$12.6 billion: Why the company that built Philly’s skyline is being sold to a California firm

We basically owe Liberty Place, the Comcast towers and the reinvigorated Navy Yard to Liberty Property Trust.

Philly skyline above the Schuylkill Banks Boardwalk

Philly skyline above the Schuylkill Banks Boardwalk

Danya Henninger / Billy Penn
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For those of us not well-versed in giant corporate mergers, it’s hard to fathom how a company that a month ago was in financial hot water can be sold for $12.6 billion, but that’s how it’s going down for one of Philly’s biggest realty firms.

Development behemoth Liberty Property Trust is being acquired by San Francisco-based Prologis, the fourth-largest public real estate company in the world, the organizations said in dual press releases this week.

If you don’t recognize the development company’s name immediately, consider the Philly skyline.

Liberty Property Trust helped create Liberty Place, the first skyscrapers to stretch past William Penn’s hat atop City Hall. It was also integral in building the Comcast Center and the Comcast Technology Center, now the tallest skyscraper in Philadelphia.

Liberty is also responsible for flipping the Navy Yard into an attractive business district and helping developing the Camden waterfront.

So what does the pending acquisition mean for Philadelphia? We break it down.

100 million square feet, 1,200 companies, too much debt

Currently headquartered on the Main Line in Wayne, Pa., Liberty Property Trust holdings include 101 million square feet of real estate, providing a home to some 1,200 corporations across the U.S. and U.K.

The deal with Prologis, a company valued at $46.4 billion, is described as a full acquisition. That means Prologis will own all of Liberty’s stock- and also take on Liberty’s debt.

Liberty shareholders, who still have to approve the deal, have been particularly vocal about their issues with the company’s share prices and strategy lately. One disgruntled shareholder, Jonathan Litt, told Bloomberg that the Prologis acquisition “is a great example of maximizing value.”

Executives said in a press release that Prologis sought to acquire Liberty because of the company’s desirable assets in key markets — including the Lehigh Valley area.

On a conference call about the deal, Prologis CIO Gene Reilly praised Liberty’s real estate dominance in the region. “We’ve been trying to grow our presence in the Lehigh Valley for years and the fact is that Liberty has led this market since its inception,” Reilly said.

From a Main Line office park to Philly’s tallest towers

Under the leadership of now-deceased founder Willard G. Rouse III, Liberty Property Trust is credited with enlivening corporate development and transforming the Malvern area with the Great Valley Corporate Center.

The Center was established in 1974, two years after Rouse founded Rouse & Associates, the company that would eventually become Liberty. Today, tenants at the Center include Vanguard, Siemens Healthcare and Johnson and Johnson — all company’s whose large workforces contribute to the city’s big “reverse commuting” population.

In 1987, after much effort by Rouse and his partners, One Liberty Place opened as the first Philadelphia skyscraper to be taller than William Penn’s hat atop City Hall. Two Liberty soon followed, opening its doors in 1990 with a retail mall on the ground floors and Cigna offices in the rest of the building. Rouse sold Liberty’s interest in the complex soon after.

After becoming publicly traded in the mid-1990s, Liberty began expanding its holdings and eating up other development corporations before founder Rouse died in 2003. Liberty’s current CEO William P. Hankowsky then took over.

Since the late 2000s, Liberty began reversing its previous suburban sprawl and began reinvesting in the city. The company built the first Comcast building, then developed the most recent $1.5 billion Comcast Technology Center project, which gained the ire of shareholders when it went $67 million over budget.

Liberty’s arts and commerce legacy

Rouse was transformative in the Philadelphia skyscraper scene, but he also contributed to other areas of development across the city — and his legacy continues after his death.

The Baltimore native was pivotal in the construction of the Kimmel Center and served as chairman during the construction of the Pennsylvania Convention Center. Current CEO Hankowsky now serves on the Kimmel Center board.

Hankowsky is a former director of commerce for the City of Philadelphia, and later served as president of the Philadelphia Industrial Development Corporation, the city’s public-private real estate investment arm. Hankowsky joined Liberty Property Trust as the executive vice president and chief investment officer in 2001. He succeeded Williard following the founder’s death in 2003 and has held the position as president and CEO since.

Hankowsky also sits on the boards of the Philadelphia Convention and Visitors Bureau, Innovation Philadelphia (a tech and creative economy-focused development initiative), the Philadelphia Board of Trade, the Chamber of Commerce and the Delaware River Waterfront Corporation, among others.

Pivot to warehouse logistics, with Amazon as a client

Construction on the Comcast Technology Center began in 2014. The building was supposed to be finished in late 2017.

In 2018, Liberty revealed construction costs on the project, of it owns 20 percent, were $67 million more than previously projected. When it opened to the public about a year after it was supposed to, Liberty blamed the cost hike on a dispute with builders L.F. Driscoll.

Another urban development at the Camden waterfront failed to attract office space tenants, forcing Liberty to write down the $80 million project by $26 million. Then, there was the stock price. Liberty had seemed unable to revitalize its shares to its pre-recession prices which peaked in 2007.

In the last few years, Liberty began selling off its office buildings in Philadelphia and surrounding counties to help raise funds. It pivoted to the business of warehouse and business logistics, and now counts Amazon among its top clients.

Still, with shares trading around $51, prominent shareholders began publicly urging Liberty to take steps toward improving its business acumen. Hence, the acquisition.

Prologis CIO Reilly said on a conference call he expects no changes in Liberty’s management or board membership, and hopes to keep as much of Liberty’s staff as possible.

Liberty’s share prices jumped from $50.57 when the market closed on Friday to a high of $59.34 on Monday.

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