This Week's Philadelphia Deal Sheet: Borrower Pays Off Distressed Center City Office Loan In Full

After a series of heavy blows to Downtown Philadelphia office buildings in debt difficulty, at least one has found a happy ending.

The $46M in securitized debt backed by the historic Widener Building on South Penn Square was paid off in full this month, according to a credit report from Morningstar. The building was part of a three-portfolio CMBS loan that matured in December and was sent to special servicing.

Though the Widener's net cash flow was only slightly below underwriting at the time of the maturity, its second-largest tenant departed in April for a sublease at 1500 Market St., which did not reach as neat a resolution when it was turned over to a receiver the same month.

Considering the worrisome states of 1500 Market and the Wanamaker Building, which sits across a narrow alley from the Widener, the payoff comes as a pleasant surprise, Morningstar reports. Even holders of the CMBS' Class-C and D shares were repaid.

PEOPLE

Multifamily and student housing developer GMH Communities named Nick Lee its new chief acquisitions officer and promoted Rand Ginsburg to chief operating officer. GMH, which last year opened Anova, the first multifamily component of the master-planned uCity Square development in University City, plucked Lee from Blue Vista Capital Management, where he most recently served as senior vice president.

LEASING

West Coast-based national thrift store chain Savers signed a 25K SF lease at The Plaza at Cherry Hill shopping center in South Jersey, the Philadelphia Business Journal reports. With the lease and a May expansion deal with Total Wine & More, owner Urban Edge Properties boosted the 417K SF center's occupancy from 71% to 82%.

The storefronts that Savers and Total Wine will occupy were vacant when Urban Edge purchased the Plaza at Cherry Hill, which sits across a commercial road from PREIT's Cherry Hill Mall, in 2017 for $51M, PBJ reports. Urban Edge has 75K SF of vacancy remaining, which may require facade and parking lot renovations to fill.

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Ensemble Real Estate Investments signed specialized healthcare provider Mid Atlantic Retina to a 12.7K SF lease at One Crescent Drive in the Philadelphia Navy Yard. Ensemble purchased the building in 2019 from Liberty Property Trust for $26.6M, according to city property records.

Ensemble acquired Liberty's Navy Yard holdings as it positioned itself to join with Mosaic Development Partners in replacing Liberty as the Navy Yard's master developer, which it officially did in 2020. Liberty's sell-off coincided with its pivot to industrial and acquisition by Prologis.

Mid Atlantic Retina's new space, its 19th, will also be associated with Center City-based specialty hospital Wills Eye. Avison Young principal Scott Martin represented Mid Atlantic in lease negotiations.

SALES

The International Brotherhood of Electrical Workers Local 98 agreed to acquire two historic office properties within the Philadelphia Navy Yard from Penn State University, the Philadelphia Inquirer reports. IBEW would purchase the 25K SF building at 4960 South 12th St. for $11.25M, and its apprenticeship and training fund would buy the 27K SF building at 1101 Kitty Hawk Ave. for $7.25M.

Penn State's board of trustees is scheduled to vote on whether to approve the sales in its next meeting on Friday. The university has already moved the operations it housed in the two buildings to other campuses, the Inquirer reports. Those operations included administrative offices, research and business incubator space.

IBEW intends to move its headquarters to the Navy Yard buildings from its current two-building site at 1701 and 1719 Spring Garden St., the Inquirer reports. It has not announced any plans for the Spring Garden buildings, which it owns.

It represents the first major decision for new IBEW business manager Mark Lynch Jr. since he won a runoff election last month against a candidate backed by Lynch's predecessor, notorious Philly power broker and convicted felon John "Johnny Doc" Daugherty, the Inquirer reports. Lynch has led the union since he originally took over for Daugherty, with the latter's blessing, in November 2021.

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Raymour & Flanigan purchased a 100K SF warehouse it occupies at 350 North Sherman St. in York for $17M in the second of two back-to-back transactions, both arranged by Cushman & Wakefield. Construction firm Inch & Co. sold the building to Dalfen Industrial for $12.7M before Dalfen turned around and immediately sold it to Raymour & Flanigan for over $4M more.

FINANCING

Manufacturer Schless Bottles received two grants from Pennsylvania programs to facilitate a relocation from Northern New Jersey to Allentown, where it committed to spend $7.5M acquiring and renovating a building into a plant for making plastic bottles and jars. 

In exchange for creating 98 full-time manufacturing jobs, Schless will receive up to $496K from the Pennsylvania Department of Economic and Community Development. DECD has already committed $196K for a workforce training grant and has submitted a proposal to Schloss for a $300K Pennsylvania First grant.