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PHILADELPHIA-The state government has sold a building to Tower Investments for $25.2 million. It will be inking 261,000 sf of leases downtown to house the 900 or so workers displaced by the sale. Tower Investments, for its part, plans to convert the aging building into a mixed-use retail-and-residential development.

The 19-story, 250,000-sf Philadelphia State Office Building, located at Broad and Spring Garden streets, was beginning to show its age, and would have required Pennsylvania to make substantial capital investments, according to Gov. Edward Rendell. The Department of General Services estimates the costs to maintain the building, make necessary repairs and lease replacement to be $30 million over 20 years. Another benefit of the transaction, Rendell continues, is that the building’s sale “will serve as a catalyst for continued economic development in the region.”

The building, situated on 1.9 acres, houses approximately 900 state workers from various agencies, including the departments of Conservation and Natural Resources, Education, Insurance, Labor & Industry and Public Welfare. The commonwealth is relocating these people into two downtown offices.

The commonwealth will lease approximately 212,000-sf at 801 Market St. for 20 years. Final lease negotiations are currently underway for the space. Three agencies will move into offices at 801 Arch St., where Pennsylvania is leasing more than 49,000 sf under a 10-year contract that will have two, five-year renewal options. The rental rate is $19.73 per sf.

Agencies planning to move to 801 Market include the Auditor General, Human Relations Commission, Inspector General, Public Utility Commission, Securities Commission, State Police, and the departments of Community and Economic Development, Education, General Services, Public Welfare, State and Treasury. The departments of Labor & Industry, Revenue, and Health will take up residence at 801 Arch. The transaction will close in late 2008 or early 2009.

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