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Shorenstein Returns to Philadelphia with $184.8M Acquisition of 1818 Market Street

Sovereign Capital Mgmt Sells 982,000-SF Office Tower
May 1, 2015
Shorenstein Properties LLC has closed on its acquisition of the 1818 Beneficial Bank Place office building at 1818 Market St. in Philadelphia, PA.

Sovereign Capital Management sold the asset for $184.75 million, or about $188 per square foot, according to public records. Sovereign's sale of the asset closed in two deeds, the first involving a consolidated fee-simple interest of one parcel and the building and a leasehold interest in the other parcel, and the second conveying the leased fee interest in that second parcel.

In addition to the San Diego-based seller, there were previously 34 fractional owners taking title as TIC, three of which reportedly declared Chapter 11 Bankruptcy during negotiations.

The 37-story, 981,743-square-foot, 4-Star office tower was constructed in 1976 on almost a full acre in the Market Street West submarket of downtown Philadelphia. Renovated in 2012, the property features ground-floor retail space that is home to Beneficial Bank and Five Below, covered parking with 410 spots, and is surrounded by new residential development and Comcast's 1.5 million-square-foot Innovation and Technology Center expected to deliver in 2018.

"This is an extremely well located asset in an area which is undergoing a revitalization and will continue to appeal to tenants seeking to recruit and retain young professionals," said Douglas W. Shorenstein, chairman & CEO, Shorenstein Properties. "1818 Market Street offers the kind of flexible, large blocks space that appeals to broad swath of growth tenants."

Shorenstein made the acquisition on behalf of its 11th real estate investment fund, a $1.22 billion investment vehicle formed in 2014 with committed capital from Shorenstein and its investors. The sale mark's Shorenstein's re-entry into the Philadelphia office market after selling Two Liberty Place ten years ago.

1818 Market was encumbered by a conduit note, WBCMT 2006-C24, that carries a cut-off balance of $122 million and a weighted average mortgage interest rate of 5.946% held by Wachovia Bank. Arbor Realty Funding, which held a $10 million B note, acquired the A note via an intecreditor agreement.

The buyer was reportedly looking to obtain a new $120 million, floating rate, five-year loan. Documents show Bank of America as the new lender. Cushman & Wakefield handled the lending assignment, brokered the sale, and has been retained by the new owner to continue its leasing assignment at the property.

Please see CoStar COMPS #3279921 for additional information on this transaction.
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