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A Cigna move could empty Two Liberty Place
Natalie Kostelni

Cigna Corp., the giant insurance company that has made Two Liberty Place its home for more than a decade, is in the market, looking for about 550,000 square feet of space. The company's 15-year lease on just over 700,000 square feet at the tower at 1650 Chestnut St. is set to expire in 2006. It is one of the biggest leases to come up in Philadelphia and one that has a profound impact on the city.

The company says the economy, as well as an increasing number of employees who work from home, drove its decision to look for about 150,000 square feet less space than it has at Two Liberty. It also doesn't have as many employees as it once did, having sold a major division a few years ago. The company is said to be looking "everywhere." That means the western suburbs, South Jersey as well as Center City. Philadelphia will have its incumbency going for it, but that no way means it has a lock on a deal. As one real estate insider said: "It's theirs to lose."

It is expected the city will need to cough up lots of financial incentives to keep Cigna. That's what happened last time Cigna went looking for a home for its then 4,400 employees. Back in the late 1980s, the insurer threatened to move to less expensive office space somewhere in the suburbs and had seriously eyed Conshohocken. When any major employer decides it is willing to leave, the city typically steps in to try to stop it. City officials worked their magic in 1987, convincing Cigna to stay. The insurer signed a lease to occupy all of the 1.2 million square feet of Two Liberty beginning in 1991 when the building opened.

The deal arranged back then was complicated and controversial. Instead of giving the insurer tax breaks, the city decided to take over the downtown leases Cigna had signed and pay rents that were 25 percent less than the company had been paying. In addition, the city applied and got an $8 million federal Urban Development Action Grant for Cigna. The city lent that money to Cigna at a low interest rate and the insurance company used it to pretty up the inside of its new office space at Two Liberty. No doubt that Cigna will again seek some concessions from the city. This time around it's a bit smaller, having 2,000 local employees. It also has shed its property and casualty business, selling it to ACE Ltd. ACE occupies the remainder of Two Liberty and also has its lease coming up in 2006.

Where Cigna might end up is anyone's guess. Its employees are located throughout the region and not in one particular area. Bets are that when it looks in the suburbs, it won't venture too far west but in submarkets closer to the city such as Conshohocken and Plymouth Meeting. Of course, staying at Two Liberty is an option but an expensive one. So is having Cigna serve as an anchor tenant to one of the two new Center City towers proposed by Liberty Property Trust and Brandywine Realty Trust. Then again, Willard G. Rouse III, who developed Two Liberty during the height of the early 1990s real estate recession, managed to get Cigna to sign on for the entire building. Smith Mack/Oncor is handling Cigna's search.

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