Market Street Philadelphia, Pennsylvania

Home , 1700 Market, 1818 Market Street, Comcast Center, Liberty Place

EXECUTIVE SUMMARY 1600 MARKET STREET

PHILADELPHIA, PENNSYLVANIA EXCLUSIVE MARKETING ADVISORS FINANCING INQUIRIES

DOUG RODIO BRETT SEGAL JOSE CRUZ RYAN ADE Senior Managing Director Managing Director Senior Managing Director Managing Director 484.532.4205 484.532.4174 973.549.2011 484.532.4209 [email protected] [email protected] [email protected] [email protected]

GRAHAM STEPHENS ANDREW WEIR BEN APPEL MEGAN McGINNIS Managing Director Senior Managing Director Senior Director Associate 212.632.1806 202.533.2504 484.532.4214 484.532.4177 [email protected] [email protected] [email protected] [email protected]

UNIVERSITY CITY

1600 76 market 30TH STREET STATION

RITTENHOUSE SQUARE

SUBURBAN STATION

DILWORTH PARK

JFK PLAZA PHILADELPHIA & LOVE PARK CITY HALL

ON THE MOVE • FALL 2017 1700 MARKET STREET • SUITE 3232 • PHILADELPHIA, PA 19103 • HFFLP.COM EXECUTIVE SUMMARY THE OPPORTUNITY

Holliday Fenoglio Fowler, L.P. (“HFF”) has been retained on an exclusive basis to arrange the sale of 1600 Market Street (the “Property,” or the “Asset”, or “1600 Market”), an 825,968 square foot, 39-story Class A office tower in Philadelphia’s thriving Central Business District (or “CBD”). 1600 Market is a rare, Class A value-add opportunity to acquire and stabilize the Property by implementing a strategic amenity enhancement plan and targeted leasing effort aimed to capitalize on the building’s superior “Main & Main” location in Market Street West, where ever-improving leasing fundamentals, including Class A, 12-month rent growth of more than 7.6% continues to bolster demand for the CBD’s most institutionally desired submarket.

1600 Market Street has been anchored by PNC Bank’s regional headquarters since 1996 1600 MARKET STREET and is currently 82.1% leased to a variety of legal, financial, consulting and professional PHILADELPHIA, PA 19103 service firms. PNC Bank currently leases 362,843 SF (43.9% NRA) at the Property ADDRESS which until recently, was scheduled to expire on May 31, 2021. PNC Bank amended its existing lease agreement such that on January 1, 2019, the tenant will downsize to 825,968 TOTAL SQUARE FOOTAGE 233,411 SF (28.3% NRA) in a rightsizing lease contraction that comes in tandem with a stabilizing lease extension that runs through May 31, 2031. The amended PNC lease 22,000 SF agreement provides over 13 years of term from the Property’s anchor and largest credit AVERAGE FLOOR PLATE tenant.

PNC’s forthcoming “give-back” of 129,432 SF (15.7% of NRA) will contribute some of THIRTY-NINE (39) the most marketable high-rise space in Market Street West including four, full-floor NUMBER OF STORIES availabilities on the Property’s 28th – 31st floors and two, large availabilities on the 2nd and 3rd floors that will be ripe for creative new tenancy or amenity enhancements. 1983 / 1997 The new owner will benefit from over 12 months lead time to plan and implement YEAR BUILT / RENOVATED the strategic repositioning of the Property from as-is condition to the top of the Class A competitive set. Implementing a tenant-focused amenity enhancement plan will 82.1% position 1600 Market Street at the leading edge of its Class A competition. The OCCUPANCY increased tenant demand from over 3.8 million square feet of existing, expiring leases (AS OF 1/1/2018) over 20,000 SF during 2018 & 2019 will drive competition and allow the new owner * to push rents to new highs as the CBD’s most desirable tenants as they compete for 71.5% premium high-rise availabilities in Market Street West. ESTIMATED OCCUPANCY (AS OF 1/1/2019) * Estimated Occupancy as of 1/1/2019 is based upon HFF’s Underwriting Assumptions which are further detailed in the Offering Memorandum.

1600 market street 3 1600 MARKET STREET Tenants IN CURRENT YIELD WITH SIGNIFICANT THE MARKET VALUE-ADD POTENTIAL 20,000+ SF

With nearly 13.5 years of remaining lease term to PNC Bank, the Property offers stable and predictable cash flow. The PNC Give-Back space located on floors 28 through 31 2018 creates highly desirable and marketable large-block availability rarely seen on high-rise floors in the CBD. The Property’s bullet proof location will generate significant interest from the most discerning retail and office users as large blocks of quality space are scarce in the Philadelphia CBD. 1.5M 1600 Market Street’s pending availability puts it in a prime position to draft off the the SQUARE FEET increased tenant demand from over 3.8 million square feet of existing, expiring leases over 20,000 SF during 2018 & 2019 will drive competition and allow the new owner to 20 TENANTS push rents to new highs as the CBD’s most discerning tenants compete for premium high-rise availability at 1600 Market.

2019 2.2M SQUARE FEET 25 TENANTS

4 EXECUTIVE SUMMARY EXECUTIVE SUMMARY

anchor tenant commItment Rightsizing Provides Stability and Mitigates Uncertainty 1600 Market Street is anchored by PNC Bank, N.A. (or “PNC”) who has utilized the Property as its regional headquarters location since 1996. PNC Bank currently occupies 362,843 square feet, or roughly 43.9% of the Property’s rentable area, across various floors including 7,276 square feet of ground level retail space with frontage along Market and 16th Streets that currently operates as PNC’s flagship bank branch downtown along with four, full-floor contiguous high-rise suites totaling 90,724 square feet prominently located on the 28th, 29th, 30th and 31st levels of the building.

In connection with PNC’s corporate downsizing mandate, the tenant recently signed an amended and restated lease agreement effective March 1, 2017 that will simultaneously right size its current building footprint from 362,843 square feet to 233,411 square feet at the end of 2018 and extend the lease term of its amended premises by 10 additional years to expire May 31, 2031. Excluding PNC’s give-back

space from the equation, the Property boasts an impressive 9.1 years of weighted MOODY’S average lease term and contributes more than 36% of the building’s annual in-place A2 CREDIT RATING

income as of January 1, 2019. S&P CREDIT RATING pncbank.com A

Start Size Expiration Floors

Existing Premises Nov-1996 362,843 SF 12/31/2018 LL, 1, 2, 3, 4, 6-11, 19, 21, 22, 28-31

New Premises Jan-2019 233,411 SF 5/31/2031 LL, 1, 4, 6-11, 19, 21, 22

1600 market street 5 1600 The Shops at Liberty Place MARKET STREET LIVE-WORK-PLAY MENTALITY IGNITES REtAIL DEMAND IN MARKET STREET WEST

The dynamic live-work-play environments that are instrumental in shaping today’s thriving Philadelphia downtown is also the catalyst that is now organically repositioning areas like Market Street West from prototypical “business districts” to vibrant mixed use consumer-centric environments.

The Philadelphia CBD’s burgeoning retail market is supported by surrounding neighborhoods and by 300,000± workers. The growth in tourism, conventions and cultural attractions, along with an expanding

BENJAMIN FRANKLINresidential PARKWAY population in Center City, now generates high volumes of pedestriansBROAD STREET on the streets day and night. Over the past decade, the number of retail establishments along with rental rates has been trending upward. The average daily foot traffic, in close proximity to the Property between the hours of 11am & 2pm, exceeds 2,700 people at any given moment, making the intersection of 16th and Chestnut Streets (1 block from the Property) the busiest of any recorded location in Philadelphia.

76 VINE STREET EXPRESSWAY THE AVERAGE DAILY FOOT TRAFFIC, IN CLOSE PROXIMITY TO THE PROPERTY BETWEEN THE HOURS OF 11AM & 2PM, EXCEEDS 2,700 PEOPLE AT ANY GIVEN MOMENT, MAKING THE INTERSECTION OF 16TH AND CHESTNUT STREETS (1 BLOCK FROM THE PROPERTY) THE BUSIEST OF ANY RECORDED LOCATION IN PHILADELPHIA.

ARCH STREET 15,181

JFK BOULEVARD

CITY 18,254 MARKET STREET MARKET STREET HALL MARKET STREET

21,300 11,568 CHESTNUT STREET CHESTNUT STREET 26,784 SANSOM STREET SANSOM STREET 12,608 7TH STREET WALNUT STREET WALNUT STREET 19,323 76

RITTENHOUSE

20TH STREET 17TH STREET 15TH STREET 13TH STREET 12TH STREET 11TH STREET

SQUARE 16TH STREET BROAD STREET

retaILERS WITHIN ONE BLOCK OF 1600 MARKET

source: philadelphiaretail.com | average daily pedestrian volume* by location

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22ND STREET

20TH STREET 19TH STREET EXECUTIVE SUMMARY

The Shops at Liberty Place

COMPELLING GROUND FLOOR RETAIL UPSIDE

The glass facades along west Market Street are changing. Rather than being reserved for banks and lobbies, many of the skyscrapers are adding food options to their ground floors. 1600 Market presents a new owner with a compelling opportunity to reposition 5,066 square feet of ground floor retail availability with frontage along Market Street. Dedicated outdoor patio space between the Property and Liberty Place at the Property’s northwestern entrance present ideal space for a bar and/or restaurant tenant seeking coveted high volume foot and vehicular traffic both during, and after business hours. Additionally, the existing tenant mix at the Property affords this new retailer access to a preferred demographic with prime retail space that exists along one the busiest commercial and tourism corridors in Center City.

Potential Ground Floor Retail

IN THE PAST 12 MONTHS, EXCITING GROUND-LEVEL RETAIL HAS ARRIVED AT NEIGHBORING PROPERTIES ON MARKET STREET, INCLUDING THE FOLLOWING:

COMCAST TECHNOLOGY 1601 MARKET 1919 MARKET 1900 MARKET CENTER

1600 market street 9 1600 MARKET STREET

RAISING THE BAR ON potenTIAL AMENITIES

1600 Market Street benefits from its ongoing capital investment and institutional–level management that has led to long-term tenant commitments highlighted by an average weighted lease-term of 9.1 years (excluding the PNC give-back space). This stability will allow for a new owner to focus on the amenitization of the Property specifically designed to attract Center City’s growing millennial workforce. PNC Bank’s low-rise, and basement level, give-back space presents the ideal area to add an amenity suite that will help the Property stay on the front lines of the competition on the battle for the City’s most discerning tenants.

STATE-OF-THE-ART RECREATION/GAMING SHARED FITNESS CENTER AREA CONFERENCE FACILITY

COMMON AREA DESIGNATED GROUND LEVEL WIFI-LOUNGE BIKE STORAGE RESTAURANT

10 EXECUTIVE SUMMARY

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1600 market street 11 1600 MARKET STREET

Market Street West contains approximately 72% of the Class A office inventory phILADELPHIAS downtown and is home to nine out of eleven trophy towers in the Philadelphia CBD. Market Street West is comprised of over 28 million square feet of Class PREFERRED A office space and is widely recognized as the preferred location for office users in the Greater Philadelphia region. Through the third quarter of 2017, SUBMARKET Class A office vacancy for the submarket was just 10.7% and Class A asking rents averaged $32.31 per square foot, setting a new high watermark for the submarket, an approximate increase of 9.4% over the trailing 36 month period. MARKET STREET WEST

ONE LIBERTY 1600 PLACE market TECHNOLOGY CENTER TWO LIBERTY 1700 PLACE MARKET

CENTER 1735 MARKET CENTRE SQUARE 1650 ARCH 1601 1515 MARKET MARKET THERE HAS BEEN AN 15TH STREET INCREASE OF 9.4% IN 16TH STREET ASKING RENTS OVER THE LAST 3 YEARS.

MARKET STREET WEST CLASS A HISTORICAL VACANCY CLASS A OFFICE STATS & ASKING RENTAL RATES

20.0% $35.00 $32.50 18.0% 28M+ 10.7% $30.00 TOTAL DIRECT 16.0% $27.50 INVENTORY (SF) VACANCY 14.0% $25.00 $22.50 12.0% $20.00 10.0% $17.50 $15.00 72% 1.9M+ 8.0% CBD CLASS A UNDER $12.50 6.0% INVENTORY CONSTRUCTION (SF) $10.00 4.0% $7.50 $5.00 2.0% $2.50 $32.31 75% 0.0% $0.00 AVERAGE PRE-LEASED ASKING RENTS INVENTORY

12 source: Costar TM EXECUTIVE SUMMARY EXECUTIVE SUMMARY

THE PHILADELPHIA SKYLINE IS GROWING. The 1,215 foot tall structure will be one of the 10 tallest buildings in the country

WORLD CLASS NEIGHBORS

THE COMCAST EFFECT

1600 Market is just two city blocks from the existing Comcast Center (completed 2008) and the neighboring Comcast Technology Center (under construction) where it is primed to directly benefit from TECHNOLOGY Comcast’s current and future economic impact. Slated for completion CENTER at the beginning of 2018, the Comcast Technology Center will be a $1.2 billion, 59-story, 1.5 million-square-foot tower comprised of 1.2 million square feet of trophy office space entirely leased to Comcast and a 220- key luxury Four Seasons hotel. The project is expected to add 2,800 additional jobs that pay an average CENTER salary of $100,000+ annually, all of which will be net new jobs to Comcast Corporation and Center City overall. Philadelphia can expect an influx of well-paid employees that will likely reside within the city limits and ignite significant economic expansion via “spin-off” office, residential and retail leasing demand across the Center City. 1600 Market is a stone’s throw to the Comcast development and will no doubt provide the new owner with additional leasing demand as Comcast and its partners gravitate towards the CBD and continue to grow.

technology center $1.2B 1.2M SF IN ESTIMATED OCCUPIED BY TOTAL DEVELOPMENT COMCAST 59 STORIES 2018 2,800+ HIGH ESTIMATED PROJECTED COMPLETION JOBS

1600 market street 13 1600 CAPITAL MARKET STREET IMPROVEMENT TIMELINE

$210,371 INSTITUTIONALLY MAINTAINED 2003

CLASS A+ ASSET $708,335 2004 1600 Market is recognized as one of the premier CBD addresses along the institutionally owned and sought after Market Street West corridor. The Property’s durable rent roll results from committed tenants who $716,578 have found stability in the Property’s institutional management, which has focused on long-term, sustained 2005 capital investment to keep the Property competitive in the eyes of Center City’s tenants. $33,025 Since 2005, ownership has invested more than $14.7 million into improvements which include a new fire 2006

alarm system (2005), a new 750 ton chiller (2007), and a three phase elevator modernization program $459,304 (2010-2013) converting the building’s elevator system to Destination Dispatch technology. Current 2007 ownership’s institutional approach to the management and maintenance of the Property will leave little to no heavy-lifting for the new owner, allowing the focus to remain on Property amenitization. $89,375 2008

$204,157 IMPROVEMENT HIGHLIGHTS ONGOING UPGRADES 2009 •• Fire alarm system replacement •• Upgrade cooling tower $1,829,599 •• 750 ton RTU chiller replacement controls and installing two 2010 new 350 ton roof-top chillers •• Destination Dispatch: $551,649 Elevator modernization (3 Phases) •• Common corridor upgrades 2011 •• Domestic water pump replacement $1,315,510 •• Plaza waterproofing 2012

$1,107,350 2013

$699,848 2014

$909,784 2016

$5,955,229 2017 ESTIMATE

$14.7+ MILLION CLASS A ENVIRONMENT AT A SIGNIFICANT DISCOUNT TO REPLACEMENT COST Landlords have continued to push rental rates over the last 12-18 months for Trophy and Class A space throughout the Philadelphia CBD. Class A asking rents have surpassed the $30.00/SF threshold, specifically for buildings that have undergone recent capital improvement plans like 1735 Market Street, 1650 Arch Street, 1818 Market Street and 1700 Market Street. At the expected trade range, a new owner will be at a cost basis well below replacement cost and will be able to position 1600 Market Street as a leading competitor for tenants demanding cutting edge, highly amenitized office space, with a prestigious Market Street address.

14 EXECUTIVE SUMMARY EXECUTIVE SUMMARY

PROPERTY HISTORY

1600 Market Street was originally constructed $210,371 in 1983 on the site of the former Fox Theatre at 2003 the intersection of 16th and Market Streets. The $708,335 property was developed by a prominent Philadelphia 2004 developer who commissioned Skidmore, Owings $716,578 & Merrill as the architect for the speculative 2005 construction of the modernistic, 39-story glass-lined structure whose original anchor tenant was Provident $33,025 Mutual Life Insurance Co. PNC is the product of the 2006 1983 merger of two significant Pennsylvania banks: $459,304 Pittsburgh National Corporation and Provident 2007 National Corporation, headquartered at 1600 Market Street. At the time, it was the largest bank merger in $89,375 2008 U.S. history. In 1996, the Property was renovated to redesign the $204,157 2009 lobby, street-level retail space and exterior facade of the Property’s first floor. The major focus of the $1,829,599 renovation was to transform the former arcade area 2010 into a grand lobby with increased retail space, while $551,649 retaining the existing premium finishes including 2011 its granite flooring and Italian marble walls. The renovations were completed in January of 1997, $1,315,510 and shortly thereafter, the Property hung signage 2012 designating the building as PNC Bank Center, its $1,107,350 anchor tenant. 2013

$699,848 2014 SKIDMORE, OWINGS & MERRILL IS ONE OF THE LARGEST AND MOST INFLUENTIAL ARCHITECTURAL FIRMS IN THE $909,784 WORLD. ITS WIDESPREAD USE OF GLASS IN ITS DESIGN WAS 2016 INFLUENTIAL IN THE MODERN “GLASS BOX” SKYSCRAPER. $5,955,229 2017 ESTIMATE

Burj Khalifa Time Warner Center Dubai New York City

1600 market street 15 1600 MARKET STREET

TECHNOLOGY CENTER

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MARKET STREET

1600 market street 17 16001600 MARKET STREET

EXCLUSIVE MARKETING ADVISORS FINANCING INQUIRIES

©2017 Holliday Fenoglio Fowler, L.P., HFF Real Estate Limited (collectively, HFF), HFF Securities L.P. and HFF Securities Limited (collectively, HFFS) are owned by HFF, Inc. (NYSE: HF). HFF and its affiliates operate out of 24 offices and are a leading provider of commercial real estate and capital markets services to the global commercial real estate industry. HFF, together with its affiliates, offers clients a fully integrated capital markets platform including debt placement, investment sales, equity placement, funds marketing, M&A and corporate advisory, loan sales and loan servicing. For more information please visit hfflp.com or follow HFF on Twitter @HFF.

ON THE MOVE • FALL 2017

1700 MARKET STREET • SUITE 3232 • PHILADELPHIA, PA 19103 • HFFLP.COM