Brewerytown Apartment Building Faces 34% Valuation Cut After Entering Special Servicing
Philly's Brewerytown neighborhood has become a growing destination over the past decade, but not everyone working to cash in on its popularity is having an easy time.
MM Partners, the owner of the 161-unit Fairmount at Brewerytown, fell delinquent on its $28M CMBS loan in January, and it was transferred to special servicing in July, according to Morningstar Credit. Now, it received a new appraisal of $32.2M, down 34% from when the loan was originated.
The building overlooking Fairmount Park at 1363 N. 31st St. has a healthy 1.4 debt service coverage ratio and was 87% occupied at the end of last year, according to Morningstar. But its problem has been the recurring vacancy in a ground-floor bar/restaurant space, which has been empty since March.
MMP has been delinquent on its payments for the property in nine of the last 12 months, according to Morningstar.
“The difference in cash flow between when the loan was underwritten and now is more or less the income attributable to the empty retail space,” Morningstar Senior Vice President David Putro said in a statement.
The company bought the building in 2021, and Managing Partner David Waxman remains optimistic about its future. He told Bisnow the residential portion has been stabilized and the company is in active discussions with potential tenants for the commercial space.
“The Fairmount at Brewerytown is a strong asset that, like many mixed-use urban properties, experienced a difficult period coming out of the pandemic,” Waxman said in a statement.
“We had turnover in several commercial tenants at the same time we saw a spike in residential delinquency — a combination that temporarily impacted cash flow.”
Putro agreed that for a property in special servicing, the Fairmount’s future appears to be relatively bright.
“The fact that the appraisal remains above the loan balance is a positive — a bit rare in the current environment,” he said.
The Fairmount isn't the first MMP property in Brewerytown that fell into special servicing this year.
The other was the 132-unit Poth Brewery Lofts at 3145 W. Jefferson St., which also includes 25K SF of retail. MMP bought the historic brewery in 2018 and completed renovations in 2022. It was 86% occupied at the end of last year, up from 74% in December 2023.
MMP’s portfolio is defined by projects in neighborhoods going through gentrification. Most are in Philly, but the company also plans to build a 116-unit mixed-use building with 10K SF of retail on the corner of Main and DeKalb streets in Norristown.
