Equitable Building auctioned for $29.5 million

In a sign of what could be things to come for metro Atlanta's distressed office market, the Equitable Building was auctioned Tuesday morning for 56 percent of what the lender was owed.

The landmark 33-story building in downtown Atlanta sold for $29.5 million in a foreclosure auction on the steps of the Fulton County Courthouse, said William Rothschild, an attorney with Sutherland, Asbill & Brennan.

Rothschild's firm represented the lender, Capmark Bank, in the foreclosure. The buyer was 100 Peachtree Street Atlanta LLC, an affiliate of Capmark.

There were no other bidders.

The building's owners, San Diego-based Equastone 100 Peachtree LLC, owed $52 million to Capmark, a division of Horsham, Pa.-based Capmark Financial Group.

Equastone paid $56.8 million in May 2007 for the 40-year-old building, which once dominated the city's skyline from its location across from Woodruff Park. Fulton County tax records put the value of the building, now about half vacant, at about $45 million, including land.

John Speros, senior vice president of Ackerman & Co., an Atlanta-based full-service commercial real estate firm, said the Equitable Building was among a number of trophy assets purchased at the top of the market based on the availability of inexpensive financing. Several of those properties could now suffer a fate similar to the Equitable Building's, he said.

"If these assets have lost a significant number of tenants or have financing coming due, their value could be dramatically reduced," Speros said. "Accordingly, owners will either have to write checks to the lender to pay down the mortgage or face foreclosure.

"We are already seeing this devaluation occur in the residential market, with lenders willing to discount their original loans on raw land and developed lots by up to 70 percent in some cases."

While the residential market appears to be approaching the bottom of the cycle, Speros said, "we are just beginning to see the problems arise in the commercial markets as a lot of the conduit loans used to finance the assets are coming due in the next 12 months."

The 20-county metro Atlanta area is home to 192.6 million square feet of office space. Metro Atlanta's overall office vacancy rate was 17 percent for the first quarter of this year and could reach 18 percent by the end of the year, said Scott Amoson, director of research for Atlanta-based Colliers Spectrum Cauble, a commercial real estate brokerage firm.

Prices will continue to fall, but don't expect investment activity to ramp up. Investors were keeping the Equitable Building on their radar as the first notable building in metro Atlanta to go into foreclosure. They wanted "to gauge what buyers were willing to pay for a Class A office building in a heavily urban area," Amoson said.