A Buckhead law firm's decision to stay put leaves developer John Dewberry still seeking an anchor tenant for his Midtown tower, the Campanile.
The firm, Morris, Manning & Martin, had announced two months ago it would move to Campanile, but it now will stay in Buckhead’s Atlanta Financial Center, where its offices will get a makeover.
Both sides said negotiations broke down over financial terms. Dewberry’s lender, a syndicate of credit unions, wouldn’t agree to terms requested by the law firm, they said.
Lenders have a say, especially after the recession, over how building owners like Dewberry use loans meant for tenant improvements, broker commissions and common area repairs, said Ben Raney, president and CEO of Raney Real Estate Companies. If a deal looks too expensive, a lender may not agree to it, because they don’t want to be have to step in if a landlord defaults.
“In a market with declining values such as we have now, lenders have found themselves acting like owners,” Raney said. “I’m not surprised this situation has happened.”
For Dewberry, it means renewing the search for a large tenant for the trophy tower he bought last year for $36 million in a distress sale. The 20-story building was built as the upscale headquarters for BellSouth in 1987. It was mostly vacated after BellSouth's merger with AT&T.
The Campanile’s largest tenant now is Georgia's Own Credit Union. It's 33 percent leased, with most of the vacancy on the top floors. Snagging the Buckhead law firm was considered a coup.
Ridr Knowlton, a partner and director of office development at Dewberry Capital, said he is disappointed. He said Dewberry hadn't planned to look for tenants so soon but had reacted when the opportunity was there.
“With regard to the top floors of the building, we will now follow our original strategy of focusing on the renovation first, and then delivering Atlanta’s premier space next year,” Knowlton said.
Another Dewberry property, Hotel Midtown, recently went back to the lender. But Dewberry also purchased two prime Midtown parcels at about the same time.
Morris, Manning has been in Buckhead since 1987.
John Heagy, a senior vice president for Hines in the southeast region, manages the building. He said with the law firm staying, and another lease in the works, the complex will be 84 percent leased. “That’s huge for this project,” he said. “We’re thrilled.”
The 300-employee firm is the largest tenant and occupies the 12th through 18th floors of the East Tower. It will expand slightly under its new, 15 year lease, upgrading all of the floors.
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