Owner Of Peachtree Street Towers In Talks To Modify Loan, Keep Largest Tenant

The loan tied to two of Downtown Atlanta’s prominent office towers at 260 and 270 Peachtree St. has gone into special servicing as its landlord, Richard Bowers & Co., is in talks to keep a key tenant in place.

The $64.8M CMBS loan backing the 620K SF, two-building office complex was transferred on Oct. 6 after the firm fell 60 days past due, according to Trepp. 

Rick Bowers, vice president of office and investments with Richard Bowers & Co., said the company went into special servicing by design to restructure the loan. CMBS loans, which are structured as a security and sold to bond investors, must enter special servicing to be extended or modified.

“We plan on getting this resolved in the next two weeks, business as usual,” Bowers said. “Everything is fine.”

Bowers said he couldn't share details of the loan modification under negotiation. Grass River Real Estate Credit Partners REIT originated the loan in November 2019 with a maturity date set for March 2030, according to Trepp. It sold the debt into a conduit CMBS loan called CSAIL 2020-C19. The special servicer is listed as 3650 REIT Loan Servicing LLC. 

3650 REIT didn’t respond to a request for comment.

Bowers & Co. acquired 260 Peachtree, formerly known as the Coastal States Building, and 270 Peachtree, the former HQ of Southern Co., in the mid-1990s. The commercial real estate firm then renovated the two buildings as part of an effort to revitalize the downtown office district, according to a 1999 Atlanta Business Chronicle profile.

As Bowers & Co. has been trying to work out its loan, it has also been in talks to keep a key tenant at 270 Peachtree.

The firm is negotiating with the Georgia Properties Commission to renew the 71K SF lease at 270 Peachtree for the State Board of Workers’ Compensation, which occupies 11.5% of the property, according to Trepp. 

The State Board of Workers’ Compensation has been at the property for more than two decades, Bowers said. 

The board’s lease expired in September, according to Fitch Ratings. Bowers said the state has still been paying rent since the lease’s expiration.

The expiration and the transfer to special servicing prompted Fitch this month to downgrade its rating on the CMBS loan and revise its outlook to negative, meaning it expects some bondholders to incur losses.

Georgia State Property Commission Deputy Executive Director Terry Jones said the state board has been discussing a renewal at the property. The board also has a request for proposals “on the street” that will be finalized in December, he said in an email. 

“We can confirm we are working on a renewal of the current tenancy and an RFP for long-term tenancy,” Jones wrote. “We cannot comment further on active procurements.”

The towers’ occupancy has declined from 82% in 2021 to 71.1% as of September, according to Trepp. If the state board were to leave the property, the occupancy rate would fall to around 60%.

Other tenants in the project include the Georgia Chamber of Commerce with 28K SF, White Oak Kitchens & Cocktails with 16K SF, the International Society of Arboriculture with 14K SF, and Bowers & Co. itself with 15K SF, according to Trepp. 

Last year, the American Cancer Society moved into 42K SF at the 22-story 270 Peachtree, complete with signage on the building, The Atlanta Journal-Constitution reported. The nonprofit’s tenancy wasn’t reflected in the Trepp or Fitch reports.

A representative for Bowers & Co. said the company paid $2M in October for renovations of space occupied by the Georgia Chamber of Commerce and that the chamber has renewed its lease at the property. The chamber confirmed the renewal and that its footprint at the property would remain the same, but it declined to discuss terms of the lease. 

Bowers' spokesperson said the properties have added 15K SF of occupancy this year.

The landlord's efforts to stabilize the building come amid a difficult period for Downtown Atlanta office owners. The submarket has the second-highest vacancy rate in the region, at nearly 32%, according to CBRE. So far this year, tenants have emptied 157K SF more than they have occupied, although absorption turned positive by 54K SF in the third quarter.