Gross

“experts” telling us the mar - ket’s down … or brimming with opportunity. Further complicating matters, the

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E ngineering & I ntegrated D esign By Jason Moss, PE, AKF Group A New Age of Adaptability in Healthcare Buildings

esigning buildings that are both flex - ible and sustainable

are grappling with incorporat - ing measures for transitioning to sustainable energy-consum - ing building systems. High- efficiency electrified equip - ment is increasingly popular to improve building energy per - formance. Heat-pump equip - ment, for example, is being considered as an alternative to fuel-burning boilers in future heating designs. However, incorporating flexibility into system design can introduce challenges such as costs, space constraints, and distribution issues that require careful coor -

dination. For instance, a facil - ity that heats with boiler steam planning a transition to heat- pump hot-water must contend with thorough analysis of the connected equipment and the prospect of extensive upgrades or limitations incurred by changing sources. Designing healthcare facilities that are flexible and sustainable can be accomplished with creative and comprehensive planning. Efficient heating and cool - ing systems are critical to improving building efficiency, and installing energy-efficient

equipment is often incentiv - ized by local, state, and feder - al governments. Some cities, such as New York City and Boston, have implemented policies with penalties for failing to meet energy per - formance benchmarks. How - ever, the future availability of natural gas is uncertain due to potential fossil fuel limitations, making it crucial for building owners and de - signers to carefully consider energy sources when making MEP design decisions. Deci - sions like using electricity

to create heat instead of fuel have a significant impact on system design considerations from electrical service to the building down to baseboard radiation size. Designing safe, reliable, adaptable, and sustainable healthcare buildings re - quires a unified vision, an understanding of trade-offs, and careful coordination. To meet the growing demand for adaptable patient care spaces and transition to sustainable energy-consuming systems, continued on page 16A

is a com - plex chal - lenge that requires a unified vi - sion and an understand - ing of the trade-offs involved. T o d a y ’ s

Jason Moss

building designs must sat - isfy functional requirements while also incorporating sus - tainability measures driven by policy, optics, and practi - cality within a dynamic en - ergy commodity landscape. In healthcare facilities, flex - ibility is a crucial aspect that is second only to safety and reliability. However, mechanical, electrical, and plumbing (MEP) building system designs in such fa - cilities face the additional challenge of adjusting to the growing desire for adaptable acuity patient care spaces and sustainability in build - ing energy. Building owners and designers must work together to create a unified vision for current and future planning while understand - ing the limitations and trade- offs involved in such designs. Designing safe and reliable healthcare building systems is not only a necessity, but also a complex task that re - quires the ability to adapt to changes in patient care envi - ronments and accommodate continuous improvements in diagnostics and treatment. The COVID-19 pandemic has highlighted the need for adaptable spaces that can support a higher level of patient care. For example, a space intended for standard treatment use would be suit - able for supporting critical care. To accomplish this, engineers must design for high ventilation rates and provide high-efficiency filtra - tion beyond typical require - ments. These improvements require significant heating, cooling, and power to achieve. A nominal spare capacity de - signed into building systems based on standard practice is swiftly exhausted by intro - ducing adaptable, pandemic- ready programs. Healthcare facilities, in ad - dition to program adaptability,

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10A — April 2023 — Spring Preview — M id A tlantic Real Estate Journal

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F inance

By Will McKenna, Progress Capital Checking in on Capital Markets, Rates, and Lending Activity after Q1

“I

can say with com - plete certainty… 2023 will be an inter -

multiple regional bank fail - ures, a forced merger of the two large Swiss banks, and

seen a historic drop in ac - quisition volume, both year over year and in comparison

As evidenced by the Silicon Val - ley Bank failure, an inability to predict where the economy and rate markets are going can have dire consequences for borrowers and lenders alike. However, that should start to smooth out as inflation slows towards the Fed’s target rate and rate hikes slow or stop altogether. I believe we will see one more rate hike in May, and then the Fed will pause for the summer. I don’t possess a magic 8 ball, but I would put a likelihood of cuts in the second half of 2023 as “Outlook not

so good.” However, the recent CPI numbers this week show that inflation is indeed slowing, which will help take out a lot of the potential rate volatility that lenders hate so much. In a recent 2023 Market Pulse update from Goldman Sachs, they highlighted the issues presented by the flight of deposits from regional and smaller banks. These banks account for 50% of commer - cial and industrial lending ac - tivities and will start pulling back – especially on LTV/LTC levels for loan offers. They also may need to raise their deposit rates paid to custom - ers, which will push up their cost of funding. This should eventually show up in lend - ing rates. What this means for borrowers and owners of commercial real estate is that those same banks who originate many of our loans in this industry have a keen eye on their deposit balances, and we will see more of them require a deposit relationship with the bank as a covenant in any future loan offerings. Finally, we need to factor in asset valuations. According to a recent Green Street report, the commercial property price index is down over 15% from this time last year. Office has obviously seen the biggest price depreciation of all asset classes, but everything except lodging/hospitality has seen double-digit annual drops in their valuation index. Taken together, what does this all mean for rates and lending activity? Borrowers today and in the upcoming few months will be met with higher capital costs, fewer willing lenders, and more conservative lending terms. Deals will require more eq - uity and cash to the table at closing. Cap rates will con - tinue to rise to catch up with borrowing costs. However, in this repricing, there will be opportunity for investors. More than 1 trillion (with a T) in outstanding CRE mortgage debt will come due over the next 24 months, according to a recent report by Morgan Stanley CIO Lisa Shalett. There may be blood in the wa - ter, but in the midst of chaos, there is also opportunity. Will McKenna is manag- ing director at Progress Capital. MAREJ

esting time.” The above quote was the last line of my prev i ous column for this publica - tion’s Capi - tal Markets,

There may be blood in the water, but in the midst of chaos, there is also opportunity. — Will McKenna

just recently a CPI report showing that the Fed’s ac - tivities – while a drag on our industry – have seemingly started working to bring down inflation. We’ve also

to the previous quarter. Not to toot my own horn here but I do believe this counts as interesting! Now what. Lenders really hate volatility.

Will McKenna

Rates, and Lending Activ - ity 2023 Forecast in Janu - ary. Since then, we’ve seen continued rate increases,

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M id A tlantic Real Estate Journal — Spring Preview — April 2023 — 11A

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I ndustrial R eal E state

By Alessandro (Alex) Conte, CCIM, SIOR, The Blau & Berg Company Federal Rate Hikes and the Industrial Real Estate Market

t was only a matter of time before the federal rate hikes started to take

by the end of the year 2023, and see a slow and gradual uptick in leases in the first half of 2024. For now, while many inves - tors are on the sidelines, they remain anxious to buy, salivat - ing at the opportunity to pur - chase quality assets in quality locations at a discount. Few investors, however, continue to prod this market for deals believing this may be the only opportunity they may have to acquire trophy assets at a dis - count, and position themselves with a strong foundation for

continued to devour space at record pace and prices. Many believe this was still part of the “hangover” following the industrial boom effects of the COVID-19 pandemic. Fast forward to the first quarter of 2023 where we are now seeing not only new con - struction coming to market, but the dreaded sub-lease space as well. Port Newark saw total cargo volumes drop from 1,524,298 in February of 2022 to 1,216,607 in February of 2023 reflecting a 20% drop in volume. The slowdown in

container activity coupled with the increase of available space leads us to the simple economics law of supply and demand reversal. If we look at the supply and demand curves, one could say that we reached equilibrium somewhere in the 3rd or 4th quarter of 2022. The question now posed to every analyst and real estate professional, is how far out the supply curve outweighs the demand curve moving forward? The consen - sus here is that we should, or will, reach the market bottom

the next cycle. Real estate cycles have a start and a finish. Fortunately, when one cycle ends a new one begins. The game never ends, pricing and demand histori - cally go up as the population continues to grow. There will be many opportunities in the months ahead, and those will - ing to capitalize on the dip will reap the most profit in the coming cycle. Alessandro (Alex) Conte, CCIM, SIOR is executive vice president of The Blau & Berg Company. MAREJ

their toll on real estate. Interestingly enough, the sale values of industrial space start - ed to adjust, almost im - mediately, in the invest -

Alessandro Conte

ment sector as institutional investors needed to reflect a high rate of return. What was helpful, however, was the lim - ited amount of available space on the market for tenants. For the better part of 2022 tenants Employee experience and. . . The most common ones are widespread, with five ameni - ties being available in 80%+ of tracked buildings: controlled access, on-site retail and food, fiber optic availability, nearby public transit, and on-site parking. Beyond those staples, occupiers are attracted to buildings with a selection of amenities that activate the space, offer convenience, and elevate employee wellness. The report also emphasizes that amenities alone are not the solution, and that occu - piers should make decisions based on their specific needs, culture, leadership goals, and feedback from employees. “What the team found inter - esting is that the amenities that make up recent flight to quality include the variety of experiences that provide convenience, activation, secu - rity, ease for commutes, and technology,” Smith said. “If occupiers had a choice between a building with high quality amenities versus less, the ex - pectation from occupiers will likely be more vs. less.” The survey of buildings covered multi-tenant office buildings with large lease signings over 12 months in 2022 from 15 urban and sub - urban markets. Buildings that were owner-occupied were excluded. Cushman & Wakefield is a leading global real estate services firm that delivers ex - ceptional value for real estate occupiers and owners. MAREJ continued from page 2A

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12A — April 2023 — Spring Preview — M id A tlantic Real Estate Journal

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C ommercial R eal E state B roker

By Leor Hemo and Ken Richardson, Vantage Commercial Real Estate Business and CRE Insights from Vantage Commercial

he commercial real estate market is facing several chal-

the uncertainty surround- ing interest rates making it difficult to predict the cost

Overall, the commercial real estate market and the business brokerage market are facing different challenges, but both markets are expected to continue to grow and evolve in 2023/2024 with favorable market conditions for sellers and a robust demand from buyers.

lenges that are impact- ing different sectors and creating dif- ficulties for investors and proper- ty owners to plan ahead, a n a l y z e

of financing, the persis- tent impact of the work- from-home env i r on - ment on of- fice space d emand , banks im- p o s i n g

challenges, the industrial sector is currently thriving, and there is still high de- mand for land for residential and industrial development. The increase in warehouses and distribution centers in recent years is expected to continue in 2023/2024 as e-

commerce continues to grow and the demand for online shopping increases. In the business brokerage sector, the market conditions remained favorable for sellers in the second half of 2022, with continued interest from buyers and a robust demand for small

and mid-sized businesses. According to BizBuySell’s Q2 2022 Insight Report, there was a 22% increase in small busi- ness transactions in the first half of 2022 compared to the same period in 2021 indicating the conditions continued to be favorable for sellers. The leading buyers in the business brokerage market continue to be first-time buy - ers and serial entrepreneurs. However, there has been an in- crease in the number of private equity firms and family offices entering the market, looking for opportunities to acquire profitable and growing busi - nesses. This trend is expected to continue in 2023/2024 as these firms seek to diversify their portfolios and find new sources of revenue. The main reasons for selling a business remain retirement and a lack of interest from the next generation. According to the Exit Planning Institute’s 2022 State of Owner Readiness Report, over 70% of business owners are over the age of 50, and many are looking to sell their businesses as part of their retirement plans. The report also found that 82% of business owners have no written plan for transferring their business to the next generation creating a significant opportunity for business brokers to work with owners and develop exit plans for their businesses. Overall, the commercial real estate market and the busi- ness brokerage market are facing different challenges, but both markets are expected to continue to grow and evolve in 2023/2024 with favorable market conditions for sellers and a robust demand from buyers. However, as with any market, there are risks and uncertainties, and it is important for investors and business owners to work with experienced brokers who can help them navigate the market and achieve their goals. Leor Hemo is president & chief executive, and Ken Richardson is VP at Vantage Commercial Real Estate. MAREJ

Leor Hemo

Ken Richardson

deals and make long-term decisions. Four critical prob- lems currently impacting the local real estate market are

stricter lending standards and lower loan-to-value ra- tios and a decline in rental rates. However, despite these

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M id A tlantic Real Estate Journal —April 2023 — 13A

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The final phase of Vermella Union is constructed by Russo Development G.S. Wilcox & Co. arranges $90,000,000 in financing for Sol at Vermella Union

one, two, and three-bedroom homes including gourmet kitch - ens, in-home washers and dry -

NION, NJ — G.S. Wilcox & Co. has completed $90 million

ers and spa - cious walk-in closets. Ame - nities include a resort-style clubhouse, high-end fit - ness center, children’s playroom, o u t d o o r

in permanent financing for a 309-unit luxury apart - ment commu - nity in Union. The financ - ing, arranged by Gretchen Wilcox , pres - ident, and

David Fryer

Gretchen Wilcox

lounges with hotel-style swim - ming pool, grills, firepits and expansive rooftop terrace. “G.S. Wilcox & Co. is grateful to have financed another portion of this exceptional campus. Competi - tive financing remains avail - able for strong sponsors such as Russo Development,” said Wilcox and Fryer in a prepared statement. MAREJ

David Fryer , principal, was secured on a 7-year term. The project, known as Sol at Ver - mella Union, is the final phase of Vermella Union constructed by Russo Development . This financing marks G.S. Wilcox & Co.’s third on this campus. These high-end rental apart - ment homes are comprised of thoughtfully designed studios,

Sol at Vermella Union

JLL represents borrower, 3 Journal Square Urban Renewal, LLC, to secure the seven-year, fixed-rate loan

countertops. Community ame - nities include a state-of-the-art

JERSEY CITY, NJ — JLL Capital Markets has ar-

health and fitness center, a yoga studio, a resident lounge with fire place and billiards, a rooftop deck with Manhat - tan skyline views and lounge areas and more. Situated at 2955 John F. Kennedy Blvd., 3 Jour - nal Square is set within the center of Jersey City

ranged the $58 million refinancing for 3 Journal Square, a 240-unit, lux - ury, mid-rise multi-hous - ing apart - ment build - ing located in Jersey City. JLL rep -

Thomas Didio Jr.

Thomas Didio

resented the borrower, 3 Journal Square Ur- ban Renew- al, LLC , to secure the seven-year, fixed-rate loan through a life insurance company. Built in 2017, 3 Journal Square offers one-, two- and three-bedroom units with bright, open layouts, full-size washers and dryers, chestnut wood vinyl flooring, granite kitchen countertops, stainless steel appliances, custom kitchen cabinetry and quartz bathroom Gerard Quinn

John Cumming

in Journal Square, allowing residents the convenient walk - ability to area amenities, and is just steps from the Journal Square Path Station. Addi - tionally, the property is proxi - mate to major north-south and east-west road corridors, as well as the connections to the New Jersey Turnpike and Pu - laski Skyway. The community

3 Journal Square

the relationship between the developer and lender teams,” said Didio. The JLL Capital Markets Investment Sales Advisory team was led by Thomas Di- dio, Thomas E. Didio Jr., Gerard Quinn and John Cumming . MAREJ

is approximately three miles from the World Trade Center and New York City’s financial district, nine miles from Mid - town Manhattan and seven miles from downtown Newark. “This financing is a testa - ment to the quality of product the developer has delivered

to the market. The lender stepped up to the plate and delivered very strong economic terms to allow the partnership to continue operating this tremendous asset in a bur - geoning submarket of Jersey City. JLL is grateful to play a role in continuing to grow

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