Amerimar Enterprises Inc. and two partners have teamed up to
buy 401 N. Broad St. in Philadelphia, one of the most important telecom hotels
along the East Coast.
Abrams Capital Management of Boston, and Hunter Newby, a
communications network and real estate investor from New York, will join
Amerimar of Philadelphia in owning and operating the 11-story,
1.3-million-square-foot building. Terms of the transaction were not disclosed.
The partnership bought the property from Stillman Group of
New York. Stillman has owned the building for the last 35 or so years. Starwood
Property Trust arranged the financing for the acquisition. Ropes & Gray
represented Amerimar and Abrams Capital on the acquisition.
About 15 years ago, Jerry Marshall, president and chief
executive of Amerimar, was attempting to redevelop 1500 Spring Garden St. into
a telecom hotel when he met Hunter Newby.
“We asked him to come down and see what we were doing,”
recalled Marshall in an interview. “Hunter said: ‘Jerry, you have an amazing
data center here but the telecom hotel here in Philadelphia is 401 North
Broad.’”
It stung, especially since 1500 Spring Garden never got any
real traction as a telecom center. Marshall knew his competition was where all
of these networks were already connected and that was in 401 N. Broad, a
building that was constructed in 1930 for Reading Co. and later redeveloped
into a telecom hotel.
The Spring Garden property was eventually converted into an
office building and sold last year for $185 million but Marshall never forgot
about 401 N. Broad.
Marshall said he had been calling Stillman for the last
year-and-a-half trying to buy the property. It was only recently he had any
luck in making a deal happen.
“We’re very proud of what we've accomplished at 401 North
Broad over the years, turning a somewhat bedraggled and relatively empty, but
historically significant, building into this extraordinary asset,” said Abbott
Stillman, chairman of the Stillman Group, in a statement. “I am truly delighted
to have passed it on to Jerry Marshall and his partners and team, who
collectively will, I'm sure, take this property to the next level.”
The property is considered the most fiber-dense,
network-neutral facility between New York and Virginia. It currently has 80
networks and is 70 percent leased up.
The building is a significant center for data and internet
traffic and offers data center infrastructure for carriers and service
providers. One of the main characteristics that attracts telecom companies to
the building is its location, which gives it the ability to tap into so-called
long-haul fiber in the region that provides access to fiber routes to Europe.
“401 North Broad is an incredibly important building,”
Marshall said.
The new owners plan to invest $70 million into the building
to make upgrades to the property.
“It needs it,” he said. “Anyone who drives by the property
can see the deferred maintenance on the façade. There’s a lot of things that a
lot of people wouldn’t necessarily see unless they are looking under the hood.”
To that end, the new owners plan to renovate the elevators
and modernizing shaftways, upgrade electrical gear, among other items that have
not been improved over the years.
One of the other investments will be creating a roughly
20,000-square-foot “Meet-Me-Room,” or MMR. It’s a space within a telecom hotel
where different networks can come together and connect with each other. In the
case of 401 N. Broad, for example, a lot of international connections run
through the building. The MMR at 401 N. Broad will be a carrier neutral room
and will be owned and controlled by Amerimar.
Amerimar owns two other telecom hotels with active MMRs, one
in Kansas City and the other in New York City.
“This is an interesting business model for us,” Marshall
said. "It’s real estate but it’s an operating business.”
Among the other properties that Amerimar owns in
Philadelphia area are the Wanamaker building, Bala Pointe Office Centre and
International Plaza.
Source: Philadelphia
Business Journal
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