Wednesday, February 8, 2012

Auction of Atlanta Skyscraper A Sign of The Times

Bank of America Plaza, the tallest tower and the most identifiable building in the U.S. Southeast, was sold at a public auction Tuesday on the steps of the Fulton County, Georgia  Courthouse. The $363 million Bank of America Plaza loan became delinquent in December after BentleyForbes stopped making payments.The noteholder had a winning bid of $235 million, according to attorney Howard Walker who ran the auction. The holders of the commercial mortgage bonds took ownership through a “credit bid” placed by LNR Partners, the tower’s special servicer.

BentleyForbes, based in Los Angeles, paid $436 million to acquire the 55-story Atlanta skyscraper in 2006 from Bank of America and Cousins Properties Inc. in the city’s biggest property deal. The 55-story Bank of America Plaza building is a first-rate address in Atlanta for many top law firms and corporations. Since the property market peaked a year after the purchase, the 1.25 million-square-foot (116,000-square-meter) building’s value has tumbled with tenants, including namesake Bank of America, reducing space.

Atlanta has the highest rate of late payments for loans on offices bundled into bonds among the largest U.S. metropolitan areas, at over 25 percent, according to data compiled by Bloomberg. That’s an increase from 10.4 percent a year ago and is more than triple the national rate. The building's owners are just another victim to the real estate bust that is sweeping over Atlanta. The area  has been  hit hard by over-building, lots of empty office space and inflated prices, Atlanta recently saw home prices fall to a thirteen year low and received the second-lowest ranking among 20 cities tracked in the Case-Shiller home price index, only Detroit did worse.

The tower was appraised at $202 million in March, according to Bloomberg, a big reason the tower is worth so much less is the diminishing fortunes of Bank of America. The bank which had occupied 30% of the building will now use just 15% of it and starve the landlord of needed tenants. To add insult to injury, the bank will pay half as much rent per square foot as it had previously, according to a  December report from Fitch Ratings.

Bank of America has been laying off employees and selling and shrinking businesses in an effort to shore up its balance sheet. In the past year, the bank sold its Canadian credit card operations, said it would exit the correspondent mortgage business and sold its remaining a stake in China Construction Bank. Bank CEO Brian Moynihan said late last year the bank would lay off 30,000 employees "over the next few years."This event and many like it reflects reality in America far better then the soaring stock market.

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