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Four Penn Center valuation falls 34% amid Philadelphia foreclosure fight
The 523,000-square-foot office building is 65% occupied, below the 84% used when the CMBS loan was originated in 2016, as the loan remains in special servicing.
Bisnow reports a Center City Philadelphia office property, Four Penn Center, is heading toward a distressed sale after lender and borrower disputes over a workout plan tied to its CMBS loan. Morningstar Credit valued the building at $61.0M, a 34% drop from the $93.0M valuation when JPMorgan Chase originated the loan in 2016, and it is also below the $63.9M of senior debt the borrower owed as of April.
The loan entered special servicing in May after the borrower, an entity associated with Teresa Tsai and Treeview Real Estate Advisors, failed to pay off the debt by its maturity date. Wells Fargo, the servicer, said it began foreclosure proceedings on July 20 after the owner proposed a workout, but the servicer commentary added the borrower made “unacceptable demands,” including that it could not pay without a substantial discounted payoff and would not invest additional capital for leasing, operations, or capital expenditures.
The servicer said it will determine whether to seek title through foreclosure or pursue a receiver sale disposition if it can appoint a receiver. Four Penn Center spans 523K SF and was built in 1964 and renovated in 2001, and the servicer said government agencies with long-term leases make up nearly half the tenant base, including the U.S. Environmental Protection Agency with a 176K SF lease through March 2037.
Morningstar expects the workout process to end with a distressed sale, citing the property’s fluctuating performance over time. The outlet said it fell below breakeven even before the pandemic, recovered somewhat, and later declined again, and that the loan has been under a low-occupancy watchlist since 2018, with origination described as being in a “cash trap” where excess revenue goes to a leasing reserve account.