3850 SE Three Mile
US - McMinnville, OR
SEK 54,280,000 | 2,309 m²
Jones Lang LaSalle (“JLL”) has been retained on an exclusive basis by the Seller, a national lender, to arrange the sale of a $161.6 million loan non-performing first mortgage loan (the “Loan”). The Loan is secured by a first lien priority interest in the fee-simple Property plus an equity pledge as additional collateral. The mixed-use tower includes multiple data centers, recording studios, office uses and retailers, in Philadelphia, Pennsylvania (the “Property”). The Loan was originated in 2015 with an initial balance of $190.0 million to recapitalize the Property, and featured interest-only payments at a rate of LIBOR + 4.70%. The Loan carried an initial term of 2 years followed by three (3) twelve (12) month extension options. Since closing, the Seller has received principal paydowns of approximately $18.0 million from the borrower and $8.0 million from property cash flow. The Loan has been further extended, resulting in a current maturity date of September 9, 2023. As of May 1, 2023, the Loan was in payment and maturity default with a combined unpaid balance of $161,603,157 ($151 PSF).
The Property is a 13-story, 1,070,000 SF mixed-use building located in Center City Philadelphia, Pennsylvania, and was 76.7% leased as of March 31, 2023. The Property was constructed in 1948 as a pharmaceutical manufacturing facility, before being gut-renovated to the shell in 2000. The building allows for heavy floor loads of up to 400lbs and offers tenants access to eight high-tension power feeds and a 17.5-watt, diesel-fueled emergency generator. The existing rent roll and physical usage is diverse with over 23 tenants, of which 19.9% are considered investment grade spanning industries including data center services (41.8%), media and broadcasting (18.5%), and consulting (18.0%). The building offers tenants large floor plates which can support heavy floor loads making it ideal for data center or life-science use.
STRONG OCCUPANCY, SOLID CREDIT & MISSION CRITICAL USES
Hovering close to 80% occupancy (as of March 2023), the Property boasts stable cash flow which reflects a 0.80x DSCR with 5.2 years of WALT remaining. The rent roll reflects a diverse tenant base, 19.9% of which are considered investment grade by Fitch and/or S&P. The building houses to two long term data center tenants occupying 200k+ SF. Significant investment from each tenant in its space, the unique building infrastructure, and lack of comparable space in the market, results in high on-going renewal probability of these anchor tenants.
LIFE SCIENCE CONVERSION OPPORTUNITY
The Property provides an excellent configuration for a potential lab conversion of current vacancies and future rollover. The Property offers infrastructure essential for lab and manufacturing operations, yet rarely seen in an adaptive re-use opportunity. Current in-place infrastructure includes large floor plates (42,000 – 123,000 SF), 14-15 foot ceiling heights, eight high-tension power feeds, 150-400lb peak flood load capacity and freight elevators with immediate access to loading.
With the loan currently in default, and a current in-place debt yield of 7.9%, the loan buyer inherits multiple resolution paths. The Loan is split between a $121.4 million senior loan and $40.2 million mezzanine loan. The lender has started enforcement of its rights and remedies to start the UCC foreclosure process.
At $161,603,157 in total unpaid principal balance, the Loan basis is $151 PSF, and at a discount to the Borrower’s acquisition basis of $172 PSF in 2013.
NORTH BROAD LOCATION
The Property is located in the North Broad Street corridor, which attracts investment because of its walkability, convenient highway accessibility, and multiple public transportation options, providing seamless access to the Philadelphia CBD. The Property is adjacent to the Community College of Philadelphia (CCP) and walking distance from The Rail Park.