The struggling office property market, particularly in Atlanta, held back improvements in late payments for commercial mortgages bundled into bonds, according to Fitch Ratings.
One Alliance Center, a 22-story tower in the Buckhead area 10 miles north of downtown Atlanta, became 60 days delinquent last month, Fitch said today in a report. A “staggering 37 percent of all Atlanta office properties in Fitch-rated deals are now considered delinquent,” the report said. That compares with late payments on commercial mortgage-backed securities of 8.3 percent in February, a 0.02 percentage point decline from a month earlier, Fitch said.
“The outlook for office properties will remain strained for the foreseeable future, with performance among Atlanta office properties to be particularly dismal,” Mary MacNeill, a managing director at Fitch Ratings, said in an e-mail statement.
The delinquency rate for office loans overall increased 30 basis points to 7.68 percent and the rate for multifamily rose to 13.3 percent from 13.04 percent in January, Fitch said. A basis point is 0.01 percentage point.
Atlanta’s office market is a victim of overbuilding and inflated real-estate prices fueled by issuance of commercial mortgage-backed securities that peaked in the U.S. at $232 billion in 2007. Bank of America Plaza, the tallest tower in the U.S. Southeast, was sold in a foreclosure auction last month after vacancies rose and the value of the building tumbled.
“Atlanta office owners have faced an uphill battle with an abundance of new supply in recent years,” MacNeill said.
While investor confidence in commercial-property debt is at the highest since May, borrowers in cities outside of prime U.S. office markets of New York, Los Angeles, Washington and Boston are finding it hard to refinance debt bundled inside CMBS.
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