Government-Related Niche Keeps Active as Brandywine Gets Funding for IRS Projects in Philly
- May 12, 2009
Brandywine Realty Trust is the latest firm to take advantage of the relatively stable government-related development market. Despite the continuing credit crunch and still-foundering economy that has laid low commercial property deals across the globe, Brandywine has received funding commitments of $209.3 million and $46.7 million, respectively, for a Philadelphia office rehabilitation and nearby parking garage project, both of which will be occupied by the Internal Revenue Service. The office project involves the redevelopment of the 862,000-square-foot 30 South Street building in the city’s University City neighborhood, which carries a total cost of $260.5 million. Across the street from that project, Brandywine is developing a 1,662-space parking garage with a $95 million price tag. The 20-year, fully-amortizing loans were provided by undisclosed lenders and carry a fixed interest rate of 5.95 percent. One factor that likely instilled confidence in the projects among lenders was the fact that the IRS has agreed to pre-lease the entirety of the office complex, as well as 94 percent of the parking garage. In the current environment of businesses closing and downsizing, it’s a good bet that the IRS–despite the likely wishes of the recent “tea party” participants, among others–is going to be existent, not to mention solvent, for the foreseeable future. Government-related projects are currently one of the most well-positioned niches of the commercial real estate market. The government’s recent stimulus efforts will result in increased space needs for many new and existing agencies–and the coming increase in demand could be a boon to owners and developers. In early April, Duke Realty broke ground on a $1 billion Alexandria, Va., office complex for the Defense Department. The 1.3 million-square-foot project is scheduled to deliver as scheduled in September of 2011. And last December, work began on the $724 million San Antonio Military Medical Center in Texas. And investors are taking notice as well. In late April, a 228,000-square-foot office property in the D.C. suburb of Rockville, Md., drew a good deal of bidder interest before selling for $43.5 million to The JBG Cos. The property houses a division of the Department of Health and Human Services.