1818 Market St. in Center City nearing deal to be sold for $203M

Shorenstein Properties is returning to the Philadelphia office market and is negotiating to buy 1818 Market St.

The San Francisco real estate company last invested in Center City in 2002 when it bought Two Liberty Place, one of Philadelphia’s signature skyscrapers, for around $200 million. It sold the 58-story, 1.2 million-square-foot property in 2005 and never looked back until now.

Shorenstein is trying to strike a deal to buy 1818 Market, a 37-story, 940,000-square-foot building, for an estimated $203 million, according to people with knowledge in the matter. The company is expected to put the building under contract this week, according to sources. If all goes as planned, Shorenstein could close on the transaction in the next 60 days.

The purchase would involve Shorenstein’s eleventh real estate fund, which was formed this year with $1.22 billion of which $75 million is committed by Shorenstein. It started making investments with the fund beginning in September and has so far bought one building — Champion Station, a four-building, 426,000-square-foot campus in San Jose, Calif.

Now called 1818 Beneficial Bank Place, the building serves as the headquarters for Beneficial Bank and Five Below. It was put on the market in May by Sovereign Capital Management Group Inc. of San Diego, Calif.

Sovereign came to own the building in a convoluted manner. It bought the building when it acquired Daymark Realty Advisors in 2012. When it was in that position, Sovereign gave 1818 Market some so-called “rescue capital” when its ownership was struggling and that investment gave Sovereign a majority interest in the property.

The property last traded in 2006 for $153.8 million. That’s when NNN Realty Advisors of Santa Ana, Calif., bought it. NNN Realty later became known as Daymark. During the recession, Daymark and its tenant-in-common approach to buying real estate ended up floundering.

The property took a big hit when Delaware Investments moved out of it and then Day & Zimmermann vacated. It was difficult to attract tenants, especially when Daymark had little money to support fit outs and take care of deferred maintenance. Sovereign’s financial boost helped to reinvigorate the building. The building is now 91 percent occupied by 63 firms.

Source: Philadelphia Business Journal