Paul Schwedelson Reporter Philadelphia Business Journal
Alterra Property Group is nearing a deal to acquire 1701 Market St. with plans to convert the longtime Morgan Lewis & Bockius headquarters building into apartments, according to industry sources.
The 305,170-square-foot property in the heart of the Central Business District has been up for sale as Morgan Lewis plans to vacate the entire space and move five blocks west into a new 19-story building at 2222 Market St. in 2023.
The 18-story 1701 Market building is owned by an entity affiliated with LXP Industrial Trust (NYSE: LXP), previously known as Lexington Realty Trust. The New York company rebranded last year as it sheds its office portfolio to focus solely on industrial properties.
Alterra declined to comment on 1701 Market.
Morgan Lewis’ lease at 1701 Market expires Jan. 31, 2024. The property, also known as Six Penn Center, was built in 1955 and Morgan Lewis moved there in 1998. The building was most recently assessed by the city at $69.8 million.
Located between Comcast Corp.'s headquarters and City Hall, the building has been viewed as a ripe candidate for an apartment conversion given the likely challenge of filling the entire space after the law firm departs.
In marketing materials for 1701 Market St., brokerage JLL said the building “offers a rare opportunity to acquire a value-add mixed-use tower that can accommodate a variety of future uses while benefiting from the asset’s trophy location in the heart of Philadelphia’s CBD.”
Philadelphia-based Alterra owns dozens of residential buildings throughout the city, several of which it has repositioned from office to residential. The company bought the One City building at 1401 Arch St. in 2017 when it had 220,000 square feet of office space. Alterra converted it to 323 apartments that opened for occupancy in 2020.
Alterra recently developed LVL North, a 410-unit apartment building with a Giant grocery store and underground parking on the northwest corner of Broad and Spring Garden streets.
The deal for 1701 Market would mark the latest office-to-residential transformation in Philadelphia, which ranked second nationally in apartment conversions in 2020 and 2021 with 1,552 new apartments that were converted from other types of buildings, according to a RentCafe analysis of Yardi Matrix data. Center City District CEO Paul Levy said 180 buildings, or 9 million square feet of office or industrial space, were converted to residential from 1998 to 2021 in Philadelphia.
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