Developer Ori Feibush purchases Old City building by taking advantage of dropping office prices

Developer Ori Feibush purchased the five-story former Colonial Penn Life Insurance Co. building at 399 Market St. in Old City with plans to keep it in use as offices.

The building has been 70% vacant since Colonial Penn moved out much of its operations, which included a call center. Feibush bought it Tuesday for $14 million, far below the most recent city assessment that put the building’s value at over $22.6 million.

“This is the greatest value opportunity in our professional lives with the distress that we’re seeing in office buildings,” said Feibush, owner of OCF Realty.

He said he sees an opening to move into the office sector as it shrinks, with almost no new buildings coming online and a handful of older structures being converted to residential or other uses.

At the same time, he contends that more employers and workers are realizing the limitations of remote work. That means there is space to meet the demand, especially for smaller users.

“It’s a great opportunity to effectively go against the market narrative and pick up some incredibly well-located buildings that are trading at wonderful discounts,” Feibush said.

He emphasized that his interest in the office market was bolstered by Mayor Cherelle L. Parker’s commitment to law-and-order policies and in-office work. Last month she announced the end of hybrid work for municipal workers, who are required to return to the office full-time July 15.

“We know she means business in bringing office workers back, and that’s hugely important for the psyche of the city to have a leader pushing for that,” Feibush said. “We’re excited to do our part here to create good quality and inexpensive office space for small businesses to grow.”

Feibush plans to retain the existing tenants, which include a TD Bank branch on the ground floor and offices occupied by an architecture firm, a logistics firm, and some nonprofits. While OCF had the building under contract, they signed a lease for a national day-care operator on the ground floor and a couple smaller tenants such as therapy offices in the floors above.

Pre-pandemic, Old City was host to about 15,000 office workers. That number has fallen radically since then, with the Bourse building struggling with a vacancy crisis, the federal government allowing flexible remote work, and Wells Fargo and the American Bible Society moving out of the building just to the west of 399 Market.

“This is a very exciting opportunity for the Old City economy,” said Job Itzkowitz, executive director of the Old City District. “Our residential population continues to grow. Our visiting population continues to rebound at near pre-pandemic numbers. But the commercial office user piece is still missing.”

Feibush said he never considered purchasing the building to convert for residential use. Instead, he wants to carve the 136,000 square feet into smaller offices, perhaps between 3,000 and 6,000 square feet in size.

Post-pandemic, the office market has been dominated by a so-called flight-to-quality in which many top tenants are renting less space in higher-end buildings, especially around the West Market Street corridor. But those users are still looking for tens of thousands of square feet.

Feibush said he sees an opportunity down market, especially for a building that he says largely needs only cosmetic upgrades such as scrapping 400 old cubicles and installing new furniture and wall coverings.

“We are, to my knowledge, the least expensive, Class B office building in the city,” said Feibush, who cited rents between $22 and $25 a square foot. According to the commercial real estate company Jones Lang LaSalle, the average Class B rent in the city is over $29 a square foot.

“The outside is not winning any awards, but the inside is fully upgraded, inclusive of all the mechanicals and systems,” Feibush said. “The guts are great. The tenants are great. It just needs some freshening up.”