Lenders Win 6 Atlanta Office Towers, Mall at Auction

A commercial real estate financing firm representing investors that control a $115.3 million CMBS loan on six office towers and a shopping mall that are part of Atlanta’s Peachtree Center has won the portfolio in a foreclosure auction with a credit bid of $127.5M.

Situs AMC secured the property in the auction, which was held on the steps of the Fulton County Courthouse last week. The only outside bid at the auction was a $1.5 million cash offer from a local investor, according to a report in the Atlanta Journal-Constitution (AJC).

Miami-based Banyan Street Capital failed to make a balloon payment in April and defaulted on six office towers at 225, 229, 233 and 235 Peachtree St. and an underground shopping mall known as the Hub.

The properties, which together encompass 2.5 million square feet, are part of Atlanta’s downtown Peachtree Center. Several high-profile buildings in Peachtree Center, including the Hyatt Regency and Marriott Marquis convention center hotels and merchandise mart AmericasMart, were not part of the foreclosure.

Banyan Street, which spent millions upgrading the foreclosed buildings and mall, told AJC that the firm remains committed to its ownership of an office tower at 191 Peachtree and a multifamily tower at 161 Peachtree, as well as multiple parking garages in the downtown area.

Peachtree Center’s occupancy, which stood at 72% percent in 2019, dipped to less than 55% last year after Truist Financial Corp. vacated its offices in two of Banyan’s buildings at the complex, with net operating revenues declining from $18.9 million to about $10 million at the same time, according to Atlanta Business Chronicle.

Despite the financial problems at the Peachtree Center, Atlanta’s overall office picture improved significantly in the second quarter.

Atlanta’s office market rebounded from a slow start this year — the market recorded 315,000 square feet of negative absorption in Q1 — with more than 1 million square feet in absorption in the second quarter, according to Colliers.

Google’s move into 500,000 square feet at 1105 West Peachtree led the way in the office surge.  The new Google office encompasses 19 floors in the building.

After taking a step back in Q1, Atlanta’s office vacancy rate dipped to 16.7% in the second quarter, a drop of 40 basis points. Availability, which hit a record high of 40 million square feet in Q2, dipped to 39.5 million square feet.

Class A office buildings, which benefitted from the flight to quality impacting office building in urban centers across the US, saw the largest decrease in office vacancies in Atlanta. Class A vacancies in Atlanta’s capital decreased by 210 basis points.

However, Colliers reported that average rents for Class A office space decreased slightly despite the decline in vacancies. Colliers attributed this dip to the availability of subleases on the market, the large amount of new supply delivered, and record-high concessions from landlords.