PhillyDeals: Real estate investors tiptoe back in

Office vacancies are still up, rents are still down, and that's how things will stay, until more employers start hiring.

Still, Wall Street has been increasingly successful at luring pension funds, insurers, and other big investors back into the kind of real estate deals that disappeared in the credit crisis of 2008 - and Philadelphia is getting a piece of the action.

The landmark Fidelity building at 123 S. Broad St., fictional home of the Duke & Duke brokerage from the Eddie Murphy movie Trading Places and real-life base for what's now Wells Fargo Bank and other business tenants, has been refinanced as part of the biggest U.S. office real estate bond deal to go through since the market for commercial mortgage-backed securities (CMBS) restarted last year.

Citi Global Realty and Goldman Sachs raised more than $45 million to refinance the building, as part of an $876.5 million CMBS deal that sold investments in dozens of U.S. properties to credit specialists and institutional investors.

The Fidelity piece went to landlord SSH Real Estate and its financial partner, Michael F. Young, who own the sixth through 30th floors of the white-stone, 1920s-era tower.

The partners' share of the building was appraised at more than $70 million. Borrowing $45 million at cheaper rates, the owners didn't have to put in any new cash.

SSH partner Jeffrey Seligsohn says his firm has boosted occupancy at the property to 86 percent, from 78 percent when it bought the space two years ago.

One of the New Yorkers who put the deal together told me investors who are returning to the office market are attracted to Philadelphia's stable - which is to say boring - real estate prices, as they scout for more deals here this year.

Former Pennsylvania Gov. Mark Schweiker has joined the board of MinSec Holdings Inc., a for-profit Wallingford, Delaware County, firm, backed by Mike DiPiano's NewSpring Capital, of Radnor, and Baltimore-based Camden Partners, which operates minimum-security work-release and parole centers for the state that Schweiker used to run, among other governments.

MinSec facilities include the parole center at 1344 W. York St. in Philadelphia and a community residential center at 201 E. 12th St. in Chester, which houses Pennsylvania and Delaware County work-release offenders.

Schweiker wasn't immediately available for comment. He is a former head of Philadelphia's Chamber of Commerce, and his current day job is running the Business Process Solutions unit for PRWT Inc., a government contractor that maintains prisons in other states, not including Pennsylvania, Schweiker says.

Quaker Chemical Co., of Conshohocken, says it is paying $30 million for Summit Lubricants, of Batavia, N.Y., a 20-year-old firm that makes machine grease and other oils for the Army.

At its Upstate New York plants, Summit will manufacture Quaker's existing line of grease products that are currently outsourced, Liam D. Burke, analyst at Janney Capital Markets, told clients in a report Monday.

"They have the capacity to do that," confirmed Quaker CFO Mark Featherstone, bringing work once left to contractors back in-house.

"We see a fit with our mining business," which makes hydraulic fluid for oil-drilling equipment, Featherstone told me.

Quaker is buying out owners and former managers who controlled Summit. With its strong cash position swollen with orders from recovering automakers and steelmakers, Quaker is "constantly looking at operations" to buy, Featherstone told me.

Andy Greenberg, chief executive at the Conshohocken-based deal-tracker GF Data Resources, told me the Summit price was about 10 percent higher than the average for similarly sized chemical companies in recent years. That implies either that Summit is growing faster than its markets or "that the real upside is the expansion Quaker expects to realize as a result of acquiring a foothold in the specialty grease market," Greenberg said.