Developer buys office tower in Philadelphia with 74% discount on appraised value

PMC Property Group will purchase the Three Parkway office tower from MRP Realty for $30 million, an amount that represents only 26% of the building’s last assessed value.

PMC Property Group will redevelop half of Three Parkway into a residential area.

According to the Philadelphia Business Journal, the city last estimated the value of the 561,000-square-foot building at just under $115 million. Washington, DC-based MRP Realty paid $95 million when it bought the property from Dallas-based Tier Real Estate Investment Trust in 2017. At the time, the building was 14 percent vacant.

But when Philadelphia-based PMC closed the deal last week, the 20-story building between 16th and 17th streets along Benjamin Franklin Parkway was more than 60 percent vacant, the PBJ reported.

PMC plans to convert half of the building into residential space, with 175 units on the bottom 10 floors. The occupied office space will remain as is, PMC Vice President Kate Groshong told PBJ.

About 174,000 square feet are to be converted to housing. The space was used by the Drexel University College of Nursing and Health Professions until 2022. The college moved that same year to the then-new uCity Square building at the corner of 36th and Filbert Streets in University City.

The Three Parkway acquisition is the third discount sale of a large commercial building in Philadelphia this summer. The Bourse Building and 400 Market St. were sold last month for 64% and 27% of assessed value, respectively, to a joint venture of Lubert-Adler Real Estate Funds and Keystone Development and Investment.

It is also one of at least five buildings that developers plan to convert into multifamily, hospitality or mixed-use buildings. The number of large blocks being converted in Philadelphia’s central business district caused the vacancy rate to drop from 20.2% in the first quarter to 19.7% last quarter.

PMC also developed the Riverwalk apartment towers and is currently working on a two-story, 287-unit apartment tower at 2301 John F. Kennedy Blvd. near Three Parkway.