Center City deal shows real estate price drop

Commercial real estate is taking a beating. Lower prices mean defaults, borrowers grabbing properties, write-offs, bankruptcies, and tough terms for new loans. But apparently that's what's gotta happen, if deals are going to get done on any terms and business is to start moving again in 2010.

1) 2000 Market Street - Deutsche Bank's RREEF America III Fund bought the 600,000-square-foot office tower at 2000 Market from Rubenstein Co. for $76.6 million, or $128 a square foot, in 2004.

I'm told RREEF balked at upgrading the property for at least one of its corporate tenants, who include lawyers Fox Rothschild, chemical maker Arkema, and the Presbyterian pension fund. As values fell, RREEF tried to sell the tower and repay lender Prudential. No deal, so Prudential took back the building. Now I hear Prudential is close to a deal to sell it, through CBRE, for around $56 million, or $85 a square foot -- down 33% from five years ago

David Jacobs of Llenrock Group first reported RREEF's give-back and the Pru-CBRE deal two days ago in his Philly 411 column on the Global Street blog here. He adds that RREEF had a chance to sell via CBRE, at a profit, in 2007, but blew it. RREEF had no comment. The firm has retained CBRE's brokerage group to sell other U.S. buildings.

2) Jacobs also reported, in the same item, that developer Brian O'Neill is close to having to give back the office portion of his Uptown Worthington development to lender Citizens Bank. The retail parts - Wegman's grocery, Target discount store - are still in progress. O'Neill was away from his office today.

3) Earlier this month, the LEM Mezzanine Fund, backed by Philadelphia's own partnership of Ira Lubert and Dean Adler, who count the state workers' and teachers' pension funds among their major investors, bought New York's fancy but badly indebted W Hotel Union Square at a foreclosure auction from owner Dubai World. 

LEM was among W's creditors. LEM paid $2.1 million for the hotel, which cost Dubai $282 million just three years ago. Debt aside, Horsham-based Realpoint estimates the hotel's now worth $137 million, reports Wall St Journal here.

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