PHILADELPHIA-Liberty Property Trust’s plans to develop One Pennsylvania Plaza, a 60-story, 1.2-million-sf office tower at 17th Street and JFK Boulevard to headquarter locally based Comcast remain “incomplete,” Liberty’s chairman, William Hankowsky, said during the Malvern-based company’s third-quarter conference call. Acknowledging, “hurdles remain,” he said he expects them to be resolved within one or two months.

Construction of the $400-million project in general, and the support of tax breaks from the city and state in particular, have riled Center City office owners. More than two dozen of them coalesced to combat the project on two grounds: that the building’s existence would increase vacancy and depress rental rates in Downtown buildings, and tax breaks represent an unfair advantage to a single building and/or tenant.

As a result, arguments in the state legislature over the provision of tax breaks stalled development throughout the summer as projected construction costs and interest rates rose. In July, the state senate approved establishing an Economic Development District at the site, which offers less generous breaks than the previously proposed Keystone Opportunity Improvement Zone. State representatives recessed for summer without acting on the Senate bill and have yet to address it.

Hankowsky listed the EDD legislation among his three hurdles. The others are “completion of a transaction between us and Comcast [which is expected to take half the space],” and “the need to finalize the building’s design, size and construction cost,” Hankowsky said. Asked if there was a point at which the project would become “diseconomic,” he said. “We’re committed to making a good economic decision. It’s conceivable that the lines we’re following will begin to look like they won’t cross,” he conceded, “but, for now, they continue to look like they will.” According to published reports, Liberty has already invested more than $65 million in the project, including land-acquisition, infrastructure development, and legal fees.

In other matters, Liberty reported third-quarter occupancy in its portfolio, which aggregates more than 60 million sf, at 91.2%. “Nationally, real estate recovery has been very slow,” Hankowsky said, “and we see 2005 as an extension of 2004, with only modest improvement. We know of five lease-expirations aggregating 800,000 sf that will not be renewing,” he said. Assuring the space would be leased, he added, “but at less than the expiring rental rates.” He estimated that leasing prices will be down 2.3% on average.” Calling conditions “somewhat better,” he said, “it’s not all over,” and that Liberty sees a shift to “steady and expanding with a sense of caution.”

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