Shorenstein’s 32-story office in Philadelphia sent to special servicing

Shorenstein Properties has a Center City office building in special servicing for a second time.

The San Francisco-based developer requested the loan linked to 1700 Market Street in Philadelphia be sent to special servicing, the Philadelphia Business Journal reported. Shorenstein is in discussions about a loan modification after its $188 million mortgage, held in a commercial mortgage-backed security, matured last week.

Barclays originated the loan in January 2022, six years after Shorenstein acquired the property.. The debt was transferred in August to special servicer Rialto Capital due to “imminent default,” according to servicer notes. The building’s most recent appraised value was $244.5 million, which dates back to 2021.

The 1700 Market Street property is 32 stories tall and spans 851,000 square feet. The building is 75 percent occupied, down from 88 percent when the loan was underwritten.

Expenses have been rising for Shorenstein at 1700 Market Street. General and administrative expenses jumped by a whopping 296 percent from 2022 to 2023. Payroll and benefits expenses also rose sharply.

The good news for Shorenstein is that more than half of its space should be leased for at least the next four years and the property’s five largest tenants don’t include any leases that expire before 2030. Reliance Standard Life Insurance is the largest tenant with 152,000 square feet, followed by Deloitte Services and co-working company Common Ground.

Down the street, Shorenstein’s $223 million loan backing the building at 1818 Market Street is also in special servicing. It is due to mature next month.

Shorenstein declined to comment to the outlet

Office distress isn’t hard to find in Philadelphia, and neither are landlords getting creative. Rubenstein Partners is considering converting part of the historic Wanamaker building at 1300 Market Street into residential space as the developer deals with the property being in receivership and vacancies stretching across two-thirds of the office.

— Holden Walter-Warner