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.
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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.
I’m glad you are fixed. :)
My first wife’s family had the candy department concession in Wanamakers. Really good chocolate items.
The family had invented Good and Plenty licorice and stayed in the candy business. Grandmother-in-law lived in Rittenhouse Square. Now that was a real building.
The last time I was in Philly, west of Broad Street looked like a Puerto Rican slum, worst than the summs east of Broad St (I went to Temple University.)
The city elected incompetent mayors and a Soros-MARXIST DA named Krasner. Now you know who is responsible for much of this.
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