Amstar acquired the building for $51 million in June 2001. At that time, it was 35% leased, according to Scott Gibler, Amstar's executive director. The 561,100-sf property at the intersection of Ben Franklin Parkway and Cherry Street is the former US headquarters for Reliance Insurance Co., which is liquidating under bankruptcy proceedings. Gibler says Amstar "was able to capitalize on this investment opportunity by entering the Philadelphia investment market early and purchasing a quality office project at a steep discount to replacement cost." The company repositioned it from an owner/user property to a multi-tenant facility.
Although Behringer Harvard owns Woodcrest Corporate Center in nearby Cherry Hill, NJ, this is its first foray into Philadelphia. Jason Mattox, executive vice president, tells GlobeSt.com, "despite some office vacancy problems in recent past years, Center City has had quite a resurgence. We think it has the right number of Fortune 500 companies and the right amount of commercial activity to make it a great place for long-term investment."
According to a Behringer SEC document, the acquisition was funded with a loan of approximately $67 million from JP Morgan Chase Bank at a fixed rate of slightly below 5.5%, and proceeds from a recent stock offering. AsGlobeSt.com reported, it raised nearly $2.5 billion this October.
Three Parkway was completed in 1970, totally renovated in 1997 and significantly upgraded by Amstar. Under that company's ownership, occupancy rose to its current 90%. Bill Luff, senior vice president in the local office of Trammell Crow Co., led the leasing team. According to the Behringer SEC filing, leasing and management is assigned to its affiliate, HPT Management Services LP, which has subcontracted "certain on-site management services" to Trammell Crow. A call to Luff was not returned by deadline.
In March 2005, excelleRX Inc. relocated its headquarters there under a 10-year lease, valued at in excess of $30 million, according to a GlobeSt.com report. The medication management provider occupies five floors aggregating about 140,000 sf. According to the Behringer SEC filing, the lease extends through May 2015 and has two five-year renewal options.
At the same time the building gained two leases valued at more than $10 million and aggregating 75,185 sf from Allstate Corp. and American International Insurance Co., an AIG affiliate. Behringer's filing says the latter agreement expires in March 2016 and has one five-year renewal option. It also says that Reliance leases approximately 62,000 sf and, under the liquidation order, the state has guaranteed rental payments and compliance with the lease, which expires in December 2009.
The average asking rental rate for class A office space in the Market West submarket is $24.82 per sf, according to a third quarter report from the local office of CB Richard Ellis. A Cushman & Wakefield report pegs the average for the submarket at $25.72 per sf.
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