PHILADELPHIA — Brandywine Realty Trust has acquired a leasehold interest in a trophy office tower located in downtown Philadelphia. Formerly known as the Bell Atlantic Tower, the building is located at 1717 Arch St. The property rises 53 stories and contains 1.03 million square feet of Class A space. It also includes a 309-space parking garage.
Occupancy for the property was 63 percent at the time of closing. Verizon holds a long-term land lease for it, which has been prepaid through August 2022. The company also recently signed a lease for floors two through seven of the building — a total of 121,945 square feet.
To acquire the property from the seller, The Blackstone Group, Brandywine provided $51.2 million in cash as well as 7.11 million operating partnership units, which are part of its new Continuous Equity Offering Program. As part of the arrangement, Blackstone will receive 7.11 million shares of what Brandywine has designated Class F units. These units do not accrue a distribution for the first year after the property's closing. After one year, the units receive a payment equivalent to the dividend Brandywine pays on its common shares. The holder of the units will have the right to exchange these units for commons shares of stock or, at Brandywine's discretion, a cash payment. Based on the net price of Brandywine's closing stock price on August 5, the 7.11 million units would be valued at $77.8 million, bringing the total value of the transaction to $129 million.
This deal increases Brandywine's Philadelphia portfolio to 3.9 million square feet of space. The REIT owns One and Two Logan Square, Cira Centre, the IRS Philadelphia campus and two development sites at Cira South. The average occupancy of its completed buildings is 97 percent.
In a statement, Brandywine President and CEO Gerard Sweeney said, “This building complements our existing One and Two Logan Square properties and affords us control over some of the best product in the Philadelphia office market.”
Frank Cohen, senior managing director of Blackstone, added, “We are excited to become significant shareholders of Brandywine in connection with this transaction. We see this as a great opportunity to participate in the U.S. office market recovery in a high-quality portfolio with a terrific management team.”
— Coleman Wood