Financial firm withdraws IPO plan for Northern Liberties apartments

A New York-based financial firm's plan to sell ownership shares of a waterfront apartment complex in Northern Liberties on the stock market has fizzled, the third misfire for the company's unconventional financing scheme in as many cities.

ETRE Residential L.L.C. said in a filing last Thursday with the Securities and Exchange Commission that it was withdrawing its application to take developer Michael Samschick's Penn Treaty Village Pennthouses public "because of unfavorable market conditions."

ETRE's deal valued the 224-apartment complex at Brown Street and North Delaware Avenue at $82 million, according to SEC filings. On a per-unit basis, that would have ranked it among Philadelphia's most-expensive multifamily properties to sell in recent years, although it also features nearly 29,000 square feet of retail space.

ETRE's decision to cancel the offering may expose some weakness in demand for residential property on Philadelphia's waterfront, compared with the searing market for apartment buildings and condo units in core Center City, said Lauren Gilchrist, Philadelphia research director at commercial real estate services firm JLL.

But it also likely shows investor unease with the notion of equity stakes in single buildings, rather than in more typical real estate investment trusts that spread risk by bundling many properties.

"The whole idea behind having a property REIT is diversification," said Christophe Terlizzi, who heads First Niagara Bank's commercial real estate practice in the Philadelphia region. "You spread your risk over multiple properties so you're not going to rise and fall on the virtues of a single asset."

The withdrawal of Penn Treaty Village's initial public offering marks at least the third time that affiliates of ETRE Financial L.L.C. have suspended or canceled plans for publicly traded single-property REITs.

ETRE officials have said in published reports that the plan enables investors to easily buy into and out of stakes in real estate assets of their choosing, rather than purchasing a REIT with a predetermined asset mix.

But the idea doesn't seem to be catching on.

ETRE failed to complete an IPO in May 2014 that would have funded the purchase of an office building at 1201 Connecticut Ave. N.W. in Washington, the Washington Post reported. The company also postponed a July 2015 IPO that would have sold shares in the State Street Financial Center in Boston, according to the Boston Globe.

The deal for the Penn Treaty Village Pennthouses, a complex of two eight-story towers, would have granted investors 89 percent of the property, with a Samschick-affiliated company retaining the rest, according to filings with the SEC.

ETRE aimed to raise $33.7 million through an IPO - and to secure a $52 million mortgage on the complex - to put toward the investors' stake, closing costs, and other expenses.

ETRE Financial did not answer a phone call seeking comment. A message left with Samschick did not immediately bring a response.

In its most recent SEC filing, ETRE did not say whether the Penn Treaty Village IPO withdrawal spelled the end of its involvement with the property.

But weaknesses in the waterfront market notwithstanding, Samschick should easily find another buyer if the price is right, JLL's Gilchrist said.

"We continue to see very strong interest in multifamily within the city overall," she said. "That Northern Liberties area is a good sort of secondary, slightly off-core location for a buyer."

jadelman@phillynews.com

215-854-2615 @jacobadelman