Aramark HQ building is aiming for $240 million sale, as other office buildings go for far less

The building that contains Aramark’s headquarters at 2400 Market St. is on the market with a target price several orders of magnitude larger than almost any recent office building sale in Philadelphia.

Two industry sources familiar with the situation say that Lubert-Adler Real Estate Funds, which owns the building, is seeking at least $240 million for the almost 600,000-square-foot building on the east bank of the Schuylkill.

That’s how much Brandywine Realty Trust sold its empty 3151 Market St. for to Burlington Stores, which plans to turn the building into its new headquarters.

But 2400 Market is a different situation. Unlike many other recent office sales in the city — which have seen multiple buildings selling for well under half their previous prices — 2400 Market is 99% occupied and not in financial distress.

In addition to Aramark, the building’s prestigious tenants include the Fitler Club and, soon, JP Morgan Chase, which is expanding its Philadelphia presence with new offices at 2400 Market.

Lubert-Adler retained real estate services company CBRE to market the property.

Since the Philadelphia Business Journal first reported that 2400 Market St. would be put up for sale, the broker has received a flood of phone calls from out-of-town investors interested in the building — even though CBRE hasn’t formally launched a marketing campaign.

“National and international investors are calling me directly, inbound, which is something that has not happened in recent memory,” said Doug Rodio, executive vice president with CBRE and the listing agent for the property.

“They are anxious to start digging in,” Rodio said. It’s an “opportunity to buy what we consider one of the best buildings anywhere, but certainly one of the best buildings in Philadelphia.”

The last time Rodio says he saw this kind of interest in a Philadelphia office building was in 2018, when 1735 Market — the city’s fifth tallest building — was for sale. CBRE has received calls from 15 different “respected” national and international investors about 2400 Market.

“That’s 15 more inbound calls than we typically get” on office building sales since the pandemic, Rodio said.

Lubert-Adler Real Estate Funds purchased 2400 Market in 2014 with PMC Property Group for $42 million and turned it into one of Philadelphia’s premier office buildings. Aramark announced its move there in 2016.

Lubert-Adler is also known for its ambitious redevelopment projects that turn down-at-their heels historic buildings into mixed-use meccas, like the Battery near Fishtown and the Bellevue on South Broad Street.

However, the firm’s namesakes are now going their separate ways, with Dean Adler making a series of announcements about new and ambitious projects.

Ira Lubert declined to comment on the sale of 2400 Market, while Adler said that he thought $240 million was the least the building could get.

“We should get between $260 [million] and $300 million for it,” Adler said. “If they don’t hit our number, I want to buy it. It’s the best property in Philadelphia.”

The aspirational price for 2400 Market is in stark contrast to the myriad distressed office sales of recent years.

Adler himself is in the process of buying the 1.7 million-square-foot Centre Square, one of the city’s largest office complexes, for $70 million. It previously sold in 2017 for $328 million.

A series of smaller buildings have also been selling for a third to a fifth of their previous prices.

For his part, Rodio of CBRE said that 2400 Market stands out for attracting investors who do not usually pay attention to Philadelphia.

“It’s investors who feel priced out of a handful of other geographic markets, most notably in the Southeast and New York City,” Rodio said, describing calls he’s been receiving. “Investors looking in the Southeast have not historically looked at Philadelphia … but for the right asset, like 2400 Market, they are anxious to learn more.”

The loan on 2400 Market was placed in special servicing in late September, which is usually an indication of financial distress. However, Lubert-Adler and outside experts say that is not the case here.

The loan on the property had reached the end of its term, but the company requested an extension while they sought to sell.

However, there are limits on how long the financial institution in charge of a commercial loan — the servicer — can hold the loan after it reaches maturity, so it had to be transferred to a special servicer while the sale process unfolds.

“It’s mainly a procedural move,” said David Putro, associate managing director of Morningstar Credit Analytics, Morningstar Credit. It’s “really not a sign of distress like most special servicing transfers. [This is] more administrative.”