Two Liberty's new view: From offices to condo

Developer Art Falcone is banking on the value of a killer view.

The luxury condos he is building on the top 20 floors of the 57-story Two Liberty Place in Center City provide that - along with a concierge service to walk your dog or deliver your groceries.

But it's the view that's priceless. Well, almost priceless. The asking price for a two-bedroom, two-bath unit is $2 million to $4 million, depending on the extras. A penthouse is just $15 million.

Real estate developers and investors around the country are watching the project, called the Residences at Two Liberty Place, to see if the concept of converting an office tower into high-end condos will take off.

Falcone Group of Boca Raton, Fla., is not the first development company to convert office space to condos. But it is the first to do so in a premiere downtown office tower.

"This is an anamoly," said Bob Clements, executive vice president and managing director of Grubb & Ellis Co., a commercial real estate firm. "At the time they purchased the space, it was a good thing to do because there was a glut of office space in the market, and probably that is what led them to consider that."

Two Liberty - classified as a trophy building because of its location, quality of space, amenities, security system, and image - had lots of vacant space to lease after it lost Ace American Insurance Co. in February 2005. Around the same time, Two Liberty's main tenant, Cigna Corp., reduced its space in the building by half, to 400,000 square feet, when it reorganized its business.

About a year and a half ago, Two Liberty was offered for sale by its co-owners, the Pennsylvania Teachers' Pension Fund and the Shorenstein Group. The Falcone Group's partner at the time - America's Capital Partners, which specializes in office buildings - took Falcone executives for a meal on the top floor of Two Liberty, where Cigna executives dine.

"When we were looking at it, we said: 'Office? No office here.' Not with this view," said Albo Antenucci Jr., Falcone's executive vice president and project manager, as he peered out from one of the model units on the 52d floor recently.

Antenucci said converting the space into 122 condos would begin this month (though four sample units have been completed), and buyers could begin moving in by fall.

Antenucci had local brokers peruse the model units last week and again this week, and gave them informational packets to take back to their clients.

Next Wednesday will be the public grand opening for Residences at Two Liberty, when all 122 units will be for sale. There have been no presales or deposits.

"There are 100,000 millionaires in Philadelphia," Antenucci said. "I want 122 of them."

He said his office had sent sales brochures to 100 Philadelphia-area chief executive officers.

Clements, the Grubb & Ellis real estate expert, said the office market in Center City had "improved significantly" since Falcone decided to do the conversion.

And while the office market has rebounded, the residential market has softened as mortgage rates have gone up, said Kevin C. Gillen, a Wharton School economist who monitors the local housing market.

"If they opened a year and a half ago, the market was much more favorable to sellers," Gillen said of Two Liberty. "The condo inventory is very large vs. the number of people who want to buy, so buyers are being very selective right now."

Still, Falcone is confident the project will take off.

"If you group the entire condo market together, then yes, I would be concerned," Falcone said in a phone interview from Boca Raton this week. "But we're going after the highest income bracket, which is a small niche in the marketplace.

"They have a lot more disposable income and much higher net worth, and are affected differently in a real estate downturn," he said. "They don't take out mortgages. They write a check."

Allan Domb, a broker and developer of luxury condos in Center City, cautioned against building too many large condo units.

"If I was the developer, I would build all small units to attract executives who work in town," he said. "The majority of the larger-square-footage buyers seek out the location of Rittenhouse Square first. From Rittenhouse, it trickles down to other places."

The condos at Two Liberty will be built in phases - the higher the floor, the higher the price.

A one-bedroom unit on the 40th floor costs $800,000, while a three-bedroom, three-bath residence on the 46th floor starts at $2.2 million. Lower floors will remain office space.

Antenucci said it's a challenge to take a commercial office building - which has deep distances between the corridor, or the core of the building, to the windows - and transform it into a residential project. So the developers are adding several dens in many of the units.

Every unit will feature a cappuccino machine, Italian-made Snaidero kitchen cabinetry, and Miele appliances. Extras will include custom millwork and in-ceiling speakers.

In addition to touchpad concierge service, residents will have an executive concierge staff of five to tend to their needs, from making restaurant reservations to pulling up their cars.

A full spa and sauna, pool, gourmet restaurant, and "pet concierge" service will occupy the 37th floor.

"It's a world-class building already, but we're taking it to a whole new level of amenities to give an experience to Philadelphians that they have not had before," said Falcone, who envisions transforming Two Liberty into something similar to the Time Warner building in New York. "It's for discriminating people that want that kind of level of service and quality, and living above everyone else in height."

But some condo developers say what Two Liberty is offering is available in other buildings.

"Other condominiums offer that, too," Domb said. He cited the Rittenhouse Hotel and Condominiums, which offers personal concierge service and top-of-the-line amenities.

Domb also pointed to other condo projects under construction - including 10 Rittenhouse Square; Parc Rittenhouse, which opens next month; 1706 Rittenhouse, which will offer robotic parking; and the soon-to-be built Ritz Carlton at 15th and Market Streets - that all offer similar features and amenities. Carl Dranoff is building Symphony House, a high-end condominium with 163 units within steps of the Kimmel Center on the Avenue of the Arts, and which will begin moving in residents in June. "We're pretty five-star, too," he said.

Still, the lowest residential floor at Two Liberty Place will be the 40th floor - seven floors above the highest residential building in all of Philadelphia and well above signature statue William Penn's head.

With the height advantage, the lofty pads afford a spectacular, unobstructed glimpse of the city.

"The views are unbelievable," Falcone said. "It takes your breath away."

848: Height (in feet) of Two Liberty Place, including spire.

122: Number of condos

546: Feet above ground for the lowest-level condo

765: Feet above ground for the highest condo

$800,000: Price of the lowest-level one-bedroom condo.

More than $15 million: Full-floor penthouse.

7,200: Square footage of penthouse

SOURCE: Falcone Group L.L.C.EndText