Commercial Building for Sale - current use office space

[phlgirl]

After 100 years in business, Rohm & Haas was purchased by Dow Chemical. The recent acquisition required substantial leveraging (debt) by Dow, and they are now looking to sell the Philadelphia headquarters (occupied and built by RH in 1965).

Article highlights:

• Dow would like to strike a deal in which it will unload the building but continue to lease a portion of it. (layoffs are currently ongoing, and final headcount has yet to be determined)

• nine-story, 350,000-square-foot building

• The vacancy rate for office space in the Independence Square submarket is a tight 4.1 percent, according to Grubb & Ellis data. That’s the lowest in the region.
• building could go for an estimated $30 million or more
• The building is architecturally significant and likely would have made for attractive condos
• It is one of the best examples of the international style that helped define mid-20th century architecture, and was part of a deliberate creep of modern architecture into the historical backdrop of Independence Mall (this building sits directly across the street from the Liberty Bell, a brand new welcome center and Independence Hall (where the declaration of Independence was signed)

The foot traffic in this location has to be some of the (if not the) highest in the city. It is a beautiful, safe neighborhood - at the core of center city Philadelphia.

I happen to know that the interior(all 9 floors) was(were) completely remodeled between 2006-2008.

This is definitely a hypothetical for me but I get such a kick out of thinking about it. What are your out-of-the-box ideas for this place? What would you research before making your decision? What would cause you to do the deal or not (if you had , or could get, the financing)?

Rohm and Haas̢۪ Phila. HQ building for sale - Philadelphia Business Journal:

Any thoughts?

 

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[Russ H]

Les Gee bought an office bldg in Louisiana a few years ago.

Got together a group of motivated investors, and made it happen.

RE: The Rohm and Haas Bldg: Apparently it's been approved for a $25M retrofit?

PHILADELPHIA | The Development Thread VII - SkyscraperPage Forum

Would be interesting to see if that included R&R of mechanicals, etc.

Illustration on the page above shows a new facade-- interesting, considering the building has historic significance?

Is this the right building, PhlGirl?

Rohm and Haas Corporate Headquarters - Wikipedia, the free encyclopedia

-Russ H.

 

[phlgirl]

That's the one, Russ! Interesting about the facade approval. I can tell you that when the interior remodel estimate was being worked up, they (RH) were also looking at completing the exterior/mechanical work. After they saw the total estimate, they decided against the total rehab and opted to only do the interior.

Not sure if that is where this 'approved project' originated from, or not.

It does have 'historic significance' but, that said, could absolutely use a facelift.

Interesting website you found there. Thanks for the link!

 

[Russ H]

-Russ H.

 

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[hatterasguy]

You would probably want to start by locking it up with an option and trying to get a tenant for it. Provided the area is decent, and you can agree on a purchase price.

The problem with something like that is they are going to want $1m for the option, so you can lose big to...kind of a gamble in this market IMHO....but thats how money is made.

IMHO I'd love to do a project like that, I think it would be a blast. Big properties are very exciting.

 

[phlgirl]

What I need to find out is how much office space goes for in this segment of the market. That, and how much of the building Dow would be willing to lease-back. At what terms?

The historic cert. would actually make me a little nervous. It means more levels of complience with local authorties. More rules. The exterior and mechanicals are another wrench.

They are definitely looking for cash. The acquisition of RH was executed on April 1 and, on the same day, they announced the sale of Morton Salt (the little girl with the umbrella) - a serious money maker, which was owned by RH.

Hmmm

 

[hatterasguy]

Finding out what office space goes for isn't to hard.

Two options:

Call brokers, I prefer CCIM because they are usualy the best. They should be able to tell you quite a bit.

Or do what I did and look at comparable asking prices on Loopnet. Make a chart and get an average. Not as accurite, but it's ballpark.

Commercial is a totaly different animal from residential. Its all done by SF, and that value can change based on a few things. The building is valued by the SF, and the lease agreements. IE if you can get DOW to sign a nice lease the value of the building will increase. This might also attract other tenants and money to the deal.

If your really serious I'd see if you can't get in contact with an experianced commercial player who is looking at this. Usualy those guys are always looking for partners; if you can bring them some money.

 

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[phlgirl]

Thanks, Hatt!

I'm not really serious.

I just like thinking through stuff like this, from time to time, in my head. I figure I am preparing for future deals. This one is close to home - merely blocks away.

Dow has stated that they do want to lease-back the building (part of). The amount of space is still unknown (as far as I know). They are looking to get this asset off of their books.

I agree, commercial is totally different. Lots to learn. Maybe I will make a few phone calls, just for kicks.

 

[hofster]

It is also a good idea to talk with a lawyer before buying or selling office commercial real estate. You will certainly want an attorney to review the purchase agreement, since buying an office commercial building can often be a substantial purchase.

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[Guest3722A]

*Understanding this is all just a hypothetical exercise*

Right now with the uncertain commercial market, I would focus on contracting tenants that commercial lenders would be comfortable with and then make sure that the lease contracts are for longer terms than what the lenders would write.

When I was doing commercial loans in MI nobody wanted to refi anybody here but then one day I found someone who had government funded schools in his buildings and even though it took alot of selling on my part as i called several lenders from across the country, I did eventually find a conventional lender (non bridge/hm) who was interested, only because they were comfortable with the fact that the school was govt related, and that it was under contract for much longer than the loan I was seeking.

 

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[Russ H]

The historic cert. would actually make me a little nervous. It means more levels of complience with local authorties. More rules.

Look up Diane Kennedy's past posts on the richdad forums re historic properties-- she loves them, when they fit the right conditions.

Apparently you get all kinds of extra deductions when you fix up historic props.

(says the guy who has restored 6 pre-1900 houses in the past 7 years . . . )

http://books.google.com/books?id=Wz...&resnum=3&ved=0CB4Q6AEwAg#v=onepage&q&f=false

-Russ H.