Earlier this year, news broke that the iconic Philadelphia office tower known as BNY Mellon Center was to sell for a record $452 million. A joint venture between New York-based Silverstein Properties and the Arden Group is set to pay roughly $350 per square foot for the 54-story tower at 1735 Market St., the highest price per square foot ever for an office building transaction in Philadelphia.
However, this record-setting sale isn’t all good news for the local market, according to the Philadelphia Business Journal. When you compare the sale price of the BNY Mellon Center to the construction costs of a trophy office tower, it is clear why developers aren’t investing in new office construction in the heart of Philly–except for Comcast, of course. It costs around $600 to $650 per square foot to build a trophy office asset, according to the newspaper, which means the BNY Mellon is changing hands at roughly 54% of replacement cost.
In light of this record-breaking office sale and all the talk around it, we thought we’d look back at the top 10 office sales of 2018 in Philadelphia, to get a better picture of the city’s office sales market. It’s easy to see why the BNY Mellon sale garnered so much attention: the largest office sale of last year fetched just $160 million, and only 4 out of the 10 biggest sales topped the $100 million mark.
There are a few names that stand out from the crowd in our top 10. American Real Estate Partners closed the first and the third-largest office deals of the year, paying a combined total of $268 million for the PNC Bank Building and Eight Tower Bridge properties. Equus Capital Partners also makes the list twice, having paid a combined $147 million for the Five Tower Bridge and 1400 Atwater Drive assets. Meanwhile, Liberty Property Trust made our list three times–as a seller. The company sold three of its Philly office assets for a total of $277 million, a move in line with its plan to move away from operating office properties and invest instead in expanding its industrial portfolio.
Check out the full top 10 below and read on for details on each of the sales on the list:
1. PNC Bank Building – $160M
PNC Bank Building
The 40-story, 825,968-square-foot high-rise at 1600 Market St. changed hands for $160 million–or $194 per square foot–in February 2018, according to Yardi Matrix data. Equity Commonwealth sold the tower previously known as the Provident Mutual Life Building to American Real Estate Partners, a real estate investment company headquartered in Herndon, Va. Built in 1982 and renovated in 1997, the Class A tower includes 815,968 square feet of rentable office space, as well as 10,000 square feet of retail. The PNC Bank Building is also subject to a 30-year unsubordinated net ground lease held by HUB Properties Trust, expiring in 2030.
2. Navy Yard – Five Crescent Drive – $130M
Navy Yard – 5 Crescent Drive
The second-largest office sale of 2018 in Philadelphia was Korea Investment Management Co.’s $130 million purchase of the Navy Yard – 5 Crescent Drive property in May. Liberty Property Trust sold the four-story, 216,338-square-foot property for roughly $604 per square foot, according to Yardi Matrix data, and the sale was subject to an $85 million loan held by Goldman Sachs. Certified LEED Platinum by the USGBC, the Class A asset built in 2013 has GSK as anchor tenant, includes three electric car charging stations and 71 bike parking spaces.
3. Eight Tower Bridge – $108M
Eight Tower Bridge
The $108 million sale of the property at 161 Washington St. in Conshohocken was the third-largest Philly office deal of last year. American Real Estate Partners bought the 16-story, 345,000-square-foot building dubbed Eight Tower Bridge from global investment management firm Barings in October 2018, aided by an $81 million loan held by a private lender. The Class A high-rise was completed in 2003 and incorporates retail space and 1,200 parking spaces.
4. 2000 Market Street – $107M
2000 Market St.
The fourth-largest sale of 2018 was that of the property located at 2000 Market St. A partnership between Goldman Sachs and Nahla Capital paid Gemini Rosemont close to $108 million for the 29-story, 665,649-square-foot Class A building. Situated in the heart of Center City, the 1972-built office tower includes 2,500 square feet of retail space, an on-site conference center, and is managed by CBRE. Notable tenants include Santander Bank, CMI Media, Fox Rothschild, and Philadelphia Dental Associates.
5. Lower Makefield Corporate Center Portfolio – $85M
Lower Makefield – North Campus
Coming in at number 5 on our list of Philly office deals is the $85 million sale of the Lower Makefield Corporate Portfolio in Morrisville, Penn. Rubenstein Partners acquired the four-building portfolio totaling 496,840 square feet in September 2018 from AIG Global Real Estate. The portfolio included the 188,988-square-foot North Campus at 1010 Stony Hill Road, as well as the South Campus properties located at 770, 790 and 800 Township Line Road. The Capital Markets Group at Cushman & Wakefield brokered the transaction of the Class B corporate office campus, according to a Rubenstein release. The campus is conveniently located just a 40-minute drive away from Center City in Philadelphia.
6. 1650 Arch Street – $79M
1650 Arch St.
The 553,349-square-foot property at 1650 Arch St. fetched $79 million in the sixth-largest Philadelphia office transaction of last year. ASI Management paid CBRE Global Investors $142 per square foot for the 27-story Class A high-rise built in 1974. Featuring 550,349 rentable square feet of office space and 3,000 square feet of retail, 165 Arch St. boasts LEED Gold certification from the USGBC and was completely renovated in 1998. The building’s tenant roster features the U.S. Environmental Protection Agency, Ameriprise, JLL, and SAGE Scholars, among others.
7. Innovation Renaissance Portfolio – $77M
Innovation Renaissance
The seventh-largest office deal of last year for the Philadelphia office market closed in January, when MLP Ventures bought the Innovation Renaissance Portfolio from Liberty Property Trust for a price tag of $77 million. MLP purchased the properties located at 2300 and 2520 Renaissance Drive and 2900 and 3500 Horizon Drive in King of Prussia, Penn., with the help of a $79 million loan held by LoanCore Capital. The properties total 642,167 square feet of Class B office space, per Yardi Matrix data, and were completed in the 1990s.
8. Five Tower Bridge – $76M
5 Tower Bridge
Another notable Philly office deal closed in October 2018, when Equus Capital Partners purchased the property at 300 Barr Harbor Drive in Conshohocken from Maguire Hayden Real Estate. The 222,058-square-foot office asset dubbed Five Tower Bridge fetched $76 million, or $341 per square foot, in a deal subject to a $49 million loan held by the Metropolitan Life Insurance Co. Home to the likes of Avison Young, Oracle, SSG, and Wells Fargo, the eight-story Class A mid-rise completed in 2000 incorporates 667 parking spaces and 27,757-square-foot floor plates.
9. 1400 Atwater Drive – $71M
1400 Atwater Drive
The 299,809-square-foot property located at 1400 Atwater Drive in Malvern, Penn., sold for $71 million in October to Equus Capital Partners. The company bought the five-story, Class A mid-rise previously known as Atwater Corporate center from Gramercy Property Trust, in an all-cash transaction. Completed in 2012, 1400 Atwater Drive is fully leased by Endo Pharmaceuticals, boasts LEED Silver certification from the USGBC, and features above-standard ceiling height and 1199 parking spaces.
10. Three Quarry Ridge – $69M
3 Quarry Ridge
The tenth-largest office sale of 2018 for the Philly market was the acquisition of Three Quarry Ridge, a six-story, 212,410-square-foot mid-rise in Malvern, Penn. Global Securitization Services purchased the building located at 425 Old Morehall Road from Liberty Property Trust in November, for a price tag of $69 million. The Class A asset was completed in 2014, has earned LEED Gold certification from the USGBC, includes an on-site conference room and a cafeteria, features 1,006 parking spaces, and is fully occupied by Vanguard.
Methodology
- Data source: Yardi Matrix;
- Square footage parameters: at least 25,000 square feet;
- Our analysis includes ownership stake, controlling interest, and remaining interest deals;
- We count portfolio deals as single transactions; these portfolio deals include only properties located within the same campus or sharing the same transaction terms;
- In the case of mixed-use assets, we only considered properties featuring at least 50% office space;
- We excluded distressed sales from our analysis.
