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Posted on 02/15/2024 6:02:05 PM PST by george76
Almost $60 million in debt backed by 1515 Market St. was transferred to special servicing in December, adding the 20-story building to the growing list of distressed office properties surrounding City Hall.
The building's owner, Florida-based Accesso Partners, has a $59.4 million balance on the loan it took out to acquire 1515 Market for $85 million in 2014. The loan, which was originated by JPMorgan Chase & Co. before being converted into a commercial mortgage-backed security (CMBS) and sold to investors, is set to mature in January 2025.
Contacted by the Business Journal for comment, Accesso issued a statement saying that it asked for the loan to be transferred to a special servicer ahead of the maturity date “so it can negotiate an extension now and continue its proactive strategy in a still-challenging refinance market.”
CWCapital is the special servicer for 1515 Market, according to January's CMBS report on the loan.
The property is the third office tower adjacent to City Hall that has had its mortgage transferred to special servicing in the last nine months, joining its neighbor Centre Square on the west side of Market Street and the historic Wanamaker building on the east side of Market.
The 502,000-square-foot building at 1515 Market was 73% occupied as of September, the CMBS report shows. The loan was underwritten at 89% occupancy, and the building was still 85% occupied in 2019 but has seen that number steadily decline since the pandemic.
...
The rising vacancy rate has been driven by the departures of smaller tenants, according to servicer notes.
Temple University, which houses its Center City campus at 1515 Market, has been the building's anchor tenant since 2001. It signed a five-year lease extension in 2022 on 130,213 square feet of space spanning floors two through six, a portion of the ground level, the plaza and the concourse.
Other than Temple, no other tenants have more than 16,000 square feet, according to the CMBS report. Others currently leasing space at 1515 Market include American Executive Centers and the Commonwealth of Pennsylvania. Most tenants have at least three years remaining on their commitments, with leases expiring in the next 36 months accounting for only 13% of the building’s square footage.
The building's net operating income was nearly $6.6 million when the loan was underwritten in 2014, according to CMBS data, but it fell to under $4.4 million in 2022 as revenue dipped and expenses and debt service increased.
It's a dynamic that has forced many Center City office properties into a corner as a shift to remote and hybrid work causes vacancies to mount and high interest rates make refinancing debt difficult.
Immediately south of 1515 Market, Centre Square has been in receivership since April, according to court filings. On the east side of City Hall, the Wanamaker building went into receivership in September and the building’s office occupancy has dropped to 35%. To the south, One South Broad was in special servicing and nearly went into receivership before property owner Aion Partners was able to extend its loan for two years.
Like Accesso did with 1515 Market, the owner of 1818 Market St. requested to transfer its $223 million loan to a special servicer in December to engage in loan modification discussions.
Good article—thanks for posting.
From the article:
“The loan, which was originated by JPMorgan Chase & Co. before being converted into a commercial mortgage-backed security (CMBS) and sold to investors”
The big investment bank gets their fees, sells the trash to “investors” aka suckers and then laughs at the stupidity of the suckers.
“Institutional investors, such as pension funds, insurance companies, and mutual funds, are significant buyers of CMBS. These investors typically have a long-term investment horizon and are attracted to the diversification, yield, and prepayment protection offered by CMBS.”
These types of institutional investors usually expect some of their purchases not to pay off. They are sophisticated buyers, and are willing to tolerate a 2-3% write-off rate for a 150 basis point boost. They probably balance their portfolios across the risk spectrum.
They’re also big boys, who can afford to take these losses.
cgbg,
You reduced to its essence any business school textbook.
Lol, I worked just down the street from there.
Philly is a cesspool.
…and then Jamie Dimon pretends to be a voice of reason about financial markets.
I keep seeing adverts in various articles, urging me to invest in commercial real estate. "The timing has never been better."
I laugh my ass off.
U nailed it.......
Pennsylvania Ping!
Please ping me with articles of interest.
FReepmail me to be added to the list.
thanks
I was married at the church on the other side of City Hall from that triangle of buildings, a half century ago. A very different time, for sure.
Mark Simone, a great NYC talk show host (and Trump supporter), often mentions the fact that only about half of the people who commuted to work in Manhattan before the Wuhan Flu scam commute there today.
I was born at Lankenau Hospital in 75…
17 of 24 federal agencies use an estimated 25% or less of their headquarters’ office capacity.. The General Services Administration, which manages all federal buildings, was operating at 11%...
US office buildings face $117 Billion debt time bomb: Mortgages due this year threaten to sink US economy as thousands of workplaces remain empty..
https://freerepublic.com/focus/f-news/4207256/posts
“The timing has never been better.”
yeah, for those who are selling ...
Its an ugly building anyhow. Maybe they can use it for the drug shootem up galleries the city wants to set up.
And the wanamakekr building houses an huge pipe Organ which has 28,750 pipes in 464 ranks.
Dr Singmaster fixed my hernia there in 1957.
housing for invaders........watch, the suckers will be the tax payers when the sanctuary cities buy them for this purpose
How many “migrants” can be housed there?
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