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AthenianRazak Increases Value at 833 Chestnut to Historic High

We’re extremely pleased to announce that a property AthenianRazak managed and turned around, 833 Chestnut, appears to have sold for the highest price in the region for large, occupied office buildings – coming in at $161m or $228 / sq ft.

In 1998, 833 Chestnut Street, then known as 841 Chestnut, was taken over by a financial institution when a major tenant moved out, leaving the building only 27% occupied and valued internally at $5m. Today the building is 92% occupied and growing.

The turnaround of this huge property was a quiet but steady success story that helped ignite and support the revitalization we’re now witnessing on East Market Street.

The turnaround was conceived and managed largely by our team at AthenianRazak, as we shepherded the property steadily through five different owners and asset managers and two major market changes.

Back in 1998, the building had daunting issues –looming failure of major systems such as HVAC and electric, masonry pieces falling off, and negative cash flow. The financial institution that owned the property turned to Athenian Properties, one of our predecessor firms, to help re-position it. We analyzed the building, the market, and the incredible access to transportation at this site, and created a phased re-development plan including initial building infrastructure improvements while testing market viability.

We successfully signed and installed a new lead tenant, Health Partners, and proceeded with the remainder of a $42 million building renovation. A major focus of the re-development was to activate the street around the building, including recreating the historic cast-iron storefronts from the previous Gimbel’s department store. We also created a data center hub in the building, seeing market opportunity, which attracted the recent seller, Digital Realty. For the grand opening of the new building lobby, we even changed the property’s “name” from 841 to 833 Chestnut to change negative perceptions about the property.

In 2004, with all major building systems replaced, existing tenants retained, and 427,000 sf of new tenants obtained, the building had way surpassed its initial value and was sold to Digital Realty Trust for approximately $60 million.

We then continued to manage and redevelop remaining parts of the cavernous property, including both additional data centers and health care occupants. Other tenants used the high-ceiling spaces for open offices now becoming popular in the area. The capstone tenant for the property was the Ob-Gyn practice for Thomas Jefferson University, requiring over 50,000 sq. ft.  We created a unique solution for this group, including space at the street level under the historic canopy, on a mezzanine, and on the upper concourse level, all connected with internal stairs and elevators, and with a grand entrance and waiting area in the two story space that formerly served as a gallery between Chestnut and Market Streets. This solution put areas of the property never before occupied into productive use, and resulted in a very favorable deal for both owner and tenant.

As East Market continues its boom as one of Philadelphia’s hottest real estate markets, 833 Chestnut can be viewed as the foundation of this transformation. Its quiet turnaround set the stage and created the stability that catalyzed today’s growth.

Check out the coverage on the 833 sale here: