Article Date: June 12, 2024
For the second time in as many years, Gagan Marwaha saw a totally empty office building as an opportunity.
Last month his firm, Marwaha Investments, bought the six-story Patriot Tower at 101 Gateway Centre Parkway in Chesterfield for $5.75 million. That’s around $46 per square foot.
The 127,000-square-foot building, once occupied entirely by defense contractor Northrop Grumman, is 100% vacant.
That’s in a time when many see office space as the weakest sector of commercial real estate. But Marwaha has a blueprint he’ll follow to make the most of his empty-building gamble.
Last year his firm paid $5.35 million for the Parham Place business park (now called Marwaha Business Park) in central Henrico. At the time, all three of the park’s buildings were empty. Marwaha now has it over 75 percent occupied via leases with the Henrico School Board and contractor ColonialWebb.
He’s drawing up a similar play for Patriot Tower, which he’s similarly rebranded as Marwaha Tower.
Marwaha said his approach is to find vacant office space whose previous owners were likely looking to fill with one large tenant, buy it, improve it and open it up for multiple tenants looking in the 5,000- to 40,000-square-foot range, where he said he believes there’s still plenty of demand.
“All these big REITs and investment institutions I’m buying from only want a single tenant base,” he said. “ColonialWebb or Henrico County would not have gotten a seat at the table (for Parham Place) because they didn’t want to take the whole campus, they just wanted a part of it. That’s where I come in. I give these people a seat at the table.”
The seller in the Chesterfield deal was Pennsylvania-based Patriot Equities. The May 31 sale included a 6-acre lot across the street at 1100 Gateway Centre Parkway. The two parcels were most recently assessed by Chesterfield County at a combined $4.2 million.
Marwaha declined to disclose how he financed the deal, saying only that it’s challenging to finance spec office deals like this in the current market.
The building’s location, near the Powhite Parkway-Midlothian Turnpike interchange, was part of the draw for Marwaha.
“It has good visibility. All it needs is a good operator – somebody who can tell the market, ‘Hey, we are here to make deals. We are open to multi-tenant it,’” he said.
Marwaha is planning to spend an additional $2 million to modernize the building, a project that’ll include renovating the lobby.
Marwaha said he’s pouring an additional $2 million into the 35-year-old building on elements including renovating the lobby, replacing the HVAC system, and repairing and repaving the property’s 600-space parking areas.
“It’s in good shape, it just needs basic upgrades,” Marwaha said, noting that he wants to have the work completed and Marwaha Tower open for tours in about 60 days.
Commonwealth Commercial’s Tucker Dowdy and Eric Hammond, who represented Marwaha in the purchase, also are handling leasing for the building. The asking rental rate is $23 per square foot, and Marwaha said he’s open to tenants looking for as little as 1,600 square feet.
Rebecca Barricklow, Joe Marchetti and David Wilkins of the recently launched Range Commercial Partners represented Patriot Equities in the sale.
Marwaha started his firm eight years ago and his portfolio also counts single- and multifamily residential buildings in Richmond, Williamsburg and Petersburg. He said he’s been gradually selling off his single-family assets and he’s still aggressively pursuing commercial buildings, but only those of a certain kind.
“It has to be a value-add (opportunity),” Marwaha said. “We don’t go buy stabilized assets.”
