Prospectus Details $46.5M Loan on One South Broad Street Building in Philadelphia

Photo Courtesy of LoopNet

JP Morgan Chase has filed a prospectus for its JPMCC 2012-LC9 CMBS offering, which includes a $46.5 million loan on The One South Broad Street building in Philadelphia.

The loan is secured by a first mortgage lien on the 25-story, Class B+ office property located in the central business district of Philadelphia. The loan has a 10-year term, and subsequent to a 12-month interest-only period, amortizes on a 30-year schedule. 

Proceeds from the loan were used to repay previously existing debt and related defeasance costs of approximately $39.5 million, fund upfront reserves of $4.7 million, pay closing costs of $0.5 million and return $1.7 million to the sponsor.

The borrowing entity for the loan is Broad One L.P., a New York limited partnership and special purpose entity.

The loan’s sponsor and non-recourse guarantor is Mark Karasick, founding principal of 601W Companies (“601W”), a privately owned New York based real estate firm specializing in acquisitions, ownership, development and management of real estate across the country. Over the past 15 years, 601W Companies has acquired approximately 24 million square feet of commercial properties valued in excess of $5 billion.

One South Broad Street is a 25-story, 433,984 square foot Class B+ multi-tenant office building constructed in 1932 and renovated in 2000.  As of October 1, 2012 the property was 87.8% leased to 21 tenants.

The largest tenant at the property, Wells Fargo, leases 33.5% of the net rentable area through December 2020. Wells Fargo’s operations at the property include Capital Finance, Treasury Management & Implementation, Audit, International Product, Credit Resolution, Financial Marketing and Corporate Real Estate.

The sponsor recently executed three new leases for an aggregate of 53,949 square feet (12.4% of net rentable area) with Walgreens, DMi Partners, Inc. and Bazelon, Less & Feldman.

Walgreens executed a forty-year lease on 25,498 square feet, which will commence on April 2013 at a rate of $34.32 per square foot. In the Walgreens’ space will be Walgreens’ new “Well Experience” urban concept store which includes a new Take Care Clinic, fresh foods, and offers web purchase and pickup options.

DMi Partners, Inc. executed a ten-year lease on 16,139 square feet, which commenced in November 2012 at a rate of $20.75 per square foot. Bazelon, Less & Feldman executed a ten-year lease on 12,312 square feet, which will commence on April 2013 at a rate of $21.50 per square foot.

The property is located across from City Hall at the intersection of South Broad Street and South Penn Square, the area known as the Center City district within the central business district of Philadelphia.

According to the appraisal, Center City offers the best accessibility of any district in the city due to a multitude of major transportation options, including local and regional rail access and major roadway access. PATCO’s high-speed line commuter train provides access to Center City from southern New Jersey and has a stop four blocks south of the property. 

The two largest roadways serving Center City – Market Street and Broad Street – are in close proximity to the property. These major thoroughfares connect to Interstate 76 (Schuylkill Expressway), which leads to New Jersey to the east and the Pennsylvania Turnpike to the west. Four blocks north of the property, Interstate 676 (Vine Street Expressway) connects Interstate 76 with Interstate 95, which is the major north/south limited access roadway on the east coast.

The property offers direct access to an underground pedestrian concourse level that connects a number of other buildings in the neighborhood so that pedestrians can walk to their offices without going outside in inclement weather. The concourse offers access to the Broad Street Subway and the Market-Frankford Line at City Hall. The regional commuter rail line, SEPTA, has an underground station at 15th and Market Street which provides underground concourse level access along most of Market Street and JFK Boulevard.

As of the third quarter of 2012, the Center City Philadelphia market was comprised of approximately 44.2 million square feet of office space with a vacancy rate of 14.3%.  According to the appraisal, the property is located in the Market West submarket which reported a vacancy rate of 14.7% and asking rents of $26.72 per square foot, as of the third quarter of 2012. The appraisal identified eight competitive properties ranging from approximately 272,000 to 1.4 million square feet that reported a weighted average occupancy of approximately 92.0% and rental rates ranging from $18.50 to $25.00 per square foot.

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