Report: Atlanta's tallest building faces ‘imminent default'

Experts now believe owner BentleyForbes is seeking to avoid default -- and possibly foreclosure -- on the trophy tower that it bought at the height of the real estate boom for $436 million, the highest price ever paid for a building in Atlanta before or since. Still, the building’s fate is part of the continuing story of Atlanta’s roller-coaster real estate industry.

The building has been losing occupants and income since BentleyForbes bought it in 2006, struggling to compete with newer towers and economic downsizing. The latest news is that Bank of America is giving back more than half its space, and its rental rate has been almost slashed in half, drastically cutting income for the building’s owner.

Once full, today the building has a vacancy of about 21 percent.

Atlanta’s Class A vacancy rate is about the same, according to Colliers International.

But that rate is running at historically high levels, and the ample available office space has been driving developers and owners to foreclose on their prized towers, or renegotiate bank loans.

The Bank of America Plaza, at 600 Peachtree St., has been making headlines ever since Cousins Properties developed its blueprints and completed it in 1992.

It became a point of pride for the aspiring capital of the South when it was completed, scraping the sky just as Atlanta was pursuing its dream of becoming an international, Olympic city. Cousins was competing at the time with architect John Portman to see who would build the taller building. SunTrust Plaza fell short because its spire wasn't as tall, though it has as many stories.

And when Bank of America Plaza sold in 2006 for a record price, it made headlines again.

But now it's making a different kind of news.

Though the primary loan on Bank of America Plaza is not in default, BentleyForbes said it asked for the loan to go to a servicing company to negotiate new loan terms. A report by commercial real estate data firm Trepp LLC shows that a secondary loan on the Bank of America Plaza is in default for non-payment, though not the primary loan with a balance of $363 million, which is held by Wells Fargo.

“BentleyForbes requested the [primary] loan for Bank of America Plaza in Atlanta to be moved to special servicing,” Tony Manos, chief operating officer of BentleyForbes, said in an e-mail. “At present, the loan is current and performing. This was a strategic decision made after discussions with LNR, who will be working closely with BentleyForbes as the special servicer to determine next steps moving forward.”

Manus Clancy, senior managing director for Trepp, believes BentleyForbes is trying to keep the trophy tower and possibly avoid foreclosure.

He said it would be “almost a dereliction of duty” for BentleyForbes' management not to work out some relief on the loan.

“So what these guys are doing is just good business,” he said.

Atlanta ranked eighth out of the top 25 metro areas in terms of commercial loans that are 60 or more days late, Clancy said.

Trouble for the city’s tallest tower appeared to be brewing last year.

First, Cousins Properties sued for alleged breach of contract when BentleyForbes canceled Cousins’ management contract.

Then, The Atlanta Journal-Constitution followed a tip in early December that a special servicer might be taking control of the building’s new management.

A leasing agent at the time, Bill Lynch, said, “That’s totally not true.” Lynch, who was with Cushman & Wakefield, has moved to Chicago and couldn’t be reached for comment Thursday. Cushman & Wakefield’s Atlanta office, which still represents the tower, had no comment.

But because the building was bought at the height of the boom, some in the real estate industry were almost waiting for the building to show distress.

“Everyone’s gotten to the point where they expect things like this to happen,” said Scott Amoson, director of research for Colliers International in Atlanta. “People were wondering when, rather than how and why.”

When BentleyForbes bought the tower, a press release said the firm was pursuing Class A trophy towers, and the company had completed more than $1.1 billion in new acquisitions in 2006.

“This was back in 2006 when the investment levels were running rampant,” Amoson said.

Its two largest occupants, Bank of America and Atlanta law firm Troutman Sanders, also seemed stable, with long-term leases.

But as newer towers started picking off tenants and existing tenants needed less space, the building’s vacancy level rose. Boston Consulting Group, for example, moved to 1075 Peachtree, and Ernst & Young moved into its own building in Allen Plaza.

When Bank of America renegotiated its lease, it set the stage to lower BentleyForbes’ income dramatically.

Trepp reported that when BentleyForbes bought the building, it was counting on future annual income of about $32 million a year. But annual income has been diving.

At one point, BentleyForbes got creative in hopes of filling space. It discussed putting a hotel in part of the tower that was built for offices, but that didn’t come to pass.

Most tenants asked for comment on Thursday declined. But one said the building had been maintained.

“I would say the quality is still very high. I haven’t seen any changes," said Keyur Patel, a consultant for Public Financial Management, a financial adviser to municipalities. The firm leases space on the building's 37th floor.

Staff reporters David Markiewicz and Jeremiah McWilliams contributed to this article.