Developing Pittsburgh Spring 2013

Pittsburgh

PITTSBURGH’S

NEXT ACT Naiop PITTSBURGH s Annual Awards Year-End Market Updates Dodd-Frank And Commercial Real Estate

SPRING 2013

DEV E LOPING

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CONT E NTS

| Spring 2013

05

President’s Perspective

Dan Puntil

19

Development Project Pittsburgh International Business Park

06

Pittsburgh’s Next Act

The region’s assets are getting accolades from around the globe but the civic and commercial real estate leaders aren’t resting on their laurels. Regional leaders talk about what works and what needs to work better for Pittsburgh to keep thriving.

26

Developer Profile

36

Eye on the Economy

40

Office Market Update

Chapman Properties

Newmark Grubb Knight Frank

44

Industrial Market Update Langholz Wilson Ellis

48

Retail Market Update CBRE

50 33

52

Avison Young

Developing Trend

An improved Panama Canal should change global logistics and create the need for more transportation and distribution to the Midwest and Northeast.

National Market Update

58

Legal/Legislative Outlook

63

Benchmarks

69

Voices

73

News from the Counties

85

Transactions of Note

NAIOP Pittsburgh's Awards

NAIOP Pittsburgh’s 20th Annual Awards Banquet honors projects and individuals exemplifying excellence in the commercial real estate industry.

www.developingpittsburgh.com

3

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:: ANThoNY roSSIE Vice President 412.904.9503 anthony.rossi@cbre.com

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We obtained the information in this document from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.

President’s Perspective PUBLISHER

Tall Timber Group www.talltimbergroup.com EDITOR

Jeff Burd

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Carson Publishing, Inc. Kevin J. Gordon kgordon@carsonpublishing.com ART DIRECTOR/GRAPHIC DESIGN

Carson Publishing, Inc. Jaimee D. Greenawalt

CONTRIBUTING PHOTOGRAPHY

Carson Publishing, Inc. Jan Pakler Pittsburgh Regional Alliance CONTRIBUTING EDITORS

Anna Burd Cecelia Cagni Karen Kukish

ADVERTISING SALES

Karen Kukish

724-837-6971 kkukish@talltimbergroup.com MORE INFORMATION:

DEVELOPINGPittsburgh is published by Tall Timber Group for NAIOP Pittsburgh 412-928-8303 www.naioppittsburgh.com No part of this magazine may be reproduced without written permission by the Publisher. All rights reserved.

This information is carefully gathered and compiled in such a manner as to ensure maximum accuracy.

We cannot, and do not, guarantee either the correctness of all information furnished nor the complete absence of errors and omissions. Hence, responsibility for same neither can be, nor is, assumed.

Keep up with regional construction and real estate events at www.buildingpittsburgh.com

W

elcome to the second edition of DevelopingPittsburgh Magazine, a publication focusing on the commercial real estate industry and brought to you by NAIOP Pittsburgh.

It is my distinct privilege to serve as President of NAIOP Pittsburgh for 2013. I am humbled to follow in line with some of the most prominent and influential leaders in the commercial real estate industry that have served in the same capacity. These great leaders have developed a strong foundation that has served as the base from which this organization was built upon, much like a real estate project. NAIOP Pittsburgh has grown year after year, to become the preeminent real estate organization in Pittsburgh with a focus on our core values of Education, Advocacy and Leadership. Together with our outstanding Board of Directors, it will be my goal to further our mission and continue to grow this great organization.

This edition of Developing Pittsburgh Magazine will focus on ‘what’s next’ for commercial real estate in Pittsburgh. The secret has been revealed that Pittsburgh real estate has not only fared far better than many other cities during the economic downturn, it has in fact, prospered. Our controlled, sustainable growth as a result of high barriers to entry have prevented over building resulting in a real estate market that performs at the top of all markets in the country. Our vacancy rates in office, industrial, retail and multifamily are among the lowest of all of the nation’s top 64 markets. Pittsburgh is now attracting regional, national and international institutional investors who have identified our region as a market that provides attractive returns while providing a stable real estate environment.

So what’s next for Pittsburgh? How do we maintain this position and most importantly, how do we continue to grow

5 DEVELOPINGPITTSBURGH

| Spring 2013

this market while maintaining these enviable statistics? Will the growth come from “Eds and Meds?” The energy sector? Will it be in the form of new development or renovation of some of our existing assets? My sense is that it will include all of the above.

In this edition of DevelopingPittsburgh, we will explore the factors that will impact our ability to maintain this momentum and continue to grow and prosper. We will discuss the challenges of keeping up an aging infrastructure, the need for pad ready sites and fostering public/private partnerships in a new era of austerity for government.

We’ll also spotlight our annual NAIOP Pittsburgh award winners. This Developing Pittsburgh has a special section devoted to the projects and people that made special contributions to the commercial real estate industry.

We should all be proud of our accomplishments, but not rest on our laurels.

Much like the city of Pittsburgh has adapted over the years, so too does our real estate industry need to adapt.

We need to continue to be creative, be proactive, be innovative and be disciplined. Those qualities have been the hallmark of Pittsburgh over the decades and have served our city very well. Let’s take the next steps and continue to grow the Greater Pittsburgh commercial real estate industry.

Daniel P. Puntil

www.developingpittsburgh.com

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F E A T U R E

WHAT'S NEXT FOR PITTSBURGH?

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F E A T U R E

“Our firm identified the characteristics of a good investment market. We look at the economic drivers.

We believe the next phase of economic development will be driven by high tech, healthcare and energy,” says Tim Wang, senior vice president

and head of investment at ING Clarion Partners. “We believe Pittsburgh has all the right pieces.”

I t wa s n ’ t t h a t l o n g a g o t h a t t h e e c o n o mi c p r o s p e c t s f o r P i t t sburgh were a bit less r os y t h a n t h e y a r e t od a y. I t wa s l e s s t h a n

a d e c a d e a g o, i n f a ct, t h a t t h e t w i n c l o s i ngs of the Lazarus and L o r d & Ta y l o r s t o r e s i n D o w n t o w n l e f t t he business community f e e l i n g l i ke n o t h i n g w o u l d w o r k t o r e t u rn the central business d i s t r i c t o r t h e c i t y to i t s f o r m e r h e y d a y s.

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F E A T U R E Of cou r s e w h a t w a s h a p p e n i n g at the t i m e w a s t h e g r a d u a l a n d increm e n t a l i m p ro v e m e n t i n t h e sector s t h a t w o u l d b e t h e l e a d i n g econo m i c d r i v e r s o f 2 1 s t C e ntury Pi t t s b u r g h . T h o s e g a i n s w e re taking p l a c e b e l o w r a d a r b u t t h e ‘new’ P i t t s b u r g h b e g a n a p e r i o d o f not-so - q u i e t i m p ro v e m e n t s w h e n Bob O’ C o n n o r b e c a m e m a y o r o f the Ci t y o f P i t t s b u r g h , t h e I m a g i n e Pittsbu r g h c a m p a i g n k i c k e d o ff a n d the G- 2 0 S u m m i t c a m e t o t o w n .

A half - d e c a d e l a t e r a n d y o u c o u l d make a n a r g u m e n t t h a t P i t t s b u r g h is beco m i n g o v e re x p o s e d b u t a f t e r a gene r a t i o n o f b a d n e w s , f e w region a l l e a d e r s a re w o r r i e d a b o u t too mu c h g o o d n e w s .

This is P i t t s b u r g h ’s n e w G o l d e n Age. B u t w h i l e P i t t s b u r g h e r s a re happil y a c c e p t i n g a c c o l a d e s f ro m all ove r t h e p l a n e t , t h i s i s a l s o probab l y a g o o d t i m e t o a s k , “What ’s n e x t ? ”

GETTING HERE All it t o o k t o b e c o m e o n e o f t h e econo m i c d a r l i n g s o f t h e g l o b e w a s a gene r a t i o n t o p a s s a n d a c o u p l e hundre d t h o u s a n d j o b s t o b e re placed . B u s i n e s s a n d c i v i c l e a d e r s have w o r k e d t h ro u g h t h re e ‘ R e naissan c e s ’ t o re m a k e P i t t s b u r g h ’s econo m i c l a n d s c a p e . F o r m o re t h a n 30 yea r s t h e re w e re n o h o m e r u n s , just ec o n o m i c ‘ s m a ll b a l l ’ – s i n g l e s and sa c r i f i c e b u n t s a n d b a s e s o n balls – t h a t s c r a t c h e d o u t t h o usands o f s m a l l w i n s .

Over t h e y e a r s , t h e re w e re p l e n t y of fals e s t a r t s b u t b e h i n d t h e scenes t h e re w e re c o n t i n u e d a d vances i n e d u c a t i o n , h e a l t h c a re and w h a t e v e r t h e t e c h n o l o g y o f the da y w a s . S e e d s w e re s o w n a t the Un i v e r s i t y o f P i t t s b u r g h , C a r negie M e l l o n a n d t h e U n i v e r s i t y o f Pittsbu r g h M e d i c a l C e n t e r, a m o n g others . W i t h o p e r a t i n g m o d e l s t h a t reinves t e d i n c o m e i n re s e a rc h , e a c h of the s e i n s t i t u t i o n s b e g a n f o r ming a n e w i d e n t i t y a n d t h e e c onomic d e v e l o p m e n t l e a d e r s b e g a n to link t h e c i t y ’s i m a g e t o t h o s e new id e n t i t i e s . A d v a n c e m e n t a t t h e univers i t i e s a n d h o s p i t a l s w o r k e d like co m p o u n d i n t e re s t . T h e e ff e c t was on l y b re a t h t a k i n g a f t e r e n o u g h time h a s p a s s e d .

8 DEVELOPINGPITTSBURGH

| Spring 2013

All it took to become one of the economic darlings of the globe was a generation to pass and a couple hundred thousand jobs to be replaced.

A m e a s ure of the success that can b e c l a i med by the region’s institu t i o n s w as aided by public policy.

T h e C o mmonwealth of Pennsylvan i a m a d e investments in the univ e r s i t i e s that have yielded results.

L i k e w i s e, the federal gover nment e n d o w e d research grants that re s u l t e d directly in a number of m a r k e t a ble advances.

T h e m o re difficult investments to m a k e o ver the years have been in p ro j e c t s and programs that worked t o t h e b enefit of the private sect o r, e s p ecially those for private d e v e l o p ment. State or local aid for c o m p a n ies who promise to create j o b s i s politically charged and often c o n t ro v ersial. Whether it’s a PIDA l o a n o r a school district tax increm e n t f i nancing (TIF) deal, taxpayers h a v e a hard time supporting the t r a n s f e r of public funds to private c o m p a n ies. Those sentiments can g e t e v e n more inflamed when the b e n e f i c i ary is a property developer.

I n t h e f i nal analysis, however, if y o u h a d to point to one policy that d i d t h e most to bring the economy t o w h e re it is today it might be the p u b l i c l y -funded support of develop m e n t s i t es.

T h e c i v i c and business leaders who h a v e w orked to secure the public s u p p o r t and private investment in t h e re g i on’s sites could not have k n o w n what today’s opportunities w o u l d b e but they needed to pre p a re a s though they could. Those t h a t b e s t foresaw the potential for e c o n o m i c growth were eventually re w a rd e d. “ I t i s i mportant to remember that t h e s u c c esses we are experiencing

in Washington County are not acci dental. They are the result of years of strategic planning un dertaken by the Washington County Commis sioners, business community and our economic development organizations to anticipate fut ure growth and be proactive in developing site ready business parks,” states Jeff Kotula, president of the Wash ington County Chamber of Commerce. “While we of course did not foresee the tremendous positive economic impacts of the energy industry 15 years ago, the decisions made then to develop ready-to-go sites made our county uniquely positioned to take advantage of these energy opportunities and ear n the moniker Washington County-The Energy Capital of the East."

Those next energy opportunities represent major tur ning points in economic direction for the region.

Most casual observers probably expect that the natural gas industry will simply follow an ever-climbing path of growth in Wester n PA but no success is assured. Success tends to come from opportunities finding the well prepare d. W ith potential employers of hundreds of thousands deciding whe re to locate key assets, now would be a fortuitous time to prepare for the future of public/private partnerships (P3).

P 3 F O R T H E F UT U R E NAIOP Pittsburgh and the Pittsburgh Regional Alliance organize a biennial tour of the city for site selectors, called the Developers Showcase. The day ends with a presentation of the findings of the site selectors to an audience of developers and economi c development officials. One of the consis tent points made by site selectors is that attractive cities demonstrate regionalism and cooperation among all players. Effective public/private partnership is a key element.

The transition from the Rendell to Corbett administrations was one that had a dramatic imp act on public/private partnerships. Even as tax receipts plummeted during the recession, Gov. Rendell kept up the stream of funding for private in dustry. His last days in office even

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F E A T U R E

include d a f l u r r y o f R e d e v e l o p m e n t Assista n c e C a p i t a l P ro g r a m ( R A C P ) grants t h a t w e re c o n t ro v e r s i a l enoug h t h a t G o v. Co r b e t t d e l a y e d signing o ff o n t h e f i n a l f u n d i n g .

Busine s s e s t h a t w e re n e x t i n l i n e for sta t e g r a n t s w e re n ’t s o f o r t u nate.

As inc o m i n g g o v e r n o r, C o r b e t t w a s concer n e d a b o u t t h e a m o u n t o f debt b e i n g t a k e n o n t o f u n d t h e RACP g r a n t s , e s p e c i a l l y w i t h o u t a metho d o l o g y f o r t r a c k i n g w h e t h e r or not t h e i n v e s t m e n t re t u r n e d re sults th a t c o u l d j u s t i f y t h e b o r ro wing. Li k e m a n y f u n d e d p ro g r a m s , RACP f o u n d e re d w h i l e t h e n e w admini s t r a t i o n e v a l u a t e d w h a t w a s fiscally – a n d p o l i t i c a l l y – i n l i n e with th e i r v i e w o f g o v e r n m e n t .

The pro g r a m w a s reo r g a n i z e d a n d trimme d d o w n t o $ 1 2 5 m i l l i o n p e r year, t o b e m a n a g e d i n t w o ro u n d s annual l y b u t i n 2 0 1 2 t h e e v a l u ation w a s re d u c e d t o a s i n g l e ro u n d .

Fundin g f o r p ro j e c t s t h a t w e re p u t in the p i p e l i n e i n 2 0 1 2 w a s b e l a tedly an n o u n c e d d u r i n g t h e f i r s t week i n F e b r u a r y 2 0 1 3 . G r a n t s f o r 14 Pitt s b u r g h a re a p ro j e c t s t o t a l e d $24.7 m i l l i o n b u t t h re e l a r g e p ro j ects, in c l u d i n g t h e R I D C ’s A l m o n o site m i s s e d o u t o n g r a n t s t h i s round.

Steve G u y i s C E O o f O x f o rd D e v e lopmen t , o n e o f t h e a p p l i c a n t s f o r its 350 F i f t h Av e n u e p ro j e c t . H e suppor t s t h e a d m i n i s t r a t i o n b u t finds t h e i r e c o n o m i c d e v e l o p m e n t policie s u n c l e a r.

“We are always in competition with other states and right now some of them are getting more competitive,” “ We n e ed to gain a better and t i m e l i e r understanding of Penns y l v a n i a ’s position with regard to e c o n o m i c development. I don’t u n d e r s t and what the administrat i o n i n t ends; what’s available and h o w t o access it,” he says. “I’m pro a d m i n i s tration but it’s difficult for b u s i n e s s to understand the state a n d w h at is available.”

R e g a rd l ess of your politics you c a n ’t re alistically look at the curre n t s u c cesses in the region’s e c o n o m y without finding traces o f p u b l i c investment throughout, b u t c e r t ainly in the area of real e s t a t e d evelopment. Wester n PA i s a re g i on with topographical and s i t e c h a llenges that make developm e n t d i fficult. When the industrial e c o n o m y crumbled thirty years ago t h e re w ere hundreds of abandoned s i t e s t h at were also unsuitable for re d e v e l opment because of environ m e n t a l hazards. W ithout the use of p u b l i c f unding, few of the projects

Redevelopment Assistance Capital Program grants for Metropolitan Pittsburgh projects were announced

by Gov. Corbett’s office February 11.

we hold up as successes – The Wa terfront, South Side Works, Pitts burgh Technology Center – would exist today.

The position of the fiscal conservatives is understandable: private development should be able to stand on its own business case or not at all. The problem is that competi tive markets haven’t operated as free markets in decades and with drawing public funding that primes private investment puts Pennsylvania at a disadvantage. W ith the gas industry expanding in Ohio, West V irginia and New York a t the same time it is maturing in Wester n PA, this is a good time to remove any disadvantages, says Avison Young’s Duke Kingsley.

“We are always in competition with other states and right now some of them are getting more competi tive,” he says.

Given the current gover nment fiscal environment it is falling to the Commonwealth to create programs that can allow investment and funding opportunities. In 2004, the state launched the Business in our Sites loan program, which has been valuable to projects like Alta V ista, Starpointe and Almono but has reached the point of having limited funds available from its revolv www.developingpittsburgh.com

11

F E A T U R E ing loan proceeds. Legislation adding as much as $75 million in underutilized development funds has been proposed but no action has been taken.

While there may not be the money available nor the political will to use it at the moment, there is little disagreement about what would be the best use of public support for private development.

“The big issue is still that we don’t have enough padready, shovel-ready sites for development,” says PRA president DeW itt Peart.

At the most recent Developers Showcase, held in November, site selectors were effusive in their praise for the region’s accomplishments but among the kudos were comments that echoed Peart’s concer n.

“Pittsburgh could benefit from a process of getting more sites ready for the development of industrial and manufacturing facilities,” noted W illiam Hear n of CH2M Hill.

W ith the improving economy, there is more urgency to finding a way for public/private site preparation proj ects to happen more quickly. “We can spen d years and years getting sites ready but most clients can’t wait two or three years for a property,” says Randall Foris ter, director of development for the Allegheny County Airport Authority. “If we don’t have the sites ready it’s impossible to attract development.”

Gregg Broujos’ suggestion is specific and succinct, “We have a lack of available speculative industrial flex product.” Broujos is a broker and the managing partner for Colliers Inter national, so his productoriented answer isn’t surprising. But his concer n about the short supply of industrial space was focused less on the developers than on the process. “It’s a definite detriment to the region not to have the space now.

The complexity of the development process makes it difficult to move a project along.”

The last point Broujos makes is one that is often overlooked in P3 discussions. Public funding for private de velopment is well and good but it may be more useful in the long run for state and municipal leaders to look at the process of entitling a project as an opportunity for partnership with private industry. Pennsylvania has ear ned a reputation for unwieldy environmental and transportation approvals for development, even when there are no complex issues involved. Moreover, the lack of uniformity and consistency at the municipal level can leave developers frustrated. For developers that aren’t accustomed to dealing with the permitting environment – like those coming from out of state – the hassles may prove to be too much.

“When you talk about due diligence that takes nine, twelve or fifteen months to get approvals, that discourages development,” notes Donald Smith, CEO of the RIDC. “Everybody should be looking for high 12 DEVELOPINGPITTSBURGH

| Spring 2013

F E A T U R E quality p ro j e c t s b u t w h e n y o u g e t a high q u a l i t y p ro j e c t [ re g u l a t o r s ] should d o e v e r y t h i ng t h e y c a n t o expedi t e t h e p ro c e s s . ” Smith m a k e s t h e p oi n t t h a t c o rporatio n s a re n ’t m ak i n g d e c i s i o n s lightly, c e r t a i n l y n o t i n t h e e c o nomic c o n d i t i o n s o f t h e l a s t f e w years, a n d t h a t o n c e a d e c i s i o n to pro c e e d w i t h a pro j e c t i s m a d e the co m p a n i e s d o n ’t w a n t t o w a i t anothe r y e a r w a i t i n g t o h a v e a p l a n approv e d . H e a d v o ca t e s f o r a f a i r and pre d i c t a b l e re g u l a t o r y p ro c e s s so dev e l o p e r s k n o w e x a c t l y w h a t can be e x p e c t e d w h e n t h e y s t a r t down a p ro j e c t . “ I n v e s t m e n t c a p i t a l wants a c o n s i s t e n t , p re d i c t a b l e path,” h e s a y s .

One o f t h e h a l l m a r k s o f t h i s n e w era in P i t t s b u r g h ’s re a l e s t a t e h i s tory is t h a t m a n y o f t h e i n d u s t r i e s and ca p i t a l t h a t a re d r i v i n g d e v e l opmen t a re c o m i n g f ro m o u t o f the reg i o n . I n m o s t p a r t s o f t h e

c o u n t r y – and certainly in the parts f ro m w hich the oil and gas industry i s c o m i n g – the process of getting a p p ro v a ls to build is much more s t re a m l i ned. Moving in that direc t i o n a t any level would signal to t h o s e b usinesses looking at West e r n PA t hat there was a business - f r i e n d l y culture.

“Ever ybody should be looking for high quality projects but when you get a high quality project [regulators] should do ever ything they can to expedite the process.”

T H E C U LT U R E O F S U C C E S S There’s little question but that a change in attitude accompanied the improvement in the economic fortunes of the region. I t is not a bad thing to shift from an attitude that expects the other shoe to drop to one that is looking for the next good thing to happen. Of course, the inherent danger in that is com placency.

“Our corporate community has been so positive for us. That has to continue and I think it will, but we still have to be attractive to businesses,” says Duke King sley. “We benefitted from everyone saying Pittsburgh is on the upswing and we have to be careful to keep that up.”

For certain there is little that re sembles complacency wi th regard to the biggest opportunity in front of the region. The announcement

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F E A T U R E A shift in population trend is showing a net increase in population. A trend that includes a long-term trend towards a younger average age. Source: Pittsburgh Regional Alliance.

public relations. For Pittsburgh to continue to be a ‘top ten’ city, systemic changes will be required in a number of our institutions. Some of these changes can be driven by business or civic leaders but others, like changing the culture of elected gover nment, will have to be part of an American cultural change. It may seem beyond the call of duty for the average citizen of Wester n PA to lead a national movement but the economic opportunity in front of our region creates that chance. of a pre f e r re d c r a c k e r s i t e b y S h e l l was tr u m p e t e d a ro u n d t h e g l o b e but reg i o n a l o ff i c i a l s h a v e c o n tinued t o w o r k t o a n s w e r S h e l l ’s questio n s a n d c o n c e r n s . M o s t l e a ders exp e c t t h e p ro j e c t t o b e b u i l t in Mon a c a b u t t h e w o r k t o c l o s e the de a l i s o n g o i n g . T h e o i l a n d gas ind u s t r y i s s t i l l i n t h e d i s c o very sta g e s a b o u t t h e s h a l e f o r m ations i n o u r re g i o n . S o m e o f t h a t discove r y i s g e o l o g i c a l b u t s o m e of the f e e l i n g o u t i s t o e n s u re t h a t compa n i e s l a n d w h e re i t ’s b e s t f o r them t o d o b u s i n e s s .

“One of the issues we must address as a region is encouraging the City of Pittsburgh to rescind its ban on natural gas drilling. This anti-gas position is harmful to our regional attraction efforts and has the potential to discourage new energy company relocations and job growth,” Kotula says. “And while it is correct that our regional economic results are encouraging, the true economic growth is occurring in counties that have embraced the energy industry such as Washington, Greene and Butler. However, make no mistake, we are now competing with Ohio’s Utica Shale and we must convince the City to also welcome the jobs, business opportunities and economic growth the natural gas industry is offering our region”

Steve Guy is concer ned about the impression outsiders get about the current debate from taxing nonprofit organizations.

“We need an appropriate resolution for some of our largest corporate citizens with regard to their nonprofit status. The negative PR hurts us,” he says. “I can’t say which outcome is right but a definitive resolution is necessarily better than saber rattling from both sides in the press.”

Bill Hunt was reminded how important the projection of enthusiasm was when he traveled around the U.S. as NAIOP Corporate chairman.

“In Nashville it was actually their politicians. Everyone said they loved the political leaders, how they seemed to be everywhere,” he says.

“The developers said the politicians were all about growth but at the same time they do the right thing for the community and environment. People were saying that made them want to go to work.”

“I still think we are not the greatest ambassadors of our region. I think that is important to companies that are looking at a city – how enthusiastic the residents are about living there,” continues Hunt.

Of course, a culture of success is about more than attitude and

14 DEVELOPINGPITTSBURGH

| Spring 2013

Don Smith, the RIDC’s C EO, thinks that public policy has been focused on the wrong issues. “There is no growth coalition at the state, fed eral or local level. The debate has been about fiscal problems and the like but it’s not about how to solve our economic growth problem,” he says. “The focus should be on creating conditions conducive to a better business climate. It’s an investment problem not a consump tion problem.”

Smith suggests that the debate should be on improving the tax and regulatory environment, education and training for workforce. While he expects that funds will still have to be available to create opportunities his belief is that the long-term retur n will come from the better standard of living that results from investing in the people.

Attracting and training a skilled workforce is another problem that is national rather than local, as is one of the solutions: foreign immigration. Obtaining an H1B visa is nearly impossible for workers with the kinds of technical skills in construction or manufacturing, for example, especially since unemployment is still high in the U. S. Demographics tell us that the need for more skilled workers will be upon us sooner than the public thinks – certainly in less than a decade – but the political

F E A T U R E climate is not conducive to anticipating that need.

Another workforce-related issue is the right to work. Nearly half the states in the U.S. have laws that protect a worker’s right to be employed without joining a union. In January, six different PA legislators introduced laws that would create a right-to-work environment. Gov. Corbett has said in past that he would sign such legislation that passes but it is still unlikely that he will get the chance. Both sides of the argument make the case that they are protecting workers’ rights and the debate will stir emotions on both sides.

For many businesses outside Pennsylvania, the right to work legislation is one of the boxes that must be checked before they will consider a location. The subject is difficult for economic development leaders in Pittsburgh because they are charged with making the region as competitive as possible but union leadership has also been a helpful partner in the region’s turnaround.

Changing the environment for taxation is not necessarily a national issue, however. As companies evaluate locations, the corporate and business taxes play a big role in the final decision. PA’s corporate taxes have long been a competitive disadvantage, even though few companies pay the full tax rate. Many of the states that compete for employers with PA have tax structures based on consumption or usage rather than income. For businesses, this seems fairer since it taxes them more proportionally to the public resources they consume. This means higher sales and excise taxes, highway tolls or gas taxes. The latter is especially appealing for Pennsylvania, since it would encourage the use of natural gas instead of oil.

States with lower income tax structures do better at attracting new employers. That’s a reality that should keep legislators motivated while they consider revamping Pennsylvania’s revenue sources.

The $900 million mixed-use Almono development is planned to be the next live/work/play project along the riverfronts of Hazelwood.

NEXT SOUTHPOINTE If you ask 50 economic development or real estate executives what the region needs most, don’t be surprised if most of them say the same thing: the next Southpointe.

“Thank God we had Southpointe to absorb all the demand when it came,” says Peart. While he doesn’t think the natural gas industry would have avoided the region without Southpointe’s capacity, Peart says, “I don’t think we would have seen all the suburban office deals that we’ve had without Southpointe.”

When asked what project or submarket could become the next landing place for new businesses Peart cited several opportunities.

“The Almono site I think is a huge opportunity for the region,” he says. The RIDC project is a 178-acre planned development along Second Avenue and the Monongahela River in Hazelwood. Its adjacency to Oakland creates exciting potential for research and technology expansion but its mixed-use master plan is what Peart referred to. “It offers a live/work environment. That’s sort of the next wave for Pittsburgh.”

Another area with lots of land and great access to transportation is the Pittsburgh Inter national Air-

port. There are almost 10,000 acres of airport-controlled and private sites that are within a mile or so of the I-376 interstate connection.

Exploration of the shale formations is moving in that direction, whether it is in Ohio or northwest of Pittsburgh. The Shell cracker and the polyethylene-fed industries that will follow will be accessible to I-376 just ten minutes or so from the airport and the recentlyannounced Souther n Connector will complete the connection from the airport/I-376 to Southpointe.

The drawback for the airport submarket is that the biggest chunk of land there is subject to Federal Aviation Administration rules, the most restrictive of which is that the land controlled by Allegheny County must be leased not sold.

For the oil and gas industry, this is counter-cultural. As time goes on, the advantages of the location will probably outweigh the desire to own land for new businesses. In the meantime, the FAA rules should be a stimulus for the private developments already underway, like Chapman Westport, Findlay Westport and Pittsburgh Inter national Business Park.

One other alter native to the large suburban development is the wise investment in infrastructure that promotes the development of unwww.developingpittsburgh.com

15

F E A T U R E derutilized land nearer to the city’s core. De Peart considers that infrastructure planning to be one of the keys to continued prosperity.

“It’s easy to lose sight of the importance of transportation infrastructure. If we can get a federal and state transportation bill and invest well, I think there is a better opportunity to find the next Southpointe,” he says. “The transportation issue right now is that we’re at capacity for infrastructure. I think the region has to look at transitoriented development. We have a fixed system but we don’t take advantage of it. That has to inform our planning process because there are some areas that really need new investment.”

The focus on transit-oriented development would be especially important to communities that are along historically active corridors at

the edge of the City of Pittsburgh.

These sites – like Route 51, the Etna-Millvale-Sharpsburg area, or McKees Rocks – have transit infrastructure other than roads and are within 10-15 minutes from Downtown. Most of these sites also grew originally because of the access to industry and would be areas of infill between town and suburban markets that are currently growing.

Most would also be well-suited for new manufacturing or transportation that supports the new industries.

For all the talk of new urban planning and culture change, it is the new industries that represent the game-changing potential. The region may well be sitting at one of those intersections of opportunity and preparation that happen only rarely, but have happened in Wester n PA a few times before. No matter how poorly or well we have managed the

opportunities over the years, the natural advantages of the Pittsburgh region have ultimately won the day. The rivers, access to water and labor and abundant energy made the region attractive. Those assets, especially the latter, are still bolstering the regional balance sheet.

Dean Barber, president/CEO of Barber Advisors was one of the experts who toured Pittsburgh as part of the Developers’ Showcase. He looked at the region as having an historical opportunity to provide companies a great economic environment and a unique take on energy independence.

“The idea of locating on a site and being energy independent because you can actually tap into the gas wells on your property, that’s not so wild a dream,” he said. “It could happen. It could actually happen in Pittsburgh.” DP

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Three projects.

Two developers.

One contractor.

Carl Belli 412.464.3006 Cranberry Business Park - Cranberry Township, PA Chaska Property Advisors

North Shore Place I and II - Pittsburgh, PA Continental Real Estate Companies

Pittsburgh International Business Park - Moon Township, PA Continental/Chaska, LLC.

Development Project

The finished exterior of the ServiceLink buildings (rendering by WTW Architects)

Pittsburgh Inter national Business Park

L

ike many developers, the partners in the Pittsburgh Inter national Business Park have had difficulty getting a spec building started, although not for the reasons you may think.

When Continental Real Estate Companies and Chaska Properties signed an agreement to develop the 40 acres along Cherrington Parkway Extension into a six-building office complex of roughly 350,000 square

feet they also agreed to get a first building underway in 2012. On the way to planning the 53,000 square foot spec building a funny thing happened: they signed a lease for two buildings of that size with loan service company, ServiceLink. By November of 2012, the Building 100 and 110 were under construction and the master plan was already in need of an update.

Pittsburgh Inter national Business Park (PIT Business Park) is the culmination of several long-range public policy projects and the work of public agencies at the local, regional and state levels. The project is an example of public investment in a site that pays taxpayers back with the fruits of private development.

The development is one of several that have been offshoots of the Allegheny County Airport Author-

ity’s e ff o r t s t o c o n v e r t a s m u c h o f t h e 1 0 , 0 0 0 a c re s s u r ro u n d i n g t h e airport to private, tax-generating use. In 2004, the Authority completed a master plan that identified the most likely sites for develo p m e n t a n d c re a t e d a h i e r a rc h y o f opportunities for public support.

Governor Rendell was still early in his first term and had also identified opportunities for public investment that would optimize the re t u r n i n n e w j o b s . A m o n g t h o s e was the ‘Business in Our Sites’ p ro g r a m , w h i c h a i m e d t o s u p p o r t re g i o n a l d e v e l o p m e n t o f p a d - re a d y sites with high likelihood of attracting developers. As it turned out a couple of public authorities h a d a s i t e i n m i n d i n M o o n To w n ship.

“We looked at all the sites that were developable at the airport and

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19

liked the Cherrington site the best.

At the same time Moon Township came to us and said that they would really like to see the Cherrington site move ahead,” remembers Randy Forister, senior director of development for the Airport Authority. “The Moon Township Transit Authority (MTA) indicated that it was willing to fund work that could get the site ready. Our feeling was that if the community is behind this, let’s see what we can do in Harrisburg.”

The site that was attracting interest was land that lay between Ewing Road and the end of Cherrington Parkway, just southeast of the Eaton

20 DEVELOPINGPITTSBURGH

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“The flexibility is the important thing about the design. The buildings are ver y amenable to different utilization, be that light manufacturing or all office,” notes Br yant Robey, partner at WT W Architects.

Corporation headquarters. The land had been used as a coal mine in past and the topography wasn’t conducive to development. To make the site attractive, the plan was to extend Cherrington Parkway south to Ewing Road and undertake the grading and remediation needed on a brownfield. The price tag for the work was $14 million and would require the coordination of a multitude of agencies.

The Airport Authority and the MTA entered into an agreement to proceed with the work, which meant lining up funds from the county and state that would cover construc-

tion. Funding came from the Allegheny County Redevelopment Authority, six million in loans and grants from the state through the Airport Authority, two million in state loans through the MTA and $2.5 million invested by the MTA’s capital funding and Moon Township respectively. The Airport Authority managed the contracting and oversaw the construction, which wrapped up in September 2008, just as the financial crisis was breaking.

Another developer planned several multi-tenant office buildings at the site, hoping to capitalize on the location and the number of corporate users in the market. The market was softening in 2008, however, and a severe economic chill eventually scuttled the project.

on the North Shore. The conversation was along the lines of we’re in the middle of this recession so how are we all going to make a living next year,” remembers Ford, who is president of Continental Real Estate Companies. “I said we ought to find someplace else to build Cranberry Business Park.”

The product at Cranberry Business Park has a number of features that make it different from the traditional office product. One differentiating factor is the generous parking, with five or six spaces per thousand square feet. The buildings have twelve- to sixteen-foot high windows that create lots of natural light and open floor plans that allow for great flexibility in layout.

There are no elevators or central core to reduce the usable space in the building or to add common area maintenance. Tenant spaces each have their own ground-level entrance for which they can control secure access.

foot. Because the tenants’ access, restrooms and loading/storage areas are all within the leasehold, there are no common areas. Useable space and rentable space are the same.

“The flexibility is the important thing about the design. The buildings are very amenable to different utilization, be that light manufacturing or all office,” notes Bryant Robey, partner at WTW Architects.

While the buildings are from a similar concept, Robey points out that the team works at making improvements on each project. “We have lessons lear ned meetings after each job that are lively and the discussion can get pretty spirited but we have been able to use those meetings to make a better building.”

Putting the two developers together wasn’t a tough sell. “I talked with Barry about being our partner in [Cranberry] but they were busy with the Waterfront, so I’ve known him

By 2011, business conditions had recovered in Wester n Pennsylvania. The gas industry – which was only arriving when plans for the site were announced – was now entrenched and beginning to expand to the airport corridor. Vacancy rates were falling with no new construction planned. Late in the year the airport authority’s marketing of its sites succeeded in attracting new interest.

“We held a tour for developers. Barry Ford and his people were there – Dick Donley may have been too – and a few days later Barry called me to say that they had a concept that might work on the site and could we talk,” Forister recounts.

The concept that Ford had in mind was single-story flex office buildings similar to the ones developed

by Chaska Properties at Cranberry Business Park. By coincidence, Ford and Chaska’s Donley had been in discussions about working together for some time before the site tour took place.

“I asked Dick to join Jason and I and several other business friends for dinner at one of our buildings

(From left) Mike Hudec and Barry Ford from Continental Real Estate Companies with Dick and David Donley from Chaska Property Advisors.

Construction is brick and steel, with a matching concrete block on the back of the buildings. The front elevation is broken up with EIFScovered entrances and canopies.

The windows are set in 6’4” openings to allow for door sets to be installed instead of glazing. The shell building is able to be delivered for approximately $65 per square foot.

Depending on the tenant’s build out and parking requirements, rents are between $15.50 and $17 per square

and Continental for a number of years,” Donley says. “And then we ended up using Continental Building Systems to build the buildings in Cranberry. They are really good people to work with.” He says that Jason Stewart was the final piece of the puzzle in common. “Barry has been using Jason for their office space for years and I’ve used Jason for all our flex space so we all knew each other very well.”

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Stewart was aware of the Cherrington Parkway site by the airport and he really liked it. The site was a mile or less from two interchanges on what is now called I-376, with access at Thor n Run Road and Ewing Road exits on the Parkway West.

He also felt that the flex office had great advantages in the airport corridor.

“One of the things about the Parkway West is that it is so deep with corporate users – where do you start - with Bayer, Thermo Fisher, Dick’s, Cigna, GlaxoSmithKline,” notes Stewart. “The Parkway West is the biggest suburban sub-market but it’s seen far less new construction than Cranberry or Southpointe. You have the biggest numbers of users working in an older product. The fact that it’s a 2013 product in a market with 1980’s buildings is a big advantage.”

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22 DEVELOPINGPITTSBURGH

| Spring 2013

“The theory that we all bought into was that the airport market is the largest suburban market and with 8 million square feet of conventional office product there was no way we couldn’t lease up 50,000 square feet,” says Donley. “It seemed to us that we had a relevant part of the market and the opportunity to do a large enough park that it could be something special. There’s enough latent demand in the market that we can land tenants who want the convenience of a single-story moder n office.”

Stewart believes the opportunity to move into single-story sole tenant buildings – property types that varied greatly from the multi-story, multi-tenant offices they were in – was attractive to ServiceLink. He says that having that kind of unique new product in the Parkway West market was a big factor but not the only factor.

“The other advantage is Cranberry Business Park,” he explains. “The idea of single-story, no common area add on, full control of utilities looks good on paper, but the fact that we could take them to seven existing buildings was very helpful. When we started in Cranberry it was more a case of ‘trust us’.”

Despite their mutual interest in the project and their belief that the one-story flex building was the right product, the team would not have come together without some help from Donley’s family.

“My wife didn’t want me to get involved in another project unless one of our children was involved to take on some of the work, so the day before we needed to pull the trigger I was going to tell Barry that I was happy to help them with the product but that I couldn’t be their partner,” he recalls. “My son David called me that day from Florida to say that he and his wife really wanted to move back to Pittsburgh. I said, do you need a job? He said yes so I said great, we can do this deal now!”

For several reasons the planning stage of the project was compressed.

Of course, the most pressing of the factors was the successful pre-leasing of the ServiceLink buildings, but the project was on a fast track from the start.

W ith Continental Real Estate as one of the development partners, construction was going to be done by their sister business Continental Building Systems, which had more than a decade of experience working with the principals involved in the project. The partners also brought in WTW Architects and engineers from Herbert Rowland & Grubic, both of which had designed the Cranberry Business Park that served as the inspiration for the PIT Business Park.

Matt Curtis, vice president of construction for Continental says that the familiarity made handling the accelerated planning less difficult.

“We did the first building with Dick from a sketch off a napkin as a design/build and we’ve treated them all as design/build projects,” says Curtis. Even though WTW develops a complete set of documents before construction Curtis says the design/ build mentality and approach lets the team skip a lot of intermediary steps that would be needed for a new client. “It helps that these are fairly economical buildings to build.

They are attractive and well built but there’s nothing very complicated about the buildings.”

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PIT Business Park represented change for Continental in a couple of ways.

For Ford, the product was a departure from the office product he was accustomed to developing.

“It really is a new product type for me personally. Of course, [Continental CEO] Frank Kass started developing 30 years ago with this same type of property in Columbus,” he explains. “I watched our construction group put the buildings together for seven or eight years and watched Dick figure the product out to the point where it really works well in the market.”

The more significant shift was in the speculative nature of the project. Continental prefers not to build spec – in fact they had done no spec office development in Pittsburgh prior to this – but Ford says they had a higher level of comfort because of their familiarity with this flex office concept as a contractor. Plus, Ford says, their partner was entirely comfortable doing spec development.

“Dick always says he can’t lease what he doesn’t have.”

Of course, in this case that adage tur ned out to be untrue. ServiceLink had been in the market for more and better space for a couple of years.

They wanted more efficient space and a bigger parking field that made a single-story layout ideal – although they didn’t necessarily know it at the time. The flexibility of the PIT Business Park design gave them the chance to have about ten percent of their space as mail room/storage, with both loading dock and drivein dock access. The open floor plan that put all of their people on one level also improved their work flow and productivity. Having the existing park in Cranberry was a big advantage, as ServiceLink was able to touch and feel the product there, and make changes to customize the space for their specific needs.

In some ways this project was the building they didn’t know they were looking for; however, there was one issue that was a potential deal breaker. ServiceLink’s corporate real estate policy required that they sign a five year lease, a condition with which the developers weren’t comfortable.

“We had a tenant that had a corporate policy of not entering into leases of longer than five years for a number of reasons that made sense for their business but we didn’t want to have two buildings and 100,000 square feet come due on the same date,” explains Donley. “What we did was approach them and say how about if we do a four-year lease on one building and a six-year lease on the other. If ServiceLink decided not to renew that would allow us to have only 50,000

The PIT Business Park design allows for open floor plans with lots of natural light.

square feet on the market and two more years to market the second building before that lease expired.”

The creative solution was in line with the spirit of ServiceLink’s policy. The staggered leases were accepted as proposed.

PIT Business Park is off to a great start. Not only does the ServiceLink lease effectively double the space that was planned to be under construction by now, it has also reduced the speculative nature of the project, although Jason Stewart hastens to remind you that Buildings 100 and 110 were moving along towards 2012 construction without the ServiceLink deal.

“They effectively did go spec to get ServiceLink in the first place. If they had not already invested heavily for services like the engineering, entitlements and approvals to do in nine months what often takes eighteen, there may not have been a deal,” he says. “Randy Forister went out of his way to make that happen. He went outside his role at the Airport Authority to smooth the way with Moon Township.”

Forister says his motives were both idealistic and practical.

“The reality is we’re a member of the community too and we want to see Moon Township thrive and do well,” he says. “We’re also a public entity and are like any other public entity struggling for funding. We converted a property that was a brownfield into land that is generating revenue for the Airport and tax revenues for the Township.”

As the plan for PIT Business Park is revised and the next building is planned, interest in the park remains high and the possibility exists that another single-tenant user may snatch up the building prior to construction. The development partners are resolute about moving ahead with a third building, with or without a tenant.

“Jason is shaking the bushes awful hard but we’re confident enough that we will move forward this year,” says Barry Ford. “I hope to have something in place before we build but we’re pressing ahead either way.”

Dick Donley chuckles at the irony of their fortunes thus far. “We’re trying to build a spec building there but we may never be able to,” he jokes. DP

PROJECT TEAM

Continental Real Estate Companies........................... Co-Developer Chaska Property Advisors........................................... Co-Developer Continental Building Systems........................... General Contractor Jones Lang LaSalle, Jason Stewart........................... Leasing Agent WTW Architects.................................................................. Architect NEXT Architecture.................................... Interior Design Consultant Herbert Rowland & Grubic......................................... Civil Engineer Dollar Bank........................................................................... Lender

www.developingpittsburgh.com

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Developer Profile

Chapman Properties

T

here aren’t many commercial real estate developers who can look back fondly at the last five years. The financial crisis and resultant recession made business conditions for development very difficult. For Steve Thomas, the market wasn’t particularly kind during that period, yet he is upbeat and proud about the course that his company, Chapman Properties took during that period.

Just prior to the downtur n, Chapman acquired two properties that were to mark the launch of the next

26 DEVELOPINGPITTSBURGH

| Spring 2013

A rendering of the Chapman Westport project.

phase of the company’s expansion.

Thomas explains that both deals were leveraged, and the recession pretty well killed any opportunity to develop the projects on the timetable that was planned.

Instead of spinning a tale of gloom and bad luck, Thomas is clear that the fortunes of Chapman Properties blossomed because of its most important assets: its people.

“This business started to take off in the way we function and interact about five years ago, and has accelerated and been clicking on all cylinders since then,” he says. “During

a difficult period, we were still able to progress and grow, and that had everything to do with our people.

In terms of efficiency, synergy and how we’re positioned for the next development we’re in a far superior position than we ever were before.”

Thomas is particularly effusive in his praise for key executives Tony Rosenberger, vice president of operations, and Kevin W ithers, Chapman’s chief financial officer, who helped set the tone for a more customer-focused approach. He’s also clear in explaining that the current trajectory of Chapman Proper-

ties comes from everyone on staff pulling in the same direction.

He describes the work atmosphere by using the F-word: Fun. Chapman Properties has evolved over the course of the last three decades. Like many Pittsburgh-based developers, Chapman’s story is also the story of its chief executive.

And Thomas’ story has a few twists and tur ns, although the roots of his business go very deep.

“I was always fascinated with real estate. When I was 16 years old I borrowed $500 from my grandmother (my parents wouldn’t lend it to me) and bought a piece of R-2 land with two buddies in Cardiff, Califor nia near where we used to surf,” Thomas says. “We put $1,500 down against a $13,000 price, and exactly twenty years later to the day we sold the property for $260,000.”

Getting a 20-bagger on his first deal should have set the course for his career path but Thomas instead went on to college and graduate school before accepting positions in marketing with J. Walter Thompson and, subsequently, Seagrams in New York. On his honeymoon in Greece he had a few dinners that would bring him back to his interest in real estate.

“A buddy of mine from grad school was in Athens working for General Motors selling heavy equipment and he had a couple of meals with my new bride and me,” Thomas remembers. “He told me that he was leaving the business there to move to Los Angeles to join Coldwell Banker, then the largest commercial real estate company in the world.

The Chapman Properties management team includes (from left) Steve Thomas, Tony Rosenberger and Kevin Withers.

Another buddy of mine from college showed me a big commission check that came from just one real estate deal. I decided I was in the wrong business.”

After marrying in 1973, Thomas moved back to Califor nia to find his fortune in the commercial real estate business, joining Coldwell Banker as an investment property broker.

Chapman Evans redeveloped several older buildings into office and retail properties, built a strip center and profitably improved and flipped a number of residential properties. Thomas describes that period in LA as especially heady times as he and his wife, Judith, were becoming established and starting their family. At the same time they were maintaining ties to Judith’s hometown of Pittsburgh. Her father was Joe Mulach, owner of Mulach Steel.

According to Thomas, his father-inlaw persisted for a decade in his attempts to attract them to Pittsburgh to help transition his business. In 1987, the Thomas’s made the commitment to move back.

“Back then with Coldwell it was kind of “all in” if you were a broker. I got a small salary while I was being trained, but then went on a $400/month draw after leaving a $40,000 a year job in New York.

My wife wondered if she had married the wrong guy,” Thomas jokes.

“My first big deal took 14 months.

I made nothing for over a year and then got several big checks. I was solidly committed to the business after that.”

For the next year, Thomas commuted between Los Angeles and Pittsburgh, winding down projects of his Califor nia development business while taking on the management of a steel fabricating and design/build parking garage business. Mulach wanted to find a buyer for Mulach Steel but the market was difficult for their businesses. Many of their projects weren’t making money and the company would eventually shut down operations. The upside for Thomas was that he had the chance to work with the assets of Mulach Steel, one of which was Leetsdale Industrial Park.

After a decade with Coldwell Banker, Thomas formed his own development company, Chapman Evans Company in Beverly Hills. He had done well as a broker, but says “I was working with a number of successful developers who were doing really well, so I thought why not try it myself.”

The property was owned 50/50 by Mulach Steel and the principals of Turret Steel. Leetsdale Industrial Park consisted of 130 acres and one million square feet of buildings that had previous lives as a steel processing center for several companies, eventually ending up in the hands of Bethlehem Steel. During

www.developingpittsburgh.com

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ing the former American Bridge and Armco Pipe mills in Ambridge. Tony Rosenberger was focused on making former industrial buildings attractive for small tenants who were often startups. Mulach thought Rosenberger might have ideas that would allow them to get more out of the Leetsdale property. Rosenberger saw the massive structures’ potential and hit it off with Mulach. “Joe was a card, a real character and we fell in love immediately,” he jokes. “So whenever he had something to fix or update he called me.”

their ownership, Bethlehem Steel built a 360,000 square foot building as part of an initiative to compete with American Bridge. They shuttered that business after fifteen years.

Just before Thomas moved to Pittsburgh, Joe Mulach had reached out to a young industrial contractor who was having success redevelop-

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“The demand for Class A warehouses was much greater than most people realized ...

For the next decade, Rosenberger’s company worked to renovate pieces of Leetsdale Industrial Park. Thomas was impressed with Rosenberger’s work ethic, optimism and steady stream of ideas for improving the property. He was also impressed with the opportunities that the property presented. After arranging to buy out the Turret Steel interests in 1998, Thomas began a program of development over the

Page 1

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next decade that would fill a market demand that was going unmet.

“The d e m a n d f o r C la s s A w a re houses w a s m u c h g re a t e r t h a n m o s t people re a l i z e d , b e c a u s e t h e m a j o rity of t h e re g i o n ’s i n v e n t o r y w a s functio n a l l y o b s o l e te , ” h e e x p l a i n s .

“Class A v a c a n c y r a t e s w e re l o w, and p e o p l e w h o c a m e t o l o o k a t this m a r k e t f o r m o d e r n w a re h o u s e and m a n u f a c t u r i n g s p a c e o f t e n couldn ’t f i n d w h a t t h e y n e e d e d a n d went e l s e w h e re . ” Those f i r s t f e w b u i l d i n g s w e re d o n e as spe c p ro j e c t s a n d t h e m a r k e t reward e d C h a p m a n a s c o m p a n i e s signed l e a s e s f o r ro u g h l y 5 0 0 , 0 0 0 square f e e t b e f o re t h e b u i l d i n g s were c o m p l e t e d . D u r i n g a t e n - y e a r period , C h a p m a n d o u b l e d t h e s i z e of Leet s d a l e I n d u s t r i a l P a r k t o o v e r two m i l l i o n s q u a re f e e t , re n o v a t ing all o f t h e o l d e r h e a v y i n d u s t r i a l buildin g s a n d b u i l d i n g ro u g h l y 100,00 0 s q u a re f e e t o f n e w C l a s s A space e v e r y y e a r.

B y 2 0 0 6 , the success of Leetsdale I n d u s t r i al Park presented Chapman w i t h a p roblem: they were running o u t o f i nventory. “ A t t h a t point we were at 90 perc e n t o c c upancy. We had plans to b u i l d o n e more 50,000 square foot b u i l d i n g ” explains Thomas “after w h i c h t here was no further land a v a i l a b l e for development. So we a c q u i re d the 300 acre parcel out a t t h e a irport that became Chapm a n We stport. Of course, we had n o i d e a what was about to happen f ro m 2 0 08 through 2011.”

W h i l e C hapman was running out o f i n v e n tory, Tony Rosenberger was f a c i n g s erious health issues. “I got a v e r y b ad prognosis so I sold my b u s i n e s s and my wife and I decided t o s i m p l ify our lives and cons o l i d a t e our properties,” he says. “ T h e n I got through the health i s s u e s a gainst all odds and Steve called.

“I actually called Tony to see if he could recommend someone for the construction and property man agement position I was trying to fill,” Thomas says. Rosenberger seemed to have had something else in mind. “I only interviewed one guy!”

What Thomas had in mind was a change in culture for Chapman Properties. His business philosophy is that tenants are custo mers first, and that keeping them happy is the best way to ensure ongoing suc cess. The tenant/landlord relation ship can be an adversarial one, where the objective is for one side to make money by squeezing the other side. Thomas believes that serving tenants well and keeping them happy is the best business strategy, and much more productive than constantly having to seek new tenants.

Chapman had always pushed for innovation in their new buildings,

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Upcoming Programs and Events

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29

The new construction at Leetsdale and Westport is Class A, high-bay space.

making t h e m m o re e ff i c i e n t a n d offerin g “ s t a t e o f t h e a r t ” b u i l d i n g feature s . T h o m a s w a n t e d t o m a k e sure Chapman’s attitude towards the customer was the same, including when they were offering something less than Class A product. He was counting on Rosenberger for that.

“The r i g h t p e o p l e w e re h e re . T h e y just ne e d e d t o b e g i v e n s o m e d i re c tion,” e x p l a i n s R o s e n b e r g e r. “ I t h a s a lot t o d o w i t h g e tt i n g o u r o u t s i d e staff to l o o k a t c u s t o m e r s a s t h e people w h o a re p u t t i n g f o o d o n t h e table, n o t a s s o m e o n e w h o i s t h e i r proble m , o r w h o i s a l w a y s b o t h e ring us. We t e a c h o u r p e o p l e t h a t it’s a g o o d t h i n g i f t h e c u s t o m e r ’s toilet b re a k s . I t g i v e s u s a c h a n c e to go o v e r t h e re a n d s e e h o w t h e y are do i n g , t o s e e i f t h e y n e e d a n y thing e l s e . " T h o m a s j o k e s “ I t e l l them t h a t t h i s g u y m a y b e a p a i n i n 30 DEVELOPINGPITTSBURGH

| Spring 2013

t h e n e c k, but he’s our pain in the n e c k . G o give him a hug.”

O n e o f those ‘right people’ was c h i e f f i nancial officer Kevin W ithe r s . H e j oined Chapman in 2001 a f t e r e i ght years with J.J. Gumberg, a n d b ro ught a discipline that the c o m p a n y hadn’t previously had.

D u r i n g his first few years at Chapm a n , W ithers’ controls and financ i a l p ro j ections weren’t being fully i n t e g r a t ed into the business. But b y 2 0 0 7 , Rosenberger and Thomas a g re e d t o implement the neces s a r y c h a nges inter nally to allow e v e r y o n e to get the full benefit of a c o n t ro ls and financial information s y s t e m that keeps the management t e a m o n top of the business. “ K e v i n ’s continual review of our t e n a n t s , building maintenance c o s t s a n d historically supported i n p u t f rom our job costing system

provides us the tools to financially manage all aspects of operations,” says Rosenberger. “Our cash management system gives all of our vendors a comfort level about timely payments. It gives us a clear picture of the current status as well as future planning.”

Having a responsive mai ntenance and management team helps keep tenants in place. While Rosenberger talks about it in terms that may seem idealistic, there is also a practical side to Chapman’s atten tion to service. Management’s be lief that attracting and building for new tenants is much more costly than what it takes to stay ahead of existing tenants’ needs is a philosophy that drives their decisions about new construction as well, right down to landscaping.

“ P e o p l e l i k e t o w o r k i n c o m f o r ta b l e , a t t r a c t i v e , c l e a n e n v i ro n m e n t s , ” s a y s T h o m a s . “ We m a ke a s i g ni f i c a n t i n v e s t m e n t i n l a n d s capi n g a n d p ro p e r t y m a i n t e n a n c e , but i n t h e l o n g r u n i t p a y s f o r i t s e l f. It re a l l y d o e s . ” Comfortable, attractive environments are a big part of the Chapman Westport plan of course. The project will eventually be larger than Leetsdale Industrial Park, with 2.6 million square feet of Class A warehouse, manufacturing, office and retail space planned on a 300-acre site. Chapman Westport lies along I-576, the Findlay Connector, just 3 minutes from the airport, and is situated in a sweet spot for its planned use and the region’s growth.

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“ I t ’s a b e t t e r s i t e t h a n L e e t s d a l e, w i t h g re a t a c c e s s t o t h e a i r p o r t,”

Chapman had always pushed for innovation in their new buildings, making them more efficient and offering “state of the art” building features.

Thoma s s a y s . “ O n e h o t b u t t o n f o r l o g i s t i c s b u sinesses i s t o b e r i g h t o n a n i n t e r s t a t e s o t r u c k drivers do n ’t w a s t e t i m e a n d f u e l w a n d e r i n g a ro u nd local ro a d s . I t ’s h a rd t o f i n d t h a t i n P i t t s b u r g h . " He sees We s t p o r t a s a h u b f o r t h a t p a r t o f t h e re gion.

“It ma y n o t b e c o m e Ty s o n ’s C o r n e r i n m y l i f e t i me, but if P i t t s b u r g h c o n t i n u e s t o g ro w, t h e p l a c e it’s going t o g ro w i s i n a n d a ro u n d t h e a i r p o r t . ” Thoma s a c k n o w l e d g e s t h a t P i t t s b u r g h h a s n o t quite yet ret u r n e d t o a s p e c d e v e l o p m e n t m a r k e t , b ut he expect s t o b e u n d e r c o n s t r u c t i o n o n t h e f i r s t building at C h a p m a n Wes t p o r t l a t e r t h i s y e a r o r i n early 2014. I t i s p l a n n e d a s a t e n - y e a r p ro j e c t , o n e t hat will ta k e T h o m a s i n t o w h a t s h o u l d b e a re t i re ment.

He chu c k l e s w h e n a s k e d w h y h e ’s t a k i n g o n a new challen g e a t t h i s p o i n t .

“I’m a d e a l j u n k i e . T h e re ’s n o d o u b t a b o u t t h a t, but I’m a c a u t i o u s o n e a t t h i s p o i n t . Yo u a s k why I am st i l l d o i n g t h i s a t t h i s s t a g e o f m y c a re e r. As long a s I s t a y h e a l t h y a n d c o n t i n u e t o e n j o y t h e busine s s , I ’ l l b e h e re . T h i s p l a c e a n d t h e s e p e o ple are wh y. We a re re a l l y h a v i n g a l o t o f f u n . ” DP

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Developing Trend

A rendering of the canal’s wider third lane after construction is completed. Source: Vickerman and Associates.

The Expansion of the Panama Canal Will Revolutionize Logistics

F

o r m o re t h a n f i v e y e a r s , c o nstruction has been underway o n t h e e x p a nsion of the Panam a C a n a l i n o rd e r t o a c c o m modat e t h e l a r g e r a n d l a r g e r s h i p s moving g o o d s f ro m t h e P a c i f i c t o the At l a n t i c a n d v i c e v e r s a . T h e projec t i s e x p e c t e d t o c o s t $ 5 . 2 5 billion u p o n c o m p l e t i o n , w h i c h h a s been d e l a y e d u n t i l f a l l 2 0 1 5 . I t h a s only b e e n re c e n t l y, h o w e v e r, t h a t expert s i n l o g i s t i c s h a v e b e e n m a king no i s e a b o u t t h e e ff e c t s o f t h e

e x p a n s i on on transportation and d i s t r i b u tion for regions that are f a r re m oved from Central America, p l a c e s l i ke Pittsburgh.

T h e p ro ject sets up several scenari o s t h a t describe a perfect marriage t h a t w i l l create more than double t h e v o l u me of goods being curre n t l y t r ansported by truck and rail f ro m t h e East Coast ports within a f e w y e a rs. Adding to that incoming f re i g h t i s the yet unknown volume o f s h i p p ing needed to move natural g a s p ro ducts from the Marcellus/ U t i c a f i elds to the Pacific Rim. But a g a i n s t this burgeoning opport u n i t y t here are also factors that c o u l d b l unt the need for infrastruct u re g ro wth and render the canal e x p a n s i on a non-event for the East Coast.

I t ’s h e l p ful to start with a look at w h a t e x perts see as the change in t r a d e f l ow that will result from the i m p ro v e d canal.

The Panama Canal connects the Atlantic and Pacific oceans and is used by as many as 14,000 vessels a year, handling about five percent of the world’s trade. Those ves sels are, by necessity no t the size that move most of today’s freight because the current canal capac ity does not accommodate the state-of-the-art ship, referred to as post-Panamax. Once complete, the expansion project will cut voyage times and costs for these bigger ships. It will open up new trade routes for energy fuels and manu factured goods.

It is the size of the post-Panamax ships that is driving the changes.

According to global shipping expert John V ickerman, demand for cargo moved over water in container ships will grow by 260 percent by 2025 compared to 2009. V irtually all of that growth is coming from Asia and most of the world’s shippers prefer to bypas s the North

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33

Americ a n p o r t s a l t o g e t h e r b e c a u s e they d o n ’t m e e t m o d e r n s t a n d a rd s and are t h e re f o re t o o e x p e n s i v e .

Becaus e o f U . S . d e m a n d , h o w e v e r, global s h i p p i n g s t i l l m o v e s a c t i v e l y to the p o r t s o n t h e We s t C o a s t a n d anothe r s e a c h a n g e i s a m o t i v e f o r making b e t t e r a c c e s s t o t h e E a s t Coast. T h e c o n t i n u e d m a t u r a t i o n o f the ma r k e t s i n t h e s o u t h e a s t e r n U. S., i n c o m b i n a t i o n w i t h t h e o ngoing s p re a d o f t h e m a j o r e a s t e r n and m i d w e s t e r n c i t i e s , i s c re a t i n g a massiv e c o n s u m p t i o n z o n e s t re t c hing fro m A t l a n t a t o C h i c a g o a n d

n o r t h e a st. By 2050, this zone will c o n s u m e more than 60 percent of t h e g o o ds in North America and s h i p p e r s will need to get to the h u b s o f that consumption zone as q u i c k l y as possible, meaning that t h e E a s t Coast ports will still have value.

B e c a u s e of the dim view of North A m e r i c a n ports and the conflicting n e e d f o r shipping access to those m a r k e t s , the gover nment of Panam a re a l i zed that the canal was at r i s k o f l osing its value but that ena b l i n g b etter access could actually

either the Suez Canal or the railroads – which relieve the congested West Coast ports – that increased volume will follow. “Pac ific shippers will want to ram as much cargo through the Panama Canal as possible.”

Those increases may be more strategic to the regional economy than simply the doubled volume that is predicted. Because of the accelerated growth of U. S. manu facturing and agriculture – which is growing at 19 percent annually – there will be much higher volumes

The expanded canal will allow for ships that are more than two-andhalf times the size of today’s vessels.

Source: Vickerman and Associates.

A ccording to global shipping expert John V icker man, demand for cargo moved over water in container ships will grow b y 260 percent by 2025 compared to 2009.

34 DEVELOPINGPITTSBURGH

| Spring 2013

i n c re a s e the volume of trade. The P a n a m a Canal project represents an i n v e s t m ent equal to 16 percent of t h e n a t i on’s GDP. Panama is betting t h a t e n abling transit will attract s h i p p e r s even if the North Americ a n p o r ts aren’t as desirable. The s u c c e s s of that bet holds the key t o t h e l ogistical changes that may f o l l o w. “ T h e i r i nvestment suggests that P a n a m a wants to be the Singapore o f t h e Wester n Hemisphere,” says V i c k e r m an. He points out that if P a n a m a bases its tolls on volume – t h e t o l l structure has not yet been a n n o u n c ed – and there is little or n o c o m petitive price cutting by

of products that originate or run through the Tri-State area. About 55 percent of dry bulk freight like grains and fertilizer currently moves through the Canal but that is expected to grow to 80 percent of all trade. No crude oil and only ten percent of liquid natural gas move through the Canal today but those volumes are estimated to be 42 percent of oil and 90 percent of LNG by as soon as the 2015 opening. The latter opens the door to China and the Pacific Rim for gas producers in the Gulf and in the shale formations that move gas through the Gulf portals.

An eco n o m i c b o o m i s e x p e c t e d for the N o r t h A m e r ic a n p o r t s a n d efforts a re b e i n g m a d e n o w b y these p o r t s . I n o rd e r t o b e re a d y t o accomm o d a t e t h e n e w g e n e r a t i o n of ship s f ro m d a y o n e , t h e P o r t A u thority o f N e w Yo r k a n d N e w J e r s e y is spen d i n g $ 1 b i l l i o n t o r a i s e t h e Bayonn e B r i d g e . A c c o rd i n g t o e s t i mates f ro m t h e U . S . A r m y C o r p s o f Engine e r s , $ 6 b i l l i o n t o $ 8 b i l l i o n a year i n f e d e r a l , l o c a l a n d p r i v a t e money i s b e i n g s p e n t b y U . S . p o r t s to mod e r n i z e .

Since m a n y o f t h e U . S . p o r t s a re already d e e p e n o u g h t o a c c o m modat e t h e p o s t - P a n a m a x s h i p s , the pri n c i p l e c h a n g e s a re f o c u s e d on how t o d e a l w i t h t h e i n f l u x o f additio n a l c a r g o p o s t - P a n a m a x ships w i l l b e c a r r y i n g . T h e P o r t o f Miami i s s p e n d i n g $ 6 0 7 m i l l i o n t o bore tw i n t u n n e l s t h a t w i l l a l l o w for big - r i g t r u c k s t o a v o i d t h e b u s y downt o w n s t re e t s of M i a m i w h e n the tru c k s a re e n t e r i n g a n d l e a v ing the p o r t . I n M a ry l a n d ’s P o r t o f Baltim o re , t h e c u r re n t t u n n e l o u t of the p o r t i s n o t t a l l e n o u g h f o r double - s t a c k e d t r a i n s a n d t h e r a i lroad c o m p a n y, C S X , i s p l a n n i n g o n buildin g a n e w r a i l - t r a n s f e r f a c i lity tha t w i l l a s s i s t d o u b l e - s t a c k e d trains e x i t i n g t h e p o r t . H e re i n Pittsbu r g h , C S X i s c u r re n t l y s p e n d ing mo re t h a n $ 2 0 m i l l i o n f o r a similar t u n n e l r a i s i ng i n S t a t i o n Square a n d i s p re p a r i n g t o b u i l d a $50 m i l l i o n c a r g o t e r m i n a l a l o n g the Oh i o R i v e r.

The $8 4 2 m i l l i o n N a t i o n a l G a t e w a y Project t h a t C S X u n d e r t o o k a l m o s t a deca d e a g o i s a i m e d a t l i n k i n g i t s best ra i l l i n e s t o C h i c a g o f ro m t h e ports o f W i l m i n g t o n N C , N o r f o l k and Ba l t i m o re . T h e G a t e w a y l i n e s will ru n t h ro u g h P i t t s b u r g h . M o re over, a s t h e re a l i t y o f t h e m e r g e d consum p t i o n z o n e s g ro w s c l o s e r i n the ne x t d e c a d e , t h e re i s i n c re a s e d likeliho o d t h a t P i t t s b u r g h w i l l b e valued a s a n i n t e r m e d i a t e l o g i s t i c s hub be t w e e n t h e H a r r i s b u r g a n d Colum b u s p r i m a r y h u b s . I f t h e e xpansio n o f t h e s h a l e g a s e x t r a c t i o n and di s t i l l a t i o n f o l l o w s t h e g a m e plan th e i n d u s t r y h a s s h a re d , t h i s new in l a n d l o g i s t i c s i n f r a s t r u c t u re will ha v e h e i g h t e n e d o r i g i n a t i o n and de s t i n a t i o n d e m a n d i n S o u t hWester n PA .

Global demand for container freight moved by ocean will not wane in anyone’s forecast for the future. Container ship technology is moving towards even larger ships, perhaps dou ble the cur rent capacity again by 2030.

G l o b a l d emand for container f re i g h t moved by ocean will not w a n e i n anyone’s forecast for the f u t u re . Container ship technol o g y i s m oving towards even larger s h i p s , p erhaps double the current c a p a c i t y again by 2030. Moreover, t h e c o s t s of shipping by ocean are e x t re m e ly favorable. Freight costs f o r a s i n gle container are $1,000 h i g h e r b y rail compared to ship.

T h o s e c ost differences grow even m o re w hen freight is moved by t r u c k , roughly 6.7 times that of o c e a n t r ansportation. One of the o t h e r l o gistical considerations of t h e P a n ama Canal widening is a re c o n f i g uration of distribution f a c i l i t i e s to limit the amount of m o v e m e nt from port to destination.

T h e s e d ynamics are working to m a k e C hicago a super-hub, capitali z i n g o n its rail capacity and availa b l e n e arby land. As an example, Wa l M a r t built a 3.4 million square f o o t i m port distribution warehouse a t t h e J oliet, IL rail yards to serve t h e u p p er Midwest. The cost of the n e w b u i l ding was entirely offset b y t h e s avings in moving freight b y t r u c k to multiple warehouses t h ro u g h out the region.

natural gas add to the volume of freight in America’s heartland when the Canal project opens in 2015, the enhanced access to growing global markets – at much cheaper rates – will likely be a competitive stimulus for those b usinesses to grow. And the sheer volume of goods moving through the U. S. ports in the east will create jobs on a large scale.

Ken Simonson is the president of the National Association of Business Economists in 2013 . Also the chief economist for the Associate General Contractors, Simonson had the opportunity to brief the Federal Reserve Board in December 2012 on the impact of the Panama Canal project on domestic construction and the economy. Simonson says the magnitude of the opportunity isn’t lost on the Fed. “The Chairman asked questions that showed he understood the subject and its effects very well,” Simonson remembers.

John V ickerman is less reserved in assessing the opportunities. He presents the case for the widening to be what he calls a “Y 2K event” – Panama decides on higher tolls, railroads cut rates aggre ssively or the Suez reacts competitively – but it’s clear that he believes that the wider Panama Canal will result in much more trade.

“I personally believe the Canal opening will be what leads the U. S. economy into real recovery,” he predicts. DP

T h e e c o nomic ripples go beyond t h e b u s i ness opportunities for new b u i l d i n g s and infrastructure. Re g a rd l e s s of whether or not revital i z e d m a nufacturing, agriculture or

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Eye on the Economy

Y

e a r- e n d a n d J a n u a r y / F e b r uary economic d a t a a re p a i n t i n g a p i c t u re that is slightly more o p t i m i s t i c a b o u t t h e e c o n o m ic reco v e r y s h i f t i n g i n t o a g ro w t h cycle, a t l e a s t i n t h e s e c o n d h a l f of the y e a r. A t t h e m a c ro e c o n o m i c level, h o w e v e r, a f e w p o t e n t i a l pothol e s s t i l l e x i s t t h a t c o u l d p ro v e the op t i m i s m u n f o u n d e d .

Startin g w i t h t h e p o t h o l e s , t h e uneven p a c e o f e m p l o y m e n t g ro w t h and th e c o l l a t e r a l da m a g e f ro m t h e politic a l w r a n g l i n g o v e r t h e b u d g e t pose t h re a t s t o b u s i n e s s e x p a n s i o n that co u l d p u t t h e e c o n o m y b a c k in neu t r a l o r e v e n t r i g g e r a n o t h e r recess i o n . C o r p o r a t e e a r n i n g s a n d small b u s i n e s s g ro w t h c o n t i n u e to be u n d e r p re s s u re f ro m g l o b a l weakn e s s . E u ro p e re m a i n s a w e a k market , w h i c h h u r t s b o t h U . S . a n d Chines e e x p o r t s . T h e C h i n e s e m a rkets sh o u l d re t u r n t o h i g h e r g ro w t h

i n 2 0 1 3 since the Chinese gover nm e n t a n d regulators seem to be re a c t i n g again to growth concer ns i n s t e a d of inflation fears but the o u t l o o k for Euro zone is for more s l u g g i s h ness.

T h e J a n uary employment data is p e r h a p s the best reason for op t i m i s m . Although the estimates o f 1 5 7 , 000 new jobs created in J a n u a r y were slightly lower than e x p e c t e d, it was the final review o f t h e 2 012 data that was the big s t o r y i n the January 30 announcem e n t . E mployers added 335,000 m o re j o bs in 2012 than initially re p o r t e d, boosting the monthly a v e r a g e to 181,000 from a prior e s t i m a t e of 153,000, with surprisi n g f i n d ings for the fourth quarter.

T h e n u mber of new jobs created in D e c e m b er was revised to 196,000 f ro m 1 5 5,000. November’s figure w a s re v i sed to 247,000 — the big g e s t i n c rease in 10 months — from 161,000.

Consistent gains near the levels experienced in 2012 would result in a rosier employment picture than most have forecasted. On average, 150,000 new jobs must be created each month to keep pac e with the growth in population alone. Gus Faucher, vice president and senior macroeconomist at PNC Financial Services, pointed out in his remarks at the NAIOP Pittsburgh symposium in January that it is the ongoing four million job shortfall in employment that is dragging the recovery.

Faucher forecasts that employ ment will grow by 160,000 jobs per month in 2013 and sees the unemployment rate falling modestly to 7.4 percent by year’s end.

The Pittsburgh region's unemploy ment rate remained below the national averages in Jan uary, at 7.2 percent. The January rate was a reversal of the recent upward trend that saw slight increases in unem ployment during 2012. Payroll em ployment in Pittsburgh continued to climb in 2012, reaching a new historical high of 1,180,000 jobs.

There were other bits of data released at the end of January that may have been cause for celebration or gloom but for the unusual circumstances caused by the perceptions of the outcome of the debt limit haggling. Personal income spiked by 2.6 percent in December but the increase is at tributable to the acceleration of dividends paid out prior to the change in tax year. In fact, dividend income alone was reported at a rate that was 34.3 percent higher than November’s. The Chicago Purchasing Manager Index – which intends to monitor manufacturing activity – jumped from 50 to 55.6 in January, but the increase was more likely the response to the pullback in gover nment purchasing and business activity ahead of the ‘fiscal cliff ’ solution.

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| Spring 2013

That d i p i n a c t i v i t y a f t e r N o v e m b e r is also c re d i t e d f o r t h e d e c l i n e i n gross d o m e s t i c p ro d u c t , w h i c h a c tually s h o w e d a 0 . 1 p e rc e n t d e c l i n e in the l a s t q u a r t e r o f 2 0 1 2 , a f t e r growin g 3 . 1 p e rc e n t i n t h e t h i rd quarte r. B e c a u s e o f t h e u n u s u a l declin e i n g o v e r n m e n t a c t i v i t y most o b s e r v e r s w e re re l u c t a n t t o even a c c e p t t h e e s ti m a t e o f d e c l i n e until re v i s i o n s a re d o n e t h i s s p r i n g .

Econo m i s t s s e e t h e d e c l i n e – i f t h a t data p ro v e s t o b e a c c u r a t e – a s unrela t e d t o t h e o v e r a l l e c o n o m i c trend.

What d o e s c o n c e r n e c o n o m i s t s i s the ev e n t u a l o u t c o m e o f t h e b u dget de f i c i t b a t t l e . A s i d e f ro m t h e psycho l o g i c a l i m p a c t t h e u n c e rtainty c a u s e s , t h e re a re a n u m b e r of pot e n t i a l m e a s u re s t h a t c o u l d be tak e n t o s o l v e t h e p ro b l e m t h a t could b e d a m a g i n g – i n t h e s h o r t run – t o t h e e c o n o m y.

a b l e t h an any compromise, part i c u l a r l y since the White House is n o t o ff ering spending cuts that c o n s e r v atives feel are appropriate i n k i n d or magnitude. The decision t o r a i s e the debt limit through May 1 8 h e l p ed avoid the kinds of negat i v e re p ercussions that occurred in A u g u s t 2011, but there was noth i n g i n t hat action that indicated

that a more reasoned debate or easy compromise on the budget deficit and sequestration solution is forthcoming. And in the meantime, there is likely to be the kind of strident positioning from both sides that created the uncertainty among businesses and consumers at year’s end.

W ith 70 percent of the U. S. econo my tied to consumer spending it’s important to look at where the consumer sits in the first quarter of 2013. By virtually all measures, American consumers have worked through the effects of the mort gage crisis and reconciled their personal balance sheets. Debt has been reduced to historical norms.

Home prices have either recovered or more commonly, the necessary measures have been tak en – how ever painful to the homeowner.

And for the near term, consumers appear unlikely to take equity out of their largest hard ass et to fi nance the purchase of consumable or depreciating goods.

The two most watched measures of the consumer are showing a divergence in trend that is one source of optimism about the potential for Graph by Integra Realty Resources.

An exc e l l e n t e x a m pl e o f s u c h measu re s i s t h e c o m p ro m i s e t h a t allowe d C o n g re s s a n d t h e p re s i d e n t to avo i d t h e f i s c a l c l i ff i n J a n uary. Th e i n c o m e t a x i n c re a s e s t h a t were e n a c t e d o n h i g h e r e a r n e r s a re expect e d t o p u t a $ 5 0 b i l l i o n h i t on the t a x p a y e r s ’ w a l l e t s ; h o w e v e r, the bi g g e r t a x i n c re a s e – t h e t w o percen t i n c re a s e i n S o c i a l S e c u r i t y tax – i s p re d i c t e d t o c o s t t a x p a y e r s double t h a t a m o u n t . A l t h o u g h t h e first d a t a o n s p e n d i n g s h o w e d t h a t consu m e r s l a r g e l y s h o o k o ff t h e i n crease , e x p e r t s p re d i c t t h a t s m a l l e r payche c k s w i l l re s u l t i n l e s s s p e n ding du r i n g t h e f i r s t h a l f o f 2 0 1 3 .

What does concer n economists is the eventual outcome of the budget deficit battle. Aside from the psychological impact the uncertainty causes, there are a number of potential measures that could be t aken to solve the problem that could be damaging – in the short r un – to the economy.

Of cou r s e , t h e m o re d a n g e ro u s o u t come f ro m t h e f i s c a l n e g o t i a t i o n s would b e f o r t h e s t e e p b u d g e t c u t s to occ u r i n s t e a d o f a m o re m e a sured a p p ro a c h . T h e s e s o - c a l l e d ‘seque s t e r ’ c u t s w ou l d re s u l t i n short- t e r m j o b l o s s e s a n d u n e xpected d e c l i n e s i n b u s i n e s s re v e n u e that a re c e r t a i n t o c a u s e n e g a t i v e GDP g ro w t h . F i s c a l c o n s e r v a t i v e s may fi n d t h e p a i n f u l m e d i c i n e o f these c u t s m o re p o l i t i c a l l y d e s i r-

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The improved consumer balance sheet is one of several key factors indicating that the long-awaited housing recovery is imminent.

Housing affordability, as measured by the ratio of rent or mortgage payment to household income is at 16 percent, a level not seen since the 1980’s. Interest rates continue to be at all-time low levels. Home values have stabilized and tur ned higher in 2012, according to the Case Shiller Index. And demand for new housing from continued household formations has been pent up since 2007 and the construction of new units has been at a pace that is roughly 50 percent of the formation rate.

“The risk wi th multifamily with two year constr uction schedules is in their exit strategy. [With low rates] the risk is getting a per manent loan when they did a deal based on a 6.5 ca p rate and in 2015 it’s a 7.5 cap rate,” he says. Griffith explains that the arti ficially low rates are disguising potential problems with income. “ You have to maintain a 4.8 percent net operating income growth each year to maintain the same va lue as today in 2017, if you assume that the ca p rate is 7.25 then.”

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| Spring 2013

re c o v ery. Consumer sentiment, w h i c h leads spending, has been t re n d i ng upward since late 2009 a n d h as now pushed past the re a d i ngs at the height of the last b o o m in 2007. Consumer spendi n g , a s measured by real personal e x p e n ditures, has been more v o l a t i l e and less resilient to the l o n g - t erm trend. Spending dipped s t e e p l y around the time of the d e b t l imit deal and downgrading o f U . S. credit in August 2011, o n l y reaching the levels of the e a r l y stages of the recovery in 2 0 1 0 . Personal expenditures re m a i n more than 20 percent lower t h a n the volume at the peak of t h e b oom.

W h a t can you take away from t h i s d ata? The glass half full a n a l y s is is that there is significant ro o m for growth in consumer s p e n d ing. At the moment, pers o n a l expenditures are nearly $2 t r i l l i o n less than in 2007. Some o f t h at decline is due to delevera g i n g and part is due to a steady i n c re a se in savings rate. Those s a v i n gs are the untapped poten t i a l . On the other hand, the trend m a y a lso indicate that a different c o n s u mer has emerged from the re c e s sion, one that will continue t o s a v e a larger share of his/her s a l a r y or continue to reduce debt t o m o re traditional levels.

The conditions for a housing re covery are ripe, which is actually a potential concer n for the continued health of the multi-family market.

Paul Griffith, managing director for Integra Realty Resources in Wex ford, put forth his concer ns about the multi-family market at IRR’s annual V iewpoint presentation at the Rivers Club on January 24. Citing the affordability and the high level of projects in the pipeline – potentially adding 4,000 units to the inventory during the next few years – Griffith raised the possibility that multi-family demand could soften rather quickly. He also raised concer ns about some fu ndamental investment problems.

“The risk with multi-family with two year construction schedules is in their exit strategy. [W ith low rates] the risk is getting a permanent loan when they did a deal based on a 6.5 cap rate and in 2015 it’s a 7.5 cap rate,” he says.

Griffith explains that the artificially low rates are disguising potential problems with income. “You have to maintain a 4.8 percent net operating income growth each year to maintain the same value as today in 2017, if you assume that the cap rate is 7.25 then.”

A commercial property type with investment fundamentals trend ing in the opposite direction is the office building. W ith vacancy rates falling, especially in the key submarket areas, the market for new office product is tight and

the en v i ro n m e n t i s v e r y f a v o r a b l e for ren t i n c re a s e s . I n a d d i t i o n t o spurrin g d e v e l o p m en t p ro j e c t s , the up w a rd t re n d i n re n t s h a s a l s o attract e d t h e a t t e n t i o n o f n a t i o n a l and gl o b a l i n v e s t o r s , l e a d i n g t o higher v o l u m e i n t r a n s a c t i o n s a n d sales p r i c e s t h a t a re w e l l a b o v e t h e norm. T h e s a l e s o f P P G P l a c e a n d 11 Sta n w i x s e t t h e b a r h i g h e r i n 2011 a n d l a s t y e a r ’s l a r g e r c o m m e rcial sa l e s s h o w e d a c o n t i n u a t i o n o f the tre n d , w i t h t h e D e l M o n t e B u i l d ing ch a n g i n g h a n d s f o r $ 1 9 4 . 4 0 / square f o o t a n d t h e E Q T B u i l d i n g trading a t $ 1 5 5 . 6 0 w i t h a g ro u n d lease.

CBRE’s i n c o m i n g m a n a g i n g d i re c t o r Jeffrey A c k e r m a n s a y s t h e i n v e s t o r interes t h a s e v e r y t hi n g t o d o w i t h the tre n d i n re n t s .

“It has b e e n h a rd t o g e t i n s t i t u tional i n v e s t o r s i n t e re s t e d i n t h i s marke t . T h e i r b i g o b j e c t i o n w a s that th e re n t s n e v e r g o u p a n d i f you lo o k a t t h e p e r i o d f ro m 1 9 9 5 to 200 5 t h e re w a s n o g ro w t h i n rent,” h e e x p l a i n s . “ I n s t i t u t i o n a l

i n v e s t o r s need an exit strategy and t h e y a re looking for an inter nal r a t e o f retur n that is in the high d o u b l e digits. When we had stable o c c u p a n cy and stable rents, with t h e o n g oing operating expenses o f t h e b uilding it was hard to get i n t e r n a l retur n or an exit strategy.”

P i t t s b u r gh’s tightening supply m e a n s t he likelihood of rising rents f o r t h e next three-to-five years.

I n t e g r a ’s mid-range forecast was f o r re n t s in Oakland and Downtown t o re a c h the mid-to-high $30’s a n d s u b urban rents to reach as h i g h a s $26/square foot for Class A s p a c e . W ith a suburban office v a c a n c y rate that is the lowest of t h e 6 1 t op U. S. markets, Pittsb u r g h s hould continue to stay on t h e r a d ar of investors from around t h e g l o be.

momentum in employment – especially given the potentia l for a more robust housing recovery – should begin to support better conditions for GDP growth beyond three percent. For the most part, the macroeconomic conditions point to the retur n to growth in 2014, making this coming year a time for identifying key indicators of growth and positioning assets for growth.

For the commercial real estate market in Wester n PA, the economic growth cycle is already underway but the vulnerability to unexpected global events remains, at least until the expected boom from the natural gas downstream industries occurs. The next step towards that reality – the green light from Shell for its cracker plant – is expected in the first part of 2013. DP

G l o b a l weakness, uncertain U. S. p o l i c y d irection and somewhat s m a l l e r consumer paychecks are l i k e l y t o keep the economy from a m a r k e d uptur n during the first s i x m o n ths of 2013. The gathering

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Office Market Update bottomed out at 8.2% which is a decline of 220 basis points from yearend 2011. Certainly the dwindling supply of Class A space and the impact on asking rents speaks to the strength of the re gion. However, this same strength has caused head aches for many tenants looking to renew, expand and/or relocate – primarily those in search of larger blocks of space 25,000 square feet and greater.

Central Business District Maintaining a trend that began a few years ago, the Central Business District (CBD) was once again in the spotlight in 2012.

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ittsburgh 2012 OFFICE Review Named by the B ro o k i n g s I n stitute as one o f o n l y t h re e metros i n t h e n a t i o n t o re c o v e r from t h e G re a t R e c e s s i o n , t h e P i t t s burgh o ff i c e m a r k e t c l o s e d 2 0 1 2 on a p o s i t i v e n o t e . Va c a n c y r a t e s mainta i n e d a d o w n w a rd t re n d , droppi n g 1 5 0 b a s i s p o i n t s f ro m the en d o f 2 0 1 1 re s t i n g a t 1 4 . 1 % ; year-to - d a t e a b s o r p t i o n w a s p o s itive, h i t t i n g a re s p ec t a b l e 6 9 9 , 1 0 7 square f e e t ; w e i g h t e d a s k i n g re n t a l rates c l i m b e d t o a h i s t o r i c a l h i g h of $20 . 3 8 p e r s q u a re f o o t a n d t h e market p l a c e e x p e r i e n c e d a f l u r r y o f proper t y s a l e s .

Class A p ro d u c t c o n t i n u e d t o b re a k record s . We i g h t e d a v e r a g e a s k i n g rental r a t e s re a c h e d a n u n p re c edente d $ 2 3 . 6 3 p e r s q u a re f o o t , up $1. 2 6 f ro m a y e a r a g o . T h i s i s

40 DEVELOPINGPITTSBURGH

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q u i t e a n increase considering the p re v i o u s year-over-year increase w a s a m ere $0.34 per square foot.

Va c a n c y levels for premium space

Development news was plentiful during the year.

PNC Bank was responsible for the last completed office tower in the CBD and contin ued to feed the construction pipeline as it demolished the future site

Class A product continued to break records. Weighted average ask ing rental rates reached an unprecedented $23.63 per square foot, up $1.26 from a year ago. This is quite an increase considering the previous yearover-year increase was a mere $0.34 per square foot.

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of its 8 0 0 , 0 0 0 - s q u a re - f o o t h e a d quarte r s b u i l d i n g . T h i s w i l l b e a n owne r- o c c u p i e d b ui l d i n g t h a t w i l l not ha v e c o m p e t i t i v e s p a c e t o l e a s e to third p a r t y t e n a n t s . H o w e v e r, i t s constr u c t i o n m a y i m p a c t t h e c o mpetitiv e m a r k e t p l a c e a s P N C m a y pull o p e r a t i o n s f ro m l e a s e d s p a c e in sev e r a l s u b m a r k e t s , i n c l u d i n g the C B D . F u r t h e r, P N C p u rc h a s e d the va c a n t 1 2 0 , 0 0 0 - s q u a re - f o o t Lord & Ta y l o r b u i l d i n g w i t h p l a n s to ren o v a t e t h e f o rm e r d e p a r t m e n t store t o h o u s e 8 0 0 P N C e m p l o y e e s .

Acros s t h e s t re e t f ro m t h i s p ro p e r t y, Oxford D e v e l o p m e n t a n n o u n c e d plans t o e i t h e r d e m o l i s h t h e e x i s ting 44 1 S m i t h f i e l d S t re e t b u i l d i n g to ma k e w a y f o r a n e w, 3 3 - s t o r y, 772,0 0 0 - s q u a re - f o o t o ff i c e t o w e r or ren o v a t e t h e e x i s t i n g p ro p e r t y into 1 8 0 , 0 0 0 s q u a re f e e t o f C l a s s A offi c e p ro d u c t . I n M a r k e t S q u a re , Millcr a f t I n d u s t r i e s b e g a n m o v i n g dirt to m a k e w a y f o r T h e G a rd e n s .

The n e w d e v e l o p m e n t w i l l i n c l u d e 120,0 0 0 s q u a re f e e t o f o ff i c e s p a c e , 22,50 0 s q u a re f e e t o f re t a i l a n d a 175-ro o m h o t e l .

Unfor t u n a t e l y, t h e s e n e w p ro j e c t s will do l i t t l e t o a l l e v i a t e t h e c u r-

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The trends for rents and vacancy rate in metro Pittsburgh since the peak of the last cycle.

rent de m a n d f o r C l a s s A p ro d u c t i n the CB D . T h e a v a i l a b i l i t y o f C l a s s A spac e c o n t i n u e d t o s p i r a l d o w nward, w i t h y e a r- e n d 2 0 1 2 v a c a n c y settlin g a t 5 . 6 % - a l e v e l n o t e xperien c e d i n o v e r 3 0 y e a r s . F u rther, w e i g h t e d a s k i n g re n t a l r a t e s spiked , re a c h i n g $ 2 7 . 6 0 p e r s q u a re foot. C o m p a r a t i v e l y, r a t e s c l o s e d 2011 a t $ 2 5 . 9 0 p e r s q u a re f o o t .

Limite d C l a s s A o p p o r t u n i t i e s w i l l push u s e r s t o c o n s i d e r C l a s s B a n d C prod u c t t o s a t i s f y t h e i r i m m e d iate ne e d s . H o w e v e r, w h i l e s p a c e i s plentif u l i n t h e s e p ro d u c t C l a s s e s , tenant s m a y h a v e t o w re s t l e w i t h the as s o c i a t e d c o n s e q u e n c e s re s u l t ing fro m t h e c h a l l e n g e s p l a g u i n g some o f t h e s e p ro p e r t i e s . F u r t h e r, an ant i c i p a t e d re d u c t i o n i n o ff i c e availab i l i t i e s d u e t o u s e re d e v e l o pment i n a f e w o f t h e s e b u i l d i n g s could c re a t e a n o t h e r o b s t a c l e f o r tenant s i n s e a rc h o f l a r g e r b l o c k s of exis t i n g s p a c e i n t h e C B D .

Notab l e t e n a n t l e a s e c o m m i t m e n t s in the C B D i n 2 0 1 2 i n c l u d e d re n e w als by C i t i z e n s B a n k a t T h re e M e l lon Ce n t e r f o r 1 4 1 , 0 0 0 s q u a re f e e t , Koppe r s I n c . f o r 7 0 , 0 0 0 s q u a re f e e t at the K o p p e r s B u i l d i n g a n d E r n s t & Youn g f o r 4 5 , 0 0 0 s q u a re f e e t

42 DEVELOPINGPITTSBURGH

| Spring 2013

a t O n e PPG Place, while Gateway H e a l t h Plan departed USX Tower l e a s i n g 100,000 square feet at Four G a t e w a y Center and Highmark took o c c u p a n cy of 57,248 square feet at 6 P P G P l ace.

I n v e s t o r s tur ned to Pittsburgh o n c e a g ain in 2012 to satisfy their a p p e t i t e, with several sales occurr i n g i n t he CBD. Some of the larger t r a d e s i ncluded the acquisition o f t h e 5 57,559-square-foot Penn Av e n u e Place by Healthcare Trust o f A m e r ica. The property traded f o r $ 9 7 per square foot. Adding t o t h e i r newly established highp ro f i l e CBD portfolio, Highwoods P ro p e r t i es purchased one of the m a r k e t ’s premiere CBD propert i e s – t h e 32-story EQT Tower – for $ 1 6 1 p e r square foot. In the fall o f 2 0 1 1 , Highwoods purchased t h e t ro p hy 1.5 million-square-foot P P G P l a ce complex. Local owner/ d e v e l o p er Elmhurst Group paid $ 7 . 3 5 million or $57 per square f o o t f o r the Fiserv Center building.

P M C P roperty Group scooped the 3 6 1 , 5 7 6 -square-foot Regional En t e r p r i s e Tower, which also included t h e H a r vard Yale Princeton Club a n d a v acant building, for $7 mill i o n . T h ey also acquired the James H . R e e d building for $30 per square f o o t a n d were the winning bidder i n a n a u ction for the distressed

23-story Clark Building, with a bid of $7 million. Characteristic of PMC is the conversion of office properties into a residential or partial residential use. S hould they maintain this business strategy, they could further deplete office inventory while continuing to fuel the CBD housing market.

In the Southside sector of the CBD/ Fringe, the University of Pittsburgh Medical Cent er (UPMC) exercised their option to purchase the 160,000-square-foot Quantum I from the Soffer Organization and Rugby Realty obtained the sevenstory Birmingham Towers through a ‘deed-in-lieu-of-foreclosure’ trans action.

Suburbs While property sales were plentiful in the CBD, the suburban markets were not left out in the cold. 2012 trades included Cranberry Woods Building 4 in the North submarket by CG Net Lease Investors LLC for $307.00 per square foot - the highest sale of the year for an office property; the 207,000-squarefoot Park Place Corporate Center was acquired by USAA Real Estate for $18.2 million in the Parkway West submarket; Starwood Capi tal Group made its debut in the

marke t p l a c e w i t h t h e a c q u i s i t i o n o f the 23 5 , 9 0 2 - s q u a re- f o o t 2 0 0 0 P a r k Lane, a n d R u g b y R e a l t y C o . I n c . , acquire d m o r t g a g e s t o t a l i n g $ 9 . 3 million f o r t w o b u i l d i n g s t o t a l i n g nearly 1 2 0 , 0 0 0 s q u a re f e e t i n P e n n Center We s t Severa l s e g m e n t s o f t h e s u b u r b a n subma r k e t s e x p e r i e n c e d a n i n c re a s e to alre a d y - h i g h o c c u p a n c y l e v e l s during 2 0 1 2 . T h e n o r t h w e s t c o rridor in t h e N o r t h , t h e S o u t h p o i n t e region o f t h e S o u t h a n d t h e O a k land/E a s t - E n d s u b m a r k e t s h e l d t h e i r positio n a s t h e t i g h t e s t l o c a t i o n s i n the Pit t s b u r g h m a r k e t p l a c e . Te n a n t s in searc h o f 1 0 , 0 0 0 s q u a re f e e t o r greate r s e e k i n g q u a l i t y s p a c e a l t e rnative s i n t h e s e m a r k e t s e g m e n t s faced a d u a l i t y o f f e w o p t i o n s and co m p e t i t i o n w i t h o t h e r u sers. Co n v e r s e l y, t e na n t s s e e k i n g occupa n c y i n t h e E a s t s u b m a r k e t were g re e t e d w i t h a n a b u n d a n c e of opp o r t u n i t i e s . Va c a n c y i n t h e East en d e d t h e y e a r a t 2 6 . 5 % over 1 1 p e rc e n t a g e p o i n t s h i g h e r than a n y o t h e r s u b m a r k e t i n t h e marke t p l a c e .

Constr u c t i o n d e l i v e r i e s t h ro u g h out th e s u b u r b s i n 2 0 1 2 o n l y t otaled 1 8 0 , 5 0 0 s q u a re f e e t . M a r k e t absorp t i o n w a s s u c h t h a t h a l f w a s commi t t e d , d o i n g l i t t l e t o a l l eviate t h e d e m a n d f ro m C l a s s A users. S t r i c t l e n d i n g s t a n d a rd s e s tablish e d i n t h e w a k e o f t h e G re a t Recess i o n h a v e m a d e i t n e a r l y imposs i b l e t o f i n a n c e p u re s p e c u lative c o n s t r u c t i o n . H o w e v e r, severa l o w n e r s a n d d e v e l o p e r s i n the mo s t c o n s t r a i n e d s u b m a r k e t s annou n c e d p l a n s t o b r i n g n e w invento r y t o t h e m a r k e t p l a c e ; a l l with s o m e l e v e l o f t e n a n t c o mmitme n t s . C h a s k a Pro p e r t y A d v i sors an d C o n t i n e n t a l R e a l E s t a t e Compa n y b e g a n d e v e l o p m e n t o f Pittsbu r g h I n t e r n a t i o n a l C o r p o r a t e Center – a 3 6 0 , 0 0 0 - s q u a re - f o o t projec t i n t h e P a r k w a y We s t s u b marke t . I n t h e E a s t L i b e r t y c o r r i d o r of the O a k l a n d / E a s t E n d s u b m a rket, Wa l n u t C a p i t a l p l a n s t o b e gin co n s t r u c t i o n o f B a k e r y S q u a re 2.0, a m i x e d u s e p ro j e c t t h a t w i l l include 4 0 0 , 0 0 0 s q u a re f e e t o f office s p a c e t h a t i s e x p e c t e d t o comple t e i n 2 0 1 4 . F u r t h e r, t h e Region a l I n d u s t r i a l D e v e l o p m e n t Corp o f S o u t h w e s t e r n P e n n s y l v a n i a

( R I D C ) , owners of the 178-acre form e r LT V Steel plant in Hazelwood, d i v u l g e d plans to begin infrastruct u re i m provements in the hopes of a t t r a c t i ng developers for housing, l i g h t i n dustrial and office space.

T h e P a r kway West and South sub m a r k e t s were home to the largest s u b u r b a n lease transactions duri n g t h e year. Sizeable transactions i n c l u d e d The W illiams Companies w h o i n k ed a deal for 112,394 s q u a re f eet at Park Place Corpo r a t e C e nter in the Parkway West s u b m a r k et, while Chevron leased 6 6 , 7 1 3 square feet in Building 600 a t C h e r r ington Corporate Center.

A l s o i n this submarket, ServiceLink

Investors tur ned to Pi ttsburgh once again in 2012 to satisf y their appetite, with several sales occur ring in the CBD. Some of the larger trades included the acqu isition of the 557,559-square-foot Penn Avenue Place

by Healthcare Tr ust of America. The property traded for $97 per square foot.

s i g n e d a lease for 106,000 square f e e t a t Pittsburgh Inter national B u s i n e s s Park. ServiceLink will vac a t e t h e ir existing home in Airport O ff i c e P ark and will relocate into t w o 5 3 , 000-square-foot buildings s o m e t i me in the fall of 2013. In t h e S o u thpointe II segment of the S o u t h s ubmarket, Ansys committ e d t o a new 186,000-square-foot h e a d q u arters building, accompan y i n g M ylan who announced the c o n s t r u ction of a 280,000-squaref o o t , 5 - story headquarters building

that is expected to be completed in 2013. Both companies have outgrown their existing buildings in Southpointe I. The impact of unstable economic conditions plaguing the nation over the past few years has been lessvolatile for the Pittsburgh region.

A lack of overbuilding within the competitive office market combined with demand from the energy, healthcare, financial and profes sional services, technology and education sectors have helped the Pittsburgh commercial marketplace endure uncertain times. However, if Pittsburgh is to satisfy demand and foster growth, new product is needed, desperately so in certain segments of the marketplace. There is currently 1.5 million s quare feet of space under construction prompted by the growth of exist ing tenants, with all but 13 percent committed. As tenants vacate their current locations to take occupancy of their newly constructed prem ises, the market may experience some loosening. Still, we anticipate that this space may dissipate rapidly due to continued growth and pent-up demand.

For information about office leasing, contact Gerard McL aughlin, executive managing director at 412/434-1036 or GMcLaughlin@ ngkf.com Pamela Lower y is vice president of research and marketing for the Pittsburgh office of Newmark Grubb Knight Frank. DP

Gerry McLaughlin

www.developingpittsburgh.com

43

Industrial Market Update

A

ctivity in the Pittsburgh Industrial market slowed during the fourth quarter due to p o l i t i c a l u n c e r t a i n t y a n d t h e loomin g f i s c a l c l i ff . F o r t u n a t e l y, vacanc y r a t e s c o n t i n u e d t o d e c l i n e and ab s o r p t i o n h a s re m a i n e d p o s i tive.

For the f u l l y e a r 2 0 1 2 t h e v a c a n c y rate fe l l t o 8 . 2 p e rc e n t , d o w n f ro m 8.9 pe rc e n t a t t h e e n d o f 2 0 1 1 . A s a resu l t , t h e a v e r a g e re n t m o v e d u p

44 DEVELOPINGPITTSBURGH

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t o $ 5 . 2 2/square foot, an increase o f 6 . 5 p ercent from the fourth q u a r t e r of 2011. At the end of 2 0 1 2 t h e total size of the Pittsb u r g h i ndustrial market was 168.3 m i l l i o n square feet, with 13.8 m i l l i o n square feet available for l e a s e . N et absorption for the year w a s 3 8 8 ,068 square feet. Industrial s p a c e t otaling 174,000 square feet w a s d e l i vered into the market in 2 0 1 2 a n d another 146,313 square f e e t o f space was under construct i o n a t year’s end.

Significant lease transactions in the quarter included the following: arter Lumber leasing 160,000 C SF at 615 East Butler Road in Butler, PA P rotoco PPI LLC leasing 151,000 SF at Jackson’s Pointe Commerce Park in Evans City, PA omtech leasing approximately C 100,000 SF to occupy the re mainder of 135 Meadow Lane in Canonsburg, PA

A u n i q u e r evival of t h e m a n u f acturing industr y is s t a r t i n g t o occur i n S o u t h w ester n Pe n n s y l v a n ia.

T hi s h a s b een seen in both h e a v y a n d l ight m a n u f a c t u ring.

The lack o f e x i s t i n g p ro d u c t a n d absorpti o n o f o l d e r i n e ff i c i e n t p ro d uct by c o m p a n i e s a ff i l i a t e d w i t h t h e Marcellu s S h a l e c o n t in u e s t o c a u s e a rise in re n t a l r a t e s . M o re s p e cifically, t h e m a r k e t i s i n a p o s i t i o n where d e m a n d i s o u t p a c i n g s u p ply. A go o d e x a m p l e i s t h e B u n c h e r Compan y ’s m o s t re c e n t d e v e l o p m e n t in Evans C i t y, PA , J a c k s o n ’s P o i n t e Commerc e P a r k . C o n s t r u c t i o n o f a 69,000 S F s p e c u l a t i v e b u i l d i n g c o mmenced i n t h e f i r s t q u a r t e r o f 2 0 1 2 and by t h e e n d o f t h e f o u r t h q u a rter 50,0 0 0 S F o f t h e s p e c b u i l d i n g had bee n l e a s e d p l u s a n a d d i t i o n a l 200,000 S F o f w a re h o u s e s p a c e t h a t had yet t o b e c o n s t r u c t e d .

A uniqu e re v i v a l o f t h e m a n u f a c turing in d u s t r y i s s t a r t i n g t o o ccur in So u t h w e s t e r n P e n n s y l v a n i a .

This has b e e n s e e n i n b o t h h e a v y and ligh t m a n u f a c t u r i n g . E x a m p l e s include AT I - A l l e g h e n y L u d l u m ’s continue d e x p a n s i o n i n B r a c k e nridge, H o l t e c ’s e x p a n s i o n i n t o a n addition a l 2 0 0 , 0 0 0 S F a t R I D C ’ S Keyston e C o m m o n s i n Tu r t l e C re e k and Aqu i o n E n e r g y ’s l e a s e o f o v e r www.developingpittsburgh.com

45

access to a skilled workforce in the region.

User activity will continue to outpace supply. Compa nies will exhaust all options in order to be more efficient and reduce the cost to the end user. In the Pittsburgh market this could lead to more builtto-suit transactions versus users settling for ineffi cient space. Pittsburgh will continue to be considered for inter national manufacturing site searches due to the available infrastructure and labor. It will likely see greater growth of compa nies involved in the new high tech manufacturing – i.e. robotic enhanced pro duction due to the region's fostering of tech related businesses and proximity to Car negie Mellon University.

315,00 0 S F i n t h e f o r m e r S o n y P l a n t (2nd Q u a r t e r 2 0 1 2 ) i n We s t m o re l a n d Count y. T h e m a n u f a c t u r i n g re v i v a l h a s occurre d i n p a r t d u e t o t h e e x i s t i n g r a i l infrast r u c t u re , t h e r i v e r n e t w o r k a n d

Amy Brocato

Amy Brocato is a broker s p e cializing in industrial and office p r o perties at Langholz W ilson Ellis. She c a n be reached at abrocato@lwrre.com o r 412-261-7115. DP Matthew Virgin Principal, Langholz Wilson Ellis

46 DEVELOPINGPITTSBURGH

| Spring 2013

Retail Market Update

I

n a sea of instability, once again Pittsburgh stands out as a bastion of stability. The Pittsburgh region has flourished and came out of the recession unscathed and stronger than ever before. Countless retailers and developers have flocked to Pittsburgh seeking opportunity, growth and prosperity. They have not and will not be disappointed.

Any discussion of Pittsburgh, needs to begin with the success and repositioning of the Central Business District (CBD). The CBD has seen development after development in the last several years approaching $5.5 billion dollars in construction costs. With cranes in the air building new mixed-use developments such as Piatt Place, Market Square Place and Three PNC Plaza and thus reshaping the heart and soul of the urban core.

The downtown and surrounding area is unrecognizable versus years and decades past. Over 25 new restaurants, several new hotels and thousands of new multifamily apartments and condominiums have transformed the CBD into a bustling, vibrant and vital

“neighborhood” that anchors the region.

The success of downtown mirrors the success of the region. Retailers no longer view Pittsburgh as an emerging market, but rather one that has emerged. V irtually every retailer, both on the high end and the low end have embarked on an expansion program unlike anything Pittsburgh has ever experienced. As a result, retailers and restaurants such as Nordstrom, Cheesecake Factory, L.L. Bean, lululemon, The Capital Grille and Crate & Barrel have either entered or expanded their presence in the market. The totality of this growth is that the net absorption in the region has surpassed over 250,000 square feet in the last year, while at the same time rents have increased to levels that have never been seen. Thus, the availability rate throughout the region is approximately 9.5% and should drop below 9% by year end.

In many regional markets, the availability rates are 5% or less with tremendous upward pressure on rents.

This demand on the present retail supply bodes well for landlords and creates some expansion challenges for retailers given the lack of prime retail space. (See chart).

Pittsburgh Retail Forecast Summary: 2013. Source CB-Richard Ellis.

48 DEVELOPINGPITTSBURGH

| Spring 2013

For many years, retailers viewed Pittsburgh as a secondary or tertiary market with many opting not to enter the market. This has changed dramatically. Now, the region is experiencing grocery wars with grocers such as Whole Foods, Giant Eagle, Trader Joe’s, Fresh Market (under construction), Market District, Aldi, and Bottom Dollar all competing for market share. Additionally, virtually every mid-size and big box in the region has been filled with credit retailers such as Ross Dress for Less, Marshall’s, TJ Maxx, Dick’s, HomeGoods, Hobby Lobby and LA Fitness. Lastly, new-to- market full service and quick casual restaurants such as Bonefish, Texas de Brazil (coming soon), Burgatory, Noodles & Company, Califor nia Pizza Kitchen and Anthony’s Coal Fired Pizza have given diners plenty of quality seats to fill for years to come. As discussed previously, there are more retailers and restaurants looking for space to grow than there are actually available prime spaces.

All of this growth has led to new retail and mixed-use developments throughout the region. McCandless Crossing and Cranberry Crossroads (North), Blue Spruce Shoppes (East), and The Gardens (CBD) and Conti-

nental North Shore (North Shore) are just a few of the new developments underway. These developments are under construction and experiencing rental rates higher than ever seen before.

So why Pittsburgh? Pittsburgh has emerged as a top tier market and benefitted greatly from strong job growth in fairly recession proof sectors such as the Meds and The Eds (hospitals and the universities) and other heavy growth industries such as high-tech and financial services. Additionally, the region is the hot bed of growth for those searching for Marcellus and Utica Shale. These overall factors have led to the total employment in the Pittsburgh area growing 1.2% versus national averages of 0.6%.

The growth in employment has led to an overall unemployment rate of approximately 5% throughout the region.

As a market that has historically been viewed as secondary or tertiary Pittsburgh has now emerged as a City of the future. The outlook for the Pittsburgh market is nothing but positive. W ith tremendous retail and residential growth, strong positive absorption, new development heating up, low vacancy rates and dramatic rental rate increases Pittsburgh is well positioned for the present and the future.

Herky Pollock | Executive Vice President & Northeast Director Retailer Ser vices Group CBRE, Inc.

600 Grant Street, Suite 4800 Pittsburgh, PA 15219-6115 T 412 394 9840 | F 412 918 5638 Herky.Pollock@cbre.com | www. cbre.com/retail24-7 DP

Herky Pollock

We Measure Up in Construction Law We address issues quickly through effective diligence diligence, experien experience, negotiation and resolution.

Our in-depth knowledge, combined with a nationally-recognized construction practice, provides the full spectrum of efficient legal support required for planning, staffing, building, acquiring or selling physical assets or operations and to resolve conflicts.

Gauge our responsive and cost-effective counsel.

Construction Business Services Employment and Labor Energy and Natural Resources Environmental Litigation Public Sector Services

412-394-5400 | www.babstcalland.com Pittsburgh, PA | State College, PA | Charleston, WV | Akron, OH | Sewell, NJ

www.developingpittsburgh.com

49

National Market Update

T

h e U . S . p re s i d e n t i a l e l e ction, looming “ f i s c a l c l i ff ” and tepid e c o n o m i c re covery i n m a n y m e t ro p o l i t a n a re a s resulte d i n a s l u g g i s h re a l e s t a t e recove r y i n 2 0 1 2 .

Large U . S . c i t i e s t h a t a re h o m e t o cluster s o f e n e r g y o r t e c h f i r m s , along w i t h “ g a t e w a y ” m e t ro p o l i t a n areas w i t h p o r t f a c i l i t i e s , g e n e r a l l y enjoye d p o s i t i v e g ro w t h i n 2 0 1 2 .

The U. S . u n e m p l o y m e n t r a t e h i t a four-ye a r l o w o f 7 . 7 p e rc e n t i n N o vembe r 2 0 1 2 , a f t e r b e g i n n i n g 2 0 1 2 at 8.3 p e rc e n t , t h a n k s t o i n c re a s e d emplo y m e n t i n t h e re t a i l , p ro f e s sional a n d b u s i n e s s s e r v i c e s a n d health c a re s e c t o r s .

Among t h e m a j o r U . S . m e t ro p o l i tan are a s , N e w Yo r k ( + 1 2 8 , 0 0 0 ) , Housto n ( + 9 5 , 8 0 0 ) a n d L o s A n g eles (+7 8 , 3 0 0 ) h a v e a d d e d t h e m o s t jobs si n c e 2 0 1 1 . W h i l e re c e n t j o b creatio n f i g u re s a re e n c o u r a g i n g , sustain e d e m p l o y m e n t g ro w t h i s require d t o h a v e a m e a n i n g f u l a n d positiv e i m p a c t . W i t h e a r l y 2 0 1 3 expect e d t o l o o k m u c h l i k e 2 0 1 2 , this tre n d w i l l h a v e t o c o n t i n u e i n ear nes t f o r a f u l l e c o n o m i c re c o very to g a i n t r a c t i o n . L o o k f o r t h e adapti v e re - u s e a n d re n o v a t i o n of obs o l e t e p ro p e r t i e s i n a l l a s s e t classes i n l i e u o f n ew c o n s t r u c t i o n .

50 DEVELOPINGPITTSBURGH

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T h e 1 0 . 2-billion square feet U.S. o ff i c e market registered an overall v a c a n c y rate of 12.1 percent as y e a r- e n d 2012 approached, reflect i n g a s l i ght improvement compared w i t h 2 0 11. Tenants continued to e n j o y f a vorable conditions with t e c h - a n d energy-driven markets e x p e r i e ncing the greatest levels of p o s i t i v e absorption. Class A prop e r t i e s a ccounted for two-thirds of t h e 4 7 . 4 million square feet of net a b s o r p t i on achieved through thirdq u a r t e r 2012 as tenants continued t o s e e k new improved space and l o c k i n favorable rental rates. As a re s u l t , class A vacancy declined 5 0 b p s t o 13.6 percent from 14.1 p e rc e n t at the end of 2011.

T h e 1 7 U.S. markets Avison Young t r a c k e d for this report comprise 2.8 b i l l i o n s quare feet with an overall v a c a n c y rate of 15.1 percent, down s l i g h t l y from that of year-end 2011.

A m a j o r ity of Avison Young mark e t s a re anticipating further, albeit m o d e s t , vacancy improvement in 2 0 1 3 ; h owever, vacancy in the U.S. m a r k e t s will likely remain elevated, w h e n c o mpared with Canada, as c a u t i o u s businesses continue to d e f e r o c cupancy decisions in the w a k e o f a slow recovery. Many ten a n t s d e monstrated a preference for u r b a n l i ve-work-play environments w i t h c u l tural diversity, new prop e r t i e s a nd amenity-rich locations w h e n t h ey relocated.

Among the Avison Young markets, New Jersey recorded the highest 2012 vacancy (25.5 percent), with flat market conditions expected in 2013. The lowest vacancy rates were recorded in Pittsburgh (8.1 percent), where rents have risen to new levels; and San Francisco (9.9 percent), where large-tenant movement is driving the market.

Only four markets expect to see increased vacancy in 2013, with the largest increase being in Washing ton, DC (+60 bps) where there are threats of federal spending cut backs and where 4 million square feet of office space is set to be delivered this year.

U.S. retail markets held steady with an average vacancy of 6.9 percent - unchanged for four qu arters - and were kept in check by a dearth of new supply. Delivery of new retail product has fallen each year since 2008 and, in 2012, 46 million square feet was delivered. Power centers are outperforming retail as a whole and posted a 6. 2 percent vacancy rate nationwide. Many Avison Young markets are report ing the expansion of dis count and big-box retailers. Select submarkets in Charleston and Houston have improving retail conditions due to population increases; Boston is see ing further stabilization; San Francisco is reporting a steady retail comeback and limited construction;

The anticipated expansion of the Panama Canal is spur ring speculative development and aggressive land acquisitions in South Florida, while in Detroit, industrial rents are primed to rise following four quarters of positive absorption.

a n d 4 . 5 percent, respectively. All b u t t w o U.S. markets are expect i n g f u r t her declines in vacancy d u r i n g 2013. Dallas (+10 bps) is e x p e r i e ncing growth of warehouse/ d i s t r i b u tion space around the city’s i n l a n d p ort and, in the Houston m a r k e t (+30 bps), drilling activi t y i s f u eling manufacturing and t h e P o r t of Houston’s expansion.

T h e a n t i cipated expansion of the P a n a m a Canal is spurring speculat i v e d e v elopment and aggressive l a n d a c quisitions in South Florida, w h i l e i n Detroit, industrial rents a re p r i med to rise following four q u a r t e r s of positive absorption.

all property types except multi-res idential fell year-over-year. Demand for core assets with stable cash flow exceeded the available prod uct in many U.S. markets. Manhattan led the country in office sales with $7.8 billion, follow ed by San Francisco with $3.9 billion and Los Angeles with $3.1 billion. Capital flow into the U.S. continued in 2012 as cross-border investors ac counted for $20.3 billion in sales by mid-December.

Duke Kingsley can be contacted at duke.kingsley@avisonyoung.com or 412-944-2131. DP

T h ro u g h third-quarter 2012, total i n v e s t m ent volume for multi-resid e n t i a l , office, industrial and retail p ro p e r t i es topped $163 billion, d e m o n s trating stabilization after s e c o n d - quarter sales volumes for

and Ne w J e r s e y w e l c o m e d severa l n e w re t a i l e r s a n d substa n t i a l d e v e l o p m e n t .

Avison Yo u n g i n d u s t r i a l market s t o t a l e d 6 . 6 b i l l i o n square f e e t w i t h a n a v e r a g e vacanc y r a t e o f 8 . 8 p e rc e n t as of t h i rd - q u a r t e r 2 0 1 2 , nearly d o u b l e t h e v a c a n c y found i n Av i s o n Yo u n g ’s Canadi a n m a r k e t s . C h i c a g o (1.2 bi l l i o n s q u a re fe e t ) and Lo s A n g e l e s ( 1 . 1 b i l l i o n square f e e t ) a re t h e l a r g e s t U.S. in d u s t r i a l m a r ke t s w i t h vacanc y r a t e s o f 9 . 6 p e rc e n t

Margaret Donkerbrook, vice president U. S. research

Duke Kingsley, principal and manager director, Avison Young Pittsburgh

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NAIOP AWARDS Developer of the Year Chaska Property Advisors

Supporter of Development Sally Haas Sally Haas was the chief executive officer of the Pittsburgh Airport Area Chamber of Commerce from October 1998 until her untimely death on December 27, 2012. She first joined the organization as membership director in March 1998 and assumed the duties of Acting Executive Director in July 1998. During her time as President, the Chamber grew from 800 members to the current 1,100 members.

2012 was yet another productive year for Chaska Property Advisors as they added to their inventory of Class A office and flex product in Cranberry Business Park and also took their development concept to a new submarket in Moon Township.

In March of 2012, Chaska delivered its seventh speculative venture in Cranberry Business Park and the project's first tenChaska CEO Dick Donley ant took occupancy of 20,000 of the building's 53,000 square feet. 300 Cranberry Business Park brings Chaska's development portfolio in the park to 560,000 square feet and, in 2013, Chaska will submit an additional 120,000 square feet of construction projects to Cranberry Township for entitlements and approvals. Chaska's portfolio of space in the park is over 90 percent leased presently.

In January of 2012, Chaska announced a joint venture with Continental Real Estate Companies to develop 40 acres of land in Moon Township. The relationship with Chaska and Continental runs deep, as Continental's Building Systems division acted as general contractor for the bulk of Cranberry Business Park's base building and tenant improvement work over the past decade.

Through an option agreement for land leasing with the Allegheny County Airport Authority, Chaska and its partners received master plan approval for more than 300,000 square feet of development from Moon Township and immediately commenced pre-development work for what will be known as Pittsburgh Inter national Business Park. Just before groundbreaking on a speculative project for 53,000 square feet of Class A single story office space, Chaska and Continental secured a lease for two buildings from Service Link, forcing the project to double its construction activity for 2012.

Shell construction is well underway for both buildings and Service Link will take occupancy at Pittsburgh International Business Park in August.

Chaska Property Advisors' reputation and professionalism is one of the finest in the industry. Its vision and commitment to real estate development in Wester n Pennsylvania is worthy of recognition.

Haas teamed with the 911th and 99th Regional Readiness Command to develop the Honorary Commanders Association, whose aim is to get the word out to the community-at-large about the vital role and economic impact the military has in this region's economy.

Sally Haas

Haas participated with the Pittsburgh Regional Alliance on business investment missions to Sheffield and Manchester, England, which resulted in recruitment of a company from the United Kingdom to the United States which was located for a time in the Chamber offices. As part of the Chamber's ongoing efforts to create global outreach opportunities, Haas led several outreach missions to China, with close to 200 people on the tours over the last four years.

To help local entrepreneurs, Haas became a certified Fast Trac Instructor and served as a mentor of the entrepreneur round table known as E.L.I.T.E., which targets support for start-up companies. In 2008, Haas completed a Regionalism & Sustainable Development Fellowship with the Ford Foundation and the American Chamber of Commerce Executives (ACCE) association under a grant awarded by the Hillman Foundation.

Not limiting her work to businesses, however, but to the entire community, Haas brought the Choices program to the airport corridor and the Chamber currently offers that program in ten school districts in the Chamber footprint. The program uses a hands-on approach to make middle school students realize that there are long-term effects to the choices they make now.

Haas was selected by SBN as one of the first recipients of the Pittsburgh Pacesetter Awards, recognizing her for her efforts on behalf of transportation and growth in the Pittsburgh region. She also served on County Executive Dan Onorato's transportation task force, and chaired the SPC Public Participation Panel.

Haas served as the board Chair of the PA Association of Chamber Professionals, and headed the Southwestern PA Chamber Executives division. www.developingpittsburgh.com

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Lifetime Achievement Award Mark Schneider The region lost one of its best and brightest individuals with Mark’s tragic passing in July 2012 at the age of 55. While he was only in Pittsburgh for thirty plus years, his contributions to our region, community and industry will be a legacy for generations that follow us.

Mark Schneider was bor n in Pittsburgh but moved to Toledo, Ohio very early in his life Mark Schneider and was educated at St John’s Jesuit High School and graduated from Miami University of Ohio in 1978. Following college, Mark volunteered as an AmeriCorps VISTA volunteer and relocated to Pittsburgh, PA where he would start his successful career as a community organizer, real estate developer and public servant.

Mark’s first position was with the Northside Civic Development where he was involved in numerous projects in Germantown and the East Ohio Street commercial district. While with the NCD, he met Dick Rubinoff, who was forming his own development company in the mid 1980’s. Rubinoff later hired Mark to be president of Rubinoff Co. During Mark’s tenure at Rubinoff the company developed a number of significant urban projects, including the 32nd Street Business Center, the 100,000 square foot 51st Street Business Center and the Alcoa Services Operations Center on the North Side.

Perhaps Mark’s most lasting projects are the urban mixed-use projects that converted brownfield wastelands into the successful Summerset at Frick Park residential community in Squirrel Hill and the award-winning Washington’s Landing. That project, which tur ned an environmentally contaminated rendering plant into a world class mixed-use residential, commercial office and recreational community was recognized by NAIOP as Public-Private Project of the Year in 1997.

After starting Fourth River Development with business partner John Watson, Mark’s focus shifted toward his passion of urban residential projects. His most recent projects include Columbus Square in the city’s Manchester neighborhood and Union Square, a major town home community being built in downtown Erie, PA.

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In addition to his contributions in real estate development, Mark served as Chairman of the Stadium Authority starting in 1993 and continued in various roles through the development of PNC Park and Heinz Field.

Mark also served as Chairman of the Allegheny County Sports and Exhibition Authority and was involved in the successful tripling of the capacity of the David L. Lawrence Convention Center, home of the NAIOP Awards Banquet.

One other project close to Mark’s heart is the World War II memorial being planned for the North Shore.

Mark was a diligent fundraiser for the project, which is scheduled to start in spring of 2013.

Hall of Fame Inductee William E. Hunt Mr. Hunt is President and CEO of the Elmhurst Corporation, a private equity fund located in Pittsburgh, PA. Elmhurst invests in commercial real estate and private operating businesses. Elmhurst’s real estate holdings include over 2.5 million square feet of office, flex and distribution space in the Pittsburgh region. Specific holdings include the RAND Building, Airside Business Park, Pittsburgh Airport BusiBill Hunt ness Park, McClaren Woods Business Park, Cranberry Crossroads and, downtown, One North Shore Center and 912 Ft. Duquesne Boulevard. Elmhurst’s non-realestate investments include the Doubletree Hotel in downtown Pittsburgh, Metis Secure Systems, Prospera Hospitality Management, and ADS Security located in Nashville, Tennessee.

Bill is actively involved in community affairs and charitable organizations, including the Duke University Graduate School of Visitors (past Chair), the Car negie Museum of Art (former Chair), Pittsburgh Downtown Partnership (former Chair), Pittsburgh Public Theater (former Chair), as well as a Board member of The Pittsburgh Foundation and the Pittsburgh Cultural Trust.

He served as NAIOP Pittsburgh board president in 2001 and was national chairman of NAIOP Corporate in 2012.

NAIOP Pittsburgh Officers Daniel Puntil, President Grandbridge Real Estate Capital

Jerry Bunda, Vice President Imperial Land Corporation

Lou Oliva, Secretary Newmark Grubb Knight Frank

Christine Vann, Treasurer Alpern Rosenthal

Lynn DeLorenzo, Past President PWC Property Solutions

Domenic Dozzi, National Board Jendoco Real Estate

Gregory Quatchak, National Committee Civil & Environmental Consultants

DeWitt Peart, National Committee Pittsburgh Regional Alliance

Board of Directors At Large Michael Belsky Columbia Gas of Pennsylvania

W. Scott Caplan Linda Fisher Dollar Bank

Wm Randell Forister Allegheny County Airport Authority

Grant Mason Oxford Devemopment Corp.

Brian Walker

Learn more about NAIOP in the western Pennsylvania tri-state region at naioppittsburgh.com or 412-928-8303.

NAIOP, the Commercial Real Estate Development Association, is the leading organization for developers, owners and related professionals in office, industrial

Millcraft Investments

Donald Smith Jr. Regional Industrial Development Corp.

and mixed-use real estate. NAIOP provides

Michael Swisher

unparalleled industry networking and education, and

Horizon Properties Group

advocates for effective legislation on behalf of our

David Weisberg

members. NAIOP advances responsible, sustainable

The Huntington National Bank

development that creates jobs and benefits the communities in which our members work and live.

Tyler Noland, DL Representative PenTrust Real Estate Advisory Svcs.

Patricia Farrell, Legal Council Meyer Unkovic & Scott

Committee Chairs

For more information on how you can develop connections with commercial real estate through NAIOP, visit us online at www.naiop.org or call 800-456-4144.

Jerry Bunda, Imperial Land Corporation Transportation Maureen Ford, ALCOA Marketing/Communication David Weisberg, The Huntington National Bank Programming Carl Belli, Continental Building Systems Membership Jamie White, LLI Engineering Inc. Economic Development Mike Embrescia, Class-G.org Developing Leaders

Congratulations to

Build To Suit - Industrial Gardner Denver Nash

100,000 sq ft Divisional Global Headquarters and North American Manufacturing & Distribution Facility

The Good Business Bank

Est. 1922

Washington County Commissioners

Speculative Office Embassy Park at 6000 Town Center, Southpointe Completed in June 2012, the project was 132,000 square feet of new construction.

DEVELOPER: Horizon Properties ARCHITECT: TKA Architects CONTRACTOR: Rycon Construction

Build-to-Suit Industrial Gardner Denver Nash New Divisional Headquarters, Alta Vista Business Park Completed in January 2012, the project was 100,539 square feet of new construction.

DEVELOPER: LaCarte Development Inc. ARCHITECT/CONTRACTOR: Al Neyer Inc.

Renovation, Industrial Building 33, Impact Guard Renovation Completed in May 2012, the project was a 133,349 square foot renovation.

DEVELOPER: Chapman Properties ARCHITECT: NEXT Architecture CONTRACTOR: Springer Construction

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Legal/Legislative Outlook Dodd Frank And Commercial Real Estate Where It All Stands

By Jonathan W. Hugg, Esq. and Lauren D. Rushak, Esq.

I

t has been over two and one half years since the passage of the Dodd-Frank Wall Street Reform and Consumer Pro tection Act (“Dodd Frank”).

After Dodd Frank’s passage, we attempted to predict some of the possible implications that the daunting l egislation would have on the commercial real estate ( “CRE”) market. Needless to say, many questions were unanswered at that time.

Not surprisingly, many ques tions remain unanswered today. T ime, however, has brought about some bits of clarity regarding the way i n which Dodd Frank has i mpacted and will continue to impact CRE in the future.

This article will attempt to highlight some of the developments of the past two and a half years with respect to Dodd Frank and CRE. Dodd Frank – and its 848 pages of legislation – re quired that 398 sets of rules be implemented. As of February 1, 2013, reports show that a total of about 279 Dodd Frank rulemaking

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deadlines have passed. Of these, 176 (63.1%) have been missed and 103 (36.9%) have been met with finalized rules. Additionally, about 129 rulemaking requirements have not yet even been proposed. Let’s just say that the process is not moving exactly as planned.

Who (or what) is responsible for the delay? Among those targeted are the banking regulators, who have been accused of “lagging” on their duty to complete vital elements of Dodd Frank. For example, they are charged with crafting the rule that requires lenders to retain some of the credit risk on mort gages that are sold off and bundled into securities. Specifically, this element of Dodd Frank requires that banks who issue commercial mortgage-backed securities have what is referred to as a five percent “skin in the game.” Lenders securitizing loans, thus, must retain ownership of five percent of each pool of the commercial mortgagebacked securities (CMBS) loans that they create. (Certain carve outs for commercial real estate mortgages exist.) By requiring lenders to retain an economic interest in the assets that they securitize, this provision of Dodd Frank is touted as seeking to better align the interests of lenders with investors. This will, seemingly, also better safeguard bondholders.

Some are not complaining about the lag time in implementing the “skin in the game” requirement.

Some believe that the measure will only serve to restrict credit avail able to the CRE market. Whether it does or not, and on what level remains to be seen. What we do know is that the new regulations for CMBS are not estimated to actually be implemented and take effect until later this year.

The SEC, who is responsible for more Dodd Frank regulations than any other agency, has also been

heavily c r i t i c i z e d f o r l a g g i n g o n its dut i e s . T h e S E C i s c h a r g e d w i t h finaliz i n g , f o r e x a m p l e , k e y re g u lations i n v o l v i n g n e w c o n t ro l s o n credit r a t i n g s a n d t h e c l a w b a c k of exe c u t i v e p a y. T h e a g e n c y h a s reporte d l y f i n a l i z e d o n l y 3 3 o f t h e 95 rule s f o r w h i c h it i s re s p o n s i b l e .

Obviou s l y, t h e S E C h a s m u c h w o r k ahead o f i t .

In earl y 2 0 1 3 , t h e “ re a c t i o n ” t o Dodd F r a n k s t i l l a p p e a r s t o b e mixed f ro m a C R E m a r k e t p e r s p e c tive. C o m m e rc i a l re a l e s t a t e l e n d ers’ co n c e r n s o v e r th e l e g i s l a t i o n appear t o b e , o n s o m e l e v e l , f a d i n g with th e p a s s a g e o f t i m e . H o w e v e r, this se e m s t o b e ( a t l e a s t i n s o m e part) a t t h e l e n d e r s ’ o w n d o i n g , rather t h a n d u e t o a n y s p e c i f i c “regul a t o r y ” a c t i o n i m p o s e d b y Dodd F r a n k . M a n y C R E l e n d e r s and ot h e r c a p i t a l ma r k e t p a r t i c ipants, a n t i c i p a t i n g t h e o n s l a u g h t of gov e r n m e n t re g u l a t i o n u n d e r Dodd F r a n k , a c t e d p re e m p t i v e l y and se l f - p o l i c e d t h e i r o w n p o l icies an d p ro c e d u re s. T h e y d i d s o t o allow i n v e s t o r s t o u n d e r s t a n d n e w investm e n t s , b e t t e r m e e t m a r k e t deman d s a n d t r y t o “ f i x ” p ro b l e m atic w a y s o f t h e p a s t . A s a re s u l t , some t r a n s a c t i o n s h a v e re p o r t e d l y becom e s i m p l e r, p r a c t i c e s e a s i e r t o unders t a n d a n d s t a n d a rd i z e d d o c u ments a n d l o a n p a c k a g e s e a s i e r t o compa re . A l l o f t h e s e t h i n g s b e i n g positiv e s t e p s f o r C R E i n t h e w a k e of Dod d F r a n k .

Howev e r, t h e re re m a i n s a l a r g e camp o f m a r k e t p a rt i c i p a n t s w h o disput e a n y l o n g - t e r m “ p o s i t i v e ” impact b y D o d d F r a n k o n C R E . T h e y cite, p r i m a r i l y, t o w h a t t h e y b e l i e v e will be v e r y s t r i n g e n t u n d e r w r i ting sta n d a rd s a n d m u c h m o re t i m e require d t o s c re e n l o a n s o n c e D o d d Frank’s r i s k re t e n t i o n re q u i re m e n t s are fin a l l y c o m p l e t e d a n d i m p l e mente d . U n d o u b t e d l y, t o u g h e r re g ulation s ( a n d i n c re as e d p ro c e s s i n g time) c o u l d d i re c t l y a n d u n f a v o rably im p a c t h o w C M B S a re i s s u e d and pr i c e d . T h i s c o u l d a l s o t h e n

Many CRE lenders and other capital market participants, anticipating the onslaught of gover nment regulation under Dodd Frank, acted preemptively and self-policed their own policies and procedures. They did so to allow investors to understand new investments, better meet market demands and tr y to “fix” problematic ways of the past. re s u l t i n (i) higher lending costs t o a l l a n d (ii) higher risk borrow e r s h a v i ng more difficulty securing C M B S f i nancing. And, ultimately, it re m a i n s quite possible that imple m e n t a t i on of the risk retention re q u i re ments will result in banks h a v i n g l ess capital available; not to m e n t i o n more complexity on how i t i s l e v eraged and more strict and c o m p l i c ated packages. Naturally, n e g a t i v e steps for CRE. D e s p i t e the ongoing speculation a n d u n c ertainty regarding the ulti m a t e , l ong-term impact that Dodd F r a n k w ill have on CRE, the reality a p p e a r s to be that many banks are a n d re m ain hesitant to make loans.

O n e c i t ed reason is that under D o d d F r ank’s regulatory scheme, a n i n s t i tution with assets ranging b e t w e e n $10 billion and $50 billion i s re q u i red to have certain inter nal

“stress testing” performed. The Office of the Comptroller of the Currency (“OCC”) recen tly pub lished its final stress tes ting rules.

The OCC will provide a set of “Base line,” “Adverse” and “Severely Ad verse” scenarios to banks to input into the testing.

Per Dodd Frank, and part and parcel to this stress testing, banks over the $10 billion threshold are also required to have an d have had reappraisals of their products done yearly. Such examinations have reportedly led to the overriding of appraisals and loans being slated as “nonaccrual” loans – even where borrowers have not missed a pay ment. This has caused many banks across the country to write down significant capital amounts because of the ratio of lending to capital.

In tur n, fearing additional capital investment write-offs, the disincen tive for banks to make additional loans heightened.

For banks with assets less than $10 billion, there are no current bankwide “stress testing” requirements within Dodd Frank. Thus, many local community banks are not subject to the same test ing regula tions. Yet, many community banks – with smaller compliance functions – find themselves spending significant time and costs determining what aspects of Dodd Frank may or may not apply to them, what will or will not impact them, and how they will meet any demands that may be placed on them. One report estimated that additional compliance costs due to Dodd Frank could be in the range of $700,000 to $1.2 million for local community banks alone. Thus, the community banks find themselves trying to balance the need of ensuring that they have effective risk manage ment techniques in place on the one hand while, on the other hand, ensuring that they are n ot stopping good CRE lending from happening altogether. Faced with these con -

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cer ns a n d w h a t c o u l d b e u n i n t e n ded con s e q u e n c e s o f D o d d F r a n k ’s massiv e re g u l a t i o n s o n l o c a l b a n k s , some p re d i c t t h a t w i t h i n t h e n e x t five ye a r s , “ re g i o n a l ” o r “ c o m munity ” b a n k s w i l l f a d e a w a y a n d be rep l a c e d b y “ s u p e r ” o r “ m e g a ” banks – b a n k s t h a t a re s u p p o s e d l y equipp e d t o h a n d l e D o d d F r a n k ’s regime .

But, ev e n t h e “ s u p e r ” o r “ m e g a ” banks t h e m s e l v e s a re f e e l i n g t h e impact o f D o d d F r a n k n o w. T h e y cite ma i n l y t o ( i ) i n c re a s e d c o m p l iance c o s t s i m p o s e d b y D o d d F r a n k (costs t h a t i n e v i t a b ly w i l l p a s s increas e d c o s t s o n t o b o r ro w e r s ) and (ii ) m o re r i g o ro u s u n d e r w r i t ing sta n d a rd s i m p o s e d b y D o d d Frank, a s p u t t i n g t h e “ c h i l l ” o n additio n a l l e n d i n g a n d C R E i t s e l f .

The lat t e r i s i m p o r t a n t b e c a u s e tighten e d u n d e r w r i t i n g s t a n d a rd s could u n d o u b t e d l y re s u l t i n , a m o n g other t h i n g s , l e n d e rs d e m a n d i n g additio n a l e q u i t y f ro m b o r ro w e r s seeking t o re f i n a n c e . C o m m e rc i a l borrow e r s s e e k i n g t o re f i n a n c e , howev e r, w i l l l i k e l y b e u n a b l e t o take o n m o re d e b t i f t h e y a re f i nancin g p ro p e r t i e s t h a t a re a l re a d y in trou b l e . I n f a c t , o n e re p o r t h a s predict e d t h a t b y 2 0 2 0 , h u n d re d s of billi o n s o f d o l l a r s o f c o m m e rcial mo r t g a g e s – o r m o re – w i l l n o t qualify f o r re f i n a n c i n g . I f a c c u r a t e , this co u l d h a v e a s t a m m e r i n g i mpact o n C R E f o r y e ar s t o c o m e .

Yet an o t h e r a s p e c t o f D o d d F r a n k that co u l d h a v e b e a r i n g o n t h e C R E and CM B S m a r k e t s i s t h e re q u i re ment t h a t f e d e r a l a g e n c i e s m o re careful l y s c r u t i n i z e a n y i n s t i t u t i o n whose a c t i v i t i e s c o u l d p o s e a s y stemic r i s k t o t h e f i na n c i a l m a r k e t s (“Too B i g � t o F a i l ” ) . T h e c o l l a p s e s or nea r- c o l l a p s e s o f m a j o r f i n a n c i a l compa n i e s ( m a j o r n o n b a n k c o mpanies i n p a r t i c u l a r ) i n t h e d a y s leading u p t o D o d d F r a n k c e r t a i n l y highlig h t e d t h e l a c k o f a n y e ff e c tive fra m e w o r k f o r s u p e r v i s i n g and re g u l a t i n g i m p o r t a n t f i n a n c i a l institu t i o n s . D o d d F r a n k i s s u pposed t o c h a n g e t h a t . I t c re a t e d the Fin a n c i a l S t a b i l i t y O v e r s i g h t Counci l t o e s t a b l i s h a f r a m e w o r k for des i g n a t i n g n o n b a n k f i n a n c i a l compa n i e s w h o s h o u l d b e s u b j e c t to supe r v i s i o n b y t he F e d e r a l R eserve a n d t h e e n h a n c e d p r u d e n t i a l

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s t a n d a rds of title I of the legisla t i o n ( i . e ., enhanced risk-based c a p i t a l and leverage requirements, l i q u i d i t y requirements, single-coun t e r p a r t y credit limits, stress testing, r i s k - m a nagement requirements, a n e a r l y remediation regime, and re s o l u t i on-planning requirements).

T h e f i n a l framework for the regula t i o n / s u p ervision of nonbank financ i a l c o m panies who could pose a s y s t e m a tic risk to the financial mark e t s h a s yet to be completed. This h a s c a u s ed much uncertainty in t h e m a r ket and has been viewed as i m p e d i n g the CMBS market growth.

A re c e n tly proposed amendment to t h e f i n a l law – requiring that the u n i q u e characteristics of the CMBS m a r k e t be looked at – may help c o u n t e r balance the uncertainty.

O t h e r D odd Frank measures that C R E p a r ticipants are closely watchi n g i n c l ude:

The Investment Advisers Act T h i s c o mponent of Dodd Frank has b e e n e n acted. It requires private f u n d s w ith real estate assets to re g i s t e r as “investment manag e r s ” a n d be regulated accordingly.

T h u s , f u nds under the classificat i o n m u st follow SEC laws, which m e a n i n creased operation costs, a m o n g other things. Additionally, c o m p e n sation structures for those i n c h a r g e of the private funds will b e c h a n ged significantly – causing m u c h c o ncer n among CRE particip a n t s . S pecifically, performanceb a s e d c ompensation (a “carried i n t e re s t ” linked to project comple t i o n ) w i l l be limited for “manage r s ” o f funds whose clients have i n v e s t e d less than $1 million or h a v e a n et worth less than $2 mill i o n . T h i s could be a real disincen t i v e t o i nvestors who previously t o o k r i s ks on new buildings and p ro j e c t s with the goal of mak i n g a l a r ge carried interest payout o n c e c o mpleted. However, like m a n y o t her parts of Dodd Frank, i t re m a i ns unclear what companies a re o r w ill be deemed “funds” that m u s t c o mply with this piece of the l e g i s l a t i on.

Vo l c k e r R u l e This rule is designed to prevent banks from making speculative bets. In essence, the rule prohib its banks from investing their own capital in funds that they operate, the goal being to eliminate some of the riskiest trading and preventing banks from becoming “Too Big to Fail.” This could mean, however, that many private equity and hedge funds that invest in real estate funds operated by the banks will need to be sold. As of early 2013, the rule has not been finalized.

Capital Rules Implicating Construction Loans A big ticket area of concer n for CRE participants involves Dodd Frank’s impact on construction lending. Dodd Frank restricts “high volatility commercial real estate loans.” Experts believe that this could be interpreted to include certain construction loans. The definitions are not yet settled, but what is settled is that reserve banks will ultimately be required to hold 12 percent instead of 8 percent on their books for each loan that they issue. Capital restrictions could result, hurting not only real estate developers but many community banks whose bulk of len ding consists of construction loans.

Bottom line: As we approach three years, Dodd Frank continues to unfold, and the ability to access liquidity for CRE projects and the legislation’s complete impact on the CRE market itself remain questionable and not fully known.

We will need to keep a close watch as the regulations continue to take shape, are debated and are imple mented. Let’s just hope that it is not another three years before any real progress has been made or im portant questions answered.

Jonathan W. Hugg, Esq. and Lauren D. Rushak, Esq. are Partners in the Commercial & Corporate Litigation Practice Group of Thorp Reed & Armstrong, LLP. DP

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Benchmarks Is Green Building Growing Without LEED?

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s g re e n building was getting a f i r m f o o thold in the middle of the last de c a d e – w h e n t h e n u m b e r of LEE D - c e r t i f i e d b u i l d i n g s i n t h e region w a s i n t h e d o z e n s – t h e conver s a t i o n a b o u t c o m m e rc i a l buildin g s b e i n g L E E D - c e r t i f i e d went s o m e t h i n g a l on g t h e l i n e s o f “my cl i e n t s w o u l d l o v e t o b e i n a LEED b u i l d i n g b u t t h e y d o n ’t w a n t to pay t h e e x t r a re n t . ” W i t h i n a few ye a r s t h e c o n v e r s a t i o n h a d change d t o s o m e t h i n g l i k e , “ m y client’s s u s t a i n a b i l i ty p o l i c y w i l l only le t t h e m re n t i n a L E E D b u i l ding.”

Now, h o w e v e r, t h e re i s a g ro w ing cu r i o s i t y a b o u t t h e n e c e s s i t y of LEE D c e r t i f i c a t i o n . I t i s u n f a i r to cha r a c t e r i z e i t a s a b a c k l a s h becaus e t h e q u e s t i o n s a re c o m i n g from d e v e l o p e r s w ho h a v e b e e n buildin g L E E D - c e r t i f i e d p ro j e c t s f o r a num b e r o f y e a r s a n d w h o p l a n to con t i n u e t o b u i l d t h o s e k i n d s o f buildin g s . D e v e l o p e r s h a v e f o r t h e most p a r t e m b r a c e d t h e v a l u e o f energy e ff i c i e n t , l i gh t a n d h e a l t h y buildin g s , i f n o t f o r t h e s a k e o f the en v i ro n m e n t t h e n c e r t a i n l y a s a resp o n s e t o t h e m a r k e t p l a c e . T h e questi o n s e e m s t o b e , i f I b u i l t m y last tw o p ro j e c t s a s L E E D - G o l d a n d I build t h e n e x t o n e t h e s a m e w a y, why d o I n e e d t o g e t i t c e r t i f i e d ?

It’s not o n l y d e v e l o p e r s w h o a re feeling w h a t i s b e i n g c a l l e d ‘ g re e n fatigue . ’ E v e n a rc h i t e c t s , w h o w e re early g re e n b u i l d i n g p ro p o n e n t s , are see i n g re s i s t a n c e f ro m w i t h i n their f i r m s t o t a k e t h e s t e p s t o c e rtify a p ro j e c t . T h e re i s n o re s i s t a n c e to des i g n i n g m o re s u s t a i n a b l y –

q u i t e t h e opposite – but reluctance t o d o c u ment the process is there. “ T h e t e rm that is being used is L E E D c e rtifiable,” says Aurora S h a r r a rd, vice president of innova t i o n f o r the Green Building Alli a n c e . S harrard confirms that ques t i o n s a b out the necessity of LEED c e r t i f i c a tion is a national trend and o n e t h a t sustainability advocates a re n o t surprised to see occurring. “ W h a t we are hearing is ‘LEEDl i k e . ’ I t ’s what a lot of our pros p e c t s a nd customers are asking f o r, ” s a ys Jim Scalo, CEO of Bur ns & S c a l o Real Estate Services. “Make n o m i s t ake. Sustainability is absol u t e l y a s important as ever. It’s just t h a t L E E D doesn’t seem to be.”

L e a d e r s hip in Energy and Env i ro n m e ntal Design (LEED) was d e v e l o p ed in the late 1990’s by t h e U n i t ed States Green Building

Council (USGBC) as a voluntary, third-party certification that would encourage sustainable design and establish a set of uniform criteria for architects and owners to follow.

During the 15 years since LEED has been in the market the USGBC has regularly updated it standards for certification, adding higher levels of achievement and stra tifying the certification standards to serve the full spectrum of construction.

The success of the LEED program is evidenced by the more than 15,000 certified projects currently listed on the USGBC’s directory. But for commercial real estate the case isn’t going to be made by the sheer volume of LEED-certified projects.

In the end, the argument will come down to what adds the most value to the property.

What changed the tide for commercial property a few years ago

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was demand from corporations who began to include a LEEDcertified building on their list of requirements, but there remains a difference between whether the corporation is leasing or owning.

No corporation has done more to advance the idea of corporate sustainability than PNC. It has invested heavily in LEED-certified buildings since developing its First Side operations center in 2001 and is currently building a building that aims to be the ‘greenest’ in the world. Yet, its 300,000-plus square foot space in Allegheny Center was not LEED-certified when originally leased, although PNC has since renovated and achieved LEED certi fication for 80,000 square feet, as well as the Eco Bistro restaurant.

For more than 30 years, Elmhurst Group has been a part of the Greater Pittsburgh region.

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“Large corporations with mandates initiated in the C-suite or even from their board will be more likely to get LEED in an owned building but it’s tough to do that in the market as a tenant,” notes Brad Totten, senior vice president and principal at Avison Young.

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64 DEVELOPINGPITTSBURGH

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Dan Adamski still sees a difference in demand when higher rents are involved. The managing director for Jones Lang LaSalle’s tenant repre sentation group, Adamski says that clients are looking at the sustain ability of the potential buildings they occupy. “About 20 percent of the time [LEED] is a factor, especial ly if it’s a corporate client,” he says.

“But I’d say fewer than t en percent of that number is willing to pay any extra for it.”

It is ce r t a i n l y n o t a n e g a t i v e t h a t the rea l e s t a t e d e v el o p m e n t c o m munity h a s b e c o m e f a m i l i a r e n o u g h with s u s t a i n a b l e d e s i g n t h a t t h e y questio n w h e t h e r o r n o t c e r t i f i c ation ad d s a n y t h i n g t o t h e b u i l d i n g ; in fact , i t i s p ro b a b l y a s i g n o f s u ccess th a t e n e r g y e ff i c i e n c y a n d e n v ironme n t a l s e n s i t i v i ty u l t i m a t e l y g e t taken f o r g r a n t e d . W h i l e t h e c o s t of con s t r u c t i o n i s n ’t re a l l y m o re f o r LEED t h a n f o r n o n - L E E D b u i l d i n g s , the co s t o f t h e a d d i t i o n a l p l a n n i n g and ad m i n i s t r a t i o n d o e s a d d a f e w bucks p e r f o o t a n d f o r h i g h e r l e v e l s of LEE D , t h e re a re c o s t s t h a t a d d on. Fo r t h e k i n d s o f b u i l d i n g s t h a t are bu i l t i n We s t e r n PA , a n y a d d e d costs c a n m e a n a b i t m o re .

Bill Hu n t , C E O o f t h e E l m h u r s t Group, w a s t h e N A IO P C o r p o r a t e board p re s i d e n t i n 2 0 1 2 . A s t h e nation a l b o a rd ’s l e ad e r h e t r a v e l e d to man y c i t i e s a n d h e a rd f ro m o t h e r develo p e r s a b o u t t h e ‘ L E E D c e r t i f iable’ t re n d . H u n t ’s f e e l i n g i s t h a t there a re re g i o n a l f a c t o r s t h a t c a n influen c e d e v e l o p m e n t o f L E E D - c e rtified b u i l d i n g s .

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“What e v e r t h e e x t r a c o s t s a re f o r LEED c e r t i f i c a t i o n , t h e y m a k e u p a bigger s h a re o f t h e p ro j e c t c o s t s in a ci t y l i k e P i t t s b u r g h , ” h e e xplains. “ I f y o u a re d o i n g a p ro j e c t i n Manha t t a n f o r $ 4 0 0 / f o o t i t ’s n o t a big de a l i f L E E D a d d s a f e w d o l l a r s a squa re f o o t m o re , b u t i f y o u ’ re doing a b u i l d i n g i n P i t t s b u r g h f o r $125 o r $ 1 5 0 p e r s q u a re f o o t t h o s e costs m e a n s o m e t h in g . ” Comm e rc i a l p ro p e r ty i s a t t r a c t i v e becaus e i t p ro v i d e s i n c o m e t h ro u g h rents t h a t c o v e r s t h e c o s t s o f financi n g a n d o p e r a t i n g t h e b u i l ding (id e a l l y a n y w a y ) , w i t h a re t u r n on top o f t h a t ; a n d , b e c a u s e t h e marke t p ro v i d e s a p p re c i a t i o n o f t h e proper t y v a l u e . A s i g n i f i c a n t n u m b e r of the o w n e r s – n o t t h e m a j o r i t y – who a re d o i n g s u s t a i n a b l e c o n s t r u c tion are d o i n g s o b e c a u s e i t ’s t h e right t h i n g t o d o . T h e s a m e c a n b e said fo r t h e m a j o r i t y o f h u m a n s w h o now h a v e m o re s u s t a i n a b l e l i f e styles. B u t t h e c re d i t - w o r t h i n e s s o f a proje c t o r t h e p ro f i t a b l e o p e r a t i o n of a bu i l d i n g t r u m p s d o i n g t h e r i g h t thing i n c o m m e rc i a l re a l e s t a t e .

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USGBC h a s d e v o t e d re s o u rc e s t o re search i n g t h e i m p a c t o f L E E D - c e r t ificatio n o n t h e c o m m e rc i a l m a r k e t .

They h a v e p re p a re d a b u s i n e s s c a s e for LEE D o n t h e i r w e b s i t e , l i s t i n g five ma i n b e n e f i t s t o t h e p ro p e r t y owner o r d e v e l o p e r : Competitive differentiator. G re e n buildin g s o ff e r l o w e r o p e r a t i n g costs a n d b e t t e r i n d o o r e n v i ro n ments, w h i c h m e e t t h e n e e d s o f corpor a t e t e n a n t s , i n v e s t o r s a n d buyers .

Mitigate risk. T h e t h i rd - p a r t y v e r i f i cation o ff e r s s o m e p ro t e c t i o n f ro m lawsuit s o v e r i n d o o r a i r q u a l i t y o r energy s a v i n g s . I n m a n y j u r i s d i ctions, L E E D b u i l d i n g s m o v e m o re quickly t h ro u g h e n t i t l e m e n t a n d permit t i n g .

Attract tenants. 2 1 s t C e n t u r y t e nants are d e m a n d i n g t h e b e n e f i t s that co m e f ro m a L E E D b u i l d i n g and m a n y a re m a n d a t e d t o l e a s e only in L E E D . R e n t s i n C l a s s A LEED-c e r t i f i e d b u i l d i n g s r u n f ro m averag e t o 2 0 p e rc en t a b o v e a v e rage.

Cost effective. T h e c o s t p e r s q u a re foot fo r L E E D b u i l d i n g s i s w i t h i n the ran g e o f t h o s e t h a t a re n o t LEED-c e r t i f i e d . A L E E D b u i l d i n g h a s life cyc l e s a v i n g s o f 2 0 p e rc e n t o f the tot a l c o n s t r u c t i o n c o s t s a n d buildin g s a l e p r i c e s f o r e n e r g y e fficient b u i l d i n g s a re a s m u c h a s 1 0 percen t h i g h e r p e r s q u a re f o o t t h a n conven t i o n a l b u i l d i n g s .

Increase rental rates. G re e n b u i l d ings ou t p e r f o r m t h e i r n o n - g re e n peer a s s e t s i n o c c u p a n c y a n d re n t a l rates. L E E D b u i l d i n g s c o m m a n d rents t h a t a re $ 1 1 . 3 3 p e r s q u a re foot m o re t h a n t h e i r n o n - L E E D peers a n d h a v e 4 . 1 p e rc e n t h i g h e r occupa n c y.

USGBC ’s c a s e re l i e s o n a C o S t a r report f ro m 2 0 0 8 t h a t l o o k e d a t values , re n t s a n d l i f e c y c l e b e n e f i t s of LEED o n c o m m e rc i a l p ro p e r t i e s .

The rep o r t f o u n d t h a t t h e re w a s a $50 to $ 6 5 p e r s q u a re f o o t i n crease i n n e t p re s e n t v a l u e o v e r 2 0 years f o r g re e n b u i l d i n g s ; h o w e v e r, somew h e re b e t w e e n $ 3 5 a n d $ 5 0 of that i n c re a s e w a s i n “ p ro d u c t i v ity and h e a l t h v a l u e , ” t w o v a l u e s

66 DEVELOPINGPITTSBURGH

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At the end of the day, the best argument for LEED certification may well be the accountability of which Shar rard speaks. With all the pressures that a constr uction project endures, the commitment and discipline that the certification requires make it much more likely that green building projects will finish as green as they start out to be.

Wit hout a way to measure the process it’s impossible to tell if a project is staying on course to meet the goal. t h a t a re hard to quantify and mea s u re . M oreover, the study looked a t b u i l d i ngs constructed in 2006 a n d 2 0 0 7. Market conditions have c h a n g e d radically since then and t h e n u m ber of green commercial b u i l d i n g s – LEED or otherwise – has g ro w n e xponentially.

M o re t o the point, the business c a s e f o r LEED is also the business c a s e f o r energy efficient, healthy a n d a t t r active buildings in general.

T h a t f a c t seems to be at the crux of t h e L E E D vs. green argument.

P i t t s b u r gh’s Green Building Alliance ( G B A ) i s the local chapter of the U S B G C but their existence pre -

dates the national organization and LEED by several years. GBA’s most ambitious initiative is th e Pittsburgh 2030 District, an effort to bring the buildings in the CBD to reduce consumption of energy and water by as much as 50 percent by 2030. That effort recent ly achieved the participation level of half the Downtown space. The 2030 Challenge is built upon the realiza tion that not all owners are going to have the opportunity to LEED certify their properties but all can significantly reduce their consumption. GBA’s advocacy of sustainable design and construction naturally includes LEED certification but their goal is that buildings be better.

Aurora Sharrard says that LEED has the same goal.

“LEED isn’t necessarily about the certification; it’s about the quality of building that is built,” she says.

Sharrard argues that LEED certifica tion – or other third-par ty certifications like EnergyStar, Green Globes of Living Building Challenge – all help ensure that the owner gets the project he/she expects. Docu menting the steps needed to meet a certification goes a long way towards tur ning intentions into actions. W ithout the discipline of the certification process, project sus tainability goals can erode, espe cially when budget concer ns arise.

As one architect answered when asked how LEED certification slips away, “One VE at a time.” LEED is also set up to evolve towards higher standards and more innova tive practices, something that even owners committed to sustainability would have difficulty achieving.

At the end of the day, the best argument for LEED certification may well be the accountability of which Sharrard speaks. W ith all the pressures that a construction project endures, the commitment and discipline that the certification requires make it much more likely that green building projects will finish as green as they start out to be. W ithout a way to measure the process it’s impossible to tell if a project is staying on course to meet the goal.

Still, t h e a i m o f a l l g re e n b u i l d i n g propon e n t s – b e t h e y z e a l o t s o r novice s – i s a p e r m a n e n t c h a n g e i n the be h a v i o r o f t h e i n d u s t r y.

Jim Sc a l o w a s l o o k i n g t o c h a n g e and re w a rd c o r p o r a t e b e h a v i o r when h e h e l p e d c rea t e C l a s s - G , a self-re p o r t i n g c e r t i fi c a t i o n s y s t e m that al l o w s o w n e r s a n d t e n a n t s t o docum e n t a n d c o m m u n i c a t e t h e i r sustain a b l e p r a c t i c e s i n t h e i r d a y to-day o p e r a t i o n s . C o m p a n i e s g e t a score b a s e d o n s u s t a i n a b l e c r i t e r i a and th e n c a n g ro w t h a t s c o re a s their s u s t a i n a b l e p r a c t i c e s g ro w.

Like th e P i t t s b u r g h 2 0 3 0 C h a l l e n g e , Class-G i s d e s i g n e d t o e n c o u r a g e busine s s e s a n d p ro p e r t y o w n e r s who d o n ’t h a v e t h e c e r t i f i c a t i o n opport u n i t y t o b e h a v e m o re re s p o n sibly a n d t o g e t c re d i t f o r i t . B u t Scalo i s n ’t a m o n g t h o s e w h o q u e s tion th e v a l u e o f L E E D c e r t i f i c a t i o n .

“We a re b y n o m e a n s a n t i - L E E D .

We’re d o i n g t h re e b u i l d i n g s a t Southp o i n t e a n d t h e y w i l l b e L E E D certifie d a n d C l a s s - G , ” S c a l o s a y s .

Green b u i l d i n g h a s a l w a y s g o n e agains t t h e g r a i n s o i t ’s n o t a s u rprise t h a t s o m e d e ve l o p e r s , c o n t r a ctors or d e s i g n e r s w o u l d g ro w w e a r y of LEE D c e r t i f i c a t i o n . L E E D s t a k e d out a p o s i t i o n w h e n t h e re w e re f e w other c e r t i f i c a t i o n s y s t e m s i n p l a c e and ha s d e f e n d e d i t s p o s i t i o n i n t h e marke t p l a c e . T h e U S G B C a l s o h a s i t s detrac t o r s , a s c a n b e e x p e c t e d w i t h any or g a n i z a t i o n t h a t s u c c e e d s i n interpo s i n g i t s e l f i n a n i n d u s t r y. Ye t withou t e i t h e r, i t ’s u n l i k e l y g re e n buildin g w o u l d h a v e t h e s h a re o f the ma r k e t c u r re n t l y e n j o y e d . L E E D is bein g e x p a n d e d to i n c l u d e e x i s ting bu i l d i n g o p e r a t i o n s a n d m a i ntenanc e ( L E E D - E B O M ) a n d t h e n e x t version o f L E E D w i l l b e m o re f o cused o n m e a s u r a b le p e r f o r m a n c e .

Wheth e r o r n o t L E E D l o s e s i t s positio n a s t h e s t a n d a rd b y w h i c h sustain a b i l i t y i s m e a s u re d re m a i n s to be s e e n b u t t h e re g u l a r e v o l u t i o n of LEE D ’s s t a n d a rd s w o n ’t h u r t t h a t cause.

“LEED v e r s i o n 4 i s a l o t m o re a b o u t perform a n c e a n d e s p e c i a l l y m o re about m a t e r i a l s , ” e x p l a i n s S h a r r a rd .

“It sho u l d g e t p e o pl e t o s t a r t a s k i n g questio n s l i k e t h e y d i d i n 1 9 9 9 . ” D P

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www.developingpittsburgh.com

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Voices Developing Leaders Answer the Question, "Why Pittsburgh?"

Josep h J o h n s o n Devel o p m e n t M a n a g e r Horizo n P ro p e r t i e s G ro u p L L C I d i d n ’t choose P i t t s b u r g h .

I am not f ro m h e re . P i t t s burgh was chosen for m e . I t a l l started when I met this teacher in Atlanta in 200 1 … O n e b i g P i t t s b u r g h weddin g ( w i t h a c o o k i e t a b l e ? ) , one bi g b a b y b o y, a n d 6 y e a r s later… W h e n I i n t er v i e w e d w i t h Horizo n P ro p e r t i e s i n F e b r u a r y o f 2007, I d i d n ’t h a v e a n y i d e a w h a t was ha p p e n i n g i n t h e ‘ B u r g h . B y faith, a n d c o n f i r m e d i n p r a y e r a n d circum s t a n c e a f t e r c i rc u m s t a n c e , I was re l o c a t i n g m y f a m i l y b e c a u s e it seem e d l i k e i t w as G o d ’s p l a n and tim i n g . I t m a d e p e r f e c t s e n s e !

Leave a t h r i v i n g A t l a n t a d e v e l o pment c o m p a n y a n d m a r k e t t o g o t o Pittsbu r g h ( i n s t e a d o f F l o r i d a w h e re I am fro m ) f o r a n o t h e r c o m m e rc i a l real es t a t e d e v e l o p m e n t j o b … i n Pittsbu r g h . T h e m a r k e t h e re w a s n ’t lookin g s o g o o d i n s p r i n g o f 2 0 0 7 .

The pa s t f i v e y e a r s h a v e s h o w n what I k n o w ! T h a n k G o d w e d i d n ’t do wh a t s e e m e d t h e o b v i o u s c h o i c e in 200 7 a n d g o t o F l o r i d a , o r e v e n stay in A t l a n t a ! B o t h P i t t s b u r g h ’s and Ho r i z o n P ro p e r t i e s ’ i n c re d i b l e prospe r i t y i n t h e p a s t 5 y e a r s h a s been a p r i c e l e s s b l es s i n g t o m e and m y f a m i l y. F o r t h e f o re s e e a b l e future, h o p e f u l l y t h e re s t o f t h i s life, th e re i s n ’t a n y w h e re i n t h e world t h a t o ff e r s m o re t o m e a n d my fam i l y t h a n t h e S . T. E . E . L . ( S t e e l , Techno l o g y, E n e r g y, E d u c a t i o n , L i v able) C i t y.

M i c h a e l Sharp V i c e P resident, B u s i n e s s Development C o n t i n e ntal Office Environments Having grown up in the Pittsburgh area (Murrysville), I had never viewed Pittsburgh as a city that could cater to young pro f e s s i o n a ls. In my mind, Pittsburgh w a s a g reat place to be raised, but t h e n i t was time to move away. In f a c t , i n 2005 I moved to New York C i t y t o pursue my career in the c o n t r a c t fur niture industry. After s p e n d i n g 5 years in Manhattan, I re a l i z e d that I wanted to both s p e n d more time with my family a n d e v e ntually start a family of my o w n . I realized New York City was n o t t h e right place for me to do it.

I n 2 0 1 0 I moved back to Pittsburgh.

I t w a s n ’t until I moved back that I re a l i z e d the tremendous potential t h a t P i t tsburgh had to offer young p ro f e s s i onals. Up until this point, I f e l t l i k e I was viewing Pittsburgh w i t h b l i nders on. In those 5 years t h a t I w as gone, Pittsburgh had b e e n c o mpletely transforming itself ( a l l w h i l e maintaining its’ heritage a n d M i d wester n values). We are n o w o n the forefront of the envi ro n m e n tal building scene, the oil & g a s i n dustry is booming, and t h e t e c h nology/healthcare sectors a re b e c oming prominently known.

M a j o r c orporations such as Apple a n d G o ogle (many of whom target y o u n g t alented professionals) now h a v e re gional offices here. All of this I probably would have never known if I were not a “boomerang”

myself. Moving forward, I plan to stay in the Pittsburgh re gion and am even looking at the possibility of buying a condo in the central business district (something I used to think was unimaginable as people just did not live downtown while I was growing up). The potential that a young professional has in this city is indescribable. The market is one of only a few in the nation that was not majorly impacted by the recession. Pittsburgh is now one of the most livable cities in the country and flies on the radar of many prominen t lists. We have culture, nightlife, champion ship sports teams, low cost of living, and a plethora of opportunity in major growing business sectors.

All of these are extremely important to young professionals. Pitts burgh can now provide the perfect balance of work and personal life all while catering to the sometimes demanding needs of the younger folks. I am extremely excited to see what the future will bring to Pitts burgh as I know we are heading in the right direction.

Autumn R. Harris Relationship Manager, AVP PNC Real Estate Banking There are three main reasons that I chose Pittsburgh over other cities now.

The first was afford ability. One demonstration of affordability that led to my ultimate decision is the median sales price of a home. It was very

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import a n t t o m e t o b e a b l e t o b u y a hom e a n d s t i l l h a v e d i s p o s a b l e income a v a i l a b l e f o r t r a v e l , f o o d and ot h e r a c t i v i t i e s . T h e m e d i a n home s a l e s p r i c e i n P i t t s b u r g h i s $130k, w h i c h i s $ 7 2 k u n d e r t h e nation a l a v e r a g e o f $ 2 0 2 k , i n a ccordan c e w i t h z i l l o w. c o m . T h i s w a s a huge f a c t o r i n m y d e t e r m i n a t i o n of whe re t o l a y m y f o u n d a t i o n a n d after a l i t t l e a n a l y s i s I f o u n d t h a t I woul d g e t m u c h m o re b a n g f o r my buc k i n t h e c i t y o f P i t t s b u r g h than m o s t o t h e r c i t i e s . T h e s e c o n d reason f o r m y d e c i s i o n w a s f a m i l y.

As a n a t i v e f ro m B e a v e r C o u n t y a n d my hus b a n d a n a t i v e o f Wa s h i n g t o n County, i t i s i m p o r t a n t t o m e t h a t I am cl o s e e n o u g h f o r c o m f o r t . I don’t w a n t t o m i s s o u t o n s h a r i n g holiday s , n e w b i r t h s o r t i m e s w h e n my fam i l y n e e d s t o b e t o g e t h e r.

The th i rd re a s o n t h a t I c h o s e P i t t s burgh w a s t h e w a n t t o b e p a r t o f a vibra n t c o m m u n i t y. I p u rc h a s e d a home i n U p p e r S t . C l a i r, w h i c h l i k e many o f t h e c o m m un i t i e s i n P i t t sburgh h a s a l l t h e a m e n i t i e s t o m a k e up a vi b r a n t c o m m u n i t y i n c l u d i n g : parks, c o m m u n i t y o r g a n i z a t i o n s , nice re s t a u r a n t s a n d c o n v e n i e n t shoppi n g . I a m v e r y p l e a s e d w i t h my dec i s i o n a n d p ro u d t o c a l l P i t t sburgh m y h o m e .

Tony R o s s i V ice P re s i d e n t , D e b t & Equi t y F i n a n c e CBRE C a p i t a l M a r ke t s A s a P i t t sburgh native, the decision to stay in Pittsburgh to pursue m y re a l e s tate finance c a re e r w a s an easy o n e . E n t e ring the industry as a yo u n g p ro f e s s i o n a l d u r i n g a time o f s o f t e n i n g f i n a n c i a l m a r k e t s the stro n g e r f u n d a m e n t a l s o f t h e Pittsbu r g h M S A a l l o w e d m e t o h i t the gro u n d r u n n i n g . Wo r k i n g i n the mo r t g a g e b a n k i n g i n d u s t r y I have th e d i s t i n c t p l e a s u re o f t e l l ing the s t o r y o f o u r d y n a m i c c i t y

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t o m a r k et participants from across t h e c o u ntry. W ith significantly l o w e r t han national unemployment a n d a n array of industries driving t h e e c o nomy (Energy, Technology, M e d i c a l , Finance, to name a few) i t i s a n easy story to tell. In fact, s o m u c h upside exists that it is v i r t u a l l y impossible to capture the s t o r y i n one conversation and still d i s c u s s the matter at hand. Duri n g t h e s e daily conversations some p e o p l e are pleasantly surprised to l e a r n a b out the health of our city, b u t m a n y are not surprised, there is n o d o u b t that Pittsburgh is on the n a t i o n a l real estate radar screen.

M i c h a e l Embrescia C o - c re a tor and Director Class-G Duquesne University's MBA (Sustainability) brought me to Pittsburgh in '07. My Clevelandroots and lifelong distaste for all things Pittsburgh c h a n g e d quickly. Instantly, I was w e l c o m ed by neighbors (still won't m o v e f rom our first Dormont h o m e ) , became regulars at all the c o o l s p ots, and it was clear within t h e f i r s t full month of living here - - - t h i s i s home.

F o l l o w i ng grad school, I quickly i m m e r s e d myself in the business e n v i ro n ment. I was lucky to land s o m e p retty cool gigs, and curre n t l y m entor under a few amazing a n d p ro minent figures. Needless t o s a y, I 'm in the right place at the r i g h t t i me.

T h e Tw o -Degree Town: the town i s l a r g e r than most, but quaint e n o u g h to realize the best of both w o r l d s . Professionally, I can make a c q u a i n tances and build relation s h i p s w i th folks with relative ease - - i f y o u don't know a person, all y o u h a v e to do is ask someone i n y o u r network. To me, this is a

great attribute to doing business in our region.

More Why?: The neighborhoods, the great universities an d health care that continue to explode, a thriving business climate, and an exciting startup scene (gar nering national attention) --- in my opinion, a sleeping giant.

"Why Pittsburgh now?" My question is, why not?!

Tyler Noland Portfolio Manager/Underwriter PenTrust Real Estate Advisory Services Inc. First, it always comes down to good people, and Pittsburgh’s people are salt of the earth. Second is the opportunity for career advancement. In Pittsburgh, young professionals swim in a lake rather than an ocean like New York City, Chicago, or LA, and the opportunity to be noticed is higher. And third, it’s the climate. I couldn’t live anywhere without four truly distinct seasons.

Four seasons offer four opportuni ties for varying hobbies and outdoor life.

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To make sure you’re spending your advertising dollars where your customers and prospects are contact Karen Kukish at: (412) 837-6971 or kkukish@talltimbergroup.com 506B McKnight Park Drive Pittsburgh PA 15237 www.talltimbergroup.com

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Gerard McLaughlin Executive Managing Director gmclaughlin@ngkf.com Louis Oliva Executive Managing Director loliva@ngkf.com 6 PPG Place, Suite 600, Pittsburgh, PA 15222 T 412.281.0100

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News from the Counties

ber 31, 2012. Sloan Brothers Company, a fourth generation family-owned business located in Northpointe, designs and builds lubrication systems for compressors and other critical equipment. Sloan ou tgrew their 20,000 SF facility within three years and has recently added an additional 10,000 SF. To accom modate their expansion, Sloan purchased a portion of the adjacent lot from the ACIDC in December 2012.

Armstrong County A r mstrong County Department of E c o nomic Development A r msdale Administration Building 1 2 4 Armsdale Road, Suite 205 K i t tanning, PA 16201 724-548-1500 (T) 724-545-6055 (F) Michael Coonley, Executive Director m p coonley@co.armstrong.pa.us w w w.armstrongidc.org T h e Armstrong County Industrial D e velopment Council (ACIDC) sold f i v e lots consisting of 21 acres b e t ween June 1, 2012 and Decem-

The largest of the County’s of fice/business parks is located only 35 minutes from down town Pittsburgh. Northpointe, located along State Route 28 at exit 18, was strategically developed in the southwest portion of Armstrong County to capture the office and light industrial markets along Route 28. Northpointe was designed with the following components: industrial/business, retail and residential. The 925 acre fully permitted facility also features multiple sources of high band width fiber, an abundance of power, approximately 300 acres of passive recreation and open www.developingpittsburgh.com

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space, i n c l u d i n g s i d e w a l k s , w a l k i n g trails, a n d p ro f e s s i o n a l l y m a n i c u re d storm w a t e r p o n d s . T h e A C I D C w i l l embar k o n a m a j o r s i t e p re p a r a tion pro j e c t i n e a r l y 2 0 1 3 t o c re a t e additio n a l p a d re a d y s i t e s . T h e s i t e design w a s f i n a l i z e d i n l a t e 2 0 1 2 and w i l l re s u l t i n 4 3 p a d re a d y acres. N o r t h p o i n t e i s c u r re n t l y home t o t e n c o m p a n i e s , a b r a n c h campu s o f I n d i a n a U n i v e r s i t y o f Pennsy l v a n i a a n d t h e P e n n S t a t e Univer s i t y E l e c t ro - O p t i c s C e n t e r.

The AC I D C re c e n t l y s o l d t w o o f t h e remain i n g K e y s t o n e O p p o r t u n i t y Zone ( K O Z ) l o t s i n th e M a n o r To w n ship Bu s i n e s s P a r k . P ro j e c t i l e Tu b e Cleani n g , I n c . p u rc h a s e d l o t # 4 i n Decem b e r 2 0 1 2 a n d p l a n s t o c o nstruct a 9 , 0 0 0 S F f a c i l i t y t o s e r v e a s their h e a d q u a r t e r s a n d d i s p a t c h i n g termin a l . C o n s t r u c t i o n i s e x p e c t e d during t h e s u m m e r o f 2 0 1 3 . P ro jectile Tu b e C l e a n i ng m a n u f a c t u re s conde n s e r t u b e c l e a n i n g e q u i p m e n t and pro d u c t s i n c l u d i n g p a t e n t e d mecha n i c a l s c r a p e r s . I n N o v e mber 20 1 2 , S t e v e ’s A u t o B o d y & Repair p u rc h a s e d l ot # 5 a n d h a s recent l y c o m p l e t e d c o n s t r u c t i o n o n

B e a v e r C o unty Beaver C o u n t y C o r po ra t i o n for Ec o n o m i c D e v e l o p m e n t 250 In s u ra n c e S t re e t , S u i t e 3 0 0 Beaver, PA 1 5 0 0 9 724-72 8 - 8 6 1 0 ( T ) 7 2 4 - 7 2 8 - 3 6 6 6 ( F ) James Pa l m e r, P re s i d e n t jpalme r @ b e a v e rc o u n t y c e d . o rg www.b e a v e rc o u n t y c e d . o rg In Aug u s t 2 0 1 2 , t h e B e a v e r C o u n t y Corpo r a t i o n f o r E c o n o m i c D e v e l o pment c o m p l e t e d a $ 3 m i l l i o n i n f r astructu re p ro j e c t a t i t s A l i q u i p p a Indust r i a l P a r k . T h e p ro j e c t i n v o l v e d constr u c t i o n o f a ro a d , s a n i t a r y sewer s e r v i c e , a n d s t o r m d r a i n a g e (water w a s a l re a d y i n p l a c e ) t o 7 2 acres o f v a c a n t l a n d o w n e d b y C E D , all ser v e d b y r a i l a n d a p p ro x i m a t e l y 45 of w h i c h h a v e f ro n t a g e o n t h e Ohio R i v e r. T h i s s e c o n d p h a s e o f

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a 1 0 , 0 0 0 SF facility. Occupancy is e x p e c t e d in February 2013. W ith K O Z , P rojectile Tube Cleaning and S t e v e ’s Auto Body & Repair will re c e i v e abatements for 10 years on re a l e s t ate taxes and certain state t a x e s . T he Manor Township Busi n e s s P a r k is now fully occupied.

I n t h e West Hills Industrial Park, t h e A C I DC sold lot #17 to the ARC M a n o r Auxiliary Foundation in D e c e m b er 2012. ARC Manor will c o n s t r u ct a 35,000 SF medical facili t y l a t e r this year. The West Hills I n d u s t r i al Park is home to multiple m e d i c a l service providers including o n e o f t he County’s largest employ e r s , t h e Armstrong County Memo r i a l H o s pital.

profit (501c3) economic devel opment corporation. The ACIDC provides a single-point-of-contact service for information pertaining to all economic development and business related resources in Armstrong County. Operating four industrial parks, a multi-tenant office building and other properties, the ACIDC is tasked with present ing new or expanding businesses a wide range of options to guide their relocation, expansion, or ini tial location decisions. The ACIDC works directly with companies to identify sites and assist with financing, permitting and workforce development needs

T h e A r mstrong County Department o f E c o n omic Development is the l e a d e c onomic development agency w i t h i n t he County. The Department p ro v i d e s staff to the Armstrong C o u n t y Industrial Development A u t h o r i ty (ACIDA), a public develo p m e n t agency and the Armstrong C o u n t y Industrial Development C o u n c i l (ACIDC), a private non-

d e v e l o pment comes upon CED comp l e t i n g the sale of the 120 acre first p h a s e of the project in early 2012.

A l s o i n August, CED purchased the f o r m e r Tegrant Diversified Brands f a c i l i t y on Blockhouse Run Road in N e w B r ighton. This 67,000 square f o o t p l ant sits on over four acres of l a n d . T he building has been vacant f o r s e v eral years. CED purchased t h e p l a nt and entered into a long t e r m l e ase with Creekside Springs, L L C f o r the entire facility. Creek s i d e , w ith facilities in Ambridge, P e n n s y l vania and Salieneville, Ohio, i s a p r i vate label bottler of water a n d f l a vored drinks. The company h a s o p portunity to expand its flav o re d water production and was c o n s i d ering sites both in Ohio and P e n n s y l vania. The former Tegrant p l a n t was well suited to Creekside n e e d s , and CED’s purchase and

long term lease with the company insured the investment remained in Pennsylvania. Creekside currently employs approximately 50, and can increase employment to 75 with the new business it will take on with its expanded production capacity.

Another way the Gateway Engineers are helping develop Pittsburgh

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Butler County

Since 1958

Desmone & Associates Architects Architecture • Planning • Interior Design 3400 Butler Street • Pittsburgh, PA 15201 412.683.3230 • www.desmone.com

Connecting ideas, capital and clients.

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. our scope of services includes: -

Freddie Mac Program Plus® Seller/Servicer | Seniors Housing Fannie Mae DUS® FHA-insured Loans | MAP and LEAN Nearly 50 Insurance Companies CMBS | Institutional Investors | Pension Funds Proprietary Lending Platform | Structured Finance $29 Billion+ Loan Servicing Portfolio

ContaCt Us Two Gateway Center | 603 Stanwix Street | Suite 1899 Pittsburgh, PA 15222 | Phone 412.391.3366 | Fax 412.471.1773 grandbridge.com Loans are subject to credit approval.

Equal Housing Lender.

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Community Development Corporation of Butler County 112 Woody Drive Butler, PA 16001 724-283-1961 (T) 724-283 3599 (F) Ken Raybuck, Executive Director kraybuck@butlercountycdc.com www.butlercountycdc.com

Yeltrah, LLC purchased the Butler County Economic Development Corporation’s 14,700 square foot flex building located at 295 Delwood Road in late 2012. The n ew Butler County business will manufacture components for the auto mobile glass industry.

Two parcels in the V ictory Road Business Park are also under agree ment and are expected to close in the first quarter of 2013. Each parcel is approximately e ight acres.

A manufacturing building costing approximately $1,000,000 will be constructed on one parcel and it is also expected that an additional $1,000,000 in equipment will be housed in the building. The second parcel will be the new home of a health care facility that will employ up to 25 people. Construction of this new building is expe cted to begin in the Spring. Both V ictory Road parcels are located in Keystone Op portunity Zones.

The Trinity Building located at 140 Hollywood Drive in the Pullman Center Business Park Expansion is currently under a sales agreement as well. The 30,000 square foot flex/warehouse space is situated on more than five acres and will be the new home of an HVAC wholesaler.

The building will permit its new owner to have both showroom and warehouse capabilities.

The Pullman Commerce Center will be the new home of a local union as they agreed to purchase 10,000 square feet that will house their office. There are 3,600 square feet of first floor office space available for lease in this building as well as additional office space that will be available at 124 Woody Drive in July, 2013.

Fa y e t t e C ounty Fay-Pe n n E c o n o m i c Develo p m e n t C o u n c i l 1040 E b e r l y Wa y, S u i t e 2 0 0 Lemon t F u r n a c e, PA 1 5 4 5 6 724-43 7 - 7 9 1 3 ( T ) 7 2 4 - 4 3 7 - 7 3 1 5 ( F ) Michae l A . Jo rd a n , J r. , Exec u t i v e D i re c t o r michae l j @ f a y p e n n . o rg www.f a y p e n n . o rg Over t h e p a s t 2 0 y e a r s , F a y - P e n n has as s i s t e d n u m e ro u s c o m p a n i e s by pro v i d i n g s u p e r i o r c o n f i d e n t i a l busine s s s e r v i c e s , s u c h a s s i t e s e l e ction as s i s t a n c e . F a y - P e n n h a s b e e n able to s u c c e s s f u l l y m a r k e t F a y e t t e County t o n e w b u s i n e s s e s b y h a ving sit e s t h a t a re rea d i l y a v a i l a b l e , which a t t r a c t s n e w p r i v a t e i n v e s tment i n t o t h e a re a .

One o f t h e m o s t re c e n t a t t r a c t i o n s include d C a l f r a c We l l S e r v i c e s , a Marcel l u s re l a t e d c o m p a n y t h a t has es t a b l i s h e d p e r m a n e n t ro o t s i n Fayette C o u n t y. C a l f r a c h a s i n v e s t e d over $ 2 0 m i l l i o n i n t h e d e v e l o p m e n t of a ne w c o m p l e x a t F a y - P e n n ’s - Fayet t e B u s i n e s s Pa r k , G e o r g e s Towns h i p , w h i c h w i l l s e r v e a s t h e hub fo r i t s t r i - s t a t e a re a o p e r a t i o n s .

Selecte d f o r i t s c e n t r a l l o c a t i o n i n the reg i o n , t h e s i t e c u r re n t l y e m ployee s 3 4 2 p e o p l e w i t h a n e x p e ctation o f re a c h i n g 1 , 0 0 0 e m p l o y e e s or high e r i n a f e w y e a r s . C a l f r a c i s commi t t e d t o b e c o m i n g p a r t o f t h e Fayette C o u n t y c o m m u n i t y a n d h i ring loc a l re s i d e n t s .

Fayette C o u n t y b o a s t s o f s e v e r a l busine s s p a r k s t h a t a re h o m e t o compa n i e s l i k e W i l l i a m s , Va l e r u s , GHX, B O S S o l u t i o n s a n d m a n y m o re .

W ith a n e v e r i n c re a s i n g d e m a n d f o r busine s s s i t e s , F a y - P e n n h a s re c e n t l y annou n c e d t h e c o n s t r u c t i o n o f a new b u s i n e s s p a r k i n D u n b a r To w n ship. G ro u n d b re a k in g i s p l a n n e d for ear l y 2 0 1 3 o n t h i s n e w d e v e lopmen t a re a t h a t w i l l i n c l u d e 3 1 1 acres w i t h s o m e s i t e s h a v i n g r a i l access t h a t w i l l c o n n e c t t h e c o m p anies to n o r t h e a s t e r n U n i t e d S t a t e s and Ca n a d a . A s a re g i o n , P e n n s y l vania’s s o u t h w e s t e r n c o r n e r h a s becom e t h e c e n t e r o f t h e M a rc e l l u s Shale i n d u s t r y a t t r a c t i n g n a t i o n a l and in t e r n a t i o n a l i n v e s t m e n t s .

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I n d i a n a C ounty Indian a C o u n t y C e n t e r f o r Econom i c O p e ra t i o n s 801 Wa t e r S t re e t Indian a , PA 1 5 7 0 1 724-46 5 - 2 6 6 2 ( T ) 7 2 4 - 4 6 5 - 3 1 5 0 ( F ) Byron G. S t a u f f e r, J r. , Exec u t i v e D i re c t o r byronj r @ c e o. c o. i n d i a n a . p a . u s www.i n d i a n a c o u n t y c e o. c o m In 2012, relocation, expansion, and recognition were paramount in Indiana County. Two national companies selected business parks in the Blairsville/Burrell Township area for new locations. Bayada Home Health Care finalized the transition of their new regional office at the Interchange Center multi-tenant building, located at the Corporate Campus business park. Bayada Home Health Care provides a variety of nursing and personal home care services to people in the comfort of their own homes. The National Center for Defense Machining and Manufacturing (NCDMM) also expanded to Indiana County, moving their national headquarters to the Corporate Campus. The NCDMM delivers optimized manufacturing solutions to the defense industry.

Lawrence County Lawrence County Economic Development Corporation 100 East Reynolds Street Plaza South, Suite 100 New Castle, PA 16101 724-658-1488 (T) 724-658-0313 (F) Linda Nitch, Executive Director nitch@lawrencecounty.com www.lawrencecounty.com Lawrence County is a player in the world of natural gas. SWEPI LP, which is owned by Royal Dutch Shell, and HilCorp Energy Company, Houston, Texas, have emerged as drillers of the Marcellus and Utica Shale throughout the county. As of December, 2012 sixty two (62) permits have been issued according to the DEP Office of Oil and Gas Management. The wells that have been drilled circle the county from the Patterson Farm in Little Beaver Township to the Twentier drilling site in Perry Township.

78 DEVELOPINGPITTSBURGH

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Ralph Resnick, NCDMM President and Executive Director and Acting Director of the National Additive Manufacturing Innovation Institute (NAMII) said, “We have found the ideal location and community for NCDMM’s headquarters. Additionally, we are proud to support the revitalization efforts underway in Indiana County to bring back more industry and business to the region. We look forward to many successful years in Blairsville." In August, NCDMM was awarded management of the (NAMII), a pilot project for the National Network for Manufacturing Innovation (NNMI).

H & W Global Industries, Inc., completed a 21,000 square-foot, stateof-the-art expansion project in 2012, and the 46,000-square-foot facility is now fully operational at the Corporate Campus business park. H&W Global Industries is an industrial coatings company providing processing and finishing for steel and aluminum parts, serving a broad range of industries including aerospace, defense, and medical.

and earning the Chairman’s Award for Pittsburgh Impact Companies.

Environmental Service Laboratories provides analytical testing, consulting and field sampling services for water and natural gas. Environmental Service Laboratories and its sister company, Environmental Land Surveying and Solutions, Inc. also received over $30, 000 in job creation tax credits from the state of Pennsylvania.

The Communities at Indian Haven earned the Employer of the Year Award for Indiana County from the Tri-County Workforce Investment Board. Communities at Indiana Haven operates assisted-living facilities that provide nursing, dietary, and therapy services.

Steady progress in 2013 will surely continue with the past year as an indication of things to come. For more information about opportunities in Indiana County, please contact the Indiana County Center for Economic Operations (www.indianacountyceo. com).

Finally, Environmental Service Laboratories, Inc. grew 274%, adding 37 new employees in the past year Most recently, LS Power of St Louis presented plans on Monday, Oct 8, 2012 to build a $750 million gas fired electric generation plant at the New Castle Development site located off Route 551 in North Beaver Township.

The Hickory Run Energy Station is the largest investment ever in Lawrence County! The project offers infrastructure improvements including extensions of Aqua Pennsylvania public water supply and North Beaver Township’s municipal sewer to the site. Also of importance is the $15 million electric substation planned adjacent to the new facility. With an anticipated real property assessment of $40 million the school district, county and township will receive a windfall from the expected taxes. The company intends to purchase materials locally and use local contract services whenever possible.

The plant will generate a $3 million annual payroll and employ 25 people.

Additionally 500 construction workers will be used to build the plant which is

expected to go into operation in 2016 or 2017.

Just 10 miles from the border of Lawrence and Beaver counties is the next BIG energy opportunity for Lawrence County. In mid-March 2012 Royal Dutch Shell announced that the Horsehead site in Monaca had been selected as its preferred site to build an ethane cracker plant. No final decision has been made. But should the plant be built, then the opportunities that this facility will offer Lawrence County are tremendous. From plastics to pharmaceuticals to carpeting and clothing, many plants utilizing ethylene and polyethylene will build in the area to be near that source of raw materials.

With the opportunity of the ethane cracker plant, comes the challenge of being prepared. Lawrence County’s Commissioners and our private sector leaders have taken the lead on preparing shovel-ready sites. There are 100

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Lawrence County (continued) acres at Millennium Technology Park, 60 acres at Neshannock Business Park and 30 acres at Shenango Commerce Park that are ready to go. In addition, the Lawrence County Economic Development Corporation is constructing a

Wa s h i n g t o n County Washingt o n C o u n t y E c o n o m i c Developm e n t Pa r t n e rs h i p 20 East B e a u S t re e t Washingt o n , PA 1 5 3 0 1 724-225- 3 0 1 0 ( T ) 7 2 4 - 2 2 8 - 7 3 3 7 ( F ) Jeff Kotu l a , P re s i d e n t jeff@was h c o c h a m b e r. c o m www.wa s h i n g t o n c o u n t y w o r k s. c o m In the second half of 2012, Washington County continued to attract businesses as its residential housing market continued to increase in activity and average sales prices of existing homes. Examples of the continuing business development: Mylan, Inc., a leading generic and specialty pharmaceutical company in

50,000 sq ft multi-tenant speculative building in Millennium Technology Park.

Not only will sites be needed, but also the necessary infrastructure of water, sewer, electric and gas to make these projects a reality. Our municipal and

the world, announced in March 2012 its intent to build a new corporate headquarters near its current location in Southpointe I located in Cecil Township just south of Pittsburgh.

Mylan has more than doubled the number of its employees over the last five years and is committed to remaining in the area. Its new corporate headquarters will be located along Town Center Boulevard in Southpointe II and is expected to be completed in 2013.

The overall development will include an approximate 280,000 square foot, five-story, LEED-certified, Class-A office building with associated infrastructure and parking.

private sector leaders must be certain to allocate the necessary financial resources to extend the infrastructure. Lawrence County is working to meet these challenges and be OPEN FOR BUSINESS in the years to come!

In September 2012, Ansys Inc., located in Southpointe I and a global provider of engineering simulation software, announced its decision to move its headquarters to a new building in Southpointe II to be developed by Bur ns & Scalo/Quattro Partners that is within a mile of its current operation.

Nearly 60 percent bigger than its current site, Ansys plans to expand into its new 186,000 square feet headquarters by consolidating 438 employees from its Southpointe I and Station Square locations as their leases expire in 2014. It expects to open its new location in the last quarter of 2014.

At Starpointe, the Washington County Council for Economic Development

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Washington County (continued) was successful in securing a Redevelopment Assistance Capital Program grant of $1.5 million to aid the development of the park’s next phase. Fourth River Development is currently in the planning stages of Flex Building 3, a 60,000 sq. ft. spec building to be built later in 2013.

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| Spring 2013

Westmoreland County Westmoreland County Industrial Development Corporation 40 North Pennsylvania Avenue, Suite 520 Greensburg, PA 15601 724-830-3061 (T) 724-830-3611 (F) Jason W. Rigone, Executive Director wcidc@wpa.net www.co.westmoreland.pa.us Healthy Business Activity – these are words that could sum up 2012 in Westmoreland based on its aggressive economic development agenda and the numerous activities occurring throughout the county that may very well be in direct relation to a healthy business climate.

Enforcing the terminology were some compelling statistics reported during the last quarter of the year. Data, such as the state’s unemployment rate of 7.9% rising above the national rate of 7.8% with Westmoreland County’s rate reportedly remaining at 0.7% and 0.6% below state and national averages, respectively. In November, foreclosures in the region were declared to be the lowest in a decade, including Westmoreland’s account of 319 predicting that the county would end the year with its lowest number of foreclosures since 2002. The region affirmed its housing starts in the third quarter at 2,396, all of which incorporated Westmoreland County’s figures that were already exceeding 2011 records by 40% and expecting to almost double its total by year end.

“Our local economy is healthy and growing for a number of reasons, but there is no doubt that some of this growth can be attributed to the county’s industrial park system and the opportunities that have been made available there for business,” said Commissioner Chuck Anderson. “Small and medium-sized companies are of particular focus and are the back-bone to our economic vitality."

With the location announcement of Aquion Energy selecting RIDC Westmoreland for its first full-scale manufacturing facility near New Stanton to many other pronounced county expansions during the second half of the year, Westmoreland County’s business climate appears to be healthy and on the rise. Growing companies are capitalizing on the opportunities in the county, such as Exxon Mobile and Chromoglass locating at the Bushy Run Corporate Park in Export, Yerecic Label and Xodus Medical expanding at the Westmoreland Business & Research Park in Upper Burrell and Washington Townships and the most recent industrial park announcement, Shalestone Group.

Shalestone Group, a subsidiary of Wendell H. Stone Company recently purchased 28 acres at the I-70 Industrial Park located in South Huntingdon Township to construct and market buildings to businesses in the natural gas industry. Plans call for the company to erect buildings between 10,000 and 21,000 square-feet, complete with “lay-down yards” for outside storage needs and will be leased or sold to private companies locating to the area.

In addition to the 28 acres purchased by Shalestone, another 6 acres has been optioned to EFR Partnership at the Westmoreland County Airpark in Latrobe. EFR Partnership, a developer of more than 220,000 square-feet of building space within the Airpark, plans to construct yet another 75,000 square-foot flex warehouse. The building will be divisible in 7,000 square-foot leasable increments for light industrial/manufacturing operations.

The total projects, including Shalestone and EFR Partnership, bring the overall acreage sold and/or optioned to almost 70 acres within the county’s industrial park system for 2012. “This is right in line with the county’s average rate of land absorption marketed in the industrial parks,” said Jason Rigone, Executive Director of the county’s Industrial Development Corporation. “With an average annual absorption of 45 acres sold in the county’s industrial park system during the last 10 years, future developed sites are a premium as we work to support this demand over the next 10 years,” adds Rigone.

In addition to green-field industrial parks, Westmoreland County extended leases on almost 113,000 square-feet of space within its existing brownfield redeveloped sites. The renewed leases include space at the Mount Pleasant Glass Centre to Lenox Outlet, Pittsburgh Electric Engines and O’Rourke Cut Crystal, as well as a lease extension to Philips Respironics at the South Greensburg Commons facility located in South Greensburg Borough.

During the third quarter of 2012, the county’s overall vacancy rate for privately-owned industrial space was reported at 11.8%, according to the Pittsburgh Office of Newmark Grubb Knight Frank, one of the largest real estate service firms in the world. “Although this rate appears to be elevated, it should be noted these calculations include the RIDC Westmoreland facility,” said Rigone. “This building caters primarily to the largest projects of 200,000 square-feet and up and removing the 1,500,000 square-feet from the inventory actually reduces the county’s rate to only 6% - one of the lowest in the region and resulting in the need for more Class A industrial space in the 25,000 – 100,000 square-foot range.”

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Some of the county’s strategic marketing efforts for 2013 will feature the newly designated Keystone Opportunity Expansion Zone (KOEZ) – New Stanton, which includes both available land parcels for sale for new construction and existing building space for lease opportunities. This site is comprised of Westmoreland Distribution Park North (177 acres) including 3 prime, pad-ready industrial sites and the county’s 2.8 million square-foot RIDC Westmoreland facility divisible in 100,000 square-foot leasable increments (173 acres). DP

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Transactions of Note

T

his list includes Allegheny County property transfer data originally collected from pub lic records by RealSTATs, In c. (www.

RealSTATs.net) and identified by them as a transfer of non-residential prop erty. Initially published in t he Pittsburgh Post Gazette Sunday edition’s Real Estate Sections, only non-residen tial transfers with a consideration or stamp value greater than $1,000,000 were selected by Tall T imber Group for research at the Allegheny County Assessor’s Online Database . Property use is determined by the assessor and data shown here (Sale Date, County Total Assessed Value, Prior Sale Price/ Date, Taxes, etc.) were coll ected from those online records. The value of the sheriff ’s deeds and the stamp value of nominal transactions are included.

Only transfers from the last six months of 2012 are included. There’s a total of $406.3 million for the 90 transactions with the City of Pittsburgh claiming nearly $61 million and accounting for 15% of the total transfer dollars in the county.

Shopping centers, particularly in Homestead, West Homestead, and Ross Township account for $145,402,863 or nearly 36 percent of total transfer dollars in the county. In dustrial uses account for $55,789,709 or nearly 14 percent.

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84 DEVELOPINGPITTSBURGH

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In the first half of 2012, 35 percent of the new owners were from outside of Pennsylvania entirely while 38% of the second half ’s transactions were from outside Pennsylvania.

Transactions of Note Property Address Municipality 300 Waterfront Drive W West Homestead

Prop Use

2000 Park Lane Dr North Fayette Twp

Office-Elevator

$36,005,184 12/14/12

680 Waterfront Drive E Munhall

Discount Store

$33,070,000 10/3/12

E Carson Street Pittsburgh, Ward 16 100 Papercraft Dr O'Hara Twp Siebert Road Ross Twp 1501 Northway Mall Ross Twp

Office-Elevator

$25,069,000 10/11/12 $24,415,769 10/12/12 $20,050,000 12/21/12 $12,000,000 11/30/12

400 Northtowne Sq Richland Twp 153, 158, & 172 E Bridge Dr Homestead 30 Pine Creek Road McCandless

Neighborhood Shopping Center

350 Waterfront Dr E Homestead 495 East Waterfront Dr Homestead SR 22 Robinson Twp 185 Waterfront Drive W Homestead

Department Store

1427 Cook School Road Upper St. Clair Twp 405 Sixth Avenue Pittsburgh Ward 2

Agricultural

324 -338 Amity Street Homestead

Small Detached Retail

$5,100,000 10/3/12

400 Oxford Drive Monroeville 10918 Frankstown Road Penn Hills 401 Chestnut Street Carnegie Waterfront Drive

Office-Elevator

$5,040,000 12/3/12 $4,825,000 12/31/12

Munhall

829 Milton Street Pittsburgh, Ward 14 6191 Steubenville Pike Robinson Twp 513 Smithfield Street Pittsburgh, Ward 2 610 Alpha Drive O'Hara Twp 230 N. Craig Street Pittsburgh, Ward 4 1 Penn Center West Robinson Twp 1630 Golden Mile Hwy Monroeville 211 Beecham Dr Kennedy Twp

Theater

Warehouse Shopping Center Shopping Center

Theater & Retail Retail Structures

Medical Clinics/Offices Industrial Restaurant, CafĂŠ and/or Bar

Office-Elevator

Independent Living-Seniors Commercial Other

Sale Price Sale Date $49,780,000 10/3/12

$10,575,000 7/13/12 $7,627,563 10/3/12 $6,560,000 12/28/12 $6,400,000 10/3/12 $6,250,000 12/31/12 $5,865,000 12/12/12 $5,660,000 10/3/12 $5,600,000 10/2/12 $5,500,000 10/22/12

$4,601,419

9/4/12 $4,500,000 10/3/12 Government/Commercial Vacant Land $4,092,861 7/23/12 Auto Sales & Service $4,000,000 9/20/12 Department Store $4,000,000 12/28/12 Light Manufacturing $3,900,000 11/9/12 Office/Apartments $3,897,173 8/15/12 Office $3,700,000 12/21/12

Prior Price Prior Date $97,743,308 3/2/07 $30,167,305 2/18/04 $29,500,000 12/28/05 $846,031 4/7/92 $16,399,206 3/2/07 $4,112,546 11/24/03 $347,500 7/28/00 $19,725,000 5/2/07 $0 11/2/12 $1,597 5/29/12 $24,200,000 11/29/00 $1,450,000 7/1/92 $57,527,862 3/2/07 $6,620,000 11/7/07 $2,000,000 5/1/06 $16,399,206 3/2/07 $500,000 4/16/01 $16,399,206 3/2/07 $1,610,641 11/24/03 $1 6/6/79 $6,500,000 10/15/08 $5,826,250 1/4/84 $5,350,000 7/27/07 $850,000 1/7/02 $0 1/5/09 $0 7/29/83

Discount Store

Warehouse Motel & Tourist Cabin

$3,608,280 12/28/12 $3,427,344 11/7/12

$3,000,000 6/13/06 $0 5/5/50 $630,000 8/16/12 $10 3/6/96 $1 6/22/10 $1,566 1/31/12 $6,000,000 12/23/96 $1 9/30/83 $3,390,000 9/1/99 $615,114

Total Assd Val Taxes $17,059,900 $85,257

Buyer Buyer City, State Lot Size M & J - Big Waterfront Town Center I LLC Chicago IL 18.09 A

$23,500,000 IX WR 2000 Park Lane Dr LP $132,358 Greenwich CT

7.61 A

$3,897,100 M & J Big Waterfront Amity Square LLC $21,731 Chicago IL 4.65 A $15,867,300 $146,299 $14,723,900 $82,103 $3,885,000 $24,479.55 $16,400,000 $82,469.33

UPMC Pittsburgh PA Stag O'Hara LLC Boston MA GRI McKnight Siebert LLC Bethesda MD LRC Northway Mall Acq LLC Akron OH

1.39 A 33.38 A 4.5 A 28.79 A

$6,528,600 $36,405 $8,690,600 $51,693 $5,187,500 $14,805

Northtowne Station LLC Cincinnati OH 16.1 A M & J - Big Waterfront Town Center I LLC Chicago IL 5.46 A MM WG McCandless LLC Albany NY 3.85 A

$7,182,200 $40,049 $4,025,000 $62,643

M & J Big Waterfront Amity Square LLC Chicago IL 7.12 A WSC Realty Partn LP Homestead PA 2.0 A Industrial Scientific Corporation

$1,682,100 M & J Big Waterfront Amity Square LLC $9,380 Chicago IL 1.82 A $212,400 $1,767 $4,600,000 $25,495

Bedner Estates LP Pittsburgh PA 112.5 A PMC 600 William Penn Place Assoc LP Philadelphia PA 40,800 sf

$1,792,100 M& J Big Waterfront Amity Square LLC $9,993 Chicago IL 1.45 A $4,560,000 $21,955 $2,200,000 $12,083 $2,799,300

UPMC Pittsburgh PA Penn Arbors Apt LLC Spring Valley NY

$869,000 $5,643 $1,810,000 $9,794

Bridge Pennsylvania LLC Monroeville PA 3.41 A www.developingpittsburgh.com G6 Hospitality Property LLC Carrollton 3.79 A

FDG C39 PA Carnegie LLC

4.36 A 3.93 A

Woonsocket, RI 1.0158 A $3,187,900 M & J Big Waterfront Market LLC Chicago IL 3.77 A $1,154,900 Education Capital Solutions LLC $12,422.00 Kansas City MO 30,138 sf $3,000,000 Diehl Of Robinson Realty LLC $16,729 Butler PA 9.28 A $2,165,000 Urban Redevelopment Auth Of Pittsburgh $31,039 Pittsburgh PA 22,549 sf $2,750,000 Penhurst Realty 2 LP $21,296 Pittsburgh PA 6.0 A $3,997,100 Sherwood Property LP $23,096.00 Pittsburgh PA 30,014 sf $5,250,000 PCW Lender Assoc 1 LP $34,019.66 Pittsburgh PA 6.63 A

85

O'Hara Twp 230 N. Craig Street Pittsburgh, Ward 4 1 Penn Center West Robinson Twp Property Address Municipality 300 Drive 1630Waterfront Golden Mile HwyW West Homestead Monroeville 211 Beecham Dr Kennedy Twp 2000 Park Lane Dr North Fayette Twp 228 Semple Street Pittsburgh, Ward 4 680 Drive E 2871Waterfront Freeport Road Munhall Harmar Twp 922 Brush Creek Road Marshall Twp E Carson Street Pittsburgh, Ward 16 100 Dr 2801Papercraft Freeport Road O'Hara Harmar Twp Twp Siebert Road Road 100 Weyman Ross Twp Whitehall 1501 Northway Mall 712 Washington Road Ross Twp Mt. Lebanon 400 Sq 6250Northtowne Library Road Richland Twp Bethel Park 153, & 172 Road E Bridge Dr 4700158, McKnight Homestead Ross Twp 30 Pine Creek Road McCandless

4919 William Flynn Hwy Hampton Twp 350 Waterfront Dr E Homestead 495 Waterfront Dr 3721East William Penn Hwy Homestead Monroeville SR 15022 Lake Drive Robinson Pine Twp Twp 185 Waterfront Drive W 45 South 23rd Street Homestead Pittsburgh, Ward 16

4695 Campbells Run Road Collier Twp 1427 Cook School Road 2nd Street Upper St. Clair Twp Leetsdale 405 Avenue 4775Sixth McKnight Road Pittsburgh Ross Twp Ward 2 305 Old Mill Road Fox Chapel 324 -338 Amity Street Homestead

7001 Jones Street Jefferson Hills 400 Drive 700 Oxford Trumbull Drive Monroeville Green Tree 10918 Frankstown Road 645 Alpha Dr Penn O'HaraHills Twp 401 Street 5309Chestnut Campbells Run Road Carnegie Robinson Twp Waterfront Drive

86

Office/Apartments Office Prop Use Theater Warehouse Motel & Tourist Cabin Office-Elevator Restaurant Discount Store Auto Sales & Service

Mini Warehouse Office-Elevator Warehouse Motel & Tourist Cabin Shopping Center Apartment-40+ units Shopping Center Bank

Neighborhood Service StationShopping Center Theater & Retail Community Shopping Center Retail Structures

Commercial Garage Department Store Medical Clinics/Offices Auto Sales & Service Industrial Office Restaurant, CafĂŠ and/or Light Manufacturing Bar

Car Wash Agricultural Vacant Commercial Land Office-Elevator Auto Service Station

Residential-Vacant Land Small Detached Retail

Warehouse Office-Elevator Office/Warehouse Independent Living-Seniors Office Commercial Other Medical Clinics/Offices

11/9/12 $3,897,173 8/15/12 $3,700,000 12/21/12 Sale Price Sale Date $49,780,000 $3,608,280 10/3/12 12/28/12 $3,427,344 11/7/12 $36,005,184 12/14/12 $3,500,000 12/28/12 $33,070,000 $3,000,000 10/3/12 7/12/12 $2,945,000 11/8/12 $25,069,000 10/11/12 $24,415,769 $2,600,910 10/12/12 12/31/12 $20,050,000 $2,580,055 12/21/12 8/28/12 $12,000,000 $2,422,608 11/30/12 10/11/12 $10,575,000 $2,320,000 7/13/12 10/16/12 $7,627,563 $2,125,000 10/3/12 12/18/12 $6,560,000 12/28/12

$2,100,000 10/15/12 $6,400,000 10/3/12 $6,250,000 $2,100,000 12/31/12 7/24/12 $5,865,000 $2,082,900 12/12/12 10/2/12 $5,660,000 $2,050,009 10/3/12 10/22/12 $2,000,000 11/15/12 $5,600,000 $2,000,000 10/2/12 9/27/12 $5,500,000 $2,000,000 10/22/12 12/31/12

$1,985,000 12/28/12 $5,100,000 10/3/12 $1,950,000 12/31/12 $5,040,000 $1,800,000 12/3/12 7/3/12 $4,825,000 $1,750,000 12/31/12 10/12/12

$4,601,419 $1,630,000

9/4/12 11/2/12 Discount Store $4,500,000 Munhall 10/3/12 829 Government/Commercial 1600Milton SouthStreet Braddock Avenue Service Station or Oil StorVacant Land $4,092,861 $1,620,000 Pittsburgh, 7/23/12 Swissvale Ward 14 Stamp value 9/11/12 6191 Steubenville Pike Auto Sales & Service $4,000,000 Robinson Twp 9/20/12 513 Street Department Store $4,000,000 1801Smithfield Murray Avenue Bank $1,605,562 Pittsburgh, Ward 214 12/28/12 10/11/12 610 Alpha Drive Light Manufacturing $3,900,000 O'Hara Twp 11/9/12 230 Craig Street Office/Apartments $3,897,173 2745N.Freeport Road Drive-In Rest or Food Service $1,592,253 Pittsburgh, 8/15/12 Harmar TwpWard 4 12/31/12 11615 Penn CenterMile West Office $3,700,000 Golden Hwy Auto Sales & Service $1,566,000 Robinson Twp 12/21/12 Monroeville 12/13/12 1102 Perry Hwy Auto Service Station $1,540,000 Ross Twp 12/31/12 1630 Golden Mile Hwy Warehouse $3,608,280 Monroeville 12/28/12 211 Motel & Tourist Cabin $3,427,344 308 Beecham 7th Street Dr Office-Elevator $1,530,000 Kennedy 11/7/12 Pittsburgh,Twp Ward 2 8/14/12 3845 Northern Pike Retail Structures $1,525,000 Monroeville 7/9/12 228 Street Restaurant $3,500,000 ParkSemple Manor Drive Vacant Commercial Land $1,522,682 Robinson Twp 12/21/12 201 Corey Ave Warehouse $1,512,810 Braddock 11/9/12 526 Penn Avenue Owned by College/University $1,500,000 Pittsburgh, Ward 2 12/23/86 DEVELOPINGPITTSBURGH | Spring 2013 7702 McKnight Road Restaurant - Fast Food $1,500,000 Ross Twp 11/14/12

3/6/96 $1 6/22/10 $1,566 1/31/12 Prior Price $6,000,000 Prior Date 12/23/96 $97,743,308 $1 3/2/07 9/30/83 $30,167,305 $3,390,000 2/18/04 9/1/99 $29,500,000 $615,114 12/28/05 10/17/86 $846,031 $80,000 4/7/92 12/26/85 $16,399,206 $0 3/2/07 3/9/73 $4,112,546 $295,000 11/24/03 6/25/98 $347,500 $169,846 7/28/00 6/13/96 $19,725,000 $1 5/2/07 6/3/91 $0 $0 11/2/12 8/28/12 $1,597 $10 5/29/12 7/24/07 $24,200,000 $1,050,000 11/29/00 12/3/01 $1,450,000 $400,000 7/1/92 12/29/97 $57,527,862 $4,500,000 3/2/07 6/30/06 $6,620,000 $260,000 11/7/07 5/7/76 $2,000,000 $325,000 5/1/06 12/23/11 $16,399,206 $245,000 3/2/07 11/8/89 $500,000 $1,540,000 4/16/01 1/19/93

$18,000 9/15/88 $16,399,206 $850,000 3/2/07 2/13/08 $1,610,641 $125,000 11/24/03 3/25/85 $1 $1 6/6/79 4/15/99 $6,500,000 $1,120,000 10/15/08 10/8/08 $5,826,250 $1 1/4/84 12/29/99 $5,350,000 $800,000 7/27/07 4/7/95 $850,000 $0 1/7/02 8/30/54 $0 $0 1/5/09 2/1/61 $0 $984,000 7/29/83 2/7/92 $1 5/30/01 $175,000 7/11/97 $3,000,000 $1 6/13/06 9/28/07 $0 $275,000 5/5/50 12/29/97 $630,000 $10 8/16/12 7/24/07 $10 $850,000 3/6/96 12/3/01 $1 $0 6/22/10 10/16/75 $1,566 $1,460,000 1/31/12 12/20/07 $6,000,000 $917,000 12/23/96 9/9/10 $1 $600,000 9/30/83 7/20/09 $3,390,000 $1 9/1/99 6/10/93 $615,114 $10 10/17/86 7/5/12 $80,000 $0 $0 1/8/68

$21,296 $3,997,100 $23,096.00 $5,250,000 $34,019.66 Total Assd Val Taxes $17,059,900 $869,000 $85,257 $5,643 $1,810,000 $9,794 $23,500,000 $132,358 $286,500 $3,897,100 $1,248,200 $21,731 $6,960 $2,510,600 $13,216 $15,867,300 $146,299 $14,723,900 $2,223,000 $82,103 $21,766 $3,885,000 $8,800,000 $24,479.55 $42,833 $16,400,000 $1,050,000 $82,469.33 $5,855 $6,528,600 $683,300 $36,405 $3,810 $8,690,600 $1,800,000 $51,693 $18,616 $5,187,500 $14,805

Pittsburgh PA 6.0 A Sherwood Property LP Pittsburgh PA 30,014 sf PCW Lender Assoc 1 LP Pittsburgh PA 6.63 A Buyer Buyer City, State Lot Size M & J - Pennsylvania Big WaterfrontLLC Town Center I LLC Bridge Chicago IL PA 18.09AA Monroeville 3.41 G6 Hospitality Property LLC Carrollton 3.79 A IX WR 2000 Park Lane Dr LP Greenwich CT 7.61 A Comhdan Realty LP 3,200 sf M & J Big Waterfront Amity Square LLC Shults Ford Harmarville Associates LP Chicago IL 4.65 Wexford 2.75 AA Guardian Self Storage Bc LLC Pittsburgh PA 4.83 A UPMC Pittsburgh PA 1.39 A Stag O'HaraMotel LLC Ltd Red Raven Boston MA 33.38 Allison Park 4.49 AA GRI McKnight Maiden BridgeSiebert LimitedLLC Partnership Bethesda 4.5 Pittsburgh MD PA 2.4 AA LRC Mall LLC Acq LLC ARC Northway CMBTLPA001 Akron OH 28.79 Jenkintown 12,052Asqf Northtowne 7 Eleven IncStation LLC Cincinnati OH 16.1 Dallas 1.48 AA M & JMcKnight - Big Waterfront 4780 LLC Town Center I LLC Chicago 5.46 PittsburghIL PA 3.84 AA MM WG McCandless LLC Albany NY 3.85 A

$270,900 $1,511 $7,182,200 $40,049 $4,025,000 $1,548,600 $62,643 $8,635

BI NT Allisan Park LLC Chicago IL 1.15 A M & J Big Waterfront Amity Square LLC Chicago IL 7.12 A WSC PartnLLC LP F& M Realty Real Estate Homestead 2.0 Monroeville PA PA 2.21AA Corporation $1,663,900 Industrial Lake DriveScientific Realty Partners LLC $10,225 Pittsburgh PA 1.14 A $1,682,100 J Big Waterfront Amity Square LLC $1,050,000 M RJ&Equities LP $9,380 1.82 A $6,428 Chicago PittsburghIL PA 31,680sf $859,200 Snyder Automotive Works Inc $5,424 Pittsburgh PA 2.11 A $212,400 Estates LP LP $44,000 Bedner Centerside Industrial $1,767 112.5 $261 Pittsburgh Leetsdale PA 1.86 AA $4,600,000 600 William Penn $531,100 PMC RK McKnight Road LLCPlace Assoc LP $25,495 40,800 $3,581 Philadelphia Huntington PA 29,000 sf sf $833,500 $1,603 $1,792,100 $9,993

Hammock Beach Partners LLC Allison Park 15.86 A M& J Big Waterfront Amity Square LLC Chicago IL 1.45 A

$1,000,000 $15,167 $4,560,000 $1,770,000 $21,955 $10,071 $2,200,000 $1,000,000 $12,083 $5,576 $2,799,300 $754,000 $6,702 $3,187,900

Eastman Chemical Resins Inc West Elizabeth 10.25 A UPMC Global Links Pittsburgh 4.36 Pittsburgh PA PA 2.26 AA Penn LLCHoldings LP West Arbors Spruce Apt Realty Spring Valley 3.93 Pittsburgh PANY 3.04 AA FDG C39 Property PA Carnegie LLC Corporation VCA Real Acquisition Woonsocket, 1.0158 Los Angeles RI 20,959 Asf M & J Big Waterfront Market LLC Chicago IL 3.77 A Education Capital Solutions LLC 7 Eleven Inc Kansas City MO 30,138 Dallas TX 13,393 sf Diehl Of Robinson Realty LLC Butler PA 9.28 A Urban Redevelopment ARC CBPBGPA001 LLCAuth Of Pittsburgh Pittsburgh 22,549 JenkintownPA 15,043 sf Penhurst Realty 2 LP Pittsburgh PA 6.0 A Sherwood Property LP I LP PWK Freeport Holdings Pittsburgh 30,014 Allison ParkPA 2.98 A sf PCW Lender Assoc 1 LP Roundhouse Property Holdings LP Pittsburgh PA 6.63 Export 6.15 A Skytop Investments LLC Covington 32,391 sf Bridge Pennsylvania LLC Monroeville PA 3.41 A G6 Hospitality Property LLC Hefren-Tillotson Inc Carrollton 3.79 Pittsburgh PA 2,250Asf CE Acquisitions VI LP Carnegie 7.04 A Comhdan Robinson Realty Manor LP Hotel Group 2689 LLC Pittsford 3.15 A Hox Management LP Warrendale 1.13 A PMC 526 Penn Avenue Assoc LP Pittsburgh PA 8,475 sf McDonald's

$1,154,900 $370,000 $12,422.00 $3,000,000 $16,729 $2,165,000 $850,000 $31,039 $6,128 $2,750,000 $21,296 $3,997,100 $1,360,900 $23,096.00 $14,570 $5,250,000 $1,517,700 $34,019.66 $7,782 $547,800 $2,885 $869,000 $5,643 $1,810,000 $800,000 $9,794 $4,053 $1,480,000 $8,253 $286,500 $1,130,100 $6,577 $623,900 $2,978.71 $1,651,800 $26,426

Google Pittsburgh, Bakery Square Strada Architecture

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Pittsburgh, Ward 2 3845 Northern Pike Monroeville Park Manor Drive Robinson Twp Property Address 201 Corey Ave Municipality Braddock 300 Waterfront Drive W 526 Penn Avenue West Homestead Pittsburgh, Ward 2 7702 McKnight Road Ross Twp 2000 Park Lane Dr 6325 Penn Avenue North Fayette Twp Pittsburgh, Ward 11

Retail Structures Vacant Commercial Land Prop Use Warehouse Theater Owned by College/University

Restaurant - Fast Food Office-Elevator Bowling Alleys/Rec Facility Stamp value

119 VIP Drive Marshall Twp Drive E 680 Waterfront 120 Andrew Drive Munhall North Fayette Twp 850 Penn Avenue Creek ETurtle Carson Street Pittsburgh, Ward 16 100 Papercraft Dr 1 Railway O'Hara TwpDrive McKeesRoad Rocks Siebert Ross Twp 1501 Northway Mall 12620Twp Perry Highway Ross Pine Twp

Medical Clinics/Offices Discount Store Community Shopping Center

400 Northtowne Sq 12680 Perry Richland TwpHighway Pine 158, Twp & 172 E Bridge Dr 153, Homestead 30 Pine Creek Road 555 Epsilon Drive McCandless O'Hara Twp 2660 Monroeville Blvd Monroeville 350 Waterfront Dr E 310 Saw Mill Run Blvd Homestead Brentwood 495 East Waterfront Dr Homestead SR 22 1215 Brighton Robinson Twp Road Pittsburgh, WardDrive 22 W 185 Waterfront 5511 Baum Blvd Homestead Pittsburgh, Ward 8

Neighborhood Shopping Center Vacant Commercial Land Theater & Retail

1427 Cook School Road 4761 William Upper St. ClairFlynn Twp Hwy Hampton 405 SixthTwp Avenue 1130 RidgeWard Drive Pittsburgh 2 Coraopolis 31 Foster Ave Crafton 324 -338 Amity Street 345 East Eighth Avenue Homestead Homestead 400 Walmart Drive Richland TwpDrive 400 Oxford 5434 Walnut Street Monroeville Pittsburgh, Ward 7 Road 10918 Frankstown 5501 Campbells Run Road Penn Hills Robinson Twp Street 401 Chestnut Carnegie Waterfront Drive 141 41st Street Munhall Pittsburgh, 829 Milton Ward Street9 6325 PennWard Avenue Pittsburgh, 14 Pittsburgh, Ward 11Pike 6191 Steubenville 260 Alpha Drive Robinson Twp O'Hara Twp Street 513 Smithfield 3030 PennWard Avenue Pittsburgh, 2 Pittsburgh, Ward 6 610 Alpha Drive Long Street O'Hara Twp Elizabeth Township 230 N. Craig Street Park Lane Ward Drive 4 Pittsburgh, 1North PennFayette CenterTwp West Robinson Twp

Bank Office-Elevator Warehouse Heavy Manufacturing Shopping Center Shopping Center Vacant Commercial Land

Retail Structures Industrial

Office Department Store Small Detached Retail Medical Clinics/Offices Industrial Discount Store Restaurant, CafĂŠ and/or Nursing Home/Private Housing Bar Agricultural Bank Office-Elevator Apartment-40+ units

Bank Small Detached Retail Institution Neighborhood Shopping Center Office-Elevator Retail Structures Independent Living-Seniors Office/Warehouse Commercial Other

$1,400,000 12/3/12 $33,070,000 $1,400,000 10/3/12 7/5/12 $1,395,686 10/11/12 $25,069,000 10/11/12 $24,415,769 $1,330,000 10/12/12 7/5/12 $20,050,000 12/21/12 $12,000,000 $1,300,000 11/30/12 9/7/12 $10,575,000 $1,300,000 7/13/12 9/7/12 $7,627,563 10/3/12 $6,560,000 $1,292,850 12/28/12 10/17/12 $1,236,870 10/5/12 $6,400,000 $1,210,000 10/3/12 12/31/12 $6,250,000 12/31/12 $5,865,000 $1,200,000 12/12/12 9/12/12 $5,660,000 $1,200,000 10/3/12 8/31/12 $5,600,000 $1,179,885 10/2/12 10/12/12 $5,500,000 $1,147,700 10/22/12 12/20/12 $1,146,075 10/9/12 $5,100,000 $1,120,292 10/3/12 10/9/12 $1,120,000 12/21/12 $5,040,000 $1,106,680 12/3/12 8/24/12 $4,825,000 $1,100,000 12/31/12 9/13/12 $4,601,419

9/4/12 $4,500,000 $1,100,000 10/3/12 7/3/12 Government/Commercial Vacant Land $4,092,861 Bowling Alleys/Rec Facility $1,094,945 7/23/12 StampSales value& Service 12/28/12 Auto $4,000,000 Office $1,060,000 9/20/12 12/7/12 Department Store $4,000,000 Retail/Stor Over $1,050,000 12/28/12 11/27/12 Light Manufacturing $3,900,000 Vacant Commercial Land $1,000,000 11/9/12 9/19/12 Office/Apartments $3,897,173 Vacant Commercial Land $1,000,000 8/15/12 12/14/12 Office $3,700,000 Discount Store Office-Walk Up

12/21/12

1630 Golden Mile Hwy Monroeville 211 Beecham Dr Kennedy Twp

Warehouse

228 Semple Street

Restaurant

88 DEVELOPINGPITTSBURGH

8/14/12 $1,525,000 7/9/12 $1,522,682 12/21/12 Sale Price $1,512,810 Sale Date 11/9/12 $49,780,000 $1,500,000 10/3/12 12/23/86 $1,500,000 11/14/12 $36,005,184 $1,454,427 12/14/12 12/28/12

Motel & Tourist Cabin

| Spring 2013

$3,608,280 12/28/12 $3,427,344 11/7/12 $3,500,000

6/10/93 $10 7/5/12 $0 Prior Price $0 Prior Date 1/8/68 $97,743,308 3/2/07 $30,167,305 2/18/04 $29,500,000 $1,533,930 12/28/05 12/6/79 $846,031 $1,105,000 4/7/92 9/6/02 $16,399,206 $442,500 3/2/07 2/8/96 $4,112,546 $10 11/24/03 7/24/07 $347,500 $625,000 7/28/00 12/3/01 $19,725,000 $625,000 5/2/07 3/14/11 $0 $200,000 11/2/12 11/29/99 $1,597 $2,225,000 5/29/12 6/26/08 $24,200,000 $110,000 11/29/00 11/7/83 $1,450,000 $2,225,000 7/1/92 6/26/08 $57,527,862 $290,500 3/2/07 1/7/88 $6,620,000 11/7/07 $2,000,000 $725,000 5/1/06 11/19/93 $16,399,206 $600,000 3/2/07 3/15/10 $500,000 $500,000 4/16/01 12/27/85 $0 1/25/64 $16,399,206 $1,808 3/2/07 12/17/10 $1,610,641 $1,419,800 11/24/03 11/2/06 $1 $700,000 6/6/79 12/3/01 $6,500,000 $0 10/15/08 9/15/82 $5,826,250 $330,000 1/4/84 12/3/01 $5,350,000 $0 7/27/07 7/24/07 $850,000 $0 1/7/02 $0 $208,864 1/5/09 9/19/97 $0 $1,000,000 7/29/83 6/8/99 $420,000 10/20/92 $10 8/11/05 $3,000,000 $0 6/13/06 9/19/79 $0 $1 5/5/50 7/19/93 $630,000 $160,000 8/16/12 9/3/97 $10 $1,760,000 3/6/96 5/29/12 $1 $100,000 6/22/10 1/9/07 $1,566 1/31/12 $6,000,000 12/23/96 $1 9/30/83 $3,390,000 9/1/99 $615,114 10/17/86 $80,000

$4,053 $1,480,000 $8,253 $1,130,100 $6,577 Total Assd Val $623,900 Taxes $2,978.71 $17,059,900 $1,651,800 $85,257 $26,426 $23,500,000 $1,243,100 $132,358 $6,741

Pittsburgh PA 2,250 sf CE Acquisitions VI LP Carnegie 7.04 A Robinson Manor Hotel Group 2689 LLC Pittsford 3.15 A Buyer Hox Management LP Buyer City, State Lot Size Warrendale 1.13 A M & J - Big Waterfront Town Center I LLC PMC 526 Penn Avenue Assoc LP Chicago IL 18.09 A Pittsburgh PA 8,475 sf McDonald's IX WR 2000 Park Lane Dr LP Racquetball One Associates Greenwich CT Pittsburgh PA

7.61 A 28,817 sf

$1,160,000 NRPD LLC $11,449 M Pittsburgh PA A $3,897,100 & J Big Waterfront Amity Square3.2 LLC $1,292,700 TK Robinson $21,731 Chicago IL LLC 4.65 A $7,208 Chicago IL 1.49 A $652,300 ARC CBTCKPA001 LLC $4,058 UPMC Jenkintown PA 25,179 sf $15,867,300 $146,299 Pittsburgh PA 1.39 A $14,723,900 Stag O'Hara LLC $180,200 Greenville LP A $82,103 Boston MA Commercial Properties 33.38 $1,025 GRI Pittsburgh PA Siebert LLC 36.8 A $3,885,000 McKnight $24,479.55 Bethesda MD 4.5 A $16,400,000 LRC Northway Mall Acq LLC $705,000 Akron LME Enterprises LLC $82,469.33 OH 28.79 A $3,931 Gibsonia PA 1.05 A $6,528,600 Northtowne Station LLC $795,000 LME Enterprises LLC $36,405 Cincinnati OH 16.1 A $4,433 M Gibsonia A $8,690,600 & J - BigPAWaterfront Town Center1.23 I LLC $51,693 Chicago IL 5.46 A $5,187,500 MM WG McCandless LLC $75,900 Albany Bryan PNY Gentile Family LP $14,805 3.85 A Pittsburgh PA 32,496 sf $760,000 H & M Holdings LLC $4,238 M Monroeville PA $7,182,200 & J Big Waterfront Amity Square1.07 LLCA $574,300 DG Saw MillRun LLC $40,049 Chicago IL 7.12 A $2,813.69 WSC Philadelphia PA LP 1.24 A $4,025,000 Realty Partn $62,643 Homestead PA 2.0 A Industrial Scientific Corporation $376,300 CE Acquisitions VII LP $4,665 M Carnegie $1,682,100 & J Big PA Waterfront Amity Square37,256 LLC sf $1,249,800 TJ Acquisition LLC $9,380 Chicago IL 1.82 A $7,681 Pittsburgh PA 21,700 sf $212,400 Bedner Estates LP $700,000 ARC CBALPPA001 LLC $1,767 Pittsburgh PA 112.5 A $3,903 PMC Jenkintown PA Penn Place Assoc1.41 $4,600,000 600 William LP A $1,147,700 Triko Holdings Inc $25,495 Philadelphia PA 40,800 sf $5,353 Coraopolis PA 1.13 A $336,700 ARC CBPBGPA002 LLC $1,878 M& Jenkintown PA $1,792,100 J Big Waterfront Amity Square 19430 LLC sqf $297,200 ARC CBHSTPA001 LLC $9,993 Chicago IL 1.45 A $1,524 Jenkintown PA 6,600 sf $500,000 Richland Zamagias Limited Partnership $3,965 UPMC Pittsburgh PA 1.11 A $4,560,000 $1,371,300 5436 Walnut $21,955 Pittsburgh PAAssociates 4.36 A $9,900 Penn Pittsburgh PAApt LLC 3,438 sf $2,200,000 Arbors $1,049,300 Polycycle Industrial Products Inc 3.93 A $12,083 Spring Valley NY $5,851 FDG Clackamas ORCarnegie LLC 3.73 A $2,799,300 C39 PA

Woonsocket, RI 1.0158 A $3,187,900 M & J Big Waterfront Market LLC $705,000 Chicago RA CAT IL I LP 3.77 A $3,598 Education Pittsburgh Capital PA $1,154,900 Solutions LLC 21,120 sf $935,850 Racquetball One Associates $12,422.00 Kansas City MO 30,138 sf $5,971 Diehl Pittsburgh PA 1.13 A $3,000,000 Of Robinson Realty LLC $635,300 Practical Administrative Solutions LP A $16,729 Butler PA 9.28 $3,737 Urban Pittsburgh PA 1.41 A $2,165,000 Redevelopment Auth Of Pittsburgh $700,000 TTPA LLC PA $31,039 Pittsburgh 22,549 sf $7,520 Penhurst PittsburghRealty PA 2 LP 8,400 sf $2,750,000 $47,500 Pittsburgh Red Stag Investments LLC $21,296 PA 6.0 A $220 Sherwood Scenery HillProperty PA 2.03 A $3,997,100 LP $586,140 Pittsburgh IX WR 2000PAPark Lane Drive LP 30,014 sf $23,096.00 $3,168.76 PCW Greenwich 16.18 A $5,250,000 LenderCT Assoc 1 LP

$34,019.66 Pittsburgh PA $869,000 $5,643 $1,810,000 $9,794

Bridge Pennsylvania LLC Monroeville PA G6 Hospitality Property LLC Carrollton

$286,500 Comhdan Realty LP

6.63 A

3.41 A 3.79 A

GRANT STREET 7-27-12- FP Full Color.indd 1

8/1/2012 10:54:22 AM

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