PhillyDeals: Liberty Property swapping offices for warehouses

Liberty Property Trust, the commercial landlord that built Philadelphia's tallest buildings, has been dumping aging suburban offices and building and buying warehouses.

The Malvern company announced last month it was selling 6.6 million square feet of mostly office space, in suburbs like Mount Laurel, Fort Washington, and elsewhere, to Greenfield Real Estate L.L.C. of Connecticut for $705 million.

Greenfield is one of many private firms buying up aging office parks.

This year, Liberty sold PNC's Delaware County operations center to Nicholas Schorsch's American Realty Capital Partners for $75 million. Liberty sold a portfolio of offices in South Jersey, among other suburban markets, to a group led by Somerset Properties in Lower Gwynedd for $146 million.

Meanwhile, Liberty is building Wal-Mart's biggest warehouse, in Bethlehem. And in October, Liberty paid $1.475 billion to buy Cabot Industrial Value Fund IV L.P.'s portfolio of warehouses spread through New Jersey and other locations.

That deal increases Liberty's focus on "industrial real estate," chief executive William P. Hankowsky (an owner of the company that publishes The Inquirer) said in announcing the Greenfield sale.

It's not that Liberty is abandoning its legacy of Willard Rouse-built signature towers. The company is ready to build that second Comcast Corp. high-rise in Center City, if Comcast decides to gather staffers in other Philadelphia rental space and locate them in another tower.

But Liberty isn't going to just wait around for scarce headline projects.

Americans are using more warehouses. According to Liberty's analysis, "Every person in every metro area uses 40 square feet of warehouse space" to support their retail purchases, Liberty's Northeastern regional executive, James J. Mazzarelli, told me in an interview this year.

"All the stuff in someone's kitchen or bathroom or bedroom comes out of a warehouse," he said. Amazon, Wal-Mart, Home Depot, Bed Bath & Beyond all calculate how many people in a given section of the country will need how much space to buy their goods over the next year, then they, or their distributors, scout for space within a reasonable driving radius.

"This generates tremendous warehouse needs," said Mazzarelli. "Take New York City and North Jersey, one of the most densely populated regions on the East Coast. All those people at 40 or 50 square feet per person need industrial space."

So Liberty is pushing its "industrial strategy - to be in 25 major markets, coast-to-coast, with multi-tenant industrial buildings," Mazzarelli said.

If trophy towers aren't in demand, Liberty will build a trophy distribution center for Wal-Mart.

And if a warehouse owner like Cabot puts a block of warehouses on the market, Mazzarelli said, the boss is ready: "Bill [Hankowsky] gets a call: 'You want to play?' Yeah! We do!"

Source: Philly.com