Wanamaker building placed in receivership with $112M debt as lenders seek foreclosure and sale
The Wanamaker Building is located at 1300 Market St. across from City Hall.
The historic Wanamaker Building has been placed in receivership as one of Center City's most recognizable office properties struggles to retain tenants and debtholders pursue foreclosure to satisfy a $112 million unpaid mortgage balance.
An emergency petition filed by Wilmington Trust N.A. for the appointment of a receiver was granted Sept. 6, according to filings with the Court of Common Pleas in Philadelphia.
Wilmington Trust represents investors in the commercial mortgage-backed securities (CMBS) that comprise the debt backed by the property.
The appointed receiver, distressed asset and property management firm Trigild IVL LLC, has taken control of the office and garage portions of the 1.4 million-square-foot Wanamaker and will manage its business operations and finances, including collecting rent and overseeing maintenance. Trigild does not have the authority to sell the building but is "authorized and permitted to contact any party or parties who may have interest in purchasing all or any part of the property," according to the court filing.
The court's approval of a receiver comes with Wilmington Trust seeking foreclosure on behalf of CMBS investors in Natixis Commercial Mortgage Securities Trust 2018-FL1, which owns the loan secured by the Wanamaker. Natixis Real Estate Capital originated the $124 million loan in May 2018 before it was broken into four separate notes and securitized.
Wilmington Trust filed a complaint in the Court of Common Pleas on Aug. 15 asking for an order foreclosing the mortgage and directing the sale of the Wanamaker building to pay a judgment of $111.9 million plus interest and fees. After it received an extension on Thursday, Wanamaker owner Rubenstein Partners now has until Oct. 24 to respond to the complaint for foreclosure, court filings show.
Philadelphia-based Rubenstein bought a majority stake in the Wanamaker, located at 1300 Market St. across from City Hall, for about $200 million in 2017. Rubenstein serves as the building’s capital partner and Amerimar Enterprises as operating partner.
The 112-year-old building is the second largest office building in Philadelphia’s central business district, according to CoStar. The building includes an underground 660-space parking garage and a Macy’s department store on the first three floors. Rubenstein sold the 435,000-square-foot Macy’s section of the building to TF Cornerstone Inc. for $40 million in 2019.
The remaining loan is secured by the 954,363-square-foot office portion of the 12-story building and the parking garage.
The loan has been in special servicing since March, according to CMBS reports, and Wilmington Trust's foreclosure complaint claims that Rubenstein failed to pay off the outstanding balance or exercise an extension by the loan's June 9 maturity date.
The property owners requested a forbearance period through the end of the year and “agreed to inject” $500,000 into the property, according to service notes in the August CMBS report.
Both Wilmington Trust and Rubenstein Partners declined to comment.
The building was constructed in 1911 as the city's first department store, Wanamaker's.
The woes could be the start of a reckoning for CMBS-backed office buildings in Center City as many property owners deal with declining occupancy and reduced leasing revenue in the wake of the pandemic. Throughout the Philadelphia region, $1.3 billion in outstanding CMBS office debt is expected to reach maturity in the next two years, according to Newmark.
The tenants who left the Wanamaker building
The Wanamaker Building has lost several major office tenants since the onset of the pandemic, with occupancy plummeting from 96% in 2020 to 47% last year, according to CMBS reports. The building produced more than $23 million in revenue each year from 2018 to 2021 but dropped to $17.7 million last year, filings show. The building’s net cash flow was down 66% year over year in 2022 to $4.3 million, less than the $6 million debt service on the loan.
The General Services Administration has relocated two agencies out of the building since 2020, opening up 239,049 square feet of space. Children’s Hospital of Philadelphia exercised an option to terminate its lease on 252,631 square feet five years early in June 2022, requiring Rubenstein to deposit a $10 million termination fee with the lender, CMBS filings show.
August loan servicer notes say the Wanamaker’s owners hoped to secure a replacement anchor tenant in June “but that opportunity failed to materialize.”
Digitas Inc., the Wanamaker’s largest remaining tenant, has a 108,619-square-foot lease expiring in November and is set to move to the Bourse building in Old City where it is taking 59,754 square feet, cutting its footprint nearly in half. The departure of Digitas could leave the Wanamaker with almost two-thirds of its office space vacant.
Finley Catering Co., the Wanamaker’s next largest tenant, has a lease for 44,269 square feet that runs until 2034. A spokesperson for Finley, which operates the Crystal Tea Room event space in the building, said the company will not be affected by a receiver taking over the property's business operations.