Building foreclosures occur nearly every business day. But when the failed investment involves the tallest office tower in the Southeast, and the building is named after one of the largest banks in the world, then it comes to represent something larger.
That seems to be the case for Bank of America Plaza. Billed as the tallest and most recognizable trophy office tower in Atlanta, the 1.3 million-square-foot structure was labeled as the "emblem" of the burst real estate bubble after its lender took back the building in a foreclosure auction held on the steps of the Fulton County Courthouse this week.
The lender, a commercial mortgage-backed security owned by investors, was represented by LNR Partners, the special servicer selected to negotiate with the borrower, BentleyForbes, to try and restructure the $363 million mortgage. The foreclosure went forward after LNR and BentleyForbes were unable to reach an agreement. BentleyForbes paid $436 million to acquire the 55-story office tower from Cousins Properties Inc. and Bank of America Corp. in a record-setting sale in 2006. At the time, the building was a reported 99% leased.
Since the sale, several major tenants have relocated to other buildings or downsized. Bank of America itself went from leasing more than 500,000 square feet in the building to less than 200,000 square feet. A loan for Bank of America Plaza became delinquent in December when BentleyForbes stopped making payments. Fitch Ratings then downgraded the loan, which was packaged as part of a commercial mortgage backed security.
Observers believe more high-profile delinquencies will occur as a large number of loans on commercial properties were made under similar circumstances in 2006 and 2007 and are coming due this year. And while the lending environment is improved, properties such as Bank of America Plaza that have suffered from tenant departures and consolidations are hard-pressed to come close to their previous valuations when the loans were made.
Given the location and quality of the asset, brokers in Atlanta expect that Bank of America Plaza will have a new owner soon at a price reflecting its current value.