At that time Shorenstein acquired the asset, it was fully leased and had been since its completion in 1990 by Rouse & Associates, the predecessor of Malvern-based Liberty Property Trust. In first-quarter 2006, however, 800,000 sf, or about two-thirds of the building will be vacated by the departure of Ace Ltd. and downsizing of Cigna Corp. In November 2004, Shorenstein handed the leasing assignment to the local office of CB Richard Ellis. George Cauffman of CBRE declined to comment on any sale.

On condition of anonymity, a Center City office specialist tells GlobeSt.com that America's Capital "is paying as much as $50 million less for the building than Shorenstein paid in 2002." Calls to Rudy Touzet, president of America's Capital, and to John Betzig of New York City-based Secured Capital, who reportedly represented Shorenstein in the sale, were not returned by deadline.

In an email obtained by GlobeSt.com, which was sent by Shorenstein to Six Fund investors and TIAA, Shorenstein states it "will incur no loss" from the sale. Fund Six's investment in the property, the email explains, "was highly structured." The fund "created a general partnership with TIAA to purchase the asset subject to a first mortgage lien held by TIAA.

"Simultaneously, Fund Six extended a $42-million subordinated loan to the partnership. This Fund Six loan provided for interest and principal payments to Fund Six for 3.5 years with full amortization by December 2005 from cash flow provided by the in-place lease for 100% of the building by Ace Insurance," the email explains.

"This unusual investment structure was designed to give Fund Six effective control over the property and, therefore, the opportunity to create value through a proactive leasing effort," it continues. "At the same time, this unusual investment structure eliminated Fund Six's downside risk and assured Fund Six a full return of, and attractive return on, its capital investment." The email says, "the total gross IRR on this investment is projected to be 16.7% compounded monthly over the 3.2-year holding period." Shorenstein's acquisition of Two Liberty was a complicated transaction in which it acquired the land and a leasehold interest. TIAA-CREFF retained a first mortgage on the property. According to America's Capital's website, it owns 50 office buildings aggregating more than six million sf in Florida, Georgia, North Carolina, Virginia and Washington, DC.

Instant Insights /

Miami Partnership Takes Two Liberty

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