Philadelphia Story: Losing A Trophy Property
The Wall Street Journal reports: A real-estate fund that is part of Deutsche Bank AG's asset-management business tried to hold onto its properties as it recently restructured some $1.2 billion in debt.
The 29-story office building at 2000 Market St. in Philadelphia is one of the buildings it lost.
The fund, RREEF America REIT III, gave up the building in a deed-in-lieu-of-foreclosure transaction to Prudential Mortgage Capital Co., which held a $49 million mortgage on the property. In December, Prudential sold the property for about $56 million to another fund, CBRE Strategic Partners U.S. Value 5 Fund. The buyer paid Prudential nearly $49 million and also agreed to pay off about $7 million in unpaid construction costs related to the building, according to people familiar with the deal.
The sale was one of the first involving a Philadelphia trophy property since the downturn, and delivered a tough benchmark to the deal-starved City of Brotherly Love. The black metal and glass tower, which is about 76% leased, went for about $85 a square foot, well below the $116-a-square-foot range that RREEF paid for the building in 2003. The price tag also was well below the $135-a-square-foot range that CB Richard Ellis Investors is said to have considered paying back in late 2007 before those talks fizzled, according to people familiar with the property.
"It's not a pretty price but it's a price," said Robert Fahey, an executive vice president with CB Richard Ellis Group Inc. who represented Prudential in the sale negotiations. "We have a data point that people can use to make judgments about other buildings."
The total volume of office deals done in the Philadelphia area that were valued at $5 million or more shrank to $99 million last year from $747 million in 2008, according to Real Capital Analytics, a New York real-estate research firm.
View the full article on The Wall Street Journal: Philadelphia Story: Losing A Trophy Property
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Posted by: Mark Alferman