Above-Average Vacancy Prompts Downgrade of BofA Tower Bonds

SEATTLE-Fitch Ratings last week downgraded $195 million in debt securities tied to the 76-story office Bank of America Tower in Downtown Seattle, in part due to above-average vacancy caused by the loss of its largest tenant earlier this year.

The law firm Preston Gates & Ellis vacated 167,000 sf in the building in January and relocated to 240,000 sf in the new IDX Tower developed by Hines Interests LP. Making matters worse, the ratings agency is reporting that since that time several other tenants with lease expirations in 2003 either have announced they will vacate or have signed new leases at current market rents, which are significantly below their previous rents.

As a result, the Equity Office Properties skyscraper is 24% vacant in a market that’s averaging 16% vacancy. Moreover, Fitch says vacancy will rise to 27% at year end if no new leases are signed and an additional 13% of the building’s leases expire in 2004, long before the market is expected to recover.