Friday, August 6, 2010

Bell Atlantic Tower sold to Brandywine Realty Trust

"Brandywine Realty Trust, a national, commercial real estate company, said Thursday that it had acquired one of Center City's most distinctive office buildings, the pink-tinged, 53-story high-rise known as the Bell Atlantic Tower, in a $129 million transaction.

The company said the deal would bring to 3.9 million square feet the total commercial office space it owns in Philadelphia, much of it in the Logan Square area, where the building, at 1717 Arch St., is located.

Taken together, the company said, the purchase from an affiliate of the Blackstone Group, which will become a 5 percent owner of Brandywine in the transaction, signals that Brandywine executives are confident about the ongoing vitality of the city's commercial real estate market.

"We think there are signs that the fundamentals are firming, and that the market is tending toward stability," said Gerald H. Sweeney, Brandywine's president and CEO. "Businesses throughout our portfolio are taking a more optimistic view. We are seeing tenants investing more dollars in their own space, and even though the unemployment numbers don't look good, businesses are starting to hire."

The property currently is 63 percent leased, Sweeney said, but the company intends to make $40 million in improvements and hopes to fill the space within a few years.

The tower, which Sweeney said will be rebranded as 1717 Arch, was built in 1990, and with its cascading layers of pink-tinged granite, now reflected off the adjacent Comcast Center, it instantly became one of Center City's best-recognized skyscrapers.

The Logan Square area, where Brandywine also owns buildings known as One and Two Logan Square, is a center for law firms and other professional-services companies, and typically commands the highest commercial lease rates.

Brandywine Realty Trust also owns the Cira Centre in University City and the IRS Philadelphia campus to be located in the renovated postal building adjacent to 30th Street Station.

In addition to Philadelphia's central business district, Radnor-based Brandywine owns commercial properties throughout the Philadelphia suburbs; in the booming Dulles corridor outside Washington, D.C.; in Richmond, Va., and in Austin, Texas, also a growth region.

"The Bell Atlantic Tower is a quality asset, and you have [an entity] in the form of Brandywine Realty that thinks it is a good time to make an investment in Philadelphia," said John Gattuso, regional director and senior vice president of Liberty Property Trust, which developed the Comcast Center. "What this is is a vote of confidence in Philadelphia and the national economy."

The purchase price for the 1,029,400-square-foot building works out to $125 per square foot. In the end, the company maintained, it will have purchased the building for less than 50 percent of the estimated replacement cost.

Despite the ongoing recession, high-value or so-called Class A office space is in relatively short supply in Center City, the company said. Overall vacancy rates in the city's central business district are 11 percent, but less for the most desirable space.

That, along with growth in the University City area and significant public investment in Center City, notably at the Convention Center, makes Philadelphia a more stable market than other regions of the country, said Sweeney.

"We think this is a very bullish statement on how we view Philadelphia's future," he said. "We view Philadelphia as being well-positioned to outperform the national real estate market."

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