PhillyDeals: PhillyDeals: Landlord BPG sees bargains in debtors' woes

'Construction has slowed all over, but real estate is a very local business," and there's always something going up, says

Stephen M. Spaeder

, head of the development group at Philadelphia-based business landlord

BPG Properties Ltd

.

In the middle of a property-market recession, BPG is putting up a new four-story office building at its

Lower Makefield Corporate Center

. Work started in August at the 90,000-square-foot building, which is going up "on spec" - without pre-signed tenants.

Like Princeton, Lower Makefield benefits from being near where Mets and Phillies territories meet, drawing tenants from both metro regions.

Division heads for

Johnson & Johnson

and other pharma companies and financial firms have left high-price, high-tax Jersey for big homes in Washington Crossing and nearby suburbs. "We find [that] where the boss lives is soon found the headquarters," Spaeder said. The other nine buildings in the Lower Makefield complex are leased, except for two suites.

Elsewhere, things are tough. "I've been in business 36 years. Everyone says this is the worst," said BPG president

Daniel DiLella

.

"But this is when you make money," he added. BPG and other relatively low-debt investors are waiting to see how bad things get before they know how good the bargains will be.

"Our debt-to-equity ratio is below 60 percent," DiLella said, and the company is flush with cash raised earlier this year from investors. By contrast, high-debt investors who acquired property with loans in the mid-2000s face pressure to sell.

"Can they hold on 'til the market comes back, or the debt comes due" and the banks ask for stiffer terms? DiLella asks. "We're hearing from people who are in a debt squeeze."

DiLella says retail, in particular, is tough on landlords lately. The

Wall Street Journal

reported yesterday that

Circuit City Stores Inc.

was weighing whether to follow

Boscov's Department Store L.L.C., Mervyn's L.L.C., Steve & Barry's L.L.C.,

and other retailers into bankruptcy.

There has been a small but interesting switch in ownership at Philadelphia's leading mall owner,

Pennsylvania Real Estate Investment Trust

(PREIT), which owns the

Gallery

and the newly improved malls in

Plymouth Meeting, Willow Grove, Cherry Hill

and

Moorestown

, among other places.

PREIT director

Mark Pasquerilla

, who became a significant shareholder when he sold his company to PREIT in 2003, has been selling his PREIT shares. On Oct. 7, he sold 200,000 shares at $13.50 each, leaving about 650,000 PREIT shares in his porftolio, down from more than 1 million earlier this year, according to Securities and Exchange Commission filings.

When insiders sell, even for personal reasons such as to diversify portfolios, it can raise questions for outside investors.

But also on Oct. 7, Pasquerilla's fellow PREIT director, the Philadelphia real estate and private-equity investment mogul

Ira Lubert

, bought 200,000 shares, also at $13.50 each, the SEC said.

Is Lubert picking up the slack? Does he see something in the future of local malls that Pasquerilla doesn't? Neither director returned calls.

We're not sure financial-service jobs will keep propping up New Jersey's economy, or fill Philadelphia's unbuilt skyscrapers, for now.

Bank of America Corp.

and

Merrill Lynch & Co. Inc.

are preparing to get rid of thousands of workers as the bank buys the brokerage, Merrill chief executive officer

John Thain

told reporters in Dubai yesterday.

"We haven't mapped it out in terms of actual number of people, but we are committed to saving $7 billion across the combined platforms, and that will be a challenge," Thain told

Bloomberg TV

. "Between our two companies, it will be clearly thousands of jobs," he said, mostly back-office information technology, operations and finance positions.

"Mother Merrill," based in New York, has more than 40,000 employees, with roughly 10,000 in New York City and about 8,000 in Jersey City, Hopewell Township and other New Jersey sites.

Bank of America, based in Charlotte, N.C., employs more than 8,000 in the Philadelphia area, at its credit card center in Wilmington (formerly

MBNA Corp.

) and branches throughout the region.

.