A private equity firm decided to hand back the keys of a downtown Atlanta office tower to avoid losing the building in foreclosure, giving the building’s value a haircut in the process.
Texas-based Lone Star Funds initiated a deed-in-lieu-of-foreclosure transaction March 12 to surrender 55 Allen Plaza to its lender, which is a subsidiary of Fortune 500 insurance giant Aflac Inc. The transaction valued the 14-story building at $57.8 million, a 27% drop in value from when Lone Star Funds acquired the tower five years ago.
The glassy corporate tower off Ivan Allen Jr. Boulevard is the latest of many distressed sales or foreclosure auctions to take place in metro Atlanta since COVID-19 upended the economy in early 2020. The office sector has been hit particularly hard with nearly 23% of all securitized debt backed by office properties in metro Atlanta being classified as delinquent in late February, according to data firm Trepp.
The 55 Allen Plaza transaction was first reported Wednesday by Bisnow. The news outlet also forebodes that the building’s cash flow could soon take a hit because its anchor tenant, professional services firm EY, is in talks to vacate roughly 110,000 square feet in the building to move to Midtown. EY currently occupies about a third of the 349,000-square-foot tower.
Lone Star Funds acquired 55 Allen Plaza on March 6, 2020, for $79 million and financed the deal with a $67.5 million loan from NXT Capital Partners. Lone Star declined to comment about 55 Allen Plaza.
The loan was later sold to Phoenicia Real Estate Holdings XI, an entity registered to New York-based asset management firm Sound Point Capital Management. Phoenicia was also listed as a subsidiary of Aflac’s global investment fund in the insurance firm’s 2024 annual financial filing. Sound Point and Aflac did not respond to requests for comment.
Credit: Phil Skinner
Credit: Phil Skinner
Built in 2007, the 55 Allen Plaza tower has struggled to remain financially afloat. Hal Barry, who developed the building and its surrounding Ivan Allen office complex, lost it in a 2011 foreclosure auction for $57 million. EY, formerly known as Ernst & Young, was a debut tenant in the tower, which still bears the firm’s logo on its top floor. With EY in the building, it is 66% occupied, according to CoStar Group data obtained and reported by the Atlanta Business Chronicle.
The 2020 pandemic disrupted Atlanta’s office market and prompted record-setting vacancy rates, which have strained building owners. Increased interest rates and other financial pressures have also squeezed landlords, leading to multiple high-profile commercial real estate foreclosures in recent years.
In early March, the Hilton Atlanta hotel off Courtland Street — the city’s third largest hotel — was sold at a foreclosure auction. Wells Fargo also foreclosed on the Westside Collective, a portfolio of four adaptive reuse projects in Atlanta’s Westside, in early March, according to Bisnow. The buildings’ value was half what it was in 2021.
Last summer, the mixed-use W Atlanta - Downtown hotel next to 55 Allen Plaza was also sold at a discount to avoid a foreclosure auction.
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