A building that once set a record for the most expensive Philadelphia office sale ever completed went up for auction this week and failed to attract even a minimum bid.
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In its 2018 heyday, the former GlaxoSmithKline building in Philadelphia's Navy Yard made history when it sold to Korean Investment Management for $130.5M, or $628 per SF, an all-time high.
But that same 208K SF building got no takers at a sheriff's auction, at least not one that met its debt servicer's reserve requirements, the Philadelphia Business Journal reported.
The high bid for the building at 5 Crescent Drive was $4M, below the reserve amount set by Rialto Capital Management. The firm is acting as a special servicer for $78.5M in debt backed by the property and owned by CMBS investors, according to court documents viewed by the PBJ.
The building was most recently assessed at $89.3M in 2023, a 33% plummet from the $132.7M assessors valued it at in 2018.
Rialto Capital Management didn't respond to queries on the failed auction. Bid4 Assets, the city's online bidding platform, noted the building's debt load could be negotiated between a new buyer and Rialto.
The building has also gone through the ringer since Korea Investment Management purchased it from Liberty Property Trust six years ago. Goldman Sachs originated the investment manager’s $85M loan on the building in May 2018, and its debt was sold off to a CMBS trust.
Korea Investment Management proceeded to make interest-only payments on the loan, which was put on a watchlist and transferred to a special servicer in November 2022. That was the same year GlaxoSmithKline downsized and relocated to 46K SF at FMC Tower in University City. GSK is required to pay rent through September 2028, but the space it left behind has remained vacant.
Korea Investment Management's loan reached maturity last year, at which point it moved to create a stipulated foreclosure with Rialto. By January, Rialto had filed a foreclosure complaint against Korea Investment Management in Philadelphia's Court of Common Pleas.
Trigild’s Lewis Taulbee was appointed as the building’s receiver in February, and notice of the sheriff’s sale was filed in early March.
A potential new owner of the massive office space could collect rent from GSK through 2028, then lease out the space afterward. But the market is difficult for large office properties, and others have fallen into the same fate of receivership.
The former Centre Square building at 1500 Market St. and the Wanamaker building at 100 E. Penn Square in Center City are also vacant and in receivership. The buildings had a $375M principal balance and $112M unpaid balance, respectively, at the time they fell into receivership, Bisnow reported last year.
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