Philly CBD Sees Leasing Activity

While leasing activity has been sluggish in the Philadelphia region, generally reflecting the national landscape, the Philadelphia CBD has been buzzing with activity. HRPT Properties Trust has signed Sovereign Bank to a 51,000-square-foot, 15-year lease for office, retail and concourse space at Centre Square (15th & Market streets). Additionally, other well-known tenants are scouring the CBD market, including KPMG (120,000 square feet) and Beneficial Mutual Savings Bank (140,000 square feet). In the Western suburbs, Brandywine Realty Trust recently signed VWR to a 14 year, 148,000-square-foot lease at One Radnor Corporate Center.

Banking on Bank Branches

The New England office of CB Richard Ellis is marketing a portfolio of 10 regional Citizens Bank branches. The branches are located in Montgomery(1), Delaware(2), Bucks(2) and Philadelphia(5) counties and total 47,000 square feet. The branches all have 10 years remaining on their lease terms. The offering is highlighted by the Main Line location at 363 West Lancaster Avenue in Wayne. There is no formal asking price, but the branches are speculated to trade in the 7% to 7.5% cap-rate range based upon recent sales comparables.

Other Corporate Dispositions

Dow Chemical is in the market with the former Rohm & Haas headquarters at 6th and Market streets in the Independence Hall section of downtown Philadelphia. Additionally, Unisys has enlisted Jones Lang Lasalle to dispose of its corporate airport hangar at the Trenton Mercer Airport in West Trenton, NJ.

Results from the Murano Auction:

The auction was a success for developer Thomas Properties, who sold all 42 units put up for auction. The units were advertised with a minimum bid price between 42% to 50% below the original developer's pricing, and on average, sold for approximately 25% below original pricing. This now means that a little more than half of the 302 total units in the building have been sold.

Within a week of the auction, ownership started offering additional units near the auction prices. With a bona fide "market" now in place, pricing is more stable. However, ownership has to hope that there is still pent up demand that was either scared away by the auction process, or was scared off by the stringent financing requirements (buyers had to use a bank of the ownership's choice if you wanted a financing contingency…if you couldn't meet the requirements, you could lose your deposit).

Otherwise, one has to wonder how they expect to sell the remaining 130-plus units that are still available. I spoke with several condo owners, and they had mixed feelings about the results of the auction. While some were excited at the prospect of filling the building, others were not happy at the lower cost basis at which many of their soon to be neighbors were able to buy comparable units, making it difficult to recapture their perceived equity upon exit.

Retail Roundup

Local "Philebrity" and successful restauranteur Stephen Starr is taking his show on the road once again. After successfully debuting the Manhattan version of the popular Asian-fusion restaurant Buddakhan a few years ago, Starr is looking south for the opening of his 20th restaurant. He has plans to open a Buddakhan outpost in Miami. This move follows the success of Starr's Steak 954 in Fort Lauderdale, located inside the W Hotel. Rumor also has it that Starr may expand his Center City empire; the next move is rumored to be a hamburger shack concept in Franklin Square.

What's the most successful store in a strip center these days? Ask local Philadelphia owners and they'll likely sing a similar song: dollar stores. While it is no surprise that wallet-conscious stores would be doing considerably better in a down economy, one has to wonder, especially in a city like Philadelphia which doesn't typically experience the peaks or troughs of other major markets, how many consumers are really trading in shopping at the local mall for Family Dollar and the like