The seller is a Lehman Brothers entity, according to Michael Foust, CEO of Digital. Digital, which is based in Menlo Park, CA, negotiated the transaction in house.
Locally based Athenian Properties manages the 15-story, 654,758-sf building, which was once a part of Gimbel's Department Store, and was completed in 1927. According to Athenian, when the JV acquired the building a large tenant was vacating, leaving the asset just 27% occupied. In 1999, at a capital investment of $42 million, the property was totally renovated with new HVAC and electrical systems along with cosmetic upgrades.
It is currently 75% leased and has 107,563 sf vacant and still in shell condition. "At the time of the renovation, the building was essentially taken down to the shell," Foust tells GlobeSt.com. "The remaining shell portion represents our upside potential," he says, "and we think that's a plus for technology-based tenants that want build-to-suit space tailored to their specific needs."
Foust feels the company focuses on "mission critical assets" and thinks that "Philadelphia is a very good market for companies, especially in New York, that need off-site facilities for back-up data and disaster recovery. We are already in discussions with potential tenants." The building is near Jefferson Hospital, and a variety of technical units of the hospital are current tenants.
The local office of CB Richard Ellis is handling the lease up. Foust says the asking rental rate for office space is "about $19 per sf to $22 per sf." This is Digital's first Philadelphia acquisition. Foust says, "We're looking for more opportunities in the Philadelphia area. It's such a large and well-located area, and it is generally overlooked by national investors."
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