Sumitomo Agrees To Sell Atlanta Financial Center At Huge Loss
Sumitomo Corporation of America is planning to unload its iconic Atlanta Financial Center complex in Buckhead at a $78M loss.
New York-based Nightingale Properties has agreed to purchase the 915K SF glass-encased office complex straddling Georgia 400 for $182M in an off-market transaction, Commercial Real Estate Direct reports. Sumitomo bought the property from Hines in 2016 for $222.5M, and has since invested $15M to upgrade AFC during its ownership, CRE Direct reported.
Nightingale is attempting to raise more than $76M in equity through the real estate crowdfunding platform CrowdStreet to purchase AFC.
“The investment offering presents a rare opportunity to acquire a trophy office at a steep discount because the seller is 'forced' and 'pressured' and needs to transact regardless of market conditions due to investor redemptions and upcoming loan maturity in Q2 2022,” according to Nightingale's offering summary on CrowdStreet.
CrowdStreet investors would be part of a larger $330M capital stack that would include $185M in senior debt, $60M in mezzanine debt and $8.5M in capital from Nightingale, according to the offering.
“We acknowledge that there is an offering live in the marketplace," CrowdStreet spokesperson Cary Brazeman said. "But we don't comment on offerings that are in the marketplace."
Nightingale officials didn't respond to Bisnow's request for comment.
Nightingale wrote in the offering it sees a big potential upside with the AFC, despite recent setbacks, including the effort for Buckhead to secede from Atlanta, a move that threatened to chill economic development prospects.
The complex's five largest tenants have been at the property for an average of more than 30 years, and current rents are lower than what tenants are paying in the market now, according to the offering. Nightingale is underwriting $42 per SF, or a 23.5% projected increase in rents with new leases.
Nightingale Senior Director of Acquisitions Will Hutton, who led a webinar for the AFC offering on CrowdStreet, told prospective investors that the current landlord already has 50K SF in letters of intent or offers to lease out with tenants. Truist is AFC's largest tenant at 265K SF, followed by Morris Manning & Martin with 134K SF, Starr Indemnity with 62K SF, North American Electric Reliability Corp. with 59K SF and Foy & Associates with 49K SF, according to offering documents. There is currently 196K SF of vacancy in the property.
“We don't even own the property yet, and we're already seeing a lot of leasing activity,” Hutton told prospective investors on the June 2 webinar. “We feel very well-insulated from any sort of uncertainty out there. Even if there's a recession and a little bit less rent growth, we're still going to be cheaper than the competition” on rents.
The planned purchase comes on the heels of news that one of AFC's banner tenants, Truist, plans to move its securities division, with 1,000 employees, to a new office development at The Battery Atlanta at Truist Park in Cobb County, home of the Atlanta Braves. The Atlanta Journal-Constitution previously reported that Truist would anchor 250K SF in a new office building at the Battery.
Nightingale said in the offering that it negotiated a three-year lease extension with Truist, giving the landlord time to pre-market the space once the banking giant moves out. Hutton said the nonprofit Hub404 Conservancy plans to develop Hub404, a capped park over Georgia 400 that will begin in front of AFC, which could generate more interest and allow the landlord to push rents up to $50 or $60 per SF.
“The upside, I wouldn't say is unlimited, but it's very strong,” Hutton said. “That's going to be a complete game-changer for all of Buckhead because that's going to be a mini High Line.”
Investment funds are due by July 8, according to CrowdStreet.
