The building sits on over 3 acres near the intersection of Forest Avenue and Discovery Drive. (Courtesy New Media Systems)
A West End office building has fallen into foreclosure and is heading to the auction block.
The Capital City Physicians Building at 8002 Discovery Drive is set to be auctioned at a bank-ordered sale Sept. 25.
Standing four stories across Forest Avenue from the Henrico Doctors’ Hospital campus, the 55,000-square-foot building is currently owned by Bauman & Co., an Atlanta-based firm that invests primarily in medical office buildings.
Bauman bought the property in late 2019 for $6.3 million, according to Henrico County records, but has since defaulted on the loan on the property, prompting the lender, South State Bank, to step in and foreclose on the collateral.
FloranceGordonBrown attorneys Skip Jones Jr., David Bernhardt and Daniel Oberski have been appointed trustees for the bank, and auction house Tranzon Key will oversee the Sept. 25 sale.
Tranzon Key Managing Partner Bill Londrey said Bauman had sought to renovate and lease up the building, but the pandemic derailed those plans.
“The loan was originated in December 2019, and the whole world shut down three months later. They started with a pretty steep uphill climb to get back out,” Londrey said.
“Their idea was to take a typical, (class)-B office building and convert it into nicer medical office space. It was a legitimate plan; they just ran out of runway.”
Bauman did not respond to a request seeking comment by press time.
The building is about 25% leased. Londrey said some renovations have been completed, including refreshing the common areas and replacing the building’s HVAC systems.
The auction will take place on site and remote bidding will be allowed through Tranzon Key’s website, Londrey said. There will be no minimum starting bid. Henrico County most recently assessed the building and 3.2-acre parcel at $5.3 million.
Other markets around the country have seen plenty of office buildings fall into trouble in recent years, including Denver, where multiple high-rises have gone into foreclosure, according to a report from BizSense sister site BusinessDen.
But foreclosure auctions of offices in Richmond have been a rarity. A few downtown towers have faced lender scrutiny in recent months, but the region’s office market has generally been outperforming the national average.
“The Richmond (office) market was not going crazy with huge amounts of development (before the pandemic),” Londrey said. “The occupancy rate around Central Virginia is quite good compared to other markets.”