Embattled Nightingale Loses Control Of Philly’s Largest Office Property
As Nightingale Properties' crowdfunded investment in an Atlanta office building was unraveling in the past few months, the New York-based landlord also lost control of its biggest holding in Philadelphia.
The 2.2M SF office complex at 1500 Market entered receivership on April 20, according to a previously unreported consent order filed in Eastern District federal court. Wells Fargo Bank, acting as trustee for shareholders of 1500 Market's $390M securitized loan, had filed for foreclosure in January.
When Nightingale's loan matured Dec. 9, it still had over $375M of principal balance unpaid along with nearly $3M in unpaid and default interest, according to Wells Fargo's foreclosure complaint. By that point, 1500 Market had already been placed in special servicing and had an October 2022 request for extension denied for failing to meet debt yield thresholds.
At 69% occupied, the property's cash flow was 33% less than it had been underwritten for in 2021 and had lost at least $34M in value from its purchase price, credit analytics firm Morningstar estimated in February.
The building, constructed in 1974, consists of 36- and 43-story towers sitting atop a four-story podium at 1500 Market St., across the street from Philadelphia City Hall and atop the 15th Street stop of the Market-Frankford Line, one of Philly's busiest subway stations.
Nightingale acquired 1500 Market, formerly known as Centre Square and identifiable to locals by the clothespin-shaped sculpture in front, for $328M in 2017 as part of a joint venture with Wafra Capital Partners. In December 2019, as it launched a multimillion-dollar renovation, the JV refinanced a previous $240M loan with a new $368M mortgage from JPMorgan Chase.
A couple of weeks later, Nightingale borrowed another $22M, per court documents. JPMorgan later sold the loan as a single-asset, single-borrower security.
CBRE asset servicer John Svorcek was named the receiver for the property in the consent order, which was agreed after months of negotiations between Wells Fargo and affiliates of Nightingale and Wafra, its frequent equity partner. Though Nightingale and Wafra still technically own 1500 Market, the receiver is legally allowed to sell the property if directed by the lender.
A CBRE spokesperson declined to comment.
CBRE and the CMBS shareholders will receive all proceeds from 1500 Market unless and until the borrower pays the nearly $380M it owed in January, plus whatever interest and costs accrued until the property went into the receiver's possession. A 2023 budget for the property submitted by Nightingale to the court estimated that 1500 Market will produce between $1.4M and $2M in net operating income per month this year.
Wafra is a Kuwait-backed firm with equity stakes in several of Nightingale's other holdings, including the rest of its Philadelphia portfolio: 1635 Market St., 1835 Market St. and 1500 Spring Garden St., all of them large office buildings.
Nightingale's problems run much deeper than losing out on 1500 Market and its millions in profit per month.
Real estate crowdfunding platform CrowdStreet accused Nightingale and its CEO Elie Schwartz of making off with the majority of $54M it raised on the platform to acquire the Atlanta Financial Center, a 915K SF office building in the city's Buckhead neighborhood. Neither Schwartz nor Nightingale have responded to repeated requests for comment from Bisnow.
