Downtown Scranton’s only Class A office space never got the chance to be what it was built for — the glittering headquarters for the Southern Union Co. gas company.
Now Southern Union’s $16 million investment is for sale at a price less than a quarter of what the company spent building it.
Hinerfeld Commercial Real Estate is selling the palatial granite and steel office building for $3.85 million on behalf of its current owner, the Florida lending company that foreclosed on it in 2018.
Whoever buys 417 Lackawanna Ave. will benefit from the disparity between what the gas company, and then Chief Operations Officer Tom Karam of Waverly, chose to spend on the 31,420-square-foot building, and its current earning potential.
“Long after Tom Karam is gone and Southern Union is gone, Scranton will still have this tremendous asset,” Karam told The Times-Tribune in 2005.
That was six months before Southern Union announced it was selling its distribution division to UGI and pulling out of its Scranton headquarters, which the company never fully occupied and construction remained unfinished at the time.
Southern Union didn’t build an investment property, said Hinerfeld President John Cognetti. The company wanted a showpiece headquarters.
It’s got its own gated parking lot with 75 spaces including 40 underground with elevator access, a luxury for a downtown office building. It’s about 60% occupied.
The top floor is empty, and Cognetti said several possible tenants have shown interested in leasing it. Current tenants include Merrill Lynch and U.S. Sen. Bob Casey.
There’s a big drawback.
It has a disproportionately high tax assessment, a symptom of Lackawanna County’s failure to reassess property values in 52 years, which means a foreboding tax bill. The seller disclosed paying annual taxes of $220,000, said Elijah Miller, the Hinerfeld agent marketing the building.
The seller, a company called SDO Fund II D32 LLC of Coral Gables, is appealing the assessment. If it wins the appeal, that would dramatically improve the value of the building and soften that tax bill.
The owners are waiting for the results of their tax appeal, Cognetti said.
Global commercial real estate brokerage Colliers International had been marketing the building. Hinerfeld, a Scranton-based company, recently took the reins in part because its agents know the regional territory so well.
“This is a unique assignment. Hinerfeld has always liked these unique assignments,” Cognetti said. “We’re confident we’re going to be able to sell it.”
Contact the writer:
joconnell@timesshamrock.com; 570-348-9131
