Wells Fargo moves to foreclose on $1.3B Workspace portfolio

Wells Fargo has moved to foreclose on Workspace Property Trust's $1.28B CMBS portfolio, filing lawsuits in multiple states over 143 office and industrial properties across Arizona, Florida, Minnesota and Pennsylvania, Bisnow reports. The loan has been one of the most valuable CMBS positions in special servicing since it landed there in May 2023; unpaid principal now sits at roughly $1.23B against a Morningstar valuation of $1.24B, down from $1.63B at issuance.

The portfolio was originated in 2018 with 146 properties totaling nearly 10M SF, and it went to special servicing in May 2023, a month before its July 2023 maturity, when WPT obtained a two-year extension on the strength of a promised occupancy and cash-flow recovery backed by new investment from existing investors, CEO Thomas Rizk said at the time. Suburban office, he argued, was holding up better than downtown product.

That thesis has faded: Morningstar puts occupancy at 75% today, down from 81% in 2022 and nearly 89% at origination, with most assets smaller than 100K SF and vacancy scattered across many small buildings, which is more expensive to cure than a single downtown block. The two largest assets are One Liberty Corporate Center, a 325K SF office building in Bloomington, Minnesota, and 1500 Liberty Ridge Drive, a 233K SF office building in Chesterbrook, Pennsylvania.

The legal machinery has been running since last year: Wells Fargo filed a lawsuit in Maricopa County, Arizona, in September 2025, and Trigild was appointed receiver for the entire portfolio, with KeyBank National Association serving as special servicer and attorney-in-fact for the lender, according to the new filings. The lender is owed the unpaid principal plus interest, special servicer fees and attorney expenses, and the current batch of foreclosure actions across multiple states follows the receiver appointment, including one filed in Hennepin County, Minnesota.

The portfolio is more than half of WPT's 18M SF holdings, acquired from Liberty Property Trust in two 2016 transactions — 29 Pennsylvania buildings in January and 108 properties in October. It is the company's center of gravity, and a court-supervised sale will test whether the trust secures any of its claim after fees.

Foreclosure on this scale sets up a price discovery event for suburban office and industrial product, because with most buildings under 100K SF and occupancy at 75%, the natural bidder is likely a local, vacancy-tolerant operator buying on current cash flow rather than replacement cost — the only way the numbers work. This is the commodity repricing PWD has long argued would settle office: capital that does not need to underwrite rent growth taking assets at income-based valuations rather than a trophy-tower trade.

The contrast with the Wells Fargo-backed refinancing of Doral Center is direct: there, lenders now finance office assets only after the capex is spent and the lease-up is proven. Here, neither condition is met, so the capital markets are resolving the loan by transferring the asset to a receiver and pricing it on today's net operating income, leaving essentially no cushion for the trust once interest, fees and attorney costs are paid from a $1.23B unpaid balance against a $1.24B valuation. The two-year extension bought time, not oxygen.

What remains is the sale: the receiver and special servicer will market a 143-property portfolio with 75% occupancy and a long tail of small-box vacancy, and bids will come in dollars per square foot that reflect current income rather than the 2018 issuance appraisal or the 2023 extension hope. That number — set in a courtroom rather than a negotiation — will be what the rest of suburban office trades against.