Last week, Hersha Hospitality Trust (HT), the Philadelphia-based Hospitality REIT specializing in upscale, mid-scale and extended-stay hotels in major metropolitan markets, priced a significant stock issuance that allowed them to raise an additional $155 million of investment capital.

Over only a three-day marketing period, they issued just under 51.8 million shares, increasing their float to a total of 118,134,727 shares outstanding. Entering the market with only a 35-million share offering, as the order book was two times oversubscribed, the company was able to upsize the offering to 45 million and exercise the entire underwriter overallotment option.

Clearly, investment managers agreed that Hersha's corporate strategy and the performance of their hotels is among the best of the publicly traded hotel companies in the marketplace. Hersha will be using the funds to reduce leverage and to acquire the Hampton Inn Times Square South and the Candlewood Suites Times Square at very attractive pricing. This will add to Hersha's existing portfolio, which includes interest in 74 hotels totaling 9,392 rooms, primarily along the Northeast Corridor from Boston to Washington, DC.

Philly's Development Narrows to Broad Street

If you have taken a walk down Broad Street recently, you will likely only see one thing you haven't seen hundreds of times before, and that is Philadelphia uber-developer Carl Dranoff's defunct condo-turned apartment building project 777 South Broad nearing completion. Dranoff enjoyed success on his last condo project, the Symphony House, which is also on Broad Street and just reached 93% occupancy.

This time around however, an inferior location and inferior marketplace forced his hand. While it is no shock to see a former condo project revert to multi-family rentals, given the oversupply of condos and economic drain put on household income over the last two years, it is interesting to note that this is the ONLY new development project expected to come online in Philadelphia in 2010.

A colleague of mine, Joe DiStefano of the Philadelphia Inquirer, sat down with Dranoff late last week, who shared some thoughts with him. "There's probably going to be a hiatus of several years before the next big project in Philadelphia gets built. The spigot is off," Dranoff said. Ironically, the only other development projects downtown are also occurring on Broad Street. Bart Blatstein and Eric Blumenfeld are still hammering out final details on their respective conversion projects along North Broad Street.

Broad Street Bully?

You think that the lenders have all the leverage today? One big time Philadelphia developer and owner scoffs at that notion. With their CMBS loan approaching maturity and only days to get a deal done, ownership was able to refinance the 21-story North American Building located at 121 South Broad Street. The $9.1 million loan, financed by TD Bank, was 65% loan to value and was a floating rate loan. With high occupancy and very solid rents ( ground floor retail space is $35 per square foot, office space is $20 per square foot), this refinance just goes to show you that if you present a bank with an attractive, lower leveraged deal, they'll move more quickly to accommodate you.

Area Developers team up for Franklin Mint Redevelopment

The 150-acre site that the Franklin Mint has sat on in Middletown, Delaware County has been the talk of the community since 2004. It was at that time that the longstanding institution ceased operations and began selling its ornaments online. Finally, a community inspired plan, in its fourth draft, has made it to local officials in the hope of redeveloping the site.

Developers McKee Group, Dewey Cos., Pennrose Properties and Wolfson Verrichia Inc are teaming up for a proposed mixed use development that would include 1,250 homes, 800,000 square feet of retail space, 235,000 square feet of office space, and a 225 room hotel. The construction of the project, which would not start for several years due to zoning, approvals, and financing would create 2,000 construction jobs and a swell of tax dollars to Middletown, Rose Tree School District, and Delaware County.

M&M's taking Market Share like Candy from a Baby

The local Philadelphia office of Marcus & Millichap is hitting the ground running in 2010, continuing their surprisingly successful 2009. While overall transaction velocity was down (and at what brokerage was it not?), the Philadelphia office handled 69 transactions in addition to three note sales.

In the process they added lenders to their roster of clients in addition to private and institutional entities. In late December, Ridge MacLaren sold Beechwood Gardens, a 160 unit apartment building in Northeast Philadelphia on behalf of REIT Home Properties for $10.5 million dollars or just under $70,000 per unit. The buyer was an LLC formed by private investors out of New York City. They were able to take advantage of cheap financing through Fannie Mae and an attractive price which equated to just below an 8% cap rate.

Yet, M&M's biggest growth may have been in the retail sector. Last month, we reported that local Philadelphia retail developer Goldenberg Group shed roughly half their staff. Along with them, they also elected to dispose of several shopping centers. Brad Nathanson sold Bensalem Crossing in Lower Bucks County for $13.6 million dollars, and has another shopping center listed on behalf of Goldenberg. Dean Zang and Mark Taylor sold a PNC Bank and Marriott ground lease on behalf of Keystone Property Group in late December at a 6.5% cap rate. Said regional manager Spencer Yablon, "We want the marketplace to know that deals are still getting done in this marketplace despite the turbulent times, and we are the ones getting those deals done."