QUARTERLY REPORT
For December 31, 2009
ERECT FUNDS I / DEBT – PROJECT UPDATES
BAKERY SQUARE AT EASTSIDE, PITTSBURGH, PA – On December 19, 2009, Walnut Capital announced that Google Inc. has leased 40,000 SF of office space at Bakery Square and will take occupancy in mid-2010. Google has outgrown its current facility at the Collaborative Innovation Center at Carnegie-Mellon University and needs additional space to accommodate its growth and hiring plans in Pittsburgh. Google will occupy the top two floors of the historic former Nabisco Bakery building, which has undergone a complete renovation in conjunction with the overall development of Bakery Square. Other tenants at Bakery Square include the University of Pittsburgh, Urban Active Fitness and Anthropologie. When completed in mid-2010, Bakery Square will have 216,000 SF of office space, 174,000 SF of retail space, a six-story parking garage and a SpringHill Suites by Marriott Hotel. This project has a total cost of approximately $115,000,000. ERECT Fund I / Debt provided $10,500,000 loan for the purchase of a Tax Increment Financing (TIF) Note from the Urban Redevelopment Authority of Pittsburgh in April 2009.
NEWBURY MARKET, BRIDGEVILLE, PA – On December 11, 2009, ERECT Fund I / Debt approved a number of modifications to the $13,900,000 first mortgage site development loan to Newbury Development Associates, L.P. Newbury Markets is a mixed-use project being developed on 303 acres in South Fayette Township, Pennsylvania. The Newbury Market master plan includes over 725,000 SF of retail/commercial space, 198 single-family residences and 125 units of multi-family housing. The loan modifications entail conversion to a dual-note structure whereby three other lenders are under an “A Note” and the ERECT Fund is under a “B Note”, both secured under the existing first mortgage lien. The A Note lenders will advance up to $9,900,000 as a revolving line of credit for approved project costs including interest to the ERECT Fund for an extended term of 18 months ending on or about September 1, 2011. Under The B Note, the ERECT Fund will advance funds for interest due December 1, 2009 and subsequent approved loan draws up to a maximum amount of $5,500,000 on a non-revolving basis for an extended term of 18 months ending on September 1, 2011 provided, however, that the combined amounts outstanding under the A Note and B Note will not at any time exceed $13,900,000. Separately, the Borrower has secured a commitment from PennVest (Pennsylvania Infrastructure Investment Authority) for an $11,000,000 subordinated loan. The PennVest loan will have a term of 20 years and an interest rate of 2.109% in years 1 through 5, adjusting to 2.965% in years 6 through 20.
PENNWOOD COMMONS, CRANBERRY TOWNSHIP, PA – On August 18, 2009, ERECT Fund I / Debt approved $6,280,000 first mortgage loan to Pennwood Commons I, LLC for the acquisition of two adjoining parcels of land comprising 17 acres on Pennwood Drive in RIDC Thorn Hill Industrial Park, Cranberry Township, Pennsylvania. The loan closed on October 21, 2009. The project is being developed in two phases. Phase I involves the development of a single-story flex office building with 52,000 square feet. Phase I site work and steel erection were completed in December 2009, and final completion of Phase I is expected in May, 2010. The borrower is in the process of negotiating a lease for the entire Phase I building.
ERECT FUND II / EQUITY – PROJECT UPDATES
BRIDGESIDE POINT II, PITTSBURGH, PA – ERECT Fund II / Equity is a limited partner in BPA II, Ltd., investing in a five-story 160,000 SF office and bio-technology research building recently constructed on 1.7 acres in the Pittsburgh Technology Center off Second Avenue in the City of Pittsburgh (Hazelwood section). The University of Pittsburgh (“Pitt”) has leased 144,265 SF (90% of total rentable space) for a term of 10 years. Pitt took occupancy of floors 3, 4 and 5 floors and a portion of the 2nd floor on October 1, 2009 and commenced rent payments. The tenant is completing its Lab work on the first floor. In accordance with accounting requirements, the ERECT Fund II’s asset value of this investment has been adjusted from book value of $3,997,500 to stabilized market value of $7,629,628. As a result, ERECT Fund II / Equity recognized a gain of $3,632,128 which contributed to an overall fourth quarter 2009 return of 12.56%.
200 CRANBERRY BUSINESS PARK, CRANBERRY TOWNSHIP, PA – ERECT Fund II / Equity is a limited partner in 200 Cranberry Associates with an investment of $1,000,000 in this 53,560 SF flex/office building located in Cranberry Business Park in Cranberry Township, PA with 238 parking spaces. Millennium Pharmacy Systems took occupancy of 6,639 SF for a five-year term in May 2009, taking space vacated by Areva in March 2009. Millennium has signed an amendment to take the balance of the Areva space of 1,407 SF as is. This brings the building’s occupancy to 94%. Other tenants in the building include the Conair Group who took occupancy of 34,859 on January 1, 2008 signing a 10-year lease, and HRG occupies 7,410 SF with 3 years left on the lease term. There is 3,245 SF available in the building. Space is being actively marketed and the Cranberry area continues to be a strong leasing market. The General Partner distributed preferred return payments to all partners including ERECT in August and December of 2009. Cash return to ERECT over the last twelve months was 11%.
WESTINGHOUSE ELECTRIC COMPANY, CRANBERRY TOWNSHIP, PA – On October 9, 2009 ERECT Fund II / Equity closed a new partnership called Cranwoods-WST, Ltd. Owned 50% by ERECT Fund II / Equity and 50% by an affiliate of the Ferchill Group. ERECT contributed $5,120,000 in equity for the construction of a three-story office building with approximately 118,582 square feet situated on 24.7 acres in Cranberry Township, Pennsylvania. Westinghouse leased the entire building for a term of fifteen years. The site is adjacent to the new 915,000 SF headquarters facility which was recently completed for Westinghouse. The total cost of the Westinghouse Office Building is estimated at $34,385,000. The GMP contract for the project was executed on October 8, 2009 with Turner Construction in the amount of $22,275,268, and work commenced on October 12, 2009. The excavating subcontractor performed the cut/fill operations and delivered the building pad on November 24, 2009. Mass excavation is still ongoing but nearly complete. Within the building footprint underground utilities are complete, footers are poured, and slab on grade is 80% complete. Final completion is scheduled on or about October 1, 2010.