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A quiet development force

Without much fanfare, The Rubenstein Co. has become a multifaceted real estate power.

Sitting in the Rubenstein Co. conference room on the 41st floor of One Commerce Square in Philadelphia and surveying the city below, one gets a sense of something powerful. Normally, real estate developers and owners of Class-A real estate are high-profile companies, a phenomenon created by corporate egos. However, there are several private companies that are giants in the industry without much buildup by the press or public disclosures required by the Securities and Exchange Commission. The Rubenstein Co is one such enterprise.

Founded in 1969 by Mark Rubenstein as a sole proprietorship, The Rubenstein Co. evolved in 1997 as a Delaware limited partnership. Today, the partnership's portfolio consists of more than 7 million sq. ft. in 14 different Class-A CBD and suburban office properties. A substantial portion of the portfolio is located in the Philadelphia area, but the portfolio spreads far beyond the Pennsylvania border.

A prime example of the opportunistic way the company has grown is the Radnor Corporate Center located along the Main Line in suburban Philadelphia. Located on a 58-acre estate, the Radnor Corporate Center is a five-building campus consisting of 730,000 sq. ft. of Class-A office facilities. As part of a joint venture, The Rubenstein Co. acquired the Center in 1994 from Radnor Corp., Sun Oil Co.'s real estate affiliate, along with other Radnor Corp. holdings, including 10 Penn Center in Philadelphia's Center City District.

The Rubenstein Co. purchased the properties for about $190 million, or about $108 per square foot, which was well below replacement cost for the 1.7 million sq. ft. of Class-A office space. Today the properties are worth more than $300 million, according to The Rubenstein Co.

Slow growth pays off Mark Rubenstein is an engineer by profession. He received his bachelor's degree in mechanical engineering in 1962 and a master's degree in engineering in 1965 from Johns Hopkins University. His approach to real estate investment is methodical and value-oriented. In the early-1980s, when commercial real estate markets began to heat up, the opportunities for his firm began to dry up. "The pricing for existing building stock and development projects went crazy," says Mark Rubenstein. During the decade, The Rubenstein Co. continued to look and bid on projects, but only within the guidelines of Mark's value approach. This netted very little new business for the organization during those years as buildings and projects were bid extremely high. "When the bids came in, we weren't even close," says Mark.

There was an upside to all this, however. "Our disciplined approach has meant that we have never missed a debt payment or given back a building," says Mark. This fact may be why The Rubenstein Co. was asked by Pittsburgh-based PNC Bank, one of the company's lenders, to assist in refurbishing a problem property in Atlanta in 1991.

Soon after the successes in Atlanta - and other workouts - the Radnor acquisition was completed in 1994. Two years later, The Rubenstein Co. bought the mortgage notes on Two Logan Square in a joint venture and later bought One Logan Square. Both of these trophy properties are now in the Rubenstein portfolio and consist of approximately 1.3 million sq. ft.

In 1997, Rubenstein purchased 2000 Market Street, consisting of 665,000 sq. ft., and reorganized the company to operate as a private REIT. In 1999, the company bought out the remaining joint venture interest in One and Two Logan Square, and became center city Philadelphia's largest Class-A building owner with 3.5 million sq. ft. in the CBD.

"The Rubenstein Co. has not only bought major properties downtown, but has maintained them at a really high quality," says Paul Levy, executive director of both the Central Philadelphia Development Corp. and the Center City District, a business improvement district in the city.

Levy acknowledges the traditionally quiet, behind-the-scenes demeanor of The Rubenstein Co., but notes the firm's growing civic involvement.

"The company is starting to play a very positive civic role, particularly in getting involved in shaping tax policies for the city," says Levy. "I think Rubenstein is very committed to the city and to improving what is already a good business climate."

The Rubenstein Co. also owns buildings in Chantilly and Tyson's Corner, Va.; in Plymouth Meeting, Radnor and Pittsburgh, Pa.; in Wilmington, Del.; and in Atlanta. The company's portfolio includes future development land in Bensalem and West Whiteland, Pa.; in Chantilly, Va.; and in Atlanta. Expansion at the sites could increase company holdings another 2.5 million sq. ft.

Father and son success David Rubenstein joined his father Mark in the family business in 1991. David worked for Chicago-based JMB Realty Corp. as an acquisitions specialist after graduating with a bachelor's degree in economics from Duke University in 1987. In 1991, he received his master's degree in business administration from the Wharton School at the University of Pennsylvania and joined The Rubenstein Co. as director of acquisitions.

David spearheaded the company's ambitious and successful acquisition program through the 1990s, and became the firm's president in 1998. David and his father have assembled a talented group of administrators and directors who help guide the company toward its goals.

For the future, both father and son indicate that they intend to take advantage of market synergies as they occur. In some cases they will be in an acquisition mode, other times they will be in the development corner. Today, in the western suburbs of Philadelphia, The Rubenstein Company is squarely in the development mode. The company expects to begin a new high-profile Class-A office development on land recently acquired in West Whiteland Township on Philadelphia's Main Line in Chester County.

On the acquisition side, the company's focus is on the corridor running from northern Virginia to central New Jersey. However, Rubenstein's portfolio includes property in Pittsburgh at the 907,000 sq. ft. Parkway Center, and both Mark and David agree that a natural extension of the company's growth could be westward into Ohio.

Whichever type of real estate transaction Rubenstein is engaged in, the company takes a full-service approach to the business. According to Mark, this approach maximizes the company's ability to improve operating margins. Rubenstein provides its own property management services, primarily to maintain tighter cost controls and guarantee quality services.

Along with Mark, the company's property managers have engineering backgrounds and take a programmatic maintenance and improvement approach to their buildings' equipment and systems. "The firm's philosophy is to arrange upgrades before it becomes mandatory," says Jeffrey Kusumi, director of corporate operations.

In this way, the buildings maintain their high-profile exterior finishes, grand entry lobbies and efficient mechanicals. This type of attention to detail is a key element in the company's strategy and success in retaining the firm's stable of big-name tenants and satisfied clients.

In addition to its property management, acquisitions, development, portfolio management and property operations departments, The Rubenstein Co. provides its own legal and accounting services. The company also has a wholly owned brokerage subsidiary, The Rubenstein Brokerage Group Inc.

The brokerage operation allows the firm to provide landlord representation for its properties and tenant representation in leasing transactions. The brokerage group enables the company to market its entire portfolio to existing and prospective tenants. Furthermore, the brokerage group uses its leasing activities to identify additional acquisitions, sales and development opportunities, says David.

Steady as she goes Just as its investment and management philosophy is methodical, so too is Rubenstein's alignment with investment partners. "We look to align ourselves, in either debt or equity, with investors that have a long-term view of the markets and market experience similar to ours - say at least 30 years worth," says Mark. On the debt side, Rubenstein's alignment is with institutional lenders like Philadelphia-based Cigna, New York Common Fund, Milwaukee-based Northwestern Mutual Life and similar companies. On the equity side, the company seeks to develop relationships with only high-quality institutional long-term investors who agree with the company's thinking and philosophy.

The Rubenstein Co.'s approach to investing eliminates many controversial issues, since all the aligned participants approach the investment arena with similar viewpoints. It also may account for the low profile the organization has kept, albeit while creating a superior building portfolio.

"In 30 years we've never flipped a property," says Mark Rubenstein. "We have sold a few properties as part of a maintenance strategy, but we buy or build for the long term as holders of real property."

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