American Real Estate Partners Lands $163M Refi for Philadelphia Tower

American Real Estate Partners has closed a $162.5 million refinancing deal for 1600 Market St., an iconic 39-story tower in Philadelphia’s Center City. Natixis Corporate & Investment Banking provided the five-year, floating-rate loan. JLL‘s Senior Managing Director Ryan Ade and Managing Partner Cary Abod of Abod Capital helped negotiate the transaction.

American Real Estate Partners acquired the high-rise in 2018. The company paid $160 million to Commonwealth Equity for the 825,968-square-foot asset. At the time it changed hands, the property was 82 percent leased. American Real Estate Partners has leased more than 100,000 square feet in the tower since acquiring it.

Also known as the PNC Building, the tower has served as the bank’s regional headquarters since 1996. PNC is currently taking up 233,411 square feet of office space at the address. In 2019, the bank dropped nearly 120,000 square feet of space after a lease renegotiation. The current agreement is set to expire in 2031, according to CommercialEdge data. The tenant roster also includes law firms, engineering consultants and real estate agencies.

Last year, the 1982-built property underwent $15 million worth of renovations. The owner initially planned to reposition the tower through cosmetic upgrades but, with the onset of the pandemic, plans shifted to include updates to the air circulation and purification systems as well as the introduction of contactless technology. The renovations brought 1600 Market St. Wired Score Gold certification and UL Industries Verified Healthy Building Mark.

The property includes a fitness center, shared conference center, game area and ground-floor restaurant and offers easy access to Center City’s dining and entertainment venues. The tower is also one block from 15th Street Subway Station and the City Hall.

Life sciences bring office stability

As of December, Philadelphia had 14.3 percent of its office inventory available for lease. The figure is 120 basis points below the national vacancy rate, the latest CommercialEdge report shows. The office market is largely supported by the metro’s expanding life sciences sector, which has been mostly unaffected by the pandemic.

In March of last year, a partnership between Ensemble Real Estate Investments and Mosaic Development Partners was selected by PIDC to develop two new life science buildings within Navy Yard, a $2.5 billion master plan development in Philadelphia. At full buildout, the development will encompass more than 1 million square feet of life sciences space.

Moderate optimism regarding the market’s recovery is fueled by next year’s wave of lease expirations, which should last until 2025, a fourth-quarter JLL report highlighted. Despite the lingering uncertainty, capital is still flowing towards traditional office buildings.

Last year, a flurry of refinancing deals closed for properties in Philadelphia’s CBD. In August, Landmark received $80 million to refinance 123 S. Broad St., a 705,500-square-foot office building in the Midtown Village district. PCCP provided the note which included $4.1 million capital for capital improvements.