The building was sold at auction Wednesday morning. (Courtesy New Media Systems)
Gagan Marwaha has snatched up yet another distressed Richmond-area office building, this time at the auction block.
The local investor won Wednesday’s foreclosure auction of the Capital City Physicians Building at 8002 Discovery Drive with a winning bid of $4.05 million. The four-story, 55,000-square-foot West End building sits on three acres across from the Henrico Doctors’ Hospital campus.
It fell into foreclosure over the summer after its former owner, Atlanta-based Bauman & Co., defaulted on a loan from lender South State Bank.
The foreclosure auction, conducted by auction house Tranzon Key, was held Wednesday in one of the building’s many available suites. Around 50 individuals were in attendance.
Bidding started at $1 million and lasted around 15 minutes. Around six individuals placed bids, but none was willing to go higher than Marwaha’s $4.05 million, which amounts to about $73-per-square-foot.
After paying closing fees and premiums, Marwaha said the cash purchase will total around $4.3 million – about $1 million less than the property’s most recent county-assessed value of $5.3 million, and $2 million less than the $6.3 million Bauman & Co. paid for it in late 2019.
Marwaha, through his firm Marwaha Investments, specializes in pumping new life into office assets that are on the fritz.
Gagan Marwaha
His strategy includes rebranding the buildings, renovating the vacant spaces on spec, and then leasing them out, typically to a mix of smaller tenants. He’s previously employed that playbook at the former Parham Place business park in Henrico and the completely vacant Patriot Tower in Chesterfield.
With a 75 percent vacancy rate, Marwaha said the Capital City Physicians Building was right up his alley.
“This acquisition just goes towards our strategy of investing in value-add office space,” Marwaha said. “We’re going to make all the available vacancies rent-ready. We’re going to spec everything and make it turn-key.”
Of the building’s 41,500 square feet of available space, Marwaha said about 7,000 is shell space that he’s also going to build out on spec. He’s budgeted around $700,000 for those renovations. He added he’s planning to sign the existing tenants at the building to long-term leases.
Like his other holdings, the Capital City Physicians Building will be rebranded to bear his name – in this case Marwaha Plaza. Parham Place is now called Marwaha Business Park and Patriot Tower is now Marwaha Tower.
“That’s the first thing I do. I always rebrand everything because I want the market to understand there’s a new owner who’s ready to cut deals on realistic pricing,” Marwaha said. “We’re going to be flexible in cutting deals and bringing people in.”
Tucker Dowdy and Eric Hammond of Commonwealth Commercial will handle leasing for Marwaha Plaza.
Meanwhile, out at Marwaha Tower, Marwaha said he’s in discussions with some state agencies and architecture firms about taking space in the 127,000-square-foot building near the Powhite Parkway-Midlothian Turnpike interchange.
Guy’s a machine. Another brilliant move. You couldn’t buy that land, clear it and build that building for under $20M today. The inherent value there is just astounding.
The fact that office space these days is inconsequential to many businesses is just a minor detail, I suppose.
I remember when industrial space was out of favor. time will tell and determine his return
He’s been killing it with his investments. Breathing fresh life in to these old buildings!
Agreed. He found a niche and knows how to work it.