The properties included in the transaction are: the five-building Radnor Corporate Center, which aggregates 733,000 sf and is just over 90% leased; the five-building, 967,000-sf Radnor Financial Center, which is the former Wyeth Pharmaceuticals complex and is just beginning lease-up following renovation; the One and Two Logan Square trophy towers aggregating 1.3 million sf in Philadelphia's CBD with occupancy of 99% and 93% respectively; the 203,088-sf Rodney Square office property in Wilmington that is more than 99% leased, and 317,465-sf 300 Delaware building in Wilmington that is 86.3% leased.

Lehman Brothers represented Rubenstein in the bidding process, which Gerard Sweeney, Brandywine's president and CEO, says included a handful of bidders for different mixes of Rubenstein's assets. Those excluded from this deal are not in Brandywine's core market area in the Philadelphia region. Sweeney says of the acquisition, "no other was remotely as attractive." He attributes the winning bid to Brandywine's knowledge of the market and the product among other factors, including the price.

While Radnor Corporate Center is a stabilized asset, Radnor Financial Center offers "an excellent repositioning and growth opportunity as the market recovers," Sweeney says. In addition, the Radnor properties directly compete with Brandywine's existing asset bases in Conshohocken, Plymouth Meeting, Newtown Square and King of Prussia. The acquisition offers "excellent upside controlling of the portfolio while mitigating downward rent pressure on existing Brandywine properties in adjacent markets." Sweeney says, "excluding Radnor Financial Center vacancy, occupancy in the area is in the 90% range," and the asking rent is in the $28 per sf to $30 per sf range. Current occupancy in the financial center's buildings ranges from 12.1% to 28.2% to zero.

He calls the Philadelphia properties "true trophies with sizes comparable to Cira Centre, enhancing our operating efficiency in the CBD. The rent roll is very stable," he adds, "and, on a portfolio basis, [they] provide current cash flow to bridge lease-up of Radnor Financial Center." Cira Centre is currently under construction and better than 65% leased. Sweeney also says, "This is not a philosophical shift in our strategy and should not be read as [our] being more acquisitive in the CBD. "

The Wilmington properties solidify Brandywine as the largest office landlord in Delaware, where it now has nearly two million sf of class A office space. Brandywine is hiring approximately 40 on-property Rubenstein personnel along with some administrative and marketing staff, but no executive management.

During the conference call, Sweeney said Brandywine does not expect Rubenstein to become "an in-market competitor." David Rubenstein tells GlobeSt.com that the agreement "contains nothing related to competition, although we don't envision competing with Brandywine." Regarding the assets excluded from this transaction, he says, "We'll look to gain maximum value, which could include a sale." Of his future plans, he says his company retains all rights to the Rubenstein Co. name. "We don't have definitive plans now; we're taking care of the present first. There is a strong inclination to explore with new investors potentially in a fund structure."

With this acquisition, which is expected to close before the end of this third quarter, the Brandywine portfolio will contain 292 office and industrial properties, aggregating 23.8 million sf.

Instant Insights /

Brandywine Acquires Rubenstein Assets for $600M

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