Two Liberty Place up for sale, could trade for as much as $250M

The office portion of Two Liberty Place, a skyscraper that helps define Philadelphia’s skyline, has been put up for sale and could go for as much as an estimated $250 million.

The tower’s 940,000 square feet of office space is 89 percent leased to multiple tenants on a long-term basis including: Cigna Corp., which signed a lease over the summer on 322,086 square feet through 2027; Buchanan Ingersoll, which leases 77,000 square feet through 2021; Republic Bank, which occupies 53, 275 square feet until 2020; and Eckert Seamans, which has 53,000 square feet through 2032. Unisys Corp. subleases roughly 90,000 square feet to 10 tenants.

There is 100,000 square feet of vacant space in the building and is comprised of three contiguous floors, which are currently scarce in the Central Business District.

When Cigna renwed its lease in August, Two Liberty’s owner, Parkway Properties Inc. (NYSE:PKY), announced it would explore selling the tower as it sought to depart from non-core markets.

Seldom do properties of this caliber come on the market and, in Philadelphia, there’s just a handful of these trophy towers.

Because of that, Two Liberty is expect to get a lot of domestic and international interest, said Robert Fahey, an investment broker with CBRE Inc., who is marketing the building with colleague Jerry Kranzel.

“We’ll see a strong turnout of interested parties,” Fahey said. “They will include major owners in the Central Business District as well as Asian, European and Canadian investors. Bigger, low-risk, high-profile buildings are being snapped up by Korean, Chinese and domestic investors.”

Two Liberty fits a profile those buyers find attractive. It’s stable with long-term leases, well located, of good quality and architecture, Fahey said.

Investors from out of town have made several purchases in Philadelphia last year and this year with the intention of making additional buys. Shorenstein Properties of San Francisco and Nightengale Properties of New York are among those who have invested in Philadelphia and are on the hunt for more acquisitions.

Shorenstein is reportedly buying 1700 Market St. from Nightengale; it is unlikely the group would go after two buildings at once. However, under a speculative scenario, Nightengale could deploy funds from that sale into Two Liberty.

A local suitor could be Brandywine Realty Trust (NYSE: BDN), which is Center City’s largest landlord of trophy and Class A space, and looks at everything that comes on the market. A Two Liberty purchase would further solidify its dominant position and likely send shutters through the market as tenants would have less leverage in lease negotiations since they would be dealing with a landlord who controls so much of the city’s top-tier office space.

The office portion of Two Liberty includes the first 36 floors of the building. Parkway Properties inherited a 19 percent interest in the tower as part of a 2011 acquisition of another real estate company that had an ownership stake in the building. The remainder of the building, floors 37 through 57, consists of residential condominiums.

The office portion of the property is part of a bigger mixed-use complex that includes the Shops at Liberty Place and a Westin hotel, which have separate ownerships. Two Liberty is considered a special property and well positioned in the market.

“With replacement costs of over $500 per square foot, little speculative construction is expected in the foreseeable future and with strong market fundamentals, Philadelphia’s highest quality properties are poised for significant rent growth during the next several years,” according to marketing materials from CBRE Inc.

Source: Philadelphia Business Journal