Brandywine Realty Trust has invested $25 million for a 25% interest in grey-stone-faced Commerce Square, twin 41-story towers totalling 1.9 million square feet of Class A office space in the 2000 block of Market Street in Center City.
UPDATED: The deal values the buildings' equity at $100 million, or around $53 a square foot. Brandywine boss Gerard Sweeney notes that a buyer would also have to finance the building's debt of $238 million, or $125 a square foot. That sets the building's total value at around $178 a square foot on a debt + equity basis. Still less than half the cost of new construction.
But better than letting the towers run down. "This is a good sign for those buildings. They were out of cash, and this stabilizes them," says Robert Fahey, executive vice president at building broker CB Richard Ellis Inc.
EARLIER: Brandywine will own the buildings as minority partner with previous Commerce owner Thomas Properties Group of Los Angeles remaining in control. Brandywine's money - $5 million at closing, $20 million by the end of 2012 - "will provide substantial capital to improve these premier properties and maintain their position among the highest-quality buildings in Center City," Thomas boss James A. Thomas said in a statement. Thomas will "oversee" the investment, Brandywine boss Gerard H. Sweeney said.
The Henry Cobb-designed towers, built in 1987 and 1992 with an enclosed garden and a few postmodern angular stone flourishes, are 89% leased; tenants include Delaware Investments, Ernst & Young, Grant Thornton, and Wolters Kluwer, among others.
The deal follows Brandywine's recent $129 million ($125/sq ft) purchase of the former Bell Atlantic headquarters in a deal with Blackstone Group, New York, a bargain, compared to the $400/sq ft price of the city's last big tower, Liberty Property Trust's Comcast Center, in the mid-2000s.