Liberty Property Trust to shed Philly, Camden office properties to focus on warehouses

Liberty Property Trust is getting out of the business of developing and owning office buildings after a decades-long string of high-profile projects that have come to define Philadelphia's skyline — including One Liberty Place and Comcast Corp.'s two skyscrapers — as it shifts its focus to its growing nationwide network of warehouses and distribution centers.

The company's current office holdings include stakes in the Comcast Center and Comcast Technology Center along Arch Street in Center City, the Penn Medicine office building at 800 Walnut St., and 10 office and research buildings at the Navy Yard. It also owns acres on the Camden waterfront that it acquired with plans to develop for office and other uses.

All will be sold, with the proceeds — estimated to reach as much as $800 million, exclusive of the Camden land — being reinvested into Liberty's portfolio of industrial properties, which now span 24 U.S. markets as well as the United Kingdom, and count Amazon.com Inc. as their top tenant.

The Wayne-based company has long signaled its intention to unwind its business as a suburban office landlord, selling off its Great Valley Corporate Center in 2016 and announcing in February that it was seeking buyers for its remaining suburban office holdings.

The urban office projects, which it had not shown any prior intent to jettison, have been taking a toll on the company's bottom line. Liberty this year had to record a $60 million charge to account for cost overruns by its contractor at the Comcast Technology Center project and write down the value of its Camden waterfront development project by $26 million.

"You only have so much capital and availability of capital," William P. Hankowsky, Liberty's chairman and chief executive, said Tuesday after announcing the shift in strategy during a conference call with analysts earlier in the day. "We've been successful on the urban side — we know how to do that — but the office space is very capital-intensive."

Hankowsky said that there is no definitive timeline for the divestitures and that Liberty is in "no rush" to complete them.

Liberty's growing nationwide portfolio of warehouses and distribution centers has benefited from increased demand as retailers compete to meet consumer demand for speedy deliveries of online orders.

"You respond to where the business opportunities are," Hankowsky said. Industrial real estate is "a very dynamic asset class in terms of demand."

Walter D'Alessio, who worked for decades as a city redevelopment official and as a Philadelphia Industrial Development Corp. (PIDC) executive and is now a principal with real estate consultancy NorthMarq Advisors LLC, said he expects others to readily fill any opening left by Liberty as a developer of Philadelphia office buildings and is not "particularly surprised or concerned" by the company's withdrawal.

"If I were them, I would be doing what they're doing, which is culling the portfolio," he said. "The office building is a tougher business than the warehouse business."

Liberty began life in 1972 as Rouse & Associates, established by founder Willard Rouse III as a developer of warehouses and suburban office parks, including the sprawling Great Valley center in Malvern.

By the late 1980s, Rouse had turned his attention to Center City, where he overcame objections to building higher than the top of City Hall to advance plans for One Liberty Place, which became the city's tallest building when completed. It was later sold.

In the early 2000s, after Rouse & Associates had evolved into its current, publicly traded incarnation as Liberty Property Trust, Rouse oversaw the start of what would become the Comcast Center. Liberty would later build the new Comcast Technology Center nearby for the telecommunications firm.

Liberty continues to hold 20 percent ownership stakes in those buildings, which it intends to sell through a process to be undertaken with Comcast's input, Hankowsky said.

Liberty also owns nearby property with Comcast for possible further expansion. Hankowsky said that the company has no immediate plans to sell its interest in that land but that it will not be the developer of any eventual projects there.

A Comcast spokesman had no comment on Liberty's planned divestitures.

Also to be sold off are Liberty's office and research buildings at the Navy Yard, which it developed after being selected in 2003 by PIDC as the main developer of the business park at the core of the former military base, known as the Navy Yard Corporate Center.

The properties include its 1200 Intrepid Ave. office low-rise, where it recently secured logistics firm Worldwide Express as a tenant, the headquarters of asset manager FS Investments, and multiple research and lab buildings for Shanghai-based pharmaceutical company WuXi AppTec.

Liberty plans to break ground next month on a fourth WuXi AppTec building, which will be its final Navy Yard office or lab building. It will, however, retain its industrial holdings at the Navy Yard, such as the complex's Tasty Baking Co. factory, and may develop further projects that fit its narrowed focus, Hankowsky said.

PIDC president John Grady said his agency plans to seek a new developer to take Liberty's place, noting that development at the Navy Yard will soon enter a new phase as the initial vision centered on the corporate center is completed.

And in Camden, Liberty will sell off parcels from what had been a vacant 26-acre site before the company acquired development rights in 2015.

Liberty built a 207,000-square-foot headquarters for American Water Works Co. with a large parking garage at the site but will do no further development there. It previously sold off land for a new tower to be occupied by South Jersey firms Conner Strong & Buckelew, the Michaels Organization, and NFI.

A spokesman for the City of Camden did not respond to a request for comment.