A Philadelphia real estate and energy company has assumed control of the Alex. Brown Building for roughly $85 million, the second time that ownership of the downtown 30-story skyscraper has shifted this year.
Resource America Inc. purchased the debt and partnership interests in the 1 South St. office tower from New York-based Blackstone Group Inc., continuing a wave of interest from out-of-town commercial real estate investors in the past year.
Like other recent transactions involving downtown "trophy" high-rises such as the 28-story 100 E. Pratt St. office tower and the 25-story Crestar Bank Building, Resource America said it decided to buy the building's $98 million worth of debt and ownership stake because it represented a solid economic opportunity.
"It made sense based on the numbers," said Greg Marks, a Resource America senior analyst. "It was an opportunity that crossed our path."
The office tower, which is fully leased to BT Alex. Brown Inc., RTKL Associates Inc. and other tenants, is expected to generate about $7 million in rent this year. The building was completed in 1991 by Harlan/KDC Associates Inc., a partnership comprising a New York developer and the development arm of a Japanese construction company.
Blackstone had included the 475,000-square-foot building in a portfolio of office assets it was offering for sale. But the New York investment firm pulled the portfolio from the market after Wall Street volatility caused stocks of real estate investment trusts to slump and affected their ability to raise capital.
"This signifies that real estate has become a more tradable commodity," said Richard P. Manekin, a senior vice president at CB Richard Ellis, a commercial real estate firm. "And we're going to see more trading taking place. If a property owner sees the opportunity to dispose of an asset to redeploy capital, they're going to take it."
"This is the reality that we're living in. But it also says that Baltimore is a market that investors want to be in," Manekin said, "and it's a vote of confidence in BT Alex. Brown, because they are such a big part of the building."
BT Alex. Brown occupies more than 60 percent of the tower that bears its name, in a lease through 2012 valued at $88 million.
Blackstone, a private investment bank founded in 1985 that controls roughly $4 billion in real estate assets in the United States and Europe, bought the Alex. Brown Building's debt and partnership stake from a Japanese bank in March for roughly $80 million. Blackstone officials did not return telephone calls for comment on the sale.
The purchase of the building's debt and interests late last month marks the first Baltimore acquisition for Resource America, which controls more than $1 billion worth of real estate loans and energy assets.
The company owns 45 loans on office buildings, hotels and apartment complexes, Marks said. Typically, Resource America buys distressed commercial mortgages in an attempt to restructure them. The Alex. Brown Building debt is not considered a distressed loan, however. Resource America is expected to retain Cushman & Wakefield Inc. to manage the property.
Resource America received a hostile $303 million buyout offer from a New York investor earlier this month, shortly after last month's purchase of a Pittsburgh energy company for $63 million in cash, stock and debt assumption.
Pub Date: 10/15/98