Owner gives up Four Falls

by Natalie Kostelni

"Four Falls Corporate Center, once a crown jewel in the Conshohocken office submarket, is in receivership.

CB Richard Ellis was appointed to oversee the property once owned by a joint venture between Thomas Properties Group Inc. of Los Angeles and California State Teachers Retirement System.

In a deed in lieu of foreclosure, Thomas relinquished Four Falls as well as two of its other suburban office properties — Walnut Hill Plaza and Oak Hill Plaza off Warner Road in King of Prussia.

“The bank is taking a strategic look at these properties to get them to achieve their potential,” a broker with CB Richard Ellis who is helping to lease up any empty space in the buildings. “The bank is going to make whatever investment necessary to keep all of the tenants happy and get it fully stabilized and accretive.”

Then the lender will eventually try to sell the properties, Dagit said.

In its quarterly report filed May 13 with the Securities and Exchange Commission, Thomas Properties said that as of that date it had a total of $96.5 million in mortgage loans owed on Four Falls as well as Oak Hill Plaza and Walnut Hill Plaza. All of the loans, Thomas said, matured and became due in full. Thomas stopped making payments on the loans and defaulted on them. The landlord decided to work with the lender to have a receiver appointed.

The buildings have seen their appraisals slashed in recent months and the value of suburban office properties, in general, have not recovered the way core assets in urban centers have begun to show gains. It became evident the loans on these buildings exceeded the current value of the properties. It’s at that point that property owners decide that these multilayered, securitized capital structures don’t lend themselves to working out extensions with a lender.

It’s becoming more common for landlords in suburbs and city centers these days to relinquish some buildings in their portfolios when loans can’t be renegotiated or it’s determined that it’s just not worth it. In Center City for example, 260 S. Broad St. is in receivership and 2040 Market St., the former AAA Mid-Atlantic building, was taken back by its lender and subsequently sold.

Thomas declined comment.

Four Falls consists of two, six-story buildings totaling 254,000 square feet. It is 80 percent occupied.

“It’s having good activity right out of the box because it was in limbo before,” he said.

One of its anchor tenants, Northrup Grumman, renewed a 25,000-square-foot lease for five years.
Walnut Hill is a four-story office complex totaling 150,572 square feet at 150 S. Warner Road in King of Prussia, and Oak Hill is four-story, 164,360-square-foot office property 200 N. Warner Road in King of Prussia. While Oak Hill is fully occupied, Walnut Hill is half vacant.

Thomas bought Four Falls, Walnut Hill and Oak Hill in 2005 when it spent an estimated $170 million to buy the suburban portfolio owned by Equity Office Properties Trust. The portfolio consisted of nearly 1 million square feet in 11 buildings. It marked Thomas’ foray into the Philadelphia suburban market after it built up a strong presence in Center City with One and Two Commerce Square and 1835 Market St.
The gem in that portfolio was Four Falls, which was constructed in 1987 by Acorn Development on a site that had once been a restaurant called the Inn of the Four Falls. The complex kicked off that submarket, setting the stage for West Conshohocken and Conshohocken to become among the most desired local office addresses.

With Thomas no longer owning these buildings, its presence in the Philadelphia area has shrunk especially after selling a stake in Commerce Square to Brandywine Realty Trust."
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