Ori Feibush Turns Bullish On Office, Acquires Old City Property For 40% Discount
Amid the office market’s freefall in Philadelphia, one developer has picked up a mostly-vacant Old City building, noting that now is the time to seize on distressed office assets.
Developer Ori Feibush bought the office at the northeast corner of Fourth and Market streets for $14M last week, a 38% drop-off from the building’s previously assessed value, according to the Philadelphia Business Journal.
Once assessed at $22.6M, Feibush described his acquisition of the 399 Market St. building as a “huge discount.”
Feibush, the owner of OCF Realty, is a long-term investor in Philadelphia who once ran for a seat on city council.
“It's atypical for us to buy office, but that is where the greatest opportunity is because there's obviously a lot of duress and noise in the market,” Feibush told PBJ.
Feibush said he believes the 136K SF office building would have been worth around $40M prior to the decline of the market, which started in 2020.
Office has taken a beating since then, with return-to-office numbers still well below pre-pandemic levels and interest rates making loan refinancing difficult. At the end of Q1 2024, the overall office vacancy rate in Philadelphia was 19.6%, according to JLL.
Office buildings are also sitting on the market for long periods of time. Last week, what was once the most expensive office in the city failed to solicit a minimum bid at a public auction.
“It might be time to stop talking about recovery,” and instead shift focus on other uses for office, Center City District President and CEO Prema Katari Gupta said at an event on the state of the district last month.
399 Market St. has been 70% vacant since Colonial Penn moved most of its operations out of the building, The Philadelphia Inquirer reported. Coworking firm IndyHall left the building permanently in 2021, according to Technical.ly.
But Feibush is unfazed, planning to maintain the building as an office. In the time the building has been under contract — about four months — Feibush said he has signed tenants that bring the building up to 45% occupancy. Most of the building's tenants occupy between 3K and 14K SF, he said.
A TD Bank branch, an architectural firm, a logistics firm and an unnamed number of nonprofit firms are among 399 Market St.'s current tenants. A national daycare operator recently signed a lease for space on the ground floor, Feibush told PBJ.
The OCF exec said he can offer rents on a per SF basis in the low-to mid-$20 range, which he believes makes it the cheapest Class-B building for rent in the city. Last quarter, the average asking rent for Class-B office buildings in Philadelphia was $29 per SF, per JLL.
“It’s just the perfect time to buy office,” Feibush told PBJ. “I suspect any real estate professional who is not jumping into the office world is going to be kicking themselves in a couple years.”
RothbergDubrow’s Peter Rothberg and Jonathan Dubrow represented Colonial Penn Life Insurance in the transaction.
