$52M CMBS Loan Backed by Philadelphia’s 401 Market Street Sent to Special Servicing
The building fell on hard times when Wells Fargo vacated 72% of rentable space
By Brian Pascus October 25, 2024 2:13 pm
reprints
The $52.4 million commercial mortgage-backed securities (CMBS) loan secured by 401 Market Street, a 484,643-square-foot office property in Downtown Philadelphia, has been sent to special servicing due to an imminent maturity default.
Morningstar Credit first reported the transfer.
The $52.4 million CMBS loan represents 8.9 percent of the CSAIL 2016-C5 conduit CMBS transaction, and is set to mature in October 2025. The financials behind the 11-story building — which opened in 1971 and underwent a renovation in 2015 — were once quite strong, as it reported a debt service coverage ratio (DSCR) of 1.40x and occupancy levels of 100 percent in the early portion of 2024, according to Trepp.
However, the loss of its prime tenant, Wells Fargo (WFC), which occupied nine floors and 72 percent of rentable space, shattered the building’s underwriting. Wells Fargo departed 401 Market Street in September, leaving the American Bible Society as the building’s largest tenant, taking up just 28 percent of rentable space, according to Trepp.
401 Market Street sits about a mile east of Philadelphia’s City Hall. It’s just off Independence Mall, a three-block historical park that includes the Liberty Bell, the National Constitution Center and Christ Church Burial Ground, resting place of Benjamin Franklin and other revolutionary leaders.
“The Independence Mall submarket has never really taken off,” Morningstar Credit Senior Vice President David Putro told CO. “This building in particular had Wells Fargo leasing 70 percent of the space, and when they left, this thing just kind of ran out of gas.
“That part of the city is just not going to draw your national office tenants at this point,” he added.
The building is owned by Miller Real Estate Fund II, which was established in 2014 by Miller Real Estate, an affiliate of Miller Investment Management.
Miller Investment Management did not respond to requests for comment.
Brian Pascus can be reached at bpascus@commercialobserver.com
