After months of trouble and failed negotiations, Atlanta's Bank of America Plaza was up for auction on the steps of the Fulton County Courthouse — a symbolic marker of how far the market has fallen, brought into focus by the building’s name.
According to Lender Processing Services [stock LPS][/stock], the five MSAs with the greatest homeprice declines in November were all in Georgia. Columbus, Macon, Gainesville and Augusta (in addition to Atlanta) declined more than 2%.
More Georgia banks failed in 2011 than any other state, with 23 failures. Since 2008 there have been 74 in the Peach State, which is also highest in the country. As HousingWire's February edition shows, Georgia's troubles stem from a troubled housing market and weak economy.
When the 55-story building was bought in 2006 at the height of the real estate boom, California-based BentleyForbes paid $463 million for it, then the most paid for an Atlanta building. At the time, BentleyForbes CEO David Cobbs told reporters that his company was snapping up real estate because it seemed like a stable investment. The market proved him wrong quicker than he imagined.
Almost immediately, vacancy rates rose to alarming highs as companies left the building or downsized space due to the weakening economy. Even the building’s namesake wanted out of the deal. Bank of America once leased almost 550,000 square feet of the tower, but by 2011, the Charlotte, N.C.-based banking giant occupied less than 200,000 — depriving Bentley Forbes millions of dollars of annual rental income.
When things first started to go bad, there was speculation the company wanted to sell the building, but BentleyForbes rebuffed the claim, saying it was confident the high vacancy rates would be a thing of the past. BentleyForbes tossed around plans to convert part of the building into a hotel in 2008 to deal with the open space, but that idea was soon squashed.
Last year, the building's mortgage — and its $363 million unpaid balance — transferred to LNR Partners, a special servicing agent, because default seemed imminent. After almost a year of talks, BentleyForbes and LNR have been unable to reach an agreement to restructure the loan. LNR took possession of the property Tuesday.
Last ditch attempts at an agreement continued, and the property officially announced foreclosure in January, but nothing happened and it sits on the steps of the courthouse waiting to be auctioned off.
The story of the tower mirrors the stories of countless other properties now sitting in foreclosure. They were purchased when the market was hot, only for things to spiral quickly out of control after the market crashed leading to a complete slowdown in renting, buying and building.
The Bank of America Tower just happens to be on a much larger scale.