Sunday, March 10, 2013

Two Liberty Place seeking to include a hotel

by Natalie Kostelni-Staff Writer, Philadelphia Business Journal
One of Center City’s conspicuous blue skyscrapers is undergoing an identity crisis.
The 58-story Two Liberty Place was initially constructed as an office building in 1990. Beginning in 2006 a portion of it was converted into residential condominiums. Now, with demand for those units on the wane, a part of the property is up for sale as a totally new use.
“We want to try to attract a luxury hotel,” said Cynthia Tucker, senior vice president at iStar Financial Inc., which has title to an undeveloped portion of the building and is marketing it as a 150-room hotel called Liberty Tower.
The range of uses for the 1.2 million-square-foot skyscraper reflects the changes in the economy and demand in the Center City commercial real estate market over the last two decades.
Two Liberty was constructed at a time when there was a boom of office buildings in the Central Business District. Once One Liberty Place came out of the ground forever changing Philadelphia’s skyline, developers jumped on the bandwagon and One and Two Commerce Square, Mellon Bank Center and what had been called the Bell Atlantic Tower came onto the market and created a glut of office space. Office construction in Philadelphia has been limited ever since as demand hasn’t warranted it.
What was then Rouse & Associates built Two Liberty at 1601 Chestnut St as the companion tower to One Liberty and as the new headquarters for Cigna Corp. When Cigna initially moved in, it occupied the entire building. That changed in 1999 when Cigna sold its property-and-casualty business to Ace Ltd. The Bermuda-based insurer then occupied half of the tower and Cigna the other half.

800,000-square-foot vacancy

Then Cigna’s needs changed. It decided in 2004 to remain in 450,000 square feet in the building, reducing its space needs by 150,000 square feet. Ace ended up buying 436 Walnut St., a 325,000-square-foot building in Philadelphia, for its new headquarters and moved out of Two Liberty.
That meant nearly 800,000 square feet of space in the building was vacant. That gave Shorenstein Co., Two Liberty’s owner at the time, an opportunity to open the building up to multiple office tenants. However, before Shorenstein got a chance to launch its renovations, it sold the building in 2005 to America’s Capital Partners. The new owner hatched a plan to convert the top 20 floors, or roughly 400,000 square feet, from high-end office space into luxury condominiums. The condo market was on fire at the time.
America’s Capital’s plans entailed putting in about 130 units from floors 37 through 57. (The 58th floor is used for mechanical systems.) The project was watched closely by the real estate and architectural communities to see if America’s Capital and its partner, Falcone Group, could pull off transforming a portion of one of Philadelphia’s modern signature skyscrapers into residential space.
Two Liberty had the potential of serving as a model for the conversion of other trophy office buildings in Center City.

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