THE PLAN…
In September 2016, Stockton Real Estate Advisors (“SREA”) and Miller Investment Management (“MIM”) partnered together on the acquisition of 3550 Market Street, a 77,619 square foot medical office property located in the heart of University City.
The Children’s Hospital of Philadelphia (“CHOP”) was the seller and nearly 100% occupant. CHOP effected a sale-leaseback, planning to give back floors 2 and 3 of office space subsequent to closing, while retaining all of their space on the ground floor and floors 4-5. During due diligence and prior to closing, CHOP agreed to only give back 1 floor of office space, retaining space on the ground floor and floors 3-5. Prior to vacating floor 2, CHOP agreed to retain 100% occupancy of the second floor and move all of their space on the ground floor to the second floor, allowing the new owners to refurbish the lobby and expand the building’s footprint adding 3,179 of additional rentable square feet available for retain tenants at significantly higher rents.
Services Provided
- Executed strategic capital improvements on the ground floor and building entrances to enhance building esthetic and curb appeal.
- Decreased the property’s operating expenses through focused property management services and competitive bidding.
- Provided landlord representation leasing services through professional leasing campaign aimed at retail tenants.
- Secured favorable financing terms allowing for the loan’s refinance once new retail tenants were acquired.
- Leases executed for NOPCO, Vybe Urgent Care, Walgreens, and Wells Fargo totaling 11,452 square feet
Value Added
SREA and MIM were created 3,179 square feet of additional rentable area to the building while achieving ground floor retail rents of more than 2.0x the rent that CHOP had been paying. The ownership team has been able to improve operating efficiencies, decreasing operating costs for the tenants and increasing their ability to pay higher rents. The exterior and ‘street presence’ of the building was improved as well, ensuring a higher profile presence on Market Street as many of the other nearby buildings along Market Street have also been redeveloped. The property’s physical profile along with its tenancy and operating efficiency have all been improved, while the financial stability of the investment has been ensured, with a long-term loan at favorable terms securing the property.