Former GSK Navy Yard HQ Sells at Steep Discount

A building that once symbolized Philadelphia’s top-of-the-market office boom is now a case study in the sector’s reset.

The Eastern Atlantic States Regional Council of Carpenters purchased the former GSK office building at the Navy Yard for $52 million, landing the vacant property at a steep discount after a drawn-out foreclosure process.

The deal for the 208,000-square-foot building at 5 Crescent Drive works out to roughly $250 per square foot, well below the $628 per square foot it fetched just eight years ago, according to the Philadelphia Business Journal.

Rialto Capital Management sold the four-story building on behalf of a commercial mortgage-backed securities trust after a sheriff’s sale this summer failed to meet the lender’s reserve price. Ownership had reverted to the trust earlier this year following a foreclosure judgment of $78.5 million against Korea Investment Management, the building’s previous owner.

GSK vacated the property in early 2022 after consolidating its Philadelphia-area offices at the FMC Tower in University City. The drugmaker negotiated a lease termination that had been scheduled to run through 2028, leaving the Navy Yard building dark as office demand softened and financing costs surged.

The carpenters’ union plans to move quickly. About 125 employees will relocate from the group’s headquarters at 1803 Spring Garden Street to the Navy Yard within the next three to six months, chief operating officer Ray Brugueras told the publication. The union will lease out any remaining space at 5 Crescent Drive and is weighing future redevelopment options for its soon-to-be-vacant Spring Garden Street property.

EAS Carpenters also plans to build a 110,000-square-foot training facility on the site’s parking lot, a project expected to take more than two years. The Carpenter Contractor Trust and the Eastern Atlantic States Carpenters Benefit Funds, both tenants at the Spring Garden Street building, are also slated to move to the campus.

The sale closes the loop on a dramatic value swing. Liberty Property Trust developed the $120 million building in 2013, touting flexible layouts and collaborative space. Korea Investment Management bought it in 2018 for $130.5 million, setting a high-water mark for Philly office trades, backed by an $85 million loan originated by Goldman Sachs and later securitized.

By 2023, however, the building’s appraised value had fallen to $89.3 million.

The deal adds to a growing list of union-backed real estate plays at the Navy Yard. Last year, IBEW Local 98 and its apprenticeship arm paid $18.5 million for two nearby buildings after relocating from Spring Garden Street.

— Holden Walter-Warner