Ho-hum, Philadelphia’s third-tallest building is changing hands.
Two Liberty Place, built for Cigna Corp. in the late 1980s, is being purchased by the Teacher Retirement System of Texas and Parkway Properties Inc., a real estate investment trust in Jackson, Miss., in a deal struck in April.
Usually, word of a big office-building sale in Center City generates lots of buzz.
This one? Not so much, probably because of the complexity of this latest deal involving Two Liberty, the 57-story tower at 50 S. 16th St.
I stumbled across the pending sale during a routine search of filings with the Securities and Exchange Commission.
On April 11, Parkway Properties - which should not be confused with Parkway Corp., the big parking-lot operator in Philadelphia - announced that it would combine with Eola Capital L.L.C., a commercial real estate firm in Orlando that had been contemplating an initial public offering.
Under the terms, publicly held Parkway Properties would gain Eola’s property-management business and six office properties in a $462 million transaction that is expected to close by June 30. Eola’s top management will join Parkway.
Of those six office properties, four are in Florida, one is in Atlanta, and the last - and biggest - is in Philadelphia.
Remember, Two Liberty is a combination office and luxury-residential tower. So this sale involves only the 940,654 square feet of office space from Floors 1 to 37. The 20 floors above that were converted into condominiums several years ago.
Ownership of Two Liberty has changed several times in the last decade. San Francisco’s Shorenstein Co. acquired it in June 2002. Three years later, Shorenstein sold Two Liberty to America’s Capital Partners L.L.C. of Miami, which hatched the plan to convert the upper floors to condos.
Then Eola acquired America’s Capital Partners’ entire 22-building office portfolio in a $1.1 billion deal in September 2009.
Philadelphia would be a new market for Parkway Properties, which has primarily invested in the Southeastern and Southwestern United States. In a conference call with analysts, Parkway president and chief executive officer Steven G. Rogers cited the city’s “attractive demographics” and called the central business district one of the stronger office submarkets in the region.
Parkway did not break out the purchase prices for each building, only that it will pay $380 million, or $154 per square foot, for 2.47 million square feet of office space.
Actually, Parkway has already purchased two of the Florida properties: a 250,000-square-foot building in Tampa and a 135,000-square-foot building in Jacksonville. The real estate investment trust paid $63.5 million for those two, chief financial officer Richard G. Hickson said.
Once the purchase of the other Eola properties is complete, three institutional investors will share ownership of Two Liberty. The Texas teachers’ pension fund, with $108 billion in assets, would own 70 percent of the building. Parkway would hold 19 percent, and Utah Retirement Systems, a public pension fund with $11 billion in assets under management, would retain its 11 percent stake.
And Parkway is buying a building that is 99 percent leased.
According to Eola’s preliminary prospectus from January, Cigna is the largest of the 16 tenants, occupying 462,682 square feet under a lease that runs until September 2016.
The only question is: Will Parkway be able to keep the health insurer when it’s time to renew that lease?