Debt Trouble Brewing At 1.2M SF CP Group Atlanta Portfolio
A mortgage backed by three prominent Atlanta office towers has been sent to special servicing because its owner is seen as at risk of imminent default.
The loan is backed by the pagoda-like One and Two Ravinia Drive office towers in Central Perimeter and One Overton Park in Cobb County. CP Group, along with Farallon Capital Management, purchased the three towers totaling 1.2M SF in 2021 for $219.5M from Franklin Street Properties.
The partners funded the purchase with a more than $200M floating-rate loan from Blackstone, which packaged $67.2M of the balance into a $1B securitized debt vehicle called a collateralized loan obligation.
CP Group founding partner Chris Eachus told What Now Atlanta in 2021 that the value-add purchase was “both a well-timed and promising opportunity” as the office market recovered from the pandemic. The three buildings were 75% leased at the time, according to a press release.
CP Group modified the loan in 2023, paying $10.5M toward the principal and extending its maturity to June 2026, according to the credit monitoring firm KBRA.
CP and Farallon spent more than $16M renovating the properties in an effort to push occupancy up to a stabilized rate of 84%, according to KBRA. That included building out 75K SF of spec suites.
But leasing has been sluggish. The 387K SF One Overton Park is 86% leased, according to CoStar information obtained by Bisnow. The 387K SF One Ravinia tower is 67% leased, and the 442K SF Two Ravinia is 52.4% leased.
The lower occupancy, combined with the floating-rate debt originated when interest rates were near zero, has prompted the need for a workout. Blackstone transferred the loan to its special servicing subsidiary, CT Investment Management, on June 11, according to Morningstar Credit Analytics.
CP Group, Farallon Capital and CT Investment Management all declined to comment.
Last year, CP Group renewed telecommunications giant T-Mobile for 100K SF, a downsizing from its previous 151K SF footprint, which amounted to more than 13% of the property’s base rent, according to KBRA. The new lease begins in August.
Because of depressed occupancy and a weak office sector, KBRA identified the loan as troubled last year and estimated that bondholders could lose $36.8M in the event of a default, based on a value of $146.9M, “which considers the risk of the property not being able to stabilize.”
Almost 23% of all securitized debt backed by metro area office properties was delinquent by at least two payments, The Atlanta Journal-Constitution reported in March, citing Trepp data. Atlanta had the seventh-highest volume of distressed securitized office debt among the 25 largest metro areas in the U.S., totaling more than $2B, according to the AJC.
CP Group, one of the largest office landlords in Metro Atlanta, owns Bank of America Plaza and the former CNN Center in Downtown Atlanta, which it is redeveloping into a mixed-use destination called The Center.
This month, it partnered with Bawag Group to reposition the 2.2M SF Piedmont Center office campus in Buckhead, which Bawag took in foreclosure from The Ardent Cos. for $200M.
