A buyer affiliated with Liberty Property Trust on Aug. 3 paid $40 million for the lot at 1800 Arch St., ending a longshot proposal by developers to build what would have been the tallest building in Center City Philadelphia.
Seller Multi Employers Property Trust, a union pension investment fund, had paid $32 million in 2007. "We're glad MEPT made a nice profit," David Richter, head of Marlton-based Hill International Group's real estate affiliate, which had hoped to develop a 1,500-foot tower on the site, told me. "We would have preferred they hold onto the property. I think we're getting close to the end of the recession. But MEPT got a good offer, for the best piece of property in Center City."
Hopeful brokers I talked to said a likely occupant for a new building on that site would be its neighbor, Comcast Corp., whose Liberty-built and -managed Comcast Center headquarters, at nearly 1,000 feet, is Philadelphia's highest building. Comcast is looking for space and has leased parts of the former CoreStates and Bell Atlantic headquarters towers.
But it's not clear that Comcast would spend $50 a square foot for new construction, when existing Philadelphia office space is available at half that price. Comcast doesn't need the 700,000+ sq ft a big tower would create, and it would be tough to finance such a large project without other tenants.
Comcast has acquired plenty of legacy NBC Universal office space in other cities, such as 30 Rockefeller Center in Manhattan (though Philly brokers are hoping Comcast could move back-office NBC operations in North Jersey down here). Comcast already controls a site on its headquarters block that could accomodate maybe a 20-story tower, if it wants to build.
That leaves open the possibility that a Liberty financial partner is looking at Comcast or another potential tenant long-term, and sees this as a chance to control the site. Liberty held the site of Comcast's current headquarters a block away for years until the company was ready to commit.
The site doesn't fit Liberty's recent deals. With few big companies hiring or needing office space, Liberty has been selling office sites and buying warehouses.
But some large corporations are using the depressed property and construction market to update home offices on the cheap. For example, PNC Financial Service Group this summer announced a new 40-story headquarters in its native Pittsburgh.
A new tower would give Philadelphia contractors and construction workers relief from the three-year slump, especially since work ended on the Pennsylvania Convention Center expansion and Brandywine Realty Trust's 30th St. Post Office conversion earlier this year.
Hill plans to concentrate its future development energies on "hotel properties on the West Coast, resort properties in the Caribbean, and low-cost housing in the Third World," Richter told me. The former tower plan, dubbed American Commerce Center, was proposed four years ago by developer Joseph Grasso and promoter Garrett Miller. Hill replaced Grasso in the group two years ago. Miller left Hill in July and joined Matthew McManus' NAI Bluestone commercial real estate loan brokerage group.