Fairstead, Castlelake Buy Philadelphia High-Rise With $195M Loan

1500 Locust. Image courtesy of Square Mile Capital Management
1500 Locust. Image courtesy of Square Mile Capital Management

Square Mile Capital Management has provided a $195 million loan to a joint venture of Fairstead and Castlelake to purchase and renovate 1500 Locust, a 45-story, 612-unit multifamily building with 7,700 square feet of retail space in Center City, Philadelphia.

The purchase price was not disclosed by the lender or borrowers but the Philadelphia Business Journal cited reports the property was sold for more than $230 million. The seller was also not released. The business journal reported the seller was an affiliate of Barings, a global investment management firm. According to Yardi Matrix data, the property had been acquired in June 1989 by the Teachers Retirement System of the State of Illinois and a 10-year, $60 million loan had been originated by Fannie Mae for the asset in March 2013. Further information on the seller was not available at press time.

The financing was arranged by Drew Anderman and Alan Blank of Meridian Capital Group. The acquisition deal was brokered by Lizann McGowan, executive managing director at Newmark in the firm’s Philadelphia office.

Fairstead, a vertically integrated real estate firm located in New York, took over management of the property upon acquisition.

Desirable Location

The high-rise, built in 1974, is located in the heart of Philadelphia at the confluence of three prominent neighborhoods—Rittenhouse Square, the Avenue of the Arts and the Central Business District.

David Murstein, managing director, Development, at Fairstead, said in a prepared statement the property is situated in a prime location with access to world-class attractions, award-winning dining, high street retail and mass transit. 1500 Locust is located a few blocks from the city’s main retail corridor with more than 200 luxury stores and restaurants. The property is within walking distance from the 1.8 million-square-foot Comcast Center office development and the University of Pennsylvania Medical Pavilion expansion. It is also within walking distance to the CBD. Center City, which has nearly 200,000 residents, is the fastest growing submarket in Philadelphia and has attracted nearly 25 percent of all new Philadelphia residents.

1500 Locust is currently more than 97 percent occupied. The building has one-, two- and three-bedroom units with washers/dryers in all units and some with balconies. The penthouse level features an amenity suite with a glass-enclosed indoor heated swimming pool and Jacuzzi. It also has a fitness center, rooftop resident lounge, media room with theater seating, outdoor sundeck with cabanas and grilling areas. The property has a 398-space parking garage.

Murstein said the joint venture partners plan to enhance the residential experience with improvements to the amenity spaces, apartments and programming.

Recent Deals

Castlelake, a global alternative investment manager, has acquired more than 30,000 assets across the United States since it was founded in 2005. The firm has offices in New York, Dallas and Minneapolis as well as London, Dublin, Singapore and Luxembourg. Late last month, the firm sold a portfolio of five residential communities in Texas and Tennessee to an unidentified investment management firm. The portfolio had 2,200 residential lots and consisted of developed single-family detached lots in Dallas; Houston; Austin, Texas; and Nashville, Tenn. It also included excess land for potential build-to-rent, multifamily and commercial development.

Fairstead’s acquisition of 1500 Locust follows several recent transactions in New York, Texas and Florida. Last month, a joint venture of Fairstead and Invesco Real Estate purchased a 1,904-unit affordable housing portfolio in the Bronx, N.Y., from Property Resources Corp. for $350 million in one of the largest deals of its kind in New York last year. Also in December, the firm acquired the 160-unit Gateway in Lake Jackson, Texas. In October, Fairstead announced it was adding $500 million of equity commitment to affordable housing platform throughout the U.S.

Square Mile Capital Management was also active in the fall. In October, the institutional real estate and investment management firm, originated $144.2 million in acquisition financing for Nicholas SunTx RE Partners II and Prizma Capital to acquire Alexan Avondale in Decatur, Ga., and Aura Bluffview in Dallas.

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