Philadelphia Student Housing Loan Sent to Special Servicer
Cathy Cunningham May 20, 2016, 3:54 p.m.
A $52.6 million loan on The Edge at Avenue North in Philadelphia has been sent to special servicing, according to data from Trepp. The multifamily property, owned by Tower Investments, had a student-housing contract with Temple University that ended in favor of a new student dorm in 2013. This turn of events likely impacted the building’s financials.
The 799-unit building is located at 1401 West Oxford Street in the Avenue of the Arts North neighborhood in Philly. The April move to special servicer National Consumer Cooperative Bank wasn’t entirely unexpected due to its negative cash flows, according to analysts at Trepp. “It’s likely that the loan won’t be refinanced before maturity, and there could be a lot of legwork to nurse this one back to health,” Sean Barrie, an analyst at Trepp, told Commercial Observer. The loan matures in October.
Trepp’s analysis referenced the servicer’s April watchlist notes, which stated the following: “Due to the current leverage of 100 percent or greater and the current financing markets, neither a refinance nor a sale of the property is possible.”
The Edge was built in 2006 and was appraised for $66.9 million “as-is” at the time. The collateral was also appraised for $76.9 million on a pro forma basis. The last full year of financials, for the period ending June 2015, reflects that the loan posted a debt service coverage ratio of 0.61x on an occupancy of 77 percent.
Temple University had a contract for 750 of the Edge’s 799 units but severed its lease in 2013, according to Philadelphia Citypaper.
It’s not all doom and gloom in the city of brotherly love, according to recent data from Trepp. “The multifamily market in Philly is performing pretty well,” said Mr. Barrie. “[However], two Philly multifamily properties that back CMBS loans are in special servicing. The caveat is that both of those loans are backed by area student-housing complexes. So the broader market might be doing well, but there seems to be some trouble when it comes to student housing.”
The Edge loan makes up 2.87 percent of the remaining collateral behind the CSMC 2006-C4 commercial mortgage-backed security.
Officials at Tower Investments did not respond to a request for comment.