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CONTE NTS

05 President's Perspective

06 Retail Changes Course 31 Developer Profile A deep recession and online Fourth River Development shopping change the character and direction of retail development. 35 Developing Trend P32 Site Development Fund helps with big site preparation.

38 Eye On the Economy

42 Office Market Update Avison Young

47 Industrial Market Update Colliers International

52 Retail Market Update Newmark Grubb Knight Frank

19 NAIOP Pittsburgh's Awards NAIOP Pittsburgh’s 21st Annual Awards Banquet honors projects 55 Capital Markets Update and individuals exemplifying excellence in the commercial real estate industry. 60 Legal / Legislative Outlook Endangered species can endanger a development project.

63 Benchmarks Foundations take a more active role in bricks and mortar development.

69 Voices NAIOP Pittsburgh Hall of Famers weigh in on the proposed ethane cracker.

23 Development Project Southpointe Town Center 73 News from the Counties

www.developingpittsburgh.com 3 Congratulations USAA and GLL. We are proud to be your trusted real estate services provider.

CBRE applauds USAA on their NAIOP “Renovation of the Year” award and GLL Real Estate Partners on their NAIOP “Green Building of the Year” award.

PARK PLACE 11 STANWIX CORPORATE CENTER GREEN BUILDING OF THE YEAR RENOVATION OF THE YEAR GLL REAL ESTATE PARTNERS USAA

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PUBLISHER Tall Timber Group www.talltimbergroup.com elcome to about shopping has changed how the Spring retail property is being developed. EDITOR 2014 edition Retailers are among the first to feel Jeff Burd of the award it when a downturn is coming and 412-366-1857 winning trends that influence retail devel- [email protected] Developing- opment have downstream impact Pittsburgh Magazine. on other commercial and industrial PRODUCTION W development. The shift to online Carson Publishing, Inc. Since the last edition of Developing- shopping, for example, has created Kevin J. Gordon [email protected] Pittsburgh the Pittsburgh chapter a market for warehousing that did has had many successes. One of not exist just a few years ago. The ART DIRECTOR/GRAPHIC DESIGN those was in our role in advocacy Internet companies that are thriving Carson Publishing, Inc. initiatives. Our membership played because of this shift, like Amazon, Jaimee D. Greenawalt a vital role in helping push through are still wrestling with what their the passage of Pennsylvania’s trans- logistics and fulfillment center needs CONTRIBUTING PHOTOGRAPHY portation funding legislation. We are. There are similar changes in Carson Publishing, Inc. received other good news when we commercial development that have Markowitz Communications learned that the Southern Beltway resulted from changes in consumer Rycon Construction connecting the Pittsburgh Interna- behavior in just a few years. Here in NEXT Architecture tional Airport and Interstate 79 was our own backyard we have seen that Desmone & Associates Architects also fully funded. NAIOP Pittsburgh influence already in the mixed-use has been actively advocating for its properties that have moved forward. CONTRIBUTING EDITORS completion for several years. A con- Anna Burd tingent of NAIOP Pittsburgh mem- Enjoy this edition of the award win- Karen Kukish bers recently attended the NAIOP ning DevelopingPittsburgh maga- ADVERTISING SALES Legislative Retreat in Washington, zine. We continue to strive to pro- Karen Kukish D.C. We spent a day on Capitol vide relevant and useful information. 412-837-6971 Hill meeting with some of Western We are always receptive to input on [email protected] Pennsylvania’s elected government new topics so please do not hesitate officials further advocating for tax to reach out to us. Remember to MORE INFORMATION: reform for Leasehold Improvments visit the NAIOP website (www.naiop- DevelopingPittsburgh is published by and Brownfield Development, in- pittsburgh.com). We look forward Tall Timber Group for NAIOP Pittsburgh corporating economic consideration to seeing you at any of our upcom- 412-928-8303 for energy saving initiatives in new ing events. www.naioppittsburgh.com construction, a comprehensive En- dangered Species Act (ESA) reform Regards, No part of this magazine may be and more transparency in the imple- reproduced without written permission mentation, and the reauthorization by the Publisher. All rights reserved. of a multi-year Federal Transporta- This information is carefully gathered and com- tion bill. piled in such a manner as to ensure maximum accuracy. We cannot, and do not, guarantee On the leadership front, we rolled either the correctness of all information furnished out our Developing Leaders Mentor- nor the complete absence of errors and omis- ing Program in January 2014. The sions. Hence, responsibility for same neither can response to participate by our mem- be, nor is, assumed. bership was tremendous and the program was actually oversubscribed Keep up with regional construction by members willing to act as men- and real estate events at www.buildingpittsburgh.com tors to our DLs. We have received favorable input from both the men- tees and mentors. Frankly, it seems like the mentors may be learning just as much as the mentees. Daniel P. Puntil In the Spring edition of Develop- NAIOP Pittsburgh President ingPittsburgh, we’re taking a look at how changes in how we think

www.developingpittsburgh.com 5 f e a t u r e

The Game Changes for Retail Development

6 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e

Rendering of the McCandless Crossing town center phase, looking from McKnight Road. Courtesy AdVenture Development.

In his 2000 bestseller, The Tipping recent holiday season was just such Point, author Malcolm Gladwell defines a tipping point and the impact of the the title as “that magic moment when changes that are taking place as a an idea, trend, or social behavior result are impacting commercial real crosses a threshold, tips, and spreads estate development across many like wildfire.” For retailers, the most kinds of properties.

www.developingpittsburgh.com 7 f e a t u r e

The re-branding of Ross Park Mall that began with the attraction of Nordstrom’s has been one of the most successful retail projects in the region. Photo courtesy Markowitz Communications.

fter more Five years later it’s quite clear that Welcoming the Consumer Back than a decade retail development has been altered of aggres- and probably not for just the short Those who feel that malls are lag- sive retail run. What is equally clear is that the ging because Americans aren’t development Great Recession had only a tem- shopping are ignoring the data. fueled by porary chilling effect on shopping. According to the Commerce Depart- consumption Consumers cleaned up their balance ment’s figures, total retail sales were that exceeded any previous trend sheets and reduced debt with some up 4.1 percent year-over-year in (or reasonA as it turns out), the retail old-fashioned belt tightening for a 2013. The same report showed that segment of the commercial property few years but had roared back by in-store sales soared 9.9 percent. universe came crashing down with 2013. What changed the face of re- The National Retail Federation (NRF) the financial crisis in 2008. Within tail wasn’t less consumer spending; reported that industry sales rose 3.7 12 months the amount of retail it was the advent of multi-channel percent in 2013. The NRF forecasts space opened fell by two-thirds from shopping, creating an approach an increase of 4.1 percent in 2014, its peak. By 2011, new space totaled called ‘omni channel retailing.’ but predicts online sales will grow less than ten percent of the space between 9 percent and 12 percent. delivered on average between 2000 “For two years we haven’t seen a and 2008. The jarring nature of the change in the pattern, where we The industry association sees the financial crisis and the fear that fol- don’t get that build in traffic past economy growing at a faster rate lowed put a freeze on retail develop- Black Friday. How much of that has than the historical average in 2014 ment; moreover, many analysts felt moved online? The pattern shifted and believes that the housing mar- that because the crisis was brought this year,” says Diane Ellis, CEO ket will continue to expand. These on by consumption run amok, there of the Limited Brands. “Is that the trends have proven to loosen shop- would be a shift in behavior. Many tipping point towards online? That pers’ purse strings, as does increased were of the opinion that Americans is where we see our growth. So we employment. NRF forecasts job would be changed by the crisis, that have to re-think our footprint with creation to average 185,000 new it would dampen consumer spend- regard to size, the role of the store jobs monthly. With inflation pegged ing permanently and create a new and the role of the mall itself.” at less than two percent, consumers paradigm. will feel freer to spend.

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South Hills Village is undergoing a renovation and re-mixing of tenants that is attracting retailers like Apple. Photo courtesy Markowitz Communications.

Another component of the retail it came to dining out. Four out of What does this mean for retail de- formula is dining. The National ten consumers responded that they velopment? If 44 million square feet Restaurant Association (NRA) re- were not eating out as often as they of new retail space satisfied a higher ported in January that it expects would like. When that same ques- level of spending than occurred sales to be $683.4 billion in 2014, tion was posed to consumers dur- when developers delivered 325 a 16.5 percent increase over 2010 ing the mid-2000's, only 25 percent million square feet of space, there and an 80 percent jump from 2000. said they wished they could eat out seems to be little doubt that floor While those increases seem robust, more. That suggests there is consid- space and sales are no longer mov- the NRA’s 2014 Restaurant Industry erable room for even higher sales in ing in concert. At the same time, Forecast found that consumers were 2014 if consumers are confident in the dining segment of retail is ac- still feeling the hangover from the the economy or simply respond to celerating and seems to have more downturn in December 2013 when pent-up demand. room to grow, albeit as a fraction

10 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e

of the total retail future development but the reward visits during the holiday shopping market. The good for success is justified. months of November and December. news for restaurant That’s half the number of visits that development is that “A tremendous number of our cus- occurred during the two months in consumers can’t eat tomers look online and purchase at 2010, when consumers were still out online. the store and many who do just the solidly in recession mode. Not only opposite, so the store experience is online shopping tamping down “A high percentage has to be very special, very distinct. traffic, the trend is also creating po- of the growth cur- The store can’t just be convenient larization between malls of varying rently is centered on or offer discounts to draw traffic,” quality. food. That includes explains Ellis. “It’s about making the full service, fast ca- store a differentiating experience, “There used to be B and C malls sual and fast food,” very high touch and high service. that served their markets but now notes Herky Pol- It’s worth making both online and the difference in quality is huge,” lock executive vice stores great experiences, because observes Ellis. “It’s either an A-plus president at CBRE. customers who shop across multiple mall or everything else is a D mall.” “Additionally, there channels will spend two or two- has been an unusual and-half times more than those who The quality of the mall is largely amount of grocery shop one channel only. And they will a perception of the quality of the and convenience spend more in both channels.” retailers and shoppers but that per- store activity led by ception – and the label that accom- Giant Eagle, Bottom Regional Malls – The Have’s panies it – goes a long way towards Dollar, GetGo and determining the kinds of rent that Speedway.” and Have Not’s can be asked. And in a time when retail footprints aren’t growing, Pollock believes that While retailers wrestle with what lower grade malls are the ones being the competition their physical presence should be, shuttered. entering the market malls are paradoxically experiencing has motivated Giant happier days. Or at least the right Simon made an announcement in Eagle to become kinds of malls are. With the delivery December that sheds light on this more aggressive. of new regional malls virtually halt- polarization. The developer has spun “The new competi- ed, mall operators are experiencing off its strip centers and smaller malls tion in the market- favorable results with the right prod- to focus on large malls and Premium place has lit a fire ucts. Simon Property Group, owner Outlets. The spinoff has not yet been under Giant Eagle to of the Ross Park Mall and South Hills branded – it is being called SpinCo – go on the offensive Village Mall, reported 7.9 percent but the properties within its portfolio and the defensive. net operating income growth in the all produced less than $10 million They are testing new fourth quarter compared to 2012 in net operating income in 2013. [store] products and and earnings of $2.47 per share. At Morris points out that even these concepts.” its January 31 earnings call, Simon smaller properties grew their NOI reported occupancy of 96.1 percent. four percent last year; but SpinCo’s “We work a lot with success will come from its ability to restaurants and “I can’t recall any time in my 12 strategically acquire similar assets at that is a segment years at Simon that occupancy was desirable prices. that is still grow- higher. All our metrics are up,” ing,” explains Jared notes Les Morris, spokesman for At a time when it is spinning off Imperatore, vice Simon Property Group. “Tenants still properties, Simon Property Group is president of retail at want to be in regional malls and also investing in its core portfolio. Grant Street Associates. “Pittsburgh outlets. Without a lot of new con- According to Les Morris, the company has gotten on the radar as being a struction, the supply and demand is pouring approximately one billion foodie town so we’ll see some new equation works in our favor. I expect dollars into its properties between concepts coming to this market.” online retailers to drive traffic to 2014 and 2016, although most will stores for pickup and mall locations go into new Premium Outlets rather The Limited has opened only a hand- will be even more valuable.” than into mainstream malls. Simon’s ful of stores in the past few years top five tenants at regional anchored and has taken a harder look at who While the equation may be work- malls are Macy’s, Sears, JC Penney’s, is shopping at their stores and why. ing for Simon, traffic in all malls Dillard’s and Nordstrom. Those first The results of the research have is off sharply. In fact, according to three have closed more than 500 been surprising and challenging for ShopperTrak, foot traffic at malls stores over the past three years. That and large retailers was 17.6 billion

www.developingpittsburgh.com 11 f e a t u r e

makes decisions to upgrade malls much more difficult. Some of Simon’s capital expenditures will be in select regional malls that are outperforming the mainstream, malls like Ross Park and South Hills Village.

Ross Park’s success can be attributed to the opening of Pittsburgh’s only Nordstrom’s. Even with very challeng- ing timing, the signing of Nordstrom attracted dozens of one-off tenants to the mall. Simon sees the same opportunity at South Hills Village and is putting tens of millions into a reworking and renovation.

“Nordstrom’s opened in October 2008, right as the recession started, but the amount of great retail that has come on board has been incred- *According to Costar's most recent quarterly market reports ible,” remarks Morris. “I don’t know any other Simon property that has remade itself so completely. South Hills Village has similar character- istics. Both malls are fixtures in the community. Both serve communities with appealing demographics and have great name loyalty.”

Still, with declining traffic the For winning results, turn to a mainstream regional mall is facing a tough road ahead. The business case team with proven performance. for operating a mall has been the steady growth in rents but retailers are looking at the value proposition harder.

“Malls used to equal traffic but that hasn’t been the case in recent years,” says Ellis. “You are looking

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12 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e

at a three percent rent increase each McKnight Road between the Perry- ideal setting for a power center or year to get maybe eight or nine per- mont and Cumberland Road inter- lifestyle center. The first phase of cent less traffic.” sections. Developer Kevin Dougherty McCandless Crossing was, in fact, a had designs on the project – which carryover from Dougherty’s days as In the final analysis, the effects of lies just north of the main McKnight a big box developer with the con- the recession, demographic changes shopping district – for more than struction of a Lowe’s that opened in and online shopping’s rise have all a decade and imagined it to be an 2010. Even at that point, however, combined to make for a different de- the plans had begun to change. velopment opportunity than the big box power center that dominated de- “I had been following the change velopment from the mid-1990’s until in trend and certainly made several the downturn in 2007-2009. There More importantly, adjustments along the way,” he is a perfect storm of influences that there are factors remembers. “Talking to big boxes it are making it more appealing for was clear they were getting smaller shoppers and developers to reduce that point to but the bricks-and-mortar stores still the size of the shopping area. More successful retail have their place.” importantly, there are factors that point to successful retail happening happening within AdVenture’s plans always included within the context of a mixed-use the context of offices, hotels and consumer service development. There is resurgence in establishments. The next phases of the neighborhood retail category. a mixed-use the project included a Home2 Suites development. hotel, LA Fitness, CVS Pharmacy, a Shopping Where You Live WesBanco branch and a Doodlebug There is resur- child care center, along with a small The largest new retail center under gence in the strip by the Lowe’s. It is the fourth construction at the moment is Mc- phase, now under construction, that Candless Crossing, a million square neighborhood saw the most significant shifts. As foot-plus project being developed retail category. retailers were changing their needs, by AdVenture Development along Dougherty decided that he’d create a

Photo courtesy Markowitz Communications.

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14 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e different kind of destination, empha- sizing dining and retailers that would fit the needs of the residential neigh- borhoods that surround the site.

“The tenants were optimizing their layouts to maximize the customer experience without wasting foot- print. We were mindful of that when we planned the retail spaces,” he days. “Dick’s was looking at 50,000 square feet. The cinema was down to 12 screens. Home Goods is only 24,000 square feet. Even the grocery store [Trader Joe’s] is only 12,000 square feet.”

McCandless Crossing had always included a portion for housing but AdVenture looked at creating the op- portunity to be a destination for the people who would work at the cen- ter and the nearby UPMC Passavant Hospital and La Roche College, as well as the adjacent neighborhoods. Total retail construction in metro Pittsburgh from 2004-2013. Source Tall Timber Group. “One of the reasons we went so heavily into restaurants at McCand- but it is also dining-oriented thus less was that we felt there was a far. The developers are able to take void on McKnight Road that we In the final advantage of the mature, dense resi- could fill,” Dougherty says. analysis, the dential development that exists near the site to target community retail as Those same dynamics are in play at effects of the their niche. two of the other new retail projects. recession, Horizon Properties is completing the “The mixed-use neighborhood con- two retail buildings at 1800-1900 demographic cept is more appealing to people Main Street, which are a mix of changes and now. The idea of ‘build it and they ground floor retail and loft offices will come’ that used to drive retail located in the heart of the South- online shopping’s to malls isn’t working,” notes Edie pointe II and Southpointe Town Cen- rise have all Hartman, director of research and ter office buildings. The retail por- communications for Grant Street tion is just less than 60,000 square combined to make Associates. She says her data shows feet and the interest has been for a different that neighborhood retail is making heavily weighted towards restaurants a comeback because of a different that want to take advantage of the development kind of convenience. “People want surrounding office workers, hotel to shop and walk around near where guests and residents of the 376 opportunity they live. It’s what is appealing apartments being built within a few that the big box about developments with residential hundred yards. As of mid-February, and retail. The neighborhood retail there were 11 tenants taking roughly power center works especially for Generation Y. half the available space. that dominated They want everything and they want it now so shopping where they live In Murrysville, Herky Pollock and development from suits them.” Mark Baranowski are developing the mid-1990’s the 71,000 square foot Blue Spruce Hartman explains that while the Gen Shoppes on Route 22 at the Monro- until the downturn Y attitude expects immediacy, that eville border. The tenant mix there in 2007-2009. demographic group also supports includes a day care center, specialty the specialty store that adds other grocer and Wine-and-Spirit store, value, like sustainability or social

www.developingpittsburgh.com 15 f e a t u r e

“Pittsburgh has The Online Fulfillment Effect to tackle retail development Retail has always been a demand in a different driver for warehousing. In the hier- way because archy of development, jobs create the new store the need for housing; retail follows concept just housing and distribution tracks re- isn’t going to tail. While online shopping has been come to Pitts- the bane of the bricks-and-mortar burgh first,” he store, the growth of online retail has explains. “Proj- recently been a boon to warehouse ects coming out development. of the ground in 2014 or 2016 Online shopping required only mod- are going to est expansion of the existing retail be right-sized distribution network to fill its orders for the neigh- initially and thereafter the growth borhoods they created logistical challenges that serve. For one could be solved by leasing/building thing the banks a few modestly-sized warehouses don’t want to around the country. The acceleration finance a big of the Internet in the late 1990’s retail devel- meant accelerating logistical needs opment. And too but the real catalyst came with second, the the astounding success of one com- retailers just pany: Amazon. aren’t there.” Beginning in 1999, Amazon began Right-size and building distribution that could keep neighborhood up with its rapid growth in sales. It are constant hardly seems risky by this time, but refrains from the company was a groundbreaker many in retail when they built a handful of fulfill- and develop- ment centers – in the hundreds of ment. For thousands of square feet – around Photo by Denmarsh Photography. Horizon, which the U. S. and a few in Europe. As originally Tim Bezos’ ambition found legs as planned a pow- the global recovery boomed in 2005 er center for and Internet use exploded, Ama- conscious. She cites the bracelet Southpointe, zon’s logistics solutions boomed too. maker Alex & Ani, which recently the right size allowed them to de- Amazon built more than 50 ‘super opened in Shadyside, as an example velop offices for the burgeoning oil warehouses’ right through the reces- of the type of handmade, socially and gas industry while providing a sion and in recent years has contin- conscious store that will attract destination dining place. For Kevin ued to expand the need for fulfill- young shoppers. Dougherty, doing neighborhood ment well beyond their own sales, development meant literally listening turning third party fulfillment into a “The specialty store is doing great to the residents who were nearby profit center. because people are interested in and may have opposed McCandless niche products and want the experi- Crossing in the first place. Lest you think this is a marginal ence that goes with those niches. impact story, compare Amazon’s They want to touch it and pick it “Residents did offer suggestions for development to the overall ware- up,” Imperatore says. retail tenants. One opponent of the house market. From 2011 through project gave us eight or nine sug- 2013 the company built 24.7 million Horizon’s Mike Swisher sees the gestions of tenants that weren’t in square feet of warehouse space. The changing retail landscape as an op- the area,” he laughs. “A couple of total amount of warehouse space portunity for secondary markets like those are actually going into the developed in the U. S. during that Pittsburgh. project.” same time was 133 million square feet. The ‘Amazon effect’ was

16 DEVELOPINGPITTSBURGH | Spring 2014 f e a t u r e

18.6 percent of all U. S. warehouse ture, creating efficiencies that justify advances in fulfillment have given development in those three years. construction of larger distribution sellers the ability to make shipping On average, Amazon’s warehouses centers at transportation hubs. costs disappear and turnaround were 915,000 square feet. Amazon The expansion of online shopping orders in well under a week’s time. now operates 100 fulfillment cen- has been a boon to shippers like Fe- Perhaps the most catalytic factor ters across the world and sees their dEx and United Parcel Service, both in the expansion of online sales is expertise and retail customer knowl- of which are in a building mode. the rapid growth of mobile devices. edge base as the key to accelerating Limited’s Diane Ellis estimates that expansion. That means secondary Don’t Fight the Change 40 percent of their online sales were and tertiary logistics points – such as from mobile in 2013. That’s a figure Western PA – will be more likely to Observers looking for a leveling out that would have been zero just a few have a location in the future. or change in the trend of online years ago. shopping or even a pullback in Of course, there are other retail- consumption will be disappointed For developers this isn’t bad news, ers whose online sales have mush- in the near term. Changes in con- just a shift in needs. The advantage roomed during the same decade or sumer behavior tend to persist until of smaller, mixed-use projects is that so. Even some of the retailers that something cataclysmic occurs. If the the market risk is spread between Amazon is hurting with its growth financial crisis of 2008 didn’t pro- varieties of product types, some of are seeing online growth of their vide that sort of shock therapy, it’s which offer very stable occupancy. own and are taking advantage of the unlikely that anything else will in the The current trend means retail sites economies of scale to create mas- next few years. should work well in urban settings sive fulfillment centers of their own. or in proximity to denser suburban Retailers like WalMart or Target are Online shopping has become seam- residential. For the next decade or also combining the need for ex- less for consumers, as retailers and so, ‘coming to a neighborhood near panded fulfillment capabilities with resellers have made it easy to select you’ will mean exactly that. DP the shifting rail and truck infrastruc- and return what they want. The

www.developingpittsburgh.com 17 st NAIOP AWARDS

Renovation – Industrial West Pittsburgh Business Park 1000 Napor Boulevard, Pittsburgh PA Completed in 2013, the project was a complete renovation of 50,000 square feet. DEVELOPER: Sampson Morris ARCHITECT: Desmone & Associates CONTRACTOR: Bruce Construction

Renovation – Office

Park Place Corporate Center The project is an acquisition and renovation of 216,000 square feet in two office buildings. The $25 million investment in 2013 resulted in 100% occupancy. DEVELOPER: USAA Real Estate Company ARCHITECT: NEXT Architecture CONTRACTOR: A. Martini & Company

Build to Suit

Pittsburgh International Business Park, Building 100 & 110 Completed in 2013, the project was the first of two 53,000 square foot offices built for ServiceLink. DEVELOPER: Chaska/Continental ARCHITECT: WTW Architects ARCHITECT-INTERIOR: NEXT Architecture CONRACTOR: Continental Building Systems

www.developingpittsburgh.com 19 Speculative - Industrial

Neville Grand, Neville Island Completed in 2011, this is a 90,000 square foot new industrial space. DEVELOPER: JLS Land Company LLC ARCHITECT: Sweeney Shank Architects CONTRACTOR: Dynamic Building Co.

Speculative Office

J. Barry Center, Southpoint II Completed in 2013, the project is a five-story, 156,000 square foot new spec office. DEVELOPER: Horizon Properties ARCHITECT: Kernick Architecture CONTRACTOR: Rycon Construction

Green Building

11 Stanwix Street, Downtown Completed as part of an ongoing renovation the project involved $6.3 million in improvements to the building lobby, HVAC systems, lighting, elevators and waste and water systems. DEVELOPER: 11 Stanwix Street LLC ARCHITECT: Desmone & Associates PROJECT MANAGER: CBRE Inc.

20 DEVELOPINGPITTSBURGH | Spring 2014 NAIOP Pittsburgh Officers Daniel Puntil, President Grandbridge Real Estate Capital

Brian Walker, Vice President Millcraft Investments

Lou Oliva, Secretary Newmark Grubb Knight Frank

Christine Vann, Treasurer BDO USA

Lynn DeLorenzo, Past President TarquinCoRE LLC

Domenic Dozzi, National Board Jendoco Real Estate

Gregory Quatchak, National Committee Civil & Environmental Consultants

DeWitt Peart, National Committee Pittsburgh Chamber of Commerce

Jamie White, National Committee LLI Engineering

Board of Directors At Large W. Scott Caplan CLAYCO

Linda Fisher Dollar Bank

Wm Randell Forister Allegheny County Airport Authority

Grant Mason Oxford Development Corp.

Tyler Noland PenTrust Real Estate Advisory Svcs. Learn more about NAIOP, the Commercial Real Estate Development NAIOP in the western Association, is the leading organization for developers, Donald Smith Jr. Regional Industrial Development Corp. Pennsylvania tri-state region owners and related professionals in office, industrial at naioppittsburgh.com and mixed-use real estate. NAIOP provides Lou Stempkowski PNC Real Estate or 412-928-8303. unparalleled industry networking and education, and advocates for effective legislation on behalf of our Michael Swisher Horizon Properties Group members. NAIOP advances responsible, sustainable development that creates jobs and benefits the David Weisberg communities in which our members work and live. Wells Fargo Michael Embrescia, DL Representative

Patricia Farrell, Legal Council Meyer Unkovic & Scott

Committee Chairs Jamie White, LLI Engineering Inc. Transportation For more information on how you can develop Maureen Ford, ALCOA connections with commercial real estate through NAIOP, Marketing/Communication visit us online at www.naiop.org or call 800-456-4144. David Weisberg, Wells Fargo Programming Carl Belli, Continental Building Systems Membership Geoff Nara, Civil & Environmental Consultants Economic Development Jamie White, LLI Engineering Inc. Economic Development Michael Sharp, Continental Office Environments Developing Leaders

Development Project

The Town Center retail buildings along Main Street are being fitted out for tenants. As of late February, 11 lessees had been signed.

opment. Southpointe II has been a were virtually no lifestyle amenities in Southpointe runaway success but while the acclaim the park. As they laid out how the sec- is well-deserved, it is easy to forget ond phase of Southpointe would de- Town Center that there were some bumps in the velop they included 34 acres for what road that came before its ‘overnight they envisioned as a 500,000 square ince the natu- success.’ foot lifestyle center, something akin ral gas industry to a power center with some provision came to Western In 2003, Horizon Properties developed for residential in a small Traditional PA and made a master plan for its role as the lead Neighborhood Development. The de- Southpointe its developer in Southpointe II. After a velopers felt that this parcel, branded home base for decade of steady and robust growth, as Southpointe Town Center, would shale exploration,S Southpointe has thousands of office workers were add the services missing to complete a experienced significant new devel- coming to Southpointe daily yet there Class A suburban office complex.

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3308 143 5773 Cool Gray 6 100:0:60:72.16 0:35:85:0 9:0:43:38 0:0:0:31 01:48:3A FB:B0:40 9E:A3:74 BA:BC:BE The new headquarters office for Mylan was the first project started within the Town Center proper.

“I think the origin of Town Center Horizon concurrently developed a spec there were certain headwinds against was that Southpointe needed to be office building, 1000 Town Center that happening,” he explains. “When more than just an office park. We had Drive to be the anchor for the Town the recession came upon us most been successful over the years and Center’s Main Street. They also devel- people don’t’ remember or realize had created a destination for busi- oped an Embassy Suites hotel oppo- that we still had a much larger town nesses, an alternate to Downtown site that office building. Southpointe center planned. We had an executed Pittsburgh,” recalls Rod Piatt, CEO of II had more than a half-million square lease with a large theater opera- Horizon. “But when you aggregate a feet of new construction within the tor. So we were well on our way to large block of population, you need to first eighteen months of opening and developing a pretty significant town have more than just a place for people plans for another spec office un- center, not the 500,000 square feet to go to work. The thought was you derway when things changed in fall we envisioned but clearly 200,000 or need to also have a place for people 2008. 250,000. I would say that some of the to recreate, shop or have dinner.” regulators who aren’t in the develop- “When we built the Homewood we ment business didn’t have vision and Southpointe II was the backdrop for knew it was going to be the end of couldn’t understand what we were the proposed Town Center. At 225 Main Street. We just didn’t know how doing at Southpointe. That was one of acres, the plan for the park was to Main Street would turn out,” observes the headwinds we faced, to develop continue the office development that Mike Swisher, principal at Horizon a plan that was going to be action- had been completed to the north of who heads up development. able.” the site and to develop large of- fice buildings following the rising The recession that was underway “The decision to change was totally ridge surrounding the Town Center wreaked havoc on real estate devel- market driven,” says Swisher. “There site. The east-west Main Street of opment across all categories but no were headwinds in 2008 and 2009 the Town Center was designed to commercial category was hit harder but as we got to 2010, I think that if connect the offices that were clos- than retail. Although Piatt says he the Ann Taylors and Gaps were still est to Southpointe Boulevard to the wasn’t necessarily eager to abandon doing deals in the second tier cities buildings above them. The timing of the Town Center that was planned, we certainly would have gone after Southpointe II turned out to be excel- circumstances dictated a change. those retailers.” lent, as the region was going into a robust growth mode and CONSOL “At one time we had visions of a Even as the door was closing on a Energy made the decision to locate larger open air shopping environment large-scale open air retail center, an- its 350,000 square foot headquarters and the economy certainly played hav- other door of opportunity was open- complex in the new phase. South- oc on that vision, although I always ing. The exploration of the Marcellus pointe II had its anchor. believed that vision would work. But Shale formation for natural gas was

www.developingpittsburgh.com 25 Construction is underway on the Town Square office building, which was designed by Kevin Turkall of Designstream LLC. Image courtesy Designstream.

about to ramp up. That industry was Horizon’s original master plan for to be the first construction in the new an opportunity looking for a place Southpointe II and the Town Center Town Center. to land and Horizon wanted to make was office-oriented and had flexibility sure it landed in Southpointe. The de- in it but the shift in prospects for the “We ended up offering a smaller town veloper reinvested in a revised master park created a need for even more center that will probably be occupied plan that would position the Town office space. The demands for office by smaller regional players with a con- Center differently to serve the compa- space created an almost chaotic shuf- centration on restaurants rather than nies that were rapidly expanding their fling of tenants as the companies in the Ann Taylors of the world,” notes presence in Western PA. the oil and gas business grew rapidly. Piatt. “I think that will suit us just fine Range Resources, for example, went and will suit the Southpointe residents “Fortunately, the oil and gas business from a handful of players to requiring just fine.” – the Ranges of the world – started its own 180,000 square foot office in to penetrate Southpointe so [those a matter of three years. Coincidental The new plan, which didn’t receive projects] were just easy things to do,” to the explosive growth in that indus- final approval until 2012, created says Piatt. “Southpointe just hap- try, a number of Southpointe’s long- parcels for three office buildings, pened to be near where some of the term occupants were also growing. Main Street office over retail buildings early drilling took place, so that kind Names like Crown Communications, of 120,000 square feet, a couple of of worked well as a bridge. We ended Ansys and Mylan had been fixtures outparcels for smaller businesses and up developing more office space to in the park and their businesses were introduced a different residential ele- fulfill the needs of all the oil and gas expanding beyond their existing facili- ment. Because one of the fallouts of companies.” ties. Mylan, in fact, proposed building the financial crisis was a larger cohort a new headquarters that turned out of people who won’t or don’t qualify

26 DEVELOPINGPITTSBURGH | Spring 2014 for a mortgage, the new plan in- that we were going to depend upon cluded apartments. Swisher says that Canonsburg, Upper St. Clair, Peters developers considering a large-scale and even South Fayette to bring din- apartment complex in an area like ers to the restaurants in the evening Southpointe were initially cautious but and the weekend. So we had to make once they got a look at the changing it an attractive destination for them to demographics and influx of workers at get here.” the park, the interest piqued. To that end, the next phases of the GMH Capital Partners from Newtown project will include a small park and Square, PA signed on to buy the more landscaping. The parking solu- parcel for construction of 376 units tions, including the structured parking plus a 640-car garage. The $40 million are geared towards the flexible day- investment represents significant con- time/night time needs. Horizon pre- fidence in the destination that South- vailed upon Cecil Township to create pointe has become. Work started in a town center overlay zoning designa- fall 2013, by which time there was tion to accommodate how parking, a frenzy of activity on virtually every setbacks and building height worked other parcel in the Town Center. in this kind of development. That took some education, since the township Construction on Mylan’s 250,000 had no other town center experience. square foot headquarters began in It also required educating civic leaders late winter 2012, with the 1800-1900 in the new realities of retail. Main Street retail/offices shortly there- after. Both buildings were designed by “One challenge has been getting Cooper Carry Architects. PJ Dick Inc. people to understand the dynamics of was the contractor for the Mylan proj- the retailers. People have said, ‘why ect. Rycon Construction built the Main don’t you get Whole Foods in there or Street project and is the contractor Fresh Foods’,” Swisher explains. “You for the Town Square office building, have to understand that Fresh Foods a 208,000 square foot multi-tenant is going to put one store in Pittsburgh office under construction that will be and it's going to be by The Galleria or anchored by Noble Energy’s 150,000 someplace like that. That’s been the square foot lease (although an official biggest frustration, getting people to announcement of that deal has not understand that, even government been made). WesBanco is also cur- officials who say ‘that’s what we want rently building a new branch on an there’. We have to say that it’s a great outparcel. idea but it’s not going to get done and then explain why it’s not going to With so much more office space sur- get done. It’s market driven, not our rounding it, the vision for the re- preference. I think we’ve finally got- Within the approved tail portion of the Town Center has ten there, so people understand why Town Center plan changed. Horizon is hopeful that the we need the retail we’re attracting.” dining focus will create a different there remains another dynamic. Within the approved Town Center plan there remains another office building office building to “The concept here is to serve the day- to develop. That project will likely be develop. That project time population, which is somewhere a 120,000 square foot multi-tenant around 14,000 or 15,000, so just for building, unless another user steps will likely be a 120,000 those people getting lunch or a cup forward first. While that will complete of coffee the market is pretty strong,” the official planned Town Center, Ho- square foot multi- says Swisher. “With the change in re- rizon has another large parcel located tail, everybody is getting smaller. Gro- opposite the Mylan office that offers tenant building, cery stores are getting smaller; fitness even better visibility from I-79. Just unless another user centers are getting smaller; everybody don’t get the impression that this de- is getting right-sized after all those velopment wraps up Southpointe. steps forward first. big boxes. Those smaller stores fit well within a concept like the town center “You hit a nerve there,” chuckles but they have to be in neighborhoods Swisher when asked about what else with a large daytime population. One is available at the park. “I know the thing we recognized in making this a word out there is that only one lot restaurant-centered development was remains in Southpointe but that’s just

www.developingpittsburgh.com 27 not the case. It makes it sound like out. And Horizon knows that the dif- happen as quickly as it did, maybe Southpointe isn’t open for business.” ference between success and struggle CONSOL puts its headquarters some- can be fairly thin. place else and Washington County “People are saying things that just doesn’t become ‘energy center east’.” aren’t true; they don’t have all the “When we were planning Southpointe information. There are still opportuni- II we pushed the county to approve DP ties to do large buildings at South- the plan to capitalize on the momen- pointe,” Piatt emphasizes. “We own tum of Southpointe I. Barry Stout was probably the best parcel at South- instrumental in getting that done,” pointe just east of the Town Center remembers Swisher. “If that didn’t and we can control whether it's office or retail. Horizon can build 500,000 square feet of space at Southpointe but only Horizon can do it because of our land holdings. PROJECT TEAM If there’s a large company that would like to come to Southpointe Horizon Properties Group LLC...... Developer then we can certainly take care of Rycon Construction...... General Contractor them.” PJ Dick Inc...... General Contractor, Mylan HQ Piatt’s concern may seem un- Cooper Carry Architects...... Architect, Town Center/Mylan founded, given the success of Southpointe in recent years, but his Gensler...... Architect, Mylan Interior Fit-out company has created a gravity that Designstream LLC...... Architect, Town Square Office Building means Horizon will get an inquiry for just about any new user of of- First Commonwealth Bank...... Lender fice space interested in the region. Cushman & Wakefield/Grant Street Associates...... Leasing Agent That’s momentum that he doesn’t want to see stopped by a false R.A. Smith...... Civil Engineer impression that Southpointe is built

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30 DEVELOPINGPITTSBURGH | Spring 2014 Developer Profile

month before John met Dick Ru- percent of what I know about real binoff and Dick hired him to be the estate” and for showing him a busi- director of marketing and leasing ness model that still works for FRD and responsible for the company’s today. The development company 200,000 square foot-plus portfolio. generates low-risk fee income from developing a commercial real estate An accountant by education, John property that is owned by a separate previously worked in the retail oil partnership that may or may not business, concert promotion and for include others outside the firm. FRD Fourth River a non-profit. His natural curiosity approaches development from the gave him a love of learning about owner’s point of view because its Development his clients’ businesses which fed his partners understand the problems ourth River De- talents for relationship-building and associated with owning and manag- velopment (FRD) deal-making. The seeds of John’s ing their own properties. was founded in path to real estate development 2006 by three were sown when at age 21, he envi- During their time at Rubinoff Co., professionals sioned and attempted a deal to use John and Mark had the opportu- whose passion the former YMCA building in down- nity to develop office and industrial was real estate even though each of town Pittsburgh to develop a mixed- projects on some interesting sites, F use building with a fitness club, a including Herr’s Island, the site of a their careers started in different are- nas. A company evolves and transi- hotel, and a Playboy Club franchise former slaughterhouse. The company tions through its history as it creates (which was all the rage then). The passed on the chance to develop and responds to opportunities in its deal never happened but a passion the residential component of the marketplace. Survival often depends for deal-making was ignited. Washington’s Landing project, and on how it responds to threats. FRD’s while the commercial portion was a response to its greatest threat, the In the early 1980’s John met Keefe winning project, the success of the unexpected death of co-founder Ellis (of Langholz Wilson Ellis) at a residential property whetted Mark’s Mark Schneider in 2012, tested the Red Cross fund-raising party that appetite for urban residential devel- resiliency of its surviving co-owners, John was promoting. Discussions opment. John Watson and Sally Flinn. with Ellis led to John’s realization that every company had some real In 1999, Mark was made president Real estate development is a busi- estate component whether the of The Rubinoff Company and John ness built on relationships and business owned or leased some became the vice president of mar- powered by the deals that are made real estate. Although he stayed in keting and leasing, with continued and executed. If the three most the entertainment business for a responsibilities for the company’s important things about real estate while longer, the opportunity Dick property management operations. is location, location, location, then Rubinoff presented proved to be That year, Sally Flinn joined the com- real estate development is about persuasive. pany after stints with the facilities relationships, relationships, relation- departments at the Sports and Exhi- ships. John Watson, Mark Schneider, and bition Authority (SEA) and University Sally Flinn first became a team at of Pittsburgh. Over the next seven It was 1990 when “Dick Rubinoff The Rubinoff Company. Their talents years she managed several of the realized that The Rubinoff Company were pooled by Dick Rubinoff as he firm’s development projects. was not growing at the rate he created a dynamic team to expand needed it to grow and that’s when Rubinoff’s business and portfo- John, Mark and Sally helped Ru- he brought in Mark and me” recalls lio even more. John is quick to binoff expand its portfolio to more John Watson. Mark was hired a credit Dick for teaching him “ninety than four million square feet; but in

www.developingpittsburgh.com 31 2006, Rubinoff Co. wanted to shift petite for urban development – a its focus away from development to special passion of Mark’s – and the managing their own properties and Navigating the firm took on a 26-lot traditional providing services for fee. The reor- neighborhood development called ganization resulted in the departure public/private Columbus Square in the Manchester of John, Mark and Sally. They still partnerships of neighborhood of the North Side. In had the drive to keep doing what 2007, the City of Erie commissioned they had been doing – commercial developing was in FRD to oversee the planning and de- and signature residential develop- Mark’s wheel house. velopment of a six-block area along ment – and Fourth River was the State Street near Griswold Park in result. His background Erie’s downtown. as chair of the John and Mark took a few projects The foundation of FRD’s business is with them – most notably Sum- SEA and Stadium provided by its property manage- merset at Frick Park and Starpointe, ment and leasing services. John’s which Rubinoff was not interested in Authority boards ‘nut-and-bolts’ approach to real pursuing further. and as commissioner estate served FRD well in these critical income-producing lines of Fourth River handles the property on the Southwest business. The company manages or sales and develops for users that Regional Planning leases nearly two dozen properties want help at Starpointe, on behalf throughout the state and region. of the Washington County Council Commission led Aside from the business’s owners, on Economic Development (WCCED). to relationships FRD employs five others who handle Mark and Sally coordinated the property management and leasing. multi-faceted planning and construc- throughout tion of Summerset, a unique Brown- government. Fourth River was in just its third year field project. One of their co-devel- of business when the recession hit opers and builders on Summerset commercial real estate hard. With was Montgomery & Rust, the builder relationships in Harrisburg and on development opportunities chilled that they had watched have such Grant Street helped assure their case by the downturn, FRD relied upon success on Washington’s Landing a was heard. its third-party services for growth decade earlier. and was able to get the Columbus The salt-and-pepper approach of the Square project underway successful- Both the Starpointe and Summerset two men fueled the fun and suc- ly. FRD also made progress on Star- projects succeeded in part because cess of Fourth River. Mark took a pointe, finding support for a large of the coordination of public and top-down approach to development infrastructure project to prepare the private resources. The environmental while John was a nuts-and-bolts guy 100-acre second phase of the indus- cleanup of the Summerset site along who kept the pro forma in focus. trial park in 2011, as the burgeoning Nine Mile Run was – and is – an John describes the difference in style natural gas industry was finding the obstacle that would have made the noting that, “Mark’s activities always northwestern Washington County land unfeasible to develop without found a project to develop and my location very attractive. significant public funding to pre- activities always found a tenant to pare. Starpointe did not face the develop for.” But both believed that FRD also undertook a difficult con- same kinds of Brownfield headaches relationships created opportunities sulting assignment for the Pittsburgh but the property was a publicly- that got developed. John explains Public Schools. The project was an owned asset that was far enough that the different approaches served assessment of the varied underuti- removed from the metropolitan area them well in meetings. Without any lized buildings in the footprint of the that it would have been difficult to well-rehearsed script, the Fourth city’s district. FRD produced an asset attract investment without sites that River team could respond flexibly maximization plan for PPS that made were immediately ready for vertical to where the prospective client was recommendations about the mainte- development. leading, knowing that each was nance and disposition of the schools capable of providing either vision or that had been closed, intending to Navigating the public/private part- detail. advise the school board how to ef- nerships of developing was in Mark’s ficiently maintain the unused build- wheel house. His background as Both early projects fared well. Star- ings and to maximize the market chair of the SEA and Stadium Au- pointe has seen seven of the original value of the schools it intended to thority boards and as commissioner 13 land parcels sold or fully devel- sell. John remarks that some of these on the Southwest Regional Planning oped and a second phase with larger properties – like the Schenley High Commission led to relationships manufacturing facilities is planned. School – were appealing to him for throughout government. Mark and Development of Summerset opened Fourth River projects; however, he John had the wherewithal to create with a waiting list of buyers and all feels their role as objective advisor compelling cases for public assis- 160 lots of the first phase are sold precluded any involvement in rede- tance in their projects and Mark’s out. That project whetted FRD’s ap- velopment of the schools.

32 DEVELOPINGPITTSBURGH | Spring 2014 Having grown the business through While completing the Erie State relishes doing business with people a tough environment, the untimely Street and other residential projects, with whom he’s maintained lifelong death of Mark Schneider in July John Watson will steer Fourth River relationships. 2012 forced an unexpected transi- Development back in a more com- tion upon the business. In addition mercial/industrial direction. He says Fourth River Development LLC to the emotional toll of losing a that the company has a deal to de- 5168 Campbells Run Road, Suite 204 friend and business partner, John velop a large building in Starpointe Pittsburgh PA 15205 and Sally found that there would be in the works and hopes for further 412-231-4444 business challenges as well. “Mark opportunities there as the park gains www.frd.us.com was larger-than-life in life,” says momentum. John is also working on DP John to explain that some of the several projects near the urban core, firm’s business relationships didn’t including a flex project in the Strip, survive Mark’s passing. and a multi-building project in Craf- ton. Having been part of a few of In May, Fourth River will make the seminal redevelopment projects another transition. Sally Flinn and in Pittsburgh, John sees the expan- John Watson are in the process of sion of the central business district preparing FRD for Sally’s departure as an opportunity. FRD is on one of to start her own consulting firm. the teams looking at alternatives She will focus on the residential and for the Produce Terminal that Mayor mixed-use development, finishing up Peduto requested. the Columbus Square project while helping the City of Altoona with John is anxious to get back to the the planning of a downtown project core business that attracted him to similar to Erie’s. real estate in the first place. He un- derstands the small-town nature of Pittsburgh’s business community and John Watson

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need, regardless of what the specific ing places where jobs can be cre- Foundations focus of the individual foundation ated and poverty can be defeated, was. Within the past decade, there particularly if those places suffered Expand Their Role has been a growing trend in promot- disinvestment and decline for long ing real property development to- periods. in Development wards that same end. Like teaching a man to fish instead of giving him a Fred Thieman, the Buhl Founda- he significant fish, funding development is provid- tion’s president, notes that the trend role played by is less about foundations funding our region’s development than about a changing charitable “Historically, bricks emphasis in how community devel- foundations opment is done. is a power- and mortar have been ful residueT of Pittsburgh’s industrial seen as a key piece “Historically, bricks and mortar have past. Names like Heinz, Carnegie, been seen as a key piece of com- Benedum, Buhl and Mellon call to of community de- munity development activities but mind the powerful men whose busi- velopment activities the vehicle has been the community nesses were the economic founda- development organization,” Thieman tion of Western PA. Those same men but the vehicle has says. He says that while founda- created charitable foundations with tions rarely did the bricks and mortar a sense of philanthropy towards been the community development themselves, the trend those in need. development orga- is for organizations like the Buhl Foundation to take the lead as part Many of the foundations that were nization,” Thieman of a broader approach to commu- established by Pittsburgh’s indus- says. He says that nity development. “The more recent trialists aimed to improve the living trend has been for foundations to conditions and culture for their while foundations get more intimately involved with workers and their families. In the rarely did the bricks the community through place-based 1980’s, when heavy industry pulled grant making. Part of that has been out of Pittsburgh, those strong foun- and mortar develop- a move towards holistic solutions to dations helped provide for the hun- ment themselves, the a community’s needs. Investing in dreds of thousands living in former a development is part of a concen- mill towns that were decimated by trend is for organiza- trated, broad, holistic strategy rather the plant closings and relocations. tions like the Buhl than just funding six houses some- Pittsburgh’s network of charitable place.” foundations played a huge role in Foundation to take the revitalization of the city’s Cultur- Place-based grant making gives phil- al District, the strength and vibrancy the lead as part of a anthropic organizations focus and a of its artistic companies, the cleanup broader approach to better opportunity to see the results of Pittsburgh’s environment, and of their work. The social problems even the leadership role Pittsburgh community develop- that charitable foundations try to organizations have played in devel- ment. “The more re- solve are interrelated and so make it oping a greener world. more difficult to work one problem cent trend has been without fixing another. Grants to It’s not surprising then that the char- for foundations to improve literacy are more effective, itable organizations in Pittsburgh for example, if nutrition and health are joining those in other cities in get more intimately problems are also improved. Using using funds to do bricks and mortar involved with the Fred Thieman’s example, funding six development. new homes in a blighted area has community through less impact if no programs exist to Charitable organizations have long place-based grant reduce crime, add employment or been concerned with economic incent growing home ownership. In development as one of the keys to making. a holistic approach to community improved conditions for those in development, foundations are seeing

www.developingpittsburgh.com 35 the benefit of building and control- as the project in completed. That ling community assets that support eventuality will close the loop on the mission of the foundation. the project’s sustainability, creating When completed, a development that is an economic One of the better known regional Almono will multiplier and that returns capital to examples of foundations taking a the foundation for re-use elsewhere. leading role in development is the be the site of Almono project. Located on a large thousands of jobs On a less grand scale, the Evergreen brownfield site between Second Cooperative Initiative in Cleveland Avenue and the Monongahela River and hundreds of has been a growing, integrated in Hazelwood, Almono is proposed homes. solution that demonstrates place- as a large-scale, mixed-use redevel- based grant making principles. opment of a former LTV steel mill Operating in the Greater University site. The project will have industrial, Circle neighborhood since 2008, office and residential properties as The timeline of the Almono project the Evergreen Cooperative Develop- the main uses. When completed, bears that out. The 178-acre site ment Fund has been a vehicle for Almono will be the site of thousands was purchased by the partnership for non-profit foundations to invest in of jobs and hundreds of homes. It’s $10 million in 2002, while the U. S. startup businesses that integrate expected to have a significant posi- was in the throes of recovering from development, employment creation, tive impact on the Pittsburgh region recession. By the time the project environmental stewardship and em- but one of the principal beneficiaries had gone through its preliminary ployee ownership. should be the blighted Hazelwood stages it was 2008. Although the neighborhood that adjoins the devel- original plan was to find a master To date, Evergreen has helped launch opment. developer for Almono, the economic three businesses: Evergreen Laun- environment made it impossible to dry, Evergreen Energy Solutions and The project – which should see do so. RIDC has taken on the role of Green City Growers. The companies its first vertical construction in site developer, shepherding Almono provide employment and owner- 2014 – was originally capitalized through the process of entitlement, ship opportunities in what was a by investment from four Pittsburgh local approvals and finding grants to poor and underinvested community. foundations, which formed a lim- aid in the preparation of the site. Moreover, the businesses that have ited partnership with the RIDC as launched provide needed services general partner. Those foundations William P. “Pat” Getty, the president to the neighborhood’s residents and – Heinz, R. K. Mellon, Benedum and of the Claude Worthington Benedum institutions – area hospitals, univer- one that remains anonymous – have Foundation says that his founda- sities and non-profits – that are envi- varied goals, some of which overlap. tion’s flexibility with its endowment ronmentally responsible. Evergreen Their motives for creating Almono fund allows the Benedum Foundation Cooperative Development Fund LP include providing both economic to be a patient investor in a project investments have been used to lever- and social benefits. There was also a that is unique in a number of ways. age grants and loans from state and strong desire from at least some of federal sources; but more important- the foundation partners to thwart “At Almono, it was our chief invest- ly, the fund has used its resources to the construction of a coke manufac- ment officer who came up with the create for-profit entities that would turing facility that was being pro- idea. We could see that site being not need further subsidy to survive. posed in the late 1990’s. carved up and we thought if we In addition to providing return on could just develop it according to the Fund’s investment, these three Although he acknowledges the some kind of plan,” he says. “How businesses also continue a cycle of growing role of foundations in de- many 178-acres parcels are there improvement and growth that is sus- velopment, RIDC’s CEO Don Smith within three miles of two major tained by their own viability. doesn’t necessarily see charitable research universities and sits on a groups working regularly on large- river? Despite all of its problems The key for development capital scale development. – and it’s got plenty of them – it’s investments like those made in potential is pretty apparent.” Cleveland was the control that the “Almono is a unique project in that foundations had in building the as- in addition to economic develop- As the project proceeds, the foun- sets that were supported. Charitable ment, the project also hits environ- dation partners in Almono LP will foundations that have environmental mental and social goals of the foun- ensure that the development is done missions could support the effort dations,” he explains. “There was a with maximum consideration for knowing that the businesses created commitment to principles of devel- sustainability in stormwater manage- were going to operate a green laun- opment there from the foundations ment, wastewater, energy and con- dry service or a solar energy com- and if they had to hold the property struction. Although the operating pany. Foundations that work towards they were willing to do so.” expenses thus far have been borne entrepreneurship or job creation by the partnership, the foundations could see the value in building facili- expect to recover their investment ties that would foster those ends.

36 DEVELOPINGPITTSBURGH | Spring 2014 As investors, the foundations could ensure that the businesses that were launched maintained the intended focus. By requiring that the companies LEAD ING THE sustain themselves, the foundations ensured that the emphasis of the de- DE VELOPMENT OF THE velopment was on adding value to the community rather than finding occu- pants to meet a pro forma. R E G ION

Fred Thieman says that the Buhl Foun- dation is committing its resources to a place-based model. Founded by the fortune of North Side retailer Henry Buhl, the foundation supports edu- cation, youth development, human services and community development throughout the city and Allegheny County, after initially focusing on the North Side neighborhood. Some 87 years later, the Buhl Foundation is returning to its roots.

“We are in the process of refocusing, looking to do more place-based grant making in the North Side,” Thieman says. “That is moving from being one of our focuses to being our primary focus over the next 10 to 20 years.” 428 B o u l e v a rd of the Allies | Suite 100 | P i t t s b u rg h | PA | 1 5 2 1 9 | 412.560.4449 i n f o @ c a s t l e b ro o k d e v e l o p m e n t . c o m Charitable foundations are expected to be key investors in a site develop- ment fund that is being administered by the Power of 32, a 32-county vision of a region that supersedes metropoli- tan boundaries. The Benedum Founda- tion is a key supporter and Pat Getty serves as chair of the steering commit- tee for the Power of 32. The goal of the site fund is to prepare large sites for industrial development but there is an emphasis on Brownfields that Getty says keeps it in line with the goals of foundations like Benedum.

“Foundation accounting rules cer- tainly encourage us to do economic development in blighted areas and a site fund is one way you can do that. These sites are almost certain to be in blighted areas. A Brownfield is almost the definition of that,” he says. “On the visionary side, if we can take two or three Brownfield sites in commu- nities that have lost their economic reason to be, then this is their chance. They don’t get many chances. It’s kind of a practical way to position them to have a kind of economic recovery.” DP

PLEASE CONTACT OR VISIT Jason Stewart, Jones Lang LaSalle www.cranberrybusinesspark.com 412-208-1400 [email protected] www.property.jll.com/PIBP

www.developingpittsburgh.com 37 Eye on the Economy

fter several dence in a recovery that was not yet just yet. Likewise, China has an over- years of com- in full bloom. built real estate market and export mercial devel- problems of its own because of the opment be- The robust fourth quarter read- European recession. ing buffeted ing came in spite of the three-week by headlines shutdown of the federal government The news on employment wasn’t about inadequateA credit, regulations, at the start of October. It’s likely that quite as good in February, although sovereign default and government the rebound from the shutdown has the overall jobs picture has improved shutdowns, it is refreshing that the worked its way through the economy more than forecasted. The U. S. central story coming into 2014 is but if not, economists predict that economy averaged 150,000 new jobs about the underlying economy again. there will be a makeup of 50 to 75 monthly in 2013 and total employ- Much like in 2008, when the coming basis points to GDP in the first quar- ment stood at 137.5 million in Janu- storm was underestimated, it appears ter of 2014. ary 2014. That is within shouting that the coming recovery is being distance of the January 2008 peak underestimated. It remains to be Improving economies in Europe and of 138.6 million jobs. Although the seen over the coming months if the China should also add 50 points or December and January job creation optimism from the fourth quarter is more to the GDP, as U. S. exports numbers were disappointing, enough justified or not, but the fundamen- would see a related increase in ex- extenuating circumstances exist that tals for commercial real estate are as ports. Getting a reliable reading on economists remain optimistic about strong as the years before the last conditions in Europe and China is the hiring trend overall. cyclical peak. difficult, however, and there is ample evidence to suggest that growth is Looking at the more reliable three- What the real estate market is look- not going to occur in the Eurozone month average of job creation makes ing for more than anything else is for a slightly more cautious narrative. an increase in the rate of growth in During the November-December- gross domestic product (GDP) and an January period, employers added an accelerated pace of hiring to bring Once productivity average of 154,000 new jobs, some unemployment down. The two aren’t levels off, the only 50,000 less per month than the unrelated of course, with the pickup September-October-November period. in GDP being a leading indicator that way for employers to more employees will be needed. respond to growth Unemployment fell to 6.6 percent in January, helped in part by what is According to the Commerce Depart- is by adding to staff. becoming a noticeable trend of Baby ment’s report on GDP at the end of Employees will Boomers retiring at a faster rate. If January, the economy provided an that trend holds, there will be added unexpectedly better rate of growth stretch to produce pressure on hiring in addition to a during the fourth quarter of 2013. more when there is different trend that is less frequently GDP growth came in at 3.2 per- examined. As has held true during cent, following a revised growth the fear of losing recessions since the 1981 downturn, rate of 4.1 percent in the third worker productivity climbed signifi- quarter. The rate of growth for the jobs or in response cantly during the Great Recession. last six months of 2013 ended up to a rallying cr y Layoffs outpaced business contrac- being 3.7 percent, nearly 100 basis tion in 2009 and hiring back occurred points higher than was forecasted during tough times. at a much slower pace since then. at mid-year and more than double As the prospects for The average worker’s productivity the anemic 1.8 percent of the first rose sharply during that period but six months of 2013. The growth in a business improve, productivity has stalled since late GDP from July-December was the the fear that pushed 2012. highest during any six-month period since the last half of 2003. After productivity abates Once productivity levels off, the only dealing with a two-point increase and additional output way for employers to respond to in Social Security withholding and growth is by adding to staff. Em- a payroll tax increase for workers must come from new ployees will stretch to produce more earning over $400,000 per year in workers. when there is the fear of losing jobs January of 2013, American consum- or in response to a rallying cry dur- ers bounced back and showed confi- ing tough times. As the prospects

38 DEVELOPINGPITTSBURGH | Spring 2014 Economists from PNC Financial Services Group expect to see a new peak in U. S. employment during the first half of 2014. for a business improve, the fear that • Agriculture: According to the million or more Americans over pushed productivity abates and ad- Department of Agriculture, a decade. Demographics are ditional output must come from new U.S. farm incomes are at their supportive of delivering signifi- workers. second-highest level since the cantly more healthcare services. 1940s on an inflation-adjusted Analysts expect the growth in em- basis. Prices remain near record On a regional level, hiring in the ployment to be strongest in five highs and the U.S. remains technology, energy and construc- healthy segments of the U. S. econ- the world’s largest agricultural tion segments is expected to be even omy: exporter. better than at the national level. Economists predict between 15,000 • Technology: Internet start- • Housing: U.S. home prices rose and 20,000 new jobs in metropoli- ups, 3D printing, robotics and 12 percent year-over-year in tan Pittsburgh during the next three growth from tech giants like 2013. Housing starts are on years. This suggests support will Apple and Google are adding track to surpass one million increase for construction of new jobs at twice the pace of the units in 2013 for the first time housing, retail and the office/indus- broader labor market. since 2007. Homebuilding and trial segments in which the jobs were the related spending on home created. • Energy: Because of shale oil and improvements will boost em- gas discoveries and improve- ployment significantly. Several other factors are creating ments in extraction technolo- economic strength that will extend • Healthcare: Spending on gies, domestic energy produc- over the next two or three years. tion is forecast to grow by more healthcare rose to more than 18 percent of GDP in 2013. than 20 percent from 2012 to Consumer spending has fully recov- The costs of Affordable Care 2035. And the International ered from the trough of the reces- Act are still unknown but the Energy Agency predicts that the sion, bringing consumer confidence legislation is expected to ex- U.S. will emerge as the world’s along with it. Just as important as tend insurance coverage to 30 largest oil producer by 2020. the renewed spending from the sec-

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40 DEVELOPINGPITTSBURGH | Spring 2014 tor that comprises 70 percent of The slowly improving employment the economy is the fact that the picture kept occupancy from growing consumer balance sheet has also Commercial real as robustly in the office and industrial been repaired. If consumer spend- sectors, even though development of ing is a result of pent-up demand estate fundamentals these asset classes remained sluggish. from the austerity that preceded it, are becoming Class A office vacancy averaged 14.5 the reemergence of the consumer percent nationally, with the Class B has not come as a result of re-lever- more supportive of rate averaging about 16.75 percent. aging. Household debt has fallen to new development Occupancy levels for both Class A 15.5 percent of income (from above and Class B industrial space were 18 percent in 2008) and mortgage throughout the just below 90 percent nationally. Cap debt shrunk from more than seven major asset classes, rates for both Class A office and in- percent to 4.7 percent of income. dustrial declined to approximately 7.5 Those are the lowest levels in 20 with the possible percent at year’s end. years. exception of multi- Development of new hotels was the While oil prices appear to be per- family. most robust segment aside from manently in the $90/barrel range, multi-family, yet data from STR (for- the price for natural gas remains merly Smith Travel Research) shows well below the historical norms. ally in Pittsburgh. Cap rates for Class that demand for rooms remains a Even after rising sharply in late 2013, A apartment properties fell below six few points higher than supply. In natural gas trades in the $4/million percent for both urban and suburban fact, even though occupancy levels BTU neighborhood and the increased product. Construction of new apart- were relatively flat in 2013 – as it production from shale gas explora- ments was running higher to absorp- was in 2012 – the average daily rate tion is likely to keep gas prices range tion in most markets, with Pittsburgh experienced double-digit increases in bound for years to come. That has ranking first with construction that 2013 and Revenue per Average Room a salutary effect on consumer confi- was 127.5 percent of the absorption (RevPAR) grew nearly six percent. dence but, more importantly, the low rate. prices make manufacturing in the Those market dynamics were even U. S. more attractive to energy-de- At the same time as these data raise more pronounced in metro Pitts- pendent industries. concerns, the vacancy rate for both burgh. Since the peak of 2007, the the U. S. and Pittsburgh markets supply of hotel rooms has increased Gas costs in Europe run between $12 were both 4.5 percent at the end 10.2 percent. Despite the increase and $14/MBTU. In China, gas prices of 2013. Class B occupancy is actu- in supply, occupancy has increased are at $18/MBTU. That low cost of ally slightly higher than Class A. by eight percent; the average daily energy makes U. S. manufacturing The growth in rents has slowed but rate is up more than 15 percent; and more competitive, especially in the occupancy continues to encourage RevPAR has risen 24.7 percent to petrochemical and industrial chemical rent increases. The conclusion that $76.55. industries. There hasn’t been a wave hypersupply is approaching seems of new manufacturing plants open- reasonable at this point in the cycle The business cycle for commercial ing in the U. S. but the trend is for but it also appears that changes in real estate is fairly predictable. De- increased manufacturing rather than demographics and household for- velopers build until too much prod- decline. Expect hiring to increase, mation patterns may be supporting uct exists for demand, generally due which has a trickledown effect multi-family differently than in past to contraction in the economy. The throughout the economy. cycles. extended trough of the last recession was anything but predictable, with Commercial real estate fundamen- Retail is another category that is a number of factors dragging on de- tals are becoming more supportive undergoing cyclical changes. The rise velopment other than simple supply of new development throughout the in e-commerce and the oversupply and demand. As 2013 ended, govern- major asset classes, with the possible of inventory from the pre-recession ment regulation is less uncertain – if exception of multi-family. boom have influenced the recovery still unsupportive – and the U. S. of new retail development dramati- fiscal status is much firmer. Govern- Construction of new apartments lead cally. Most U. S. markets are still in ment should present little drag on the commercial real estate recovery the early stages of recovery based on the economy and on development. because of investor appetite and historical metrics. The average va- Assuming that the trend of recovery financing that rested upon the dif- cancy rate for retail property fell from continues its arc in spring, com- ficulty of home ownership follow- above nine percent to 8.42 percent mercial real estate should see green ing the mortgage crisis. Apartment in 2013. Urban vacancy was lower at lights for development in 2014. construction and acquisition has ac- 7.65 percent and the average region- DP celerated through 2013 to the point al mall vacancy rate was under seven where hypersupply is becoming a percent. concern, both nationally and region-

www.developingpittsburgh.com 41 Office Market Update

he success of Pitts- burgh’s office market continued in 2013 as rental rates increased and construction in the area carried on at a high level.T The region was once again at the top of the list of places to relocate to, work, and invest. Not only did the energy sector in Western Pennsylvania grow at a rapid rate, but the healthcare and finan- cial industries experienced similar market growth and expansion as well. Pittsburgh and its surrounding submarkets, by all indicators, are ready to enter 2014 on the upswing of a successful 2013.

A forecast for the Pittsburgh office market can be revealed by the past performance of all transaction types (lease, sale, etc.) over the course of a year. During 2013, the CBD Class A office market realized a substantial rise in rental rates coupled with heavy con- struction activity in the suburbs. By relying on these indicators, 2014 is poised to be another good year throughout the Pitts- burgh office market.

The CBD continues to thrive on the success of companies new and old getting established in the region. The city offers attractive rental rates across all classes. Average Class A rental rates have hit a recent high, averaging $25.16 per sq. ft. over the fourth quarter, while Class B rates hovered around the $19.30 per sq. ft. mark. With an enticing Class A vacancy rate, developers continue to eye speculative development projects in the city.

42 DEVELOPINGPITTSBURGH | Spring 2014 began occupancy at One PPG Place, 2008. With many new projects kick- CBD Omnyx- Pittsburgh and Axiall Cor- ing off in the fourth quarter of 2013 poration also moved into key loca- and first quarter 2014, the suburbs Pittsburgh’s CBD office market was tions in the CBD. Other notable CBD currently have over 750,000 square as strong a performer as any of the occupants also found new homes feet under construction. Medical region’s submarkets in 2013. Sta- in Downtown. Allegheny County office activity was strong in the tistically, the market leaned in the Economic Development relocated eastern and southern suburbs with landlord’s favor with vacancy rates from 425 6th Ave. to One Chatham the transfer of Corporate Office ending the year at 13.7%. Rental Center, PNC relocated from USX Park - a 116,000 sq. ft. medical of- rates for Class A properties saw Tower to the Lord & Taylor Building, fice complex which sold in July for positive growth and leasing activity Metz Lewis moved to the Henry W. $15.14 million to Healthcare Trust remained consistent. Many notable Oliver Building, and Buck Consul- of America. St. Clair Hospital also buildings traded, while multiple ma- tants changed their address to 11 opened a new 40,000 sq. ft. medical jor tenants renewed and expanded Stanwix Street. office building in Peters Township as their Downtown presence. well as an addition of over 25,000 On the other end of the spectrum, sq. ft. on Oxford Drive. Many of the large office users were several big name Pittsburgh based active throughout the year. There- companies reduced their presence Suburban construction activity fore, it did not come as a shock that in Pittsburgh in 2013. Heading the continued to be a bright spot with PNC continued to grow and restruc- list were H.J. Heinz and EDMC. Their developers focusing on the I-79 cor- ture their downtown offices. The downsizing as well as multiple oth- ridor from Butler to Washington, PA. Lord & Taylor building (formerly Mel- ers resulted in over 350,000 sq. ft. The largest lease of the year was the lon Bank’s headquarters) was given of sublease space coming to market 118,000 sq. ft. transaction by PPG new life as the home to PNC’s call over the course of 2013. for their North American Architec- center. Add this to the current con- tural Coatings headquarters at 400 struction taking place at PNC Tower, The CBD continues to thrive on the Bertha Lamme Drive in Cranberry and it is evident PNC plays a major success of companies new and old Woods. The Parkway West also saw role in the real estate of Pittsburgh’s getting established in the region. substantial activity with the pur- CBD. The city offers attractive rental rates chase of over 60 acres by Chevron. across all classes. Average Class A It is rumored Chevron has plans to Many CBD owners evaluated options rental rates have hit a recent high, make this their next regional head- for selling their buildings due to the averaging $25.16 per sq. ft. over the quarters and home to an estimated favorable landlord conditions exist- fourth quarter, while Class B rates 1,000 workers. This number could ing in the region. Significant CBD hovered around the $19.30 per sq. grow to as much as 1,500 employees sale transactions in 2013 included: ft. mark. With an enticing Class A by 2025. Federated Tower’s sale to Starwood vacancy rate, developers continue to Capital, Rugby Realty’s purchase of eye speculative development proj- Dick’s Sporting Goods also an- the Koppers Building, Drury Hotel’s ects in the city. From a landlord’s nounced in June 2013 they had acquisition of the Federal Reserve perspective, the CBD is in seemingly leased 73 acres from the Allegh- Building and the sale of the Clark great shape due to limited high-rise eny County Airport Authority to Building to PMC Holdings. A strong options paired with low vacancy accommodate expansion of their indicator of rising investor interest and growing rental rates. However, corporate headquarters campus. in the region was demonstrated by with the unfortunate news of EDMC Their initial commitment was for a the endless activity over the previous and H.J. Heinz both putting very single 180,000 sq. ft. building to be 12 months. large blocks of excess space on the completed by 2015. It is expected, market, mid-tier opportunities still however, Dick’s will add substan- Numerous large CBD tenants con- remain prevalent in downtown Pitts- tially more square footage. Another tinued to expand and extend their burgh. notable development was the com- leases: Northwestern Mutual, KDKA, mencement of DiCicco Develop- FiServ, Leech Tishman and KPMG. Suburbs ment’s construction project involving Newcomers also began to make their the 130,000 sq. ft. WestPointe Cor- presence known as top-tier business- The Pittsburgh suburban office porate Center Four. Users seeking a es Downtown. Computer Sciences market turned in another strong corporate or regional headquarters Corporation became a tenant at performance in 2013. Rental rates presence in 2014 may face limited Penn Liberty Plaza, Willis Insurance rebounded from the recession of options due to the past year’s large volume of transactions.

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Construction LaLannd Use EEnvviiroonmenm ntan al Litigatiot on

CrCreedditors’ Rigghtst EEnenergy & EmEmpmploymmenent & Innsolvencyn y Naatuuraal Resoourrcees BBuusinineess SerSe vviccess & Labboor Although the price of natural gas remained below $4.00 per thousand cubic feet for most of 2013, gas com- panies and their subsidiaries were not deterred from moving into the region. The over- all vacancy rate in the suburban markets ended the fourth quarter 2013 at 15.3%. Net absorption totaled a positive 424,775 square feet for the year compared to 526,010 square feet of positive net absorption in 2012. Class A #43 Best Places for Business and rents bottomed out at $21.07 per Careers and one of Under30CEO. sq. ft. during 2009 but ended 2013 The Pittsburgh office com’s Top 30 Best Cities for Young at $22.12 per sq. ft. During the Entrepreneurs. Combine these ac- same period vacancy rates in subur- market is poised colades with the continued success ban Class A space dropped from a for a strong and of the growing energy, healthcare, high in 2009 of 23.1% to 11.2% at and financial sectors and one can the end of 2013. The Class B mar- active 2014 coming conclude Pittsburgh’s office market ket interestingly saw a slight decline off the momentum is moving in a promising direction in vacancy rates during the same in 2014 and beyond. period. The Class B market vacancy gained in 2013. PNC rate of 18.1% in 2009 compared Tower’s construction For more information contact: to the vacancy rate of 17.7% in 2013. Currently, there are only four is moving forward Duke Kingsley existing buildings along the Parkway with an estimated Avison Young West with more than 50,000 sq. ft. 20 Stanwix St. #401 available. completion date of Pittsburgh, PA 15222 June 2015. UPMC, 412-944-2130 Forecast [email protected] St. Clair Hospital, DP The Pittsburgh office market is PNC, and Highmark poised for a strong and active 2014 coming off the momentum gained all have plans to in 2013. PNC Tower’s construction is continue to expand moving forward with an estimated completion date of June 2015. their real estate UPMC, St. Clair Hospital, PNC, and footprints in the Highmark all have plans to continue to expand their real estate footprints region. in the region. Other exciting devel- opments for 2014 include: Ansys’ relocation within Canonsburg, Noble Energy’s search for a new headquar- The positive business climate in the ters in the region, and Continental Pittsburgh office market is fur- Real Estate continuing development ther exemplified by recent national on the North Shore. acknowledgements. These praises include being named as Forbes’ Duke Kingsley

www.developingpittsburgh.com 45

Industrial Market Update

With the continued he fourth growth of e-commerce our total market of 519,750 sq. ft. quarter of of Class A products. This is below 2013 fin- and impending equilibrium for a healthy market. ished in opening of the Panama Furthermore, the definition of Class much the A product in the Pittsburgh region same way it Canal in 2015/2016, would not necessarily hold up in began andT maintained throughout the remaking of the markets with more speculative devel- the year; solid if unspectacular opments such as Columbus or Lehigh growth. The vacancy rate fell from global supply chain Valley. 7.9 percent in the third quarter to will have a profound 7.7 percent in the fourth quarter Take this in context with the predic- and dropped three basis points in impact on the U.S. tion of many economists that indus- total over the course of the year. industrial and retail trial will continue to outpace other The lack of quality Class A ware- real estate categories, i.e. office and house continues to be a factor markets. East and Gulf retail, in 2014 and into 2015/2016. with vacancy levels dropping to an Coast ports equipped Colliers International’s own national astounding 2.97 percent. to handle the increase economist K.C. Conway recently published our Q1 2014 Global Pre- The greater Pittsburgh’s industrial in cargo flows, such as dictions. The following quote out- market is approximately 172 million Baltimore, Charleston lines some of his thoughts on why square feet spread out over the industrial will continue to flourish on seven-county region (Allegheny, and Norfolk, as well a national level. Armstrong, Butler, Beaver, Fayette, as inland ports and Westmoreland, and Washington) “Industrial will remain the star per- and the Class A portion is approxi- intermodal markets, forming real estate property type as mately 17,500,000 sq. ft. With are well positioned U.S. distributors, manufacturers, and a vacancy rate of 2.97 percent we retailers scramble to remake their only have a total availability across to benefit from the supply chains just in time for the change.”

www.developingpittsburgh.com 47 onset of the first post-Panamax de- much a secondary market. As it per- cade. With the continued growth of tains to Pittsburgh, the next quote e-commerce and impending opening The expansion by Conway relates to expansion in of the Panama Canal in 2015/2016, tertiary U.S. industrial markets. the remaking of the global supply of the Panama chain will have a profound impact Canal portends “Demand for U.S. commercial real on the U.S. industrial and retail estate will finally move out to stra- markets. East and Gulf Coast ports great opportunity tegic secondary markets. For indus- equipped to handle the increase to inland ports trial property, this will mean places in cargo flows, such as Baltimore, aligned with the new post-Panamax Charleston and Norfolk, as well as in the Tri-State supply chain. Secondary metro inland ports and intermodal markets, economics with an ICEE (Intellectual are well positioned to benefit from region, provided Capital, Education and Energy) focus the change.” the material can will see the most demand.” Although Pittsburgh has hit the navigate the lock Optimism is the word heading into radar of the national real estate 2014. Pittsburgh should be especial- community for the opportunity on systems. ly bullish given the multitude of sto- the investment side, we are still very ry lines that should positively impact

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48 DEVELOPINGPITTSBURGH | Spring 2014 the industrial market. These include needed passage of the State Trans- passage of the State Transportation CSX announcing that they will con- portation Bill. Any of these alone are Bill and the CSX multi-modal facility struct a $50,000,000 multi-modal fa- significant but, taken in total and tie in nicely with Conway’s predic- cility in McKees Rocks, the continued combined with the positive national tion that growth among intermodal expansion of the Southwest Penn- dynamics, insure that the region will markets will continue to escalate. sylvania energy sector and the much continue to advance forward. The

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www.developingpittsburgh.com 49 The investment being made by CSX pectancy of 50 years. Nearly 45,000 evidence that supply is tight when is evidence that they consider Pitts- loaded barges carrying more than 66 a building is scooped up prior to burgh to be a player in the inland million tons of material, valued at formally going to market. intermodal supply chain. The McKees $5.6 billion passed through district Rocks project would entail the reno- locks in fiscal year 2012. The fund- As we head into 2014 the over- vation of the former Pittsburgh and ing for replacement and rehabilita- all industrial market future looks Lake Erie Railroad site which oper- tion is piece meal and results in bright. Disruptions are inevitable, ated for over 100 years. This $50 continued construction delays and but companies will continue to look million project is part of CSX’s Na- cost overruns. The expansion of the to Western Pennsylvania as an area tional Gateway project. The Gateway Panama Canal portends great oppor- of growth. The shale boom has cre- project is an $850 million publicly tunity to inland ports in the Tri-State ated a cottage industry for not only private partnership to create a highly region, provided the material can the drillers and gas suppliers, but efficient and environmentally friend- navigate the lock systems. also for companies that benefit from ly double-stacked clear rail corridor participating within the mid and on the CSX network between the Deals of significance in the fourth downstream markets. Demand for mid-Atlantic and the Midwest. Ac- quarter include Trufood’s (formerly good warehouse / distribution space cording to Michael J. Ward, chair- Tsudis Chocolate) lease of 155,000 will continue to outstrip supply and man, president and chief executive square feet at 106 Gamma Drive in hopefully lead to additional specula- officer of CSX, “The facility will RIDC O’Hara, the sale at 3000 Grand tive development. By not offering create more economic opportunity Avenue (60,000 square feet) on Nev- the market quality options in which for its residents and significantly en- ille Island; and the sale at 19 35th incoming companies can set up hance distribution opportunities for Street (40,000 square feet) in the shop, or for existing businesses to its businesses”. Strip District. On the land side, Para- expand the region risks experiencing gon USA purchased thirteen acres opportunity loss to our neighboring The other critical component of the of 62nd Street from the URA with industrial regions who offer better intermodal trifecta is highway infra- plans to build a new food distribu- options. structure. While Western Pennsyl- tion warehouse. The first quarter vania still has our windmills to tilt of 2014 has already brought the For more information contact: with respect to our highway system, announcement that the Pittsburgh we took a huge step in the right Post Gazette will move their printing John Bilyak SIOR, CCIM direction with the passage of House operation out to the 240,000 square Colliers International Bill 1060 in November of 2013. foot former Flabeg Solar building at Two Gateway Center, 603 Stanwix The State Transportation Bill will the Clinton Commerce Park. Flabeg Street, Suite 125 infuse $2.3 to $2.4 billion dollars exited the building only three years Pittsburgh, PA 15222 of sorely needed funds into road after taking occupancy and hiring 412-321-4200 ext. 209 and bridge projects across Penn- 300 employees. This is good news [email protected] sylvania. This will lead to not only for the region, but offers further www.colliers.com the repair of aging infrastructure DP and the avoidance of road closures and weight reductions on bridges, but to the start of new projects. The most high profile of these is Phase II of the Mon-Fayette Express Way/Southern Beltway. This 13.3 mile stretch of highway will con- nect Phase I which travels from the Pittsburgh International Airport to Imperial (Route 22) and then runs South into Washington County, ultimately connecting to I-79. For a region without a conventional belt- way (and no, red, yellow, blue, and green do not count), this is a much awaited announcement.

Unfortunately, the news is not all positive with the third key element required for intermodal transporta- tion. Our nation’s system of locks and dams is collectively in very poor condition given that 52% have eclipsed their designated life ex- (Left-to-right) Anthony Pantoni, Pat Tracy, John Bilyak and Ray Orowetz

50 DEVELOPINGPITTSBURGH | Spring 2014 for showing what can be done.

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PNC, Midland Loan Services and “for the achiever in you” are registered marks of The PNC Financial Services Group, Inc. (“PNC”). Lending products and services require credit approval and are offered by PNC Bank, NA, a wholly owned subsidiary of PNC. Investment banking and ◊ capital markets activities are conducted by PNC through its subsidiaries PNC Bank, National Association, PNC Capital Markets LLC, and Harris Williams LLC. Services such as public finance advisory services, securities underwriting, and securities sales and trading are provided by PNC Capital Markets LLC. Merger and acquisition advisory and related services are provided by Harris Williams LLC. PNC Capital Markets LLC, and Harris Williams LLC are registered broker-dealers and members of FINRA and SIPC. Harris Williams & Co. is the trade name under which Harris Williams LLC conducts its business. PNC does not provide legal, tax, or accounting advice. ©2014 The PNC Financial Services Group, Inc. All rights reserved. CIB RE PDF 0214-052-175097 Retail Market Update

opened a Market District Express in PITTSBURGH the South/Rt.19 submarket. This new model combines a high-end COMMERCIAL grocery, gas station and convenience store with a modern dining experi- RETAIL SECTOR – Other retailer ence. 2013 Recap activity during Urban locations were the choice of several other grocers including the year included Bottom Dollar which opened an he secret is 18,000-square-foot store in Home- getting out announcements stead and announced plans for a that Pittsburgh by Dick’s Sporting store in Garfield for 2014. Along is one of the neighboring Baum Boulevard, Aldi best places to Goods. In the North/ opened its doors in the newly live, work, and McKnight Road renovated Offices at Baum. A new play and the Pittsburgh retail market T submarket, Dick’s Shop N’ Save opened adjacent to is evidence of that. 2013 capped the CBD in the Hill District; the another relatively strong period for will be relocating 29,500-square-foot store is the first retail real estate in Pittsburgh and such store to open in that neighbor- the Pittsburgh retail sector closed and expanding to hood in 30-plus years. As a result the year on an optimistic note. De- approximately 50,000 of the growing residential popula- clining unemployment figures and tion and substantial retail and office increased consumer spending no square feet from redevelopment in the CBD, local doubt contributed to this success. Northway Mall to developer Ralph Falbo and Giant Limited space availability in many Eagle are separately exploring plans trade areas has pushed rents up to the new McCandless to bring a grocery store to the CBD varying degrees in the top submar- where no such full-service store cur- kets and demand for space remained Crossing, and in the rently exists. rather strong. East/Monroeville Restaurant growth continued Various retailers and retail sectors submarket, Dick’s throughout 2013 at a brisk pace entered the region and/or expanded will move from an with competition often fierce for the their presence and grocers led the best restaurant sites. Numerous new pack during 2013. Included were adjacent Monroeville and established independent eateries a mix of high-end and discount Mall out-parcel to opened throughout the marketplace concepts. In the East/Monroeville in 2013, a few regional/national submarket, Shop N’ Save signed the Mall itself. The newcomers to the area included a lease for 26,000 square feet in Pittsburgh mattress Ontario-based Tim Horton’s, locating the Village of Murrysville shopping in the Meadow Lands and All Star center. Trader Joe’s committed to an war continued Grill and Zoup! in Southpointe; all in 11,500-square-foot store in the new with Mattress the Washington submarket. McCandless Crossing in the North/ McKnight Road submarket. The store Firm and Levin Other retailer activity during the year is expected to open in 2014 and is included announcements by Dick’s the third location in the Pittsburgh Mattress opening Sporting Goods. In the North/McK- market for the California-based spe- a number of new night Road submarket, Dick’s will be cialty grocer. Fresh Market, based relocating and expanding to ap- in Greensboro, N.C., made its debut locations throughout proximately 50,000 square feet from into the Pittsburgh marketplace with Pittsburgh. Northway Mall to the new McCand- a 19,000-square-foot store in the less Crossing, and in the East/Mon- South/Rt.51 submarket and Whole roeville submarket, Dick’s will move Foods committed to a new loca- from an adjacent Monroeville Mall tion in the South Hills. Dominant out-parcel to the Mall itself. The Pittsburgh-based grocer Giant Eagle Pittsburgh mattress war continued

52 DEVELOPINGPITTSBURGH | Spring 2014 with Mattress Firm and Levin Mattress opening a number of new locations throughout Pittsburgh. In addition, La-Z-Boy Furniture Gallery contin- ued its re-entry into the marketplace with a number of new showrooms in regional trade areas around greater Pittsburgh. Furthermore, HomeGoods committed to 25,000 square feet within Monroeville Mall- its second location in the region.

Developers were busy during the first half of the year either announc- ing plans for new projects or fueling existing sites. In Washington County in the South submarket, Horizon Properties progressed with South- pointe Town Center which will con- sist of 100,000 square feet of retail space. Horizon is also marketing The Street At The Meadows – a mixed-use development that will contain luxury multi-family units and 50,000-square- feet of retail. Newbury Market, at I-79 and SR-50 in Fayette Township in the South submarket, will include a 120,000-square-foot office building, and can accommodate over 200,000 square feet of retail. At McCandless I N N OVAT I V E Crossing in the North/McKnight Road CONSTRUCTION FOR BUSINESS AND INDUSTRY submarket, site work began on the H E A LT H CA R E E D U CAT I O N C O M M U N I T Y C O M M E R I C A L fourth phase of the 500,000-square- foot complex. Joining Cinemar, Longhorn Steakhouse, Bonefish Grill, and Carraba’s Italian Grill will be Panera, Chipotle and First Watch. In the bustling CBD, where the residen- tial population has increased by more than 30% in past twelve years ac- cording to the Pittsburgh Downtown Partnership, Millcraft Investments and McKnight Realty Partners will rede- velop the former Saks Fifth Avenue department store into 25,000 square feet of retail and a 450-space park- ing garage. Along the adjacent North Shore Fringe, North Shore Developers LP is diligently working toward the purchase of 1.3 acres of land for a three-story, 80,000-square-foot of- L A N D A U B U I L D I N G C O M P A N Y fice building and 40,000-square-foot R E L A T I O N S H I P S | R E P U T A T I O N | R E S U L T S retail complex. Lease commitments have been secured for Toby Keith’s

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www.developingpittsburgh.com 53 Looking ahead, 2014 is expected to be another good year for the Pittsburgh retail sector. Favorable retailer activity should keep vacancy rates low and rents stable or increasing, particularly in the better suburban trade areas ...

rates low and rents stable or in- creasing, particularly in the better suburban trade areas, the CBD, and the East End of the City. A new progressive mayor should help an already hot city and an encourag- ing economic environment, Marcel- lus Shale growth, low interest rates, and consumer and retailer demand should spur development activity in the Pittsburgh region in 2014. Ur- ban redevelopment will continue as more people move to the City.

For more information contact:

David Glickman Director Newmark Grubb Knight Frank 412-434-1065 [email protected] DP

I Love This Bar & Grill, Burgatory remaining 28 percent interest in the and North Park Lounge for the re- 903,431-square-foot Mall At Robin- tail portion. son. The Cleveland-based company also sold its 50 percent interest in Sale activity in the Pittsburgh re- the nearby 457,231-square-foot gion maintained a brisk pace and Plaza at Robinson Town Center. included the 1.2 million-square- Net proceeds to Forest City were foot Century III Mall purchased by $7.75 million at closing. Also in Moonbeam Capital Investments the West/Robinson submarket, the LLC from C-III Asset Management 146,000-square-foot Plaza at The in the South/Rt.51 submarket; DDR Pointe was purchased by WP Realty acquired the 299,000-square-foot from US Bank for $16.8 million. Township Marketplace in the Beaver submarket from Blackstone JV in Looking ahead, 2014 is expected David Glickman a portfolio sale of power centers; to be another good year for the In the West/Robinson submarket, Pittsburgh retail sector. Favorable Forest City Enterprises acquired the retailer activity should keep vacancy

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evelopers The extraordinary interest rate en- categories of commercial real estate and inves- vironment that has prevailed since in 2013 and surveys of real estate tors will the Federal Reserve Board took rates professionals predict that com- find that to the floor through its short-term mercial property will gain in value the combi- policy and Quantitative Easing pro- between two and four percent again nation of grams continues to have an impact in 2014. According to Integra Realty market forces,D Federal policy and on cap rates that is unprecedented. Resources’ Viewpoint 2014 market an improving economy is creating As 2014 unfolds, lenders seem to survey, roughly 20 percent of the a capital market environment that be accepting the cap rate compres- respondents even predicted appre- is more favorable in 2014. In an sion and looking to other factors to ciation of more than four percent for unequal but opposite reaction to the evaluate real estate risk, even while industrial Class A property. excesses of 2007 – with apologies keeping a wary eye on the potential to Isaac Newton – the availability of threat of rising rates. At the root of the good news about capital is growing because of con- appreciation is the improving econo- tinued low yields from alternative What has occurred over the past my, especially the growth in employ- sources, a re-balancing of risk and two years is a return to commercial ment; however, perhaps the single return, and a continued improve- real estate appreciation that is more most important factor driving real ment in the performance of commer- certain and a general recovery in the estate performance has been the cial properties. performance of commercial proper- limited new construction. The lack of ties. Appreciation was positive for all new inventory, especially in the more

www.developingpittsburgh.com 55 Colliers International | Pittsburgh distressed categories like retail and industrial properties, allowed for specializes in adding value to our improved absorption and rents.

clients to accelerate their success. Against that backdrop, the outlook for commercial real estate capital sources is for increased participa- tion. Feedback from the recent Mortgage Bankers Association’s (MBA) Commercial Real Estate Forum was that the major lend- ing sources – banks, life insur- ance companies and commercial mortgage-backed securities (CMBS) – should be somewhere between bullish and aggressive in 2014.

Of the three, life insurance compa- nies have been the most influential since the recession. As the finan-

Commercial Real Estate Sales and Leasing Services cial institutions were in disarray in 2009, life insurance companies > Real Estate Management > Valuation and Advisory were the first source of available fi- > Corporate Solutions > Investment nancing for commercial real estate, > Sustainability > Auctions albeit almost exclusively for the one category of property – apart- 412 321 4200 | www.colliers.com | @PghCRE ments – that was in favor. Need- ing to place premium revenue in Learn how we are living our values of service, expertise, investments that could provide the community and fun at www.colliersinternationalpittsburgh.com returns needed to meet their actu- arial pro forma for benefit payouts, life companies saw multi-family as an opportunity. Since then, life insurance investment in commer- cial real estate has diversified into other categories and grown each year. As of the end of 2013, life REAL ESTATE CAPITAL SOLUTIONS companies held over 13 percent of the nearly $2.5 trillion commercial mortgage market. Those holdings produced roughly nine percent of the life insurance industry’s cash and invested assets. For 2014, the (412) 279‐4100 plan is to add to that share. “Life companies have a tremen- dous amount of cash right now,” observes Gerard Sansosti, execu- tive managing partner for HFF in Pittsburgh. “Last year life insur- (412) 279‐9800 ance investment [in commercial real estate] was about $53 to $55 billion. I think it’s probably going to be about $60 billion in 2014.”

“You’re catching me right after the MBA so I just had a meeting every (412) 279‐8800 45 minutes for two days and it was pretty much all life companies,” jokes Daniel Puntil senior vice 333 Baldwin Road, Suite 200 president at Grandbridge Real Es- Pittsburgh, PA 15205 tate Capital. “I would say without

56 DEVELOPINGPITTSBURGH | Spring 2014 exception that every life insurance company has increased its alloca- tion from 2013 to 2014. And all of them commented to me that their spreads have come down.”

One of the surprises of 2013 was the resurgence of the CMBS mar- ket. CMBS was the poster child of the ‘go-go’ period of CRE finance in the middle of the last decade, Since 1958 peaking at nearly $230 billion in 2007 and collapsing to less than Desmone & Associates $3 billion in 2009. Analysts pre- dicted a recovery for CMBS in 2011 and 2012 after the full extent of Architects the damage to commercial real es- Architecture • Planning • Interior Design tate worked itself out; however the global financial shocks that came 3400 Butler Street • Pittsburgh, PA 15201 from fears of sovereign default 412.683.3230 • www.desmone.com during the summers of those years stunted recovery. Even though the problems originated in govern- ment-issued bond debt, the sell-off that occurred dampened all bond markets. Instead of returning to levels close to the historical CMBS issuance average of $60 billion, volume stalled out just above $30 billion in mid-year, reaching $48 billion for 2012.

The improving fundamentals and absence of a fear-inducing scenario helped boost CMBS issuance above $80 billion in 2013. According to the Urban Land Institute’s Real Estate Consensus Forecast, CMBS issuance will be $88 billion in 2014 and top $100 billion in 2015.

As might be expected, the increas- ingly strong fundamentals of CRE have whetted the appetite of CMBS investors. Commercial real estate returns yielded 8.5 percent in 2013, according to the National Innovative Solutions. Outstanding Support. Council of Real Estate Fiducia- ries (NCREF). NCREF forecasts 8.8 KU Resources, Inc. provides a full range of environmental management and site percent returns in 2014 and 8.6 development engineering services to a wide range of clients. We have technical percent in 2015. The diminished and project management experience in the following areas: yields from alternative investments, like Treasury Bonds, have pushed  Site Development Engineering bond investors to consider com-  Property Redevelopment and Public Funding Support mercial real estate mortgages more  Environmental Site Assessments and Remediation favorably. Pricing for CMBS has  Environmental Planning, Permitting, and Compliance increased and leveled out, as has  Geotechnical Engineering the risk spread.

Sansosti explains that there are still some concerns within the CMBS market. www.kuresources.com

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www.developingpittsburgh.com 57 “CMBS conduit business was about Regulation is also an important fac- $53 billion [in 2013]. When you add While the bad loans tor in how commercial banks will in single-asset sales you get up to behave in the real estate markets in $80 billion,” he says. “Single-asset have largely been 2014. Although the housing mar- bonds haven’t priced well. There written down or off ket seems to be in full recovery, the aren’t enough buyers out there to fallout from the crisis is still work- create demand for those deals. Once the bank balance ing its way through the banking you get above a $150 million deal sheets, the regulations system. While the bad loans have you have to carve it up into several largely been written down or off the bonds or it’s not as desirable. What meant to deal bank balance sheets, the regulations may also hold down volume is that with the mortgage meant to deal with the mortgage in- the pools of loans seem to be stuck dustry are just now kicking in. These around one billion. That seems to industry are just now will principally affect residential be where the buyers of bonds are kicking in. These lenders by limiting what is consid- comfortable.” ered a ‘qualified mortgage’ that can will principally affect be profitably sold into the secondary Still, even with some headwinds in market. For commercial real estate, the market, CMBS participants are residential lenders these increased regulations will put growing. There are now 38 CMBS by limiting what is more pressure on the commercial conduits in the market. At the peak lenders to make loans. of the market in 2007, there were considered a ‘qualified 44 lenders. An overriding concern mortgage’ that can be Banks are flush with cash. Deposits about increased competitors in the are at high levels. As a result of the CMBS market will lead to decreasing profitably sold into crisis, the ratio of deposits to loans underwriting caution. the secondary market. may be at an all time high. In a low interest rate environment, the alter- “CMBS will do the deals that others For commercial real natives for banks to grow will become won’t. There’s an important place in estate, these increased fewer with the regulations that Dodd- the market for CMBS but it’s not just Frank brings. That should be a good CMBS that is getting more aggres- regulations will put thing for commercial real estate. sive,” says Puntil. more pressure on the “I don’t think regulations are caus- Since the crisis, CMBS deals have commercial lenders to ing any concern or pause with stayed below 75 percent loan-to- commercial real estate. We continue value. No observers of the CMBS make loans. to look at quality deals,” says John market sees that shifting upward in Fetsko, senior vice president/senior the immediate future but pressure to banking officer at WesBanco. “We increase volume, especially for newer the requirement of a five percent are looking more closely at concen- entrants, would offer an incentive to risk retention that the CMBS origina- trations. There has been a lot of move the proceeds towards a higher tor would retain through the life of demand for hotels or offices, for LTV, or at least a higher value. IRR’s the loans. This provision would unfa- example, but not for retail. We have Paul Griffith, the managing direc- vorably impact the pricing of CMBS financed our share of hotels – and tor in Pittsburgh, says that he’s seen issuances. Another deal-breaking they have been good to us – but at that pressure manifest itself. regulation is the requirement that some point there could be pockets buyers of the so-called ‘B-piece’ por- that are overbuilt.” “It’s interesting with the Wall Street tion of the bonds – which have the investment banks like Goldman most default exposure but bring the “Commercial real estate has always Sachs that are now more regulated,” highest returns – must hold the bond been an important part of our busi- he says. “The banking side of the until the underlying loans mature. ness, even during the recession,” business is playing it by the book but This provision would prevent savvy says Andy Devonshire, Dollar Bank's the lending side of CMBS is trying to investors from re-selling the posi- chief commercial lending officer push the envelope on appraisals.” tions as a risk management step. and president Dollar Bank of Ohio. “The only real issue on the com- The iceberg that looms for the CMBS Proponents of CMBS have kept the mercial side is that the banks that market is the regulation that will regulations from being implemented were struggling during the recession result from the Dodd-Frank legisla- thus far but some measures could be are now healthy again and are being tion from 2010. As proposed, the put in place in 2014. That would be aggressive again. That leads to doing regulations on CMBS contain several bad news for a portion of the capital things that ultimately are going to provisions that are totally at odds market that could be vital as the cause problems again. There are too with the current market practices next wave of re-financing maturities many banks chasing the same busi- and would dampen investor interest for ten-year deals arrives in 2015 ness.” significantly. Chief among these are and 2016.

58 DEVELOPINGPITTSBURGH | Spring 2014 Devonshire feels that the improv- ing economic conditions throughout Western PA and Eastern OH make commercial property attractive to lenders and that the competitive situation makes the market attrac- tive to borrowers. The latter is a consistent refrain throughout the real estate capital industry, as more  capital is available for deployment than there are borrowers, although with an improving economy that  could change in fairly short order.   The parallels that are being drawn  to the frothy lending of the mid- 2000’s period are coming from the conditions that are being offered  on deals. The share of non-recourse  loans is growing. Lenders are be-   coming willing to do construction- to-permanent loans. Spreads have   fallen to 150 basis points and less. -  Lenders are getting creative in mak- ing permanent loans work for not- yet-stabilized properties.  -- All these and other looser condi-  tions should give pause to those  who track the credit markets but  there is one significant difference between 2014 and 2007. Unlike 2007, there has been nothing like a real estate bubble and the artificial boom that resulted from it. Lenders Congratulations Horizon Properties Group may be anxious for deals but the & Kernick Architecture underlying economy has kept de- velopers from rushing in to soak up the lending capacity. With the U. S. economy – and perhaps the global economy – gathering steam, the capital markets may be a willing en- abler of overdue growth. But even if the demand for loans doesn’t heat up, those looking to finance com- mercial development or acquisitions should find ready partners in the banks, life insurance companies and conduits in 2014.

“It is a great time to be a borrower right now in this market,” says Puntil. on the award winning Sansosti seems to agree and offers J. Barry Center Speculative Office Project of the Year! a parallel that is both encouraging and cautious. “It really feels like 2 89 01 9 4 we’re in 2005 again. If you look at 1

A

Y the investment market, debt mar- N 2 R N 5 ket and construction activity, it just A I V S feels like 2005.” E R DP 25 YEARS. OVER 2500 PROJECTS COMPLETED.

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www.developingpittsburgh.com 59 Legal/Legislative Outlook

when mammals, birds, fish, reptiles nor and each of the four legislative How Bugs and and amphibians are threatened and caucus leaders and review regula- become a part of the state list of tions from every other state agency, Bunnies Can Kill endangered species. Currently, including endangered species desig- Pennsylvania businesses seeking nations made by the Department of a Development permits for development projects Conservation and Natural Resources. must first determine whether the Project location of their project produces a The Endangered Species Coordina- “hit” on the current PNDI database, tion Action requires the PGC and By Valerie Kamin which is a database managed by the FBC to provide to the IRRC detailed Pennsylvania Department of Natu- reasoning and a summary of accept- n Pennsylvania ral Resources that catalogues and able data and methodology upon State Representa- geo-codes federally and state listed which a proposed designation is tive Jeff Pyle’s leg- endangered species habitats. based, and any activities that may islative district, a be affected by such designation. school district was If a developer receives a “hit” on Proponents of the bill view this required to pay the PNDI database, indicating that procedure as increasing agency ac- thousands of dollars to mitigate the the site may be a habitat for a countability and transparency with I protected species, the developer is respect to the designation process, impact of a new school construc- tion project on the habitat of the then required to conduct a habi- which is largely viewed as shrouded Indiana bat, a protected endangered tat assessment or a more extensive in secrecy and without regard to species, even though no bats were (and expensive) habitat field survey, local economies. Undoubtedly, the ultimately found on the construc- depending on the circumstances. If legislation would curb the power of tion site, according to Rep. Pyle. a field survey is required, there may the state’s fish and game agencies He has also publically expressed his be a very short time-frame within in the protection and classification frustrations that a species of endan- which to effectively conduct the of the threatened and endangered gered mussel has stalled the dredg- survey. For example, a field sur- species. ing of gravel in the Allegheny River vey for the habitat of the Indiana which would be used on state road bat, the most common endangered “We are simply asking for sufficient projects. Not surprisingly, a signa- species to return PNDI “hits” in burden of proof that a species is ture piece of Rep. Pyle’s legislative Western Pennsylvania, can only be truly endangered or under a threat agenda has included reinforcing performed between May and Au- of extinction,” Rep. Pyle has said. what he views as a currently ne- gust. A developer who misses this “Not all state agencies are required glected balance between endan- window will be subject to a nine to play by the same rules when it gered species management and month delay, simply because of the comes to these designations, and economic development. habitat survey requirement. my bill would essentially level the playing field.” “If you go back and look at the House Bill 1576, introduced by Game Commission and Fish and Rep. Pyle, aims to change the ways The proposed legislation also re- Boat’s charter, they’re not allowed in which animals are added to the quires the development of a new to make any decisions based on state’s endangered species list, while centralized database, which would economic reasons. But I think in alleviating obstacles for developers replace the PNDI system. Similar today’s economy, and with jobless and increasing regulatory transpar- to the PNDI, the database would figures the way they are, it has to ency. Known as the Endangered identify the specific spatial areas in be considered. There’s a balance to Species Coordination Action, the bill which listed species are known or everything,” Pyle has said. maintains the FBC’s and PGC’s power likely to be present. However, the to designate endangered and threat- new database would also indicate Since the passage of the Endan- ened species, but will subject their the exact coordinates of endan- gered Species Act of 1973, the decisions to independent review and gered habitats. This information is Pennsylvania Game Commission ratification by the Independent Reg- currently made unavailable to the (PGC) and the Fish and Boat Com- ulatory Review Commission (IRRC). public in order to prevent poach- mission (FBC) have had the sole dis- Created in 1982, the members of the ers from hunting endangered and cretion and authority to determine IRRC are appointed by the gover- threatened wildlife.

60 DEVELOPINGPITTSBURGH | Spring 2014 Natural oil and gas

“We want to be able to say, here is producers are not protection are able to provide input the science,” said Drew Compton, the only groups in a consistent and open manner.” chief of staff of State Senator Joe The coalition includes NAIOP, PA Scarnati, the sponsor of Senate Bill voicing support Coal Alliance, Schuylkill Chamber 1047, the companion bill to House for the legislation. of Commerce, Energy Association Bill 1576. “It’s posted, it’s available of Pennsylvania, PA Independent to reporters, developers, legisla- The Pennsylvania Oil & Gas Association, Associated tors and therefore there’s a rational Petroleum Industries of PA, National basis this area should be protected Chamber of Federation of Independent Business, for frogs, fish, trout, whatever. We Business and Electric Power Generation Associa- want to ensure anyone who has an tion, Pennsylvania Food Merchants interest in a property can be able Industr y and a Association, Pennsylvania Manu- to ascertain what species are being multi-industr y facturers Association, American protected and what aren’t,” said Concrete Pavement Association, Crompton. coalition voiced Pennsylvania Asphalt Pavement their support Association, Pennsylvania Forest The proposed legislation also re- Products Association, Pennsylvania quires government agencies re- in a letter to Farm Bureau, PA Anthracite Council, viewing applications for permits, Pennsylvania Central Atlantic Bridge Associates, approvals or other authorizations Pennsylvania Builders Association, to consider potential impacts only Legislators. National Utility Contractors As- on listed species and their critical According to sociation, Associated Pennsylvania habitats included in the centralized Constructors, PA Aggregates and database. Unless agency data indi- the letter, those Concrete Association, Master Build- cates that the presence of a pro- ers’ Association of Western Penn- tected species is likely, government groups “firmly sylvania, Associated Builders and agencies shall not require persons believe that Contractors Keystone Chapter and to conduct field surveys or other the Greater Pittsburgh Chamber of activities to determine or evalu- there must be a Commerce. ate the presence of species or their balance between habitats. These two bills have made it out of the designation committee and are currently on the Rep. Pyle and Sen. Scarnati’s pro- and protection House and Senate floors awaiting a posed legislation has incited con- vote. A hearing on S.B. 1047 took siderable debate, but has garnered of plant, wildlife, place on January 10, 2014 at the tremendous support. The heads of and fish species Indiana University of Pennsylvania the Associated Petroleum Industries campus in Indiana County. While of Pennsylvania, the Pennsylvania and economic waiting for a vote on this proposed Independent Oil & Gas Associations development. legislation, developers should and the Marcellus Shale Coalition continue to work closely with their wrote in a letter of support that environmental consultants to appro- the bill will “introduce consistency, priately plan for the habitat review transparency, and accountability to voiced their support in a letter to process. threatened and endangered species Pennsylvania Legislators. According conservation while also allowing to the letter, those groups “firmly Valerie B. Kamin is a member of sustainable economic development believe that there must be a bal- Meyer, Unkovic & Scott’s Real Estate across the Commonwealth.” ance between the designation and and Lending Group and focuses her protection of plant, wildlife, and practice on commercial real estate Natural oil and gas producers are fish species and economic devel- development, acquisition, disposi- not the only groups voicing support opment. This legislation achieves tion and leasing projects. She can for the legislation. The Pennsylva- such a balance and ensures that all be reached at [email protected] nia Chamber of Business and Indus- parties involved in the process of DP try and a multi-industry coalition species evaluation, designation and

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A new fund that is meant to boost with the shared economic opportu- Site Development the inventory of available sites nities of the shale gas play and the throughout a 32-county footprint – crisis in local government finance, Fund is Part of a one that encompasses the heart of a sense of urgency moved leaders the Marcellus and Utica shale forma- to get serious about super-regional Super-Regional tions – is a blueprint for cooperation thinking. A steering committee de- across regional and state lines. veloped 14 initiatives that would cre- Marketing Push ate benefits for the entire region and The P32 Site Development Fund is in 2012 began to pursue them. an initiative of the Power of 32, a regional visioning collaboration of One of those initiatives was to get hey say politics private and public leaders who are better sites for business growth. The make strange trying to identify and solve problems objective was to ensure that there bedfellows. In that are common to the people and would be adequate sites ready to ac- the world of businesses of 32 counties in south- commodate the expansion of existing economic de- western PA, eastern OH, north- regional businesses and the attrac- velopment, the ern WV and the two westernmost tion of new businesses. The latter emergence of the natural gas indus- T counties in MD. The concept of the was especially relevant to the bur- try has made strange bedfellows of 32-county super-region has been geoning gas industry. business attraction competitors. an idea in formation since 1999 but

www.developingpittsburgh.com 63 Pat Getty chuckles at the memory of competitive bankers, brokers and economic development agencies all enthusiastically embracing the site fund concept. As the concept began to be fleshed out, it made sense for the Allegheny Conference on Community Development – a founding partner of the Power of 32 – to be the communi- cations conduit for the fund. The Al- legheny Conference has the resources to manage the process but Getty says that rival economic development agen- cies were somewhat suspicious of a fund that the Conference would lead.

“There were three very parochial county commissioners involved with the Power of 32 who I was meeting with one night. We were sitting at dinner and they asked, what about this site fund,” Getty recalls. “They Source: Pittsburgh Regional Alliance were suspicious of how it would work so I explained that there would be a process to identify the best sites that It has been an article of faith that explains. “The region clearly needed would have regional impact. One com- there aren’t enough pad-ready or shov- more pad-ready land. It was a broker, missioner said that if she thought it el-ready sites in Western PA for some Lou Oliva, who said that if there were was really an honest and transparent time. In truth, a number of govern- a fair, honest process to identify the process, she would support it even if ment and non-profit efforts have im- best sites that have the right charac- her county didn’t have any of the sites. proved the inventory of available sites teristics to attract the kinds of com- That’s when I thought, this idea has over the past half-decade. Lou Oliva, panies that would hire regionally and real power.” who is executive managing director for have regional impact, and the regional Newmark Grubb Knight Frank’s Pitts- economic entities would be willing to With that kind of broad support, burgh office, was part of the P32 team market the sites because they would the P32 Site Development Fund was looking at the problem. He is one of recognize the regional economic introduced in the second half of 2013. those who feel the site inventory isn’t benefit, then a site fund made sense. The Pittsburgh Regional Alliance (PRA) a dire problem at the moment but said From that second, everybody jumped is the point for communication and that his concern was that the efforts on board.” administration of the proposals. CH2M to create sites in the past weren’t as is the consultant hired to evaluate the effective as they could have been. sites from an engineering and con- structability perspective. A Market “I don’t know that there is a lack of Advisory Team will review the site pro- sites right now. But if you look at It has been an posed to identify the most suitable and the public money that went to vari- strategic properties. Callay Capital LLC ous IDC projects, you have to ask was article of faith has been retained as the fund manager that money well spent,” he asks. “Did that there aren’t and has the experience with its sister [the decision] take market factors into company, Pentrust Realty, to assemble consideration? Were developers and enough pad-ready multiple parties into a funding mecha- brokers involved in meetings trying nism. to prioritize where the money should or shovel-ready go?” sites in Western PA The Site Development Fund is a private loan fund that will support develop- The Claude Worthington Benedum for some time. In ment of speculative, shovel-ready sites Foundation is a major sponsor of the truth, a number of by financing horizontal construction Power of 32 and the Benedum’s presi- only. The Fund is initially limiting the dent, William P. Getty, co-chairs the government and sites to 20 acres or more to help with steering committee. He recalls those non-profit efforts the challenges of developing large economy team meetings and the early industrial parcels given the topography indications that the idea might have have improved of the 32-county region and the his- traction. the inventory of tory of much of the industrial land. An emphasis is being placed on Brown- “For the site fund, the economy team available sites over field sites. The Fund will invest up to came up with two main ideas,” Getty the past half-decade.

64 DEVELOPINGPITTSBURGH | Spring 2014

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OFFICE•RETAIL•STUDENT HOUSING WAREHOUSE / INDUSTRIAL•HEALTHCARE•EDUCATION ASSISTED LIVING•INTERIOR / EXTERIOR RENOVATION 50 percent of the cost to prepare land “I met with Secretary of Commerce development agencies understand with loans ranging from one million to [Keith] Burdette in West Virginia and what is viable. P32 accepted applica- ten million dollars. his feeling is that everything between tions for suitable properties on Octo- Parkersburg and Beaver – you can ber 8, 2013. There were 29 applicants “We’re looking at the marketability of basically just draw a line and there – a number that the Fund expected to the site, revisiting the original crite- will be substantial development if be higher – and a fair number of those ria of site selection,” explains Josh both crackers are built,” says Lavrinc. simply weren’t complete enough to Lavrinc, CEO of Callay Capital. “Engi- “Energy isn’t the only sector though. act further. The good news is that the neers want to know if there’s access It would be foolish to ignore the bird Fund does not intend to use deadlines to highways, rail and utilizes but is it a in the hand, the other clusters that are to eliminate projects. site that is in demand. Were it not for building, like information technology the gap in funding the costs of prepar- or mortgage servicing.” “In the first round of applications they ing the site, would there be vertical needed more information from a num- construction there?” It is the natural gas industry’s develop- ber,” Lavrinc says. “There was concern ment that offers the best opportunity that those who didn’t get approval lost In the marketing of the Fund, it is be- for the type of large footprint devel- but it was just the initial round and ing described as a ‘patient’ loan fund. opment for which there are very few P32 will be open for business every It’s also a fund that will likely produce available sites. Stories are being quietly day. It’s not a competition with a due returns that will be conservative. While date so those applicants can resubmit there are patient, conservative private with more information.” investors out there, the investor for the P32 Fund is more likely going to be an “Energy isn’t the There is still time from the investment entity that has a stake in the region’s side of the P32 Fund as well. Accord- success beyond the return on the cash only sector though. ing to Josh Lavrinc, the securities itself. It would be foolish documents for the fund are still being finalized so no official investments “It will be investors looking for ‘double to ignore the bird in have been made as yet, although he bottom line’ returns,” notes Dewitt the hand ... says there is significant interest and Peart, president of the PRA. “Foun- commitment from a number of organi- dations, banks, corporations, utility zations. The goal for the Fund’s initial companies are the sorts of entities that round is $40 million. All the parties invest in the communities where they involved in the P32 Fund still expect do business.” told of million-square-foot users in- to close funding by the end of the vestigating sites along the Ohio River first quarter. Assuming that transpires, Lavrinc echoes Peart’s assessment. “I and users looking at locating along loans for the first projects identified expect charitable foundations, banks the I-376 backbone to be between could begin processing before mid- that have incentives or credits for com- Pittsburgh and the Akron-Youngstown 2014. munity investments, energy companies area. These locations either lack sites that have an interest in indirect return or have sites that will require substan- Having $40 million in site development from community development or other tial investment to clean and prepare funding available will help developers corporations looking to promote com- should a large user appear. According and business attraction professionals munity development.” to De Peart, those are the opportuni- deal with some of the obstacles that ties that aren’t going to get to the make industrial development very dif- It is in the reach of what constitutes brokers and developers to chase using ficult in this part of the northern Ap- community that makes the P32 Site the current site inventory. palachian region. To meet the demands Development Fund different, if not of real estate development on the scale unique. It is the intent of the Power of “We’re getting inquiries from site that is desired, however, the P32 Fund 32 leaders that the chosen sites have location consultants and we’re getting will have to grow and be leverage for the potential to impact job creation eliminated before it even gets to the public development grants. and business growth well beyond brokers,” he explains. “The PRA tracks county or metropolitan borders. It is the reasons why we lost a project and “It’s not the complete answer to solv- somewhat difficult to even visualize the lack of real estate is still the num- ing this problem. It’s just one more tool what kinds of projects might fit that ber one reason. We have an analysis in the tool box we can use to bring category were it not for the energy of where demand exists but there is no projects here,” reminds Peart. “We sector. The looming prospect of not product. Right now demand is being have to work with all the other tools to one but two ethane crackers being driven by outside forces like petro- bring business to the region.” developed within the 32-county region chemical.” DP makes it easier to understand how such big projects will multiply employ- If the results of the initial round of site ment and business growth down- proposals are any indication, the cycle stream. of economic growth is still too early to have land developers and economic

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NAIOP Pittsburgh's Hall of Famers Weigh In on the Economic Impact of the Proposed Ethane Cracker

Thomas J. Murphy Louis V. Oliva, SIOR Gregory P. Quatchak, P.E. Retired, CEO Executive Managing Director, Founding Principal Jendoco Construction Newmark Grubb Knight Frank Civil & Environmental Consultants, Inc.�

“The deci- “Based “Civil & sion to on all of Environ- proceed the infor- mental with an mation Consul- ethane provided tants, Inc. cracker to date by (CEC) has in Mo- numerous already naca will sources re- experienced certainly garding the the growing enhance positive needs for commer- economic industrial cial devel- impact and com- opment of an mercial real in the region. First, it will provide ethane processing facility, the estate from downstream industries construction jobs which always potential investment by Shell (or within the Marcellus and Utica help an area. any other related company) of an Shale natural gas plays. We have ethane cracker plant in the Pitts- been assisting clients in evaluat- Secondly, new people enter the burgh region should be a catalyst ing properties and completing site area requiring housing develop- for a significant amount of in- planning and development for ment again providing jobs in the dustrial property development in equipment assembly and laydown, housing sector. Finally, it has our region. Manufacturing is the materials handling and other light frequently been recognized that key component to real economic industrial type activities supporting each new job entering an area growth and the thought of seeing their natural gas operations. In ad- will support four to six jobs in the all of our investments in site de- dition, we have provided complete service and support sectors of the velopment and infrastructure made design and entitlement services economy. This will take the form in and around the Airport corridor for new office buildings for gas of restaurants, shopping centers, utilized by food processing, apparel companies and their downstream theaters, professional offices, all manufacturers, packaging, medi- suppliers. The ethylene cracker contributing to commercial devel- cal products and other industry plant proposed by Shell at the opment in the area. All concerned verticals that should benefit by the former Horseheads Resources Plant should be encouraged to proceed feed stock produced by the ethane in Beaver County will exponentially with this project.“ cracker is extremely exciting for increase the need for real estate all of us in this region! I always development to support the down- hoped I would live long enough to stream and upstream petrochemical experience a boom period in Pitts- industries. For example, I have read burgh and this may be the first real that the construction of the ethyl- opportunity! As my professional ene cracker plant will require hous- career started with the demise of ing for 5,000 construction workers the steel industry, I would like to over a 3 year timeframe. The real end my professional career watch- estate development needs associ- ing the proliferation of new manu- ated with the temporary construc- facturing facilities throughout the tion and permanent petrochemical region!” industry investments in our region will be a major component of our next industrial boom.”

www.developingpittsburgh.com 69 James Scalo Proven Success | Unparalleled Client Service President Burns & Scalo Real Estate Services

“The impact will be substantial. This will drive development along the largest sub market - the Parkway West. It will include the Airport Authority land and private land. The impact will be multiplied Providing Effective Solutions for Southwestern with the infra- Pennsylvania’s Commercial Real Estate Needs structure connecting the Parkway to I-79 in 2019.“ Office | Industrial | Retail | Investment Ronald J. Tarquinio Owner TARQUINCoRE, LLC

“A decision to proceed with the cracker will 606 Liberty Avenue | Suite 300 | Pittsburgh, PA 15222 certainly be a 412.261.2200 | www.LWEre.com good thing for Pittsburgh. There shouldn’t be any doubt about that. But there is a lot of infor- mation that we don’t have about what the impact will actually be.”

“It would be helpful to probe other mar- kets where these kinds of projects were built to see what kind of commercial properties were needed to service them. In other markets where this happened, how many square feet of office space was needed. We have a certain number of ho- tel rooms in the marketplace; how many more rooms will be needed? How many apartment units are needed and does the demand disappear after construction is completed? What kind of industrial proj- ects will follow a new cracker and what size should we expect them to be?

Getting this kind of information from others who experienced a project like the cracker would be very useful to help guide development. This will attract a lot of interest in Pittsburgh from all over the country. If it were up to me, I would en- sure that our lenders and regional lead- ers probed in to these questions and I’d make sure we didn’t overbuild.” DP

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14-02135_FCB_Develop_PGH.indd 1 2/21/14 2:38 PM News from the Counties

ing the second half of 2013. The Armstrong County Industrial Devel- opment Council (ACIDC) sold lots within their industrial parks, leased space within their Class A multi- tenant facility, provided financing assistance, and utilized state funds to construct pad-ready sites.

In December 2013, Projectile Tube Cleaning, Inc. completed construc- tion of their 10,000 square foot fa- cility in the Manor Township Business Park. The new building will allow the company to meet a growing custom- er demand. With the sale to Projec- tile Tube Cleaning, Inc., the Manor Township Business Park is now fully occupied with tenants that include: Nutrition, Inc.; Steve's Auto Body, Inc.; Projectile Tube Cleaning, Inc; Armstrong County the Pennsylvania National Guard; and a senior citizen housing complex Armstrong County featuring 73 condominium units. Armstrong County Department of Economic Development R.E.D. Mantini LLC purchased Lot Northpointe Technology 36 in the West Hills Industrial Park Center Center II to develop a new Pennsylvania State 187 Northpointe Boulevard Police Barracks in Armstrong County. Freeport, PA 16229 Occupancy is expected in early 2015. 724-548-1500 (T) 724-545-6055 (F) Also in late 2013, the ACIDC learned Michael Coonley, Executive Director that their application for a Keystone [email protected] Opportunity Expansion Zone (KOEZ) www.armstrongidc.or designation was approved. The newly-designated KOEZ is available Economic growth in Armstrong County at Northpointe and the West Hills was tied to several success stories dur- Industrial Park. Pad-ready industrial

www.developingpittsburgh.com 73 Armstrong County (continued) CED approved loans for two man- Beaver County ufacturing projects in November, sites and a new retail/commercial area Beaver County Corporation consisting of $200,000 in direct at Northpointe are within the zone in loans from its Business Develop- for Economic Development addition to all of the remaining acre- ment Fund. The projects will cre- 250 Insurance Street, Suite 300 age at the West Hills Industrial Park. ate or retain fifteen jobs with total Beaver, PA 15009 Additionally, the KOEZ designation was capital investment of $400,000. added to several school facilities in Arm- 724-728-8610 (T) 724-728-3666 (F) James Palmer, President strong County that recently closed or Chalmers and Kubeck (C&K), [email protected] are scheduled to close. The designation one of the largest independently www.beavercountyced.org should help in the efforts to repurpose owned machine shops in the these facilities. United States, announced its The Beaver County Corporation purchase of the former Armstrong for Economic Development (CED) The ACIDC is the lead economic de- World Industries’ site in Beaver completed a more than $1,000,000 velopment agency within the County Falls. Armstrong ceased produc- earth-moving project as part of and provides a single-point-of-contact tion of building products at the its continued expansion of the service for information pertaining to site three years ago. C&K pro- Hopewell Business and Industrial all economic development and busi- vides valve sales and service, a full Park, located at Exit 48 off I-376. ness related resources in Armstrong service CNC machine shop, pump The project involved moving more County. Operating four industrial parks, repair with testing, and a full field than 200,000 cubic yards of earth a multi-tenant office building and other services department. The compa- as part of creating an additional properties, the ACIDC is tasked with ny will invest over $3.5 million to fifteen acres at the site. To date, presenting new or expanding businesses acquire, renovate, and equip the the Hopewell project has become a wide range of options to guide their facility, creating fifty-three jobs home to ten projects employing relocation, expansion, or initial location within three years of beginning over 1,500. Currently all improved decisions. The ACIDC works directly with operations in Beaver Falls. property at the site is either sold or companies to identify sites and assists under agreement. with financing, permitting and work- In December Beaver County was force development needs. host to the Beaver County and Southwest Pennsylvania Manufac- turing Community Roundtable, partnering with the Obama Ad- ministration, the U.S. Environmen- tal Protection Agency, the Com- monwealth of Pennsylvania, and regional economic development leaders. The Roundtable con- vened local government, regional organizations, state government, federal agencies, private sector organizations including manufac- turing leaders, and philanthropic and non-profit organizations. Its purpose was to promote public- private and intergovernmental partnerships focused on revitaliza- tion of localities along the Ohio River for a resurgence of manufac- turing jobs. Approximately 150 attended.

74 DEVELOPINGPITTSBURGH | Spring 2014

The former Trinity Building site at Butler’s Centre City project, which Butler County the Pullman Center Business Park includes a new Marriott Springhill Community Development Expansion (PCBPE) is now home to Suites Hotel and Rite Aid Pharmacy, Corporation of Butler County Johnstone Supply, an HVAC whole- continues to move forward. Devel- 112 Woody Drive saler. The 30,000 square foot build- oper J.S. Capitol Construction has Butler, PA 16001 ing provides them with both show- agreed to acquire additional prop- 724-283-1961 (T) 724-283 3599 (F) room and warehouse space. UAW erty in 2014 to build a much needed Ken Raybuck, Executive Director Local 3303, which serves employees parking garage. Cranberry Township [email protected] of AK Steel, purchased 10,000 has four commercial projects over www.butlercountycdc.com square feet of office space at the 100,000 square feet currently going Pullman Commerce Center, also through the planning process. These The Community Development Cor- located at the PCBPE. The property include the new Penguins training poration of Butler County (CDC) at the Victory Road Business Park is facility plus 190,000 square feet of finalized three deals in 2013 - the located in a Keystone Opportunity office at the same site; a 100,000 sale of the former Trinity Building, Zone and will be the new home of square foot addition to Cranberry the sale of 10,000 square feet of Kerry Manufacturing, who will erect Business Park; and an additional office space at the Pullman Com- a new manufacturing building on 125,645 square feet at Ehrman merce Center and the sale of seven- the site. Contact the CDC at (800) Square. and-one-half acres at Victory Road 283-0021 or kraybuck@butlercoun- Business Park. tycdc.com for office or industrial space.

development initiatives, thereby developed a ten-year industrial de-

Fayette County creating new sustainable jobs. velopment strategy, which includes Fay-Penn Economic Development the acquisition and development of Council In the past few years, Fay-Penn has additional business parks and con- 1040 Eberly Way, Suite 200 been successful in providing busi- struction of several new speculative Lemont Furnace, PA 15456 ness site and location assistance to buildings offering flex space (either 724-437-7913 (T) 724-437-7315 (F) fifteen gas and gas-related compa- single or multi-occupant). Michael A. Jordan, Jr., nies alone and the inquiries contin- Executive Director ue to come. As a result, more than Advanced manufacturing remains an [email protected] 100 acres of land have been sold, extremely important, high value- www.faypenn.org and Fay-Penn was able to immedi- added industry for Fayette County. ately accommodate the location of It is evident in reviewing the trends During 2013 the projected new seven companies leasing a total of of companies that have moved into business development due to the 47,000 square feet in single and or expanded within Fayette County expansion of Marcellus Shale and multi-tenant building space. business parks over the past decade, other energy and advanced manu- that having a strategically located facturing and support businesses The gas industry activity not only property with accessibility to rail is overwhelmingly favoring positive offers significant job opportunities and air service, four-lane highways, economic growth in Southwestern and new private investment, it also existing and sufficient infrastruc- Pennsylvania. Fay-Penn Economic creates a great need to develop new ture, along with shovel ready sites is Development Council (Fay-Penn) location sites and buildings for im- a key driver of new business devel- is working to develop and provide mediate occupancy. In an effort to opment as it pertains to manufac- additional sites to support business address that shortfall, Fay-Penn has turing in Fayette County.

Greene County Industrial Devel- Irwin Car & Equipment purchased

Greene County opments Inc. received great news two acres in EverGreene Technol- Greene County Industrial with the announcement of a $1.5 ogy Park to construct a new distri- Developments, Inc. million Redevelopment Capital As- bution warehouse and will employ 300 EverGreene Drive sistance Grant to aid in the phase twelve people. Construction began Waynesburg, PA 15370 four construction of EverGreene in January 2014. 724-852-2965 (T) Technology Park near Waynesburg. 724-852-4132 (F) Activity in the Park was robust in Red Cedar Brown Partners LLC Don Chappel, Executive Director the second half of 2013 with four from Chicago purchased 14.8 acres [email protected] projects taking shape. in EverGreene in mid-December to www.gcidc.org construct a new building to house FMC, a Fortune 500 gas and oil

76 DEVELOPINGPITTSBURGH | Spring 2014 Greene County (continued) company. This is the first of two proposed buildings for the site and earth moving began the last week of December. The project will employ twenty-five people with an initial $4 million investment.

R.G. Johnson Company Inc. moved into their new 35,000 square foot building in Ever- Greene Technology Park in early December. The project is a $5 million investment on seven acres of land and will employ twenty-five people. R.G. John- son constructs coal mine shafts and does repair work and has been a coal mine related busi- ness for nearly a century.

Permits were filed and received for earth moving to develop a ten-acre pad-ready site in EverGreene Technology Park. The bid for the work will be let in January with a tight schedule for a May completion. WCDC.VPRPhouse2homeDevPgh_Layout 1 2/7/14 12:34 PM Page 1

Bayles Energy LLC, a subsidiary of IMG Midstream of Yard- ley, proposes to build a small Looking for a Building 20-megawatt natural gas-fired power plant in Greene Town- for Your Business? ship. Burning gas produced lo- cally, it will serve about 13,000 homes, cost between $15 and $20 million, and take about nine months to complete giving it a 2015 target for commercial operation.

The Greene County Memo- rial Hospital Foundation plans to build a 45,000 to 51,800 square foot recreation center on 7.6 acres of vacant land along Oakview Drive in Frank- lin Township. They expect the building to be large enough to contain an indoor soccer field, basketball courts, fitness cen- ter, and multi-purpose rooms The Wilkinsburg CDC can help. that could be used for aerobics and educational programs to If you have thought about purchasing a building or renting a storefront, benefit the community. the WCDC showcases listings of property for sale and rent in downtown Wilkinsburg.

For more information visit www.wilkinsburgcdc.org/real-estate

www.developingpittsburgh.com 77 Business Park located adjacent to The Central Allegheny Challenger Indiana County a new 5,500 foot runway. Parcel Learning Center project was an- Indiana County Center sizes can be customized from as nounced in December, the first such for Economic Operations small as a couple acres to pad ready education facility in Pennsylvania, 801 Water Street sites in excess of 30+ acres. which included a $1.365 million Indiana, PA 15701 Redevelopment Assistance Capital 724-465-2662 (T) 724-465-3150 (F) Indiana County also has a mix of Program (RACP) grant. The Indi- Byron G. Stauffer, Jr., industrial and office/flex buildings ana County location will serve 22 Executive Director available for lease or sale, with counties. Planning is also underway [email protected] spaces ranging from 2,500 square for a STEM Institute (Science-Tech- www.indianacountyceo.com feet up to 200,000 square feet, nology-Engineering-Mathematics). many of which are designated with Please visit www.pachallenger.org. Indiana County offers fast-tracked KOZ tax incentives. development at four Keystone Op- The Indiana County Center for portunity Zone (KOZ) designated Creps United Publications is com- Economic Operations (CEO) provides business park locations: the Indiana pleting a 95,000 square foot state- comprehensive information and re- County Corporate Campus located of-the-art printing plant operation sources pertaining to economic and at the intersection of U.S. Routes on a 9.4 acre site at the Windy workforce development opportuni- 22 and 119, the 119 Business Park Ridge Business & Technology Park. ties. Please visit www.indianacoun- along U.S. Route 119, the Windy Groundbreaking for the project tyceo.com. Ridge Business & Technology Park at occurred in March 2013 and ex- the intersection of U.S. Route 422 cavation and construction were and PA Route 286, and the Indiana fast-tracked with substantial project County – Jimmy Stewart Airport completion in December.

We are working with several smaller “If the proposed Lawrence Downs Lawrence County manufacturers - either in the pro- Casino and Racing Resort becomes Lawrence County Economic cess of moving into an existing fa- a reality and hires the projected Development Corporation cility in the County or are building 1,200 full- and part-time employ- 100 East Reynolds Street their own establishments – that are ees, it would become the larg- Plaza South, Suite 100 (you guessed it!) involved in either est employer in the county,” said New Castle, PA 16101 the natural gas industry or recla- Dan Vogler, chairman of Lawrence 724-658-1488 (T) 724-658-0313 (F) mation. These businesses include: County's board of commissioners, Linda Nitch, Executive Director Magnetic Lifting Technologies, which has committed $50 million [email protected] Portersville Valve, EnTech Industries, to the project. “This has been our www.lawrencecounty.com Ben Weitsman’s Upstate Shredding, No. 1 priority as a board of commis- and RWE Holding Company. sioners because of the potential for The past is not always predictive significant economic impact for our of the future but in the case of eco- The County is anticipating the county and neighboring counties,” nomic growth in Lawrence County, Lawrence Downs Casino & Racing Vogler said. all indicators point to the con- Resort long-planned for Mahoning tinued robust interest our county Township along our border with the Though we’ll keep our fingers witnessed in 2013 as a hotspot for State of Ohio. The proposal cur- crossed for the realization of Law- uses related to the shale gas indus- rently on the table with PA Gaming rence Downs, we believe that our try and metal reclamation. Control Board calls for the devel- future growth involving the natural opment of a $225 million racing gas industry is not a matter of luck. L.S. Power is set to get approval and gambling facility. The facility The LCEDC, along with our county for a natural gas-fired electricity will feature a harness-racing track; officials, have worked tirelessly to generation plant on a site in North about 1,250 slot machines at open- ensure that adequate manufactur- Beaver Township. The Hickory Run ing; about forty live table games ing real estate is available to entice Energy Station – as it will be called and ten poker tables; and surface businesses to land here. This, along – is expected to generate twenty- parking for 2,000 vehicles, accord- with lucrative financing incentives, five permanent job positions, a ing to Penn National. Both Penn have made Lawrence County an whopping 500 temporary construc- National Gaming Inc. and partner enviable target for new investment. tion jobs and will expend $750 mil- Endeka Entertainment LP have Again, predictions are precarious lion in investments. The plant will submitted proposals to the Com- to make but a positive future for have a 900-megawatt capacity and monwealth to operate that gaming Lawrence County throughout 2014 will provide a much needed source facility. is a sure bet. of low-cost power.

78 DEVELOPINGPITTSBURGH | Spring 2014 The Power to Prosper is right under our feet.

Nature put Washington County, Pennsylvania at the center of the Marcellus Shale. It’s up to you to make the most of it.

There is more energy to tap. There is more room to grow. There is more time to prosper.

Join other Washington County companies and help shape the nation’s economy, energy security and clean energy future. Put your company on top of it all.

www.washcochamber.com tance Capital Program grant from Credit Union and GetGo confirmed Washington County the Commonwealth of Pennsylvania new facilities in Meadows Land- Washington County Economic for infrastructure improvements. ing. Also along this gaming and Development Partnership entertainment corridor, three new 20 East Beau Street In Hanover Township, the northern hotels, including a new 155-room Washington, PA 15301 tier of the county, the Washington Hyatt Place by Meadows Hotel As- 724-225-3010 (T) 724-228-7337 (F) County Council on Economic De- sociates LLC were either opened or Jeff Kotula, President velopment welcomed Lifting Gear announced in the fourth quarter. [email protected] Hire as a new addition to their www.washingtoncountyworks.com successful Starpointe Business Park. Finally, the Greater Washington Along the Racetrack Road Corridor County Region welcomed the open- Washington County finished a in both North and South Strabane ing of Mylan’s 280,000 square foot strong year with major economic Townships, the Meadows Landing Robert J. Coury Global Center as development announcements in the development announced construc- well as the groundbreaking of AN- final quarter of 2013. Alta Vista tion of the Tri-State Surgery com- SYS’ new headquarters building in Business Park in Fallowfield Town- plex which will house the offices Zenith Ridge of Southpointe II. In ship introduced two new develop- of Washington Ear Nose & Throat, addition, the Washington County ments with Scientific Drilling and Washington Health System Wom- Chamber of Commerce and Wash- Waukesha-Pearce Industries com- en’s Diagnostic Center, the offices ington County Tourism Promotion mitting to the park. Also in the of Southwestern Gastroenterol- Agency announced their merger Monongahela Valley, Mon River ogy Oncology Associates, Keystone and consolidation to new offices Industrial Park, a former Wheeling- Anesthesia Associates and other located at 375 Southpointe Blvd., Pittsburgh Steel site, received a physicians’ offices. In addition, Southpointe. $1.5 million Redevelopment Assis- Washington Area Teachers Federal

nomic development,” said Commis- Burrell and Washington Townships. Westmoreland sioner Charles Anderson. Leed’s is a company known for its County comprehensive line of promotional The year ended with notable high- products. The company first located Westmoreland County Industrial lights including Seton Hill Univer- its operations in the county’s Busi- Development Corporation sity’s October announcement of ness & Research Park in July 1997 40 North Pennsylvania Avenue, its new 60,000 square foot Health when they purchased twelve acres Suite 520 Sciences Center. The $21.5 million to construct an initial 100,000 Greensburg, PA 15601 four-story center will link to Lynch square foot office and warehouse 724-830-3061 (T) 724-830-3611 (F) Hall on two levels within the cam- facility to house their eighty-five Jason W. Rigone, Executive Director pus and will include examination employees. Less than two years lat- [email protected] rooms, classrooms, laboratories er, they increased their office/ware- www.co.westmoreland.pa.us and office space for students in a house facility by another 40,500 variety of majors who earn degrees square feet. Since that expansion, In the second half of 2013, West- from the university and the Lake the company has grown its opera- moreland County continued to Erie College of Osteopathic Medi- tions to include a 200,000 square attract businesses as its unemploy- cine program. foot warehouse for distribution ment rate was down to 6.7% which of products, a 39,000 square foot is below the state and national In November, Arnold Palmer Re- design center housing a variety of averages and home sales were up – gional Airport’s announcement that sales, marketing and other adminis- signs that the county’s economy is Greyhound began service from the trative functions, and over six acres on a developing course. airport in Latrobe to downtown of property for overflow employee Pittsburgh was a major broadcast parking alone. The average price of homes sold in creating tremendous opportunities Westmoreland County increased by for travelers in the region. With the intent to purchase the last 4.6%, and the number of sales rose remaining “pad-ready” lot within by 10.6% reaching a level of new The all-round industrial park suc- the industrial park, Leed’s plans to housing construction not seen in cess story for 2013 may very well construct a new facility in multiple the area for at least a generation. have been Leedsworld. In Decem- phases. “The first phase is cur- “Our job is to keep Westmoreland ber the company announced its rently anticipated to be approxi- County open for business and I’m intent to purchase another 22.585 mately 200,000 square feet with optimistic that we continually strive acres at the Westmoreland Business roughly 20% that will be utilized for all the right numbers when you & Research Park located in Upper for decoration operations and 80% look to our future growth in eco-

80 DEVELOPINGPITTSBURGH | Spring 2014 that will be utilized for warehouse space,” said David Farr, Chief Financial Officer of Leed’s. “When fully built, we anticipate total square footage for the facility of around 500,000 square feet.” The compa- ny hopes to finalize design plans and begin construction of the first phase as soon as possible with a goal of moving into the new facility by the first quarter of 2015.

In addition to the twenty-two acres pur- chased by Leed’s, Early American Pitts- burgh, Inc. and the Mount Pleasant Glass Museum moved operations to Mount Pleasant Glass Centre in Mount Pleasant. Buildings Early American Pittsburgh, a family-owned candle manufacturing company founded by Elmer and Dorothy Byrnees in 1962, manufactures many types of candles in ad- dition to specialty candles for wholesalers throughout the country. Mount Pleasant Glass Museum, displaying the history and products of three world-famous glass man- ufacturers that once operated in Mount Pleasant, opened its doors within 1,500 Heavy/ square feet of existing space occupied by Industrial O’Rourke Cut Glass. DP

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www.developingpittsburgh.com 81 People & Events

NAIOP Ski Outing co-chair Bob Dezort from Anderson Interiors PenTrust’s Tyler Noland (left) with Brian Pukylo from First (center) with (from left) Brian Winfield, Jeff Kotula from the Commonwealth Bank at NAIOP’s ski event. Washington County Chamber of Commerce, Washington Coun- ty Commissioner Larry Maggi and Gene Pash of Value Properties. The 2014 event drew 110 skiers and revelers to Seven Springs on February 7. This year’s event was the largest in its history.

(Left-to-right) Kento Omuri and Felix Fukui of Fukui Archi- (From left) Louis Oliverio from Dinsmore & Shohl, James tects with architect Roy Penner. Murray-Coleman from Trammel Crow, HFF’s Kyle Prawdzik and Chris Minnerly from The Mosites Co.

Yaso Snyder from Mobili Office with Greg and Cindy Ashley Hartman from Langan Engineering with PNC’s Pfeiffer of Pfeiffer Holdings at CREW’s holiday dinner on Autumn Harris at the CREW dinner. January 14 at Lidia’s.

82 DEVELOPINGPITTSBURGH | Spring 2014 DEVELOPMENT (From left) NAIOP Pittsburgh board member Greg Quatchak from CEC, IKM’s Mark Witouski and Chic Noll from Desmone & Associates.

BROKERAGE

Jim McDunn from Citizens Bank with Emily Timko from RCx Building Diagnostics. PROPERTY MANAGEMENT

Mary Jo Vicario (left) and Kelly from Derbish DraxxHall Management Corp.

www.developingpittsburgh.com 83 Apartment Complexes Senior Living Facilities Condominiums Hotels

BNY Mellon’s Richard Schaich and Pamela Gill.

General Contractors Fast and safe execution with a clear cost benefit solution for our clients. Contact: Dave McMullen - [email protected] www.franjoconstruction.com 412-462-4371

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capital and clients. Andrea Lepore from MBM Contracting and BNY Mellon’s David Danielson.

Grandbridge Real Estate Capital provides the vital link between complex market conditions and capital solutions. As a national full-service leader in commercial and multifamily finance, we combine our wide range of capital sources with a knowledgeable and experienced team to deliver results, deal after deal.

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C o n t a C t U s Two Gateway Center | 603 Stanwix Street | Suite 1899 Pittsburgh, PA 15222 | Phone 412.391.3366 | Fax 412.471.1773 grandbridge.com (From left) Sarah Reigl of Meyer, Unkovic & Scott, Mimi Fersch and Kim Bolam from First American Title Insurance. Loans are subject to credit approval. Equal Housing Lender.

84 DEVELOPINGPITTSBURGH | Spring 2014

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