FORT WASHINGTON, PA-New York City-based APF Properties has acquired the class A office building at 500 Virginia Dr. from GE for $35.7 million, or about $97 per sf. It represents the company’s first, but not its last, acquisition in Greater Philadelphia, according to Berndt Perl, an APF principal.

The asset was built in the 1980s and “stripped to the beams when GE bought it in 1999,” Perl says. GE gut-renovated the building into a corporate headquarters for its insurance subsidiary. After divesting itself of the subsidiary, GE downsized its own space in the property and, this year, listed it for sale. James Sheehan, senior director of Cushman & Wakefield’s financial services group in Philadelphia, marketed it for GE, and APF submitted the highest bid and represented itself in the transaction.

At that time, it was 82% occupied. “I think other bidders didn’t fully realize its value,” Perl tells GlobeSt.com. “We projected that by leasing up the vacancy and eliminating redundancies in the building’s operation we could increase NOI by a third, from $2.4 million a year to $3.2 million by 2009. Using a 6% cap rate, that would equate to an increase in value of more than $13 million,” Perl says.

“We were looking at the Philadelphia area,” he continues, “because, relative to the other Atlantic seaboard cities of New York, Boston and Washington, DC, Philadelphia has not appreciated as much, and we think it represents good value. We see revitalization in this area and a strengthening of Center City. We are looking in both the city and the near suburbs.”

Among the major tenants at the time of the transaction are GE, Honeywell and Chase Manhattan Mortgage. “With GE’s permission,” Perl says, “prior to the closing, we identified MetroPCS, a cellular service provider, looking for about 32,000 sf, which is lifting occupancy to 96%.” In addition, APF is reconfiguring some interior space to create 11,000 sf of additional windowed office space, he reports. The new owner has assigned leasing to Sean O’Reilly of Cushman & Wakefield, and Perl says the asking rent rates range from $17.50 per sf to $19 per sf.

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