Property energy Marcellus Shale activity, low interest rates

Posted September 20, 2010

By Michael Bradwell
Observer-Reporter


McMURRAY - Heartland Homes apparently hasn't heard the news about the national downturn in new home construction.

Every day, heavy equipment can be seen moving earth on a large swath of ground adjacent to All Saints Greek Orthodox Church in North Strabane Township, as Heartland prepares to add 44 single-family homes to its 85-unit Concord Green townhome development just off West McMurray Road.

The project could be seen as an anomaly in the national home-building market, where most markets are struggling to sell off excess inventories of new homes.

But Kathy Cooper, sales manager at Concord Green, said a number of factors, from the Marcellus Shale drilling activity to historic low interest rates, are keeping Lawrence-based Heartland building homes - and selling them at an average of 50 to 60 units per month - at its developments in Washington, Allegheny and Butler counties as well as in West Virginia.

"We have not sold under 50 homes a month since the beginning of the year," she said, adding that she already has six people waiting for single-family homes in Concord Green.

Among the reasons for the Concord Green expansion, Cooper said, are home purchases by people employed in the area's Marcellus Shale drilling industry, as well as some demand from homeowners who have been displaced by the Mon-Fayette Expressway project in Cecil Township. She added that in addition to the development's proximity to Interstate 79 and Route 19, historically low interest rates in the 4.5 percent range are also prompting people to buy new homes as opposed to existing ones.

William McCloskey, the Canonsburg builder and developer who developed and sold the lots to Heartland for Concord Green, agreed that oil and gas activity in the area is having a positive impact on the success of the development, adding that the homes, which start at $220,000, are priced for the market.

"The price has a lot to do with it," he said, adding that the market for high-end spec homes "is kind of flat right now."

The Marcellus Shale activity also is making a major impact on commercial real estate activity in the county, particularly at Southpointe, where more than 50 energy-related companies now have offices.

Earlier this month, Cecil Township supervisors approved a proposal by Horizon Properties Group to build a new $30 million Appalachian regional headquarters for Range Resources, the largest area driller in the Marcellus.

While the approval is contingent upon Horizon reaching an agreement with the Washington County Authority on the disposition of the 13-acre parcel for Range in Southpointe II, a new Range building would consolidate about 175 employees who currently work in two Southpointe buildings the company leases. When the new headquarters is completed, Range will be home to between 500 and 700 employees in the development.

Other companies that perform work related to the Marcellus Shale are also locating in Southpointe, with plans to hire more employees.

In late August, Universal Pegasus International, a Houston, Texas, company that provides engineering and project management services to the oil and gas industry, cut the ribbon on 10,000 square feet of space it's leasing at 601 Technology Drive. Chief Executive Officer John Jameson said the office employs 12 people, but is expected to grow to between 50 and 70 employees within the next 18 months. He said the company expects to hire most of the new employees from the local work force.

On Friday, Community College of Beaver County officially opened its first bricks-and-mortar classroom in Washington County in Southpointe's Bailey Center building. In addition to continuing to teach dealer trainees for The Meadows Racetrack & Casino's table games, the college opened a state-of-the-art computer lab to offer programs for the oil and gas industry, such as training for geographical information systems technicians and safety certifications.

Kelley Hoover, director of brokerage services for Burns & Scalo, said about 50 percent of her recent leasing activity in Southpointe has involved placements for oil and gas companies. She added that while those companies insist on office space, she also receives many requests from energy-related companies involved in production for space outside of the mixed-use park.

While Southpointe represents the county's largest commercial real estate development, Morgantown, W.Va., based developers David and Rick Biafora are preparing to bring a small shopping center, convenience store, offices and a hotel on 14 acres straddling North and South Strabane townships off Route 19 north across from the entrance to Racetrack Road.

David Biafora, who had originally announced plans for a 2,000-unit apartment complex on the site, said last week he had to scale back his plans and drop the residential component, but said his company is hoping to build a smaller apartment complex somewhere in South Strabane Township next year.

The residential and commercial real estate activity here has helped local banks sidestep the lingering fallout from the subprime mortgage collapse of two years ago.

Pat O'Brien, chief executive officer of Monessen-based FedFirst Financial, said the bank's mortgage loan portfolio has held "a nice mix" of both new and existing homes, with more financing going for new home construction over the past few months.

O'Brien, whose bank successfully completed a stock offering last week, added that business from the Marcellus Shale drilling activities continues, noting that the bank is currently assisting two separate companies that want to locate manufacturing operations here, with each planning to bring more than 100 jobs.

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