Foreclosure Threatens TerraCap’s Suburban Atlanta Office Building

Office distress is creeping into Atlanta’s north suburbs.

The lender, Phoenicia Real Estate Holdings VII, has moved to foreclose on the five-story, 159,000-square-foot building at 200 Ashford Center North in Dunwoody, Bisnow reported. The property will hit the auction block on June 4.

The owner, an affiliate of Florida-based TerraCap Management, failed to pay off its $20.3 million loan on the property. TerraCap bought the building for $24.6 million, or roughly $154 per square foot, in 2019, when it was 85 percent leased. Its current occupancy rate is unclear.

Financial troubles surrounding the property reflect broader challenges facing the office market, which has been pummeled by remote-work trends since the pandemic. The Atlanta metro’s office vacancy rate reached 24.6 percent in the first quarter, up 2 percent year-over-year, according to Savills. Even among Class A properties, which fared relatively well post-pandemic, about 35 percent of space was vacant.

Poor performance of office assets has been exacerbated by spiked interest rates since last year, leading to an uptick in foreclosures and other signs of distress. In the downtown building at 41 Marietta Street, for instance, Dallas-based Wolfe Investments and Bluelofts are facing foreclosure after defaulting on a $20 million loan.

TerraCap was drawn to the Dunwoody building in part because of its amenities, including a renovated fitness center and high-end conference center.

The Dunwoody building isn’t TerraCap’s only troubled Atlanta property. The firm recently relinquished two other office buildings, Deerfield Point and Windward Pointe 200 in Alpharetta, to lender Synovus Bank after defaulting on debt payments. TerraCap acquired those buildings in 2017 for over $47 million, but the deed-in-lieu-of-foreclosure transaction valued the combined 340,000 square feet of office space at $23.7 million, or just under $70 per square foot.

Office vacancy in the Central Perimeter submarket, which includes Dunwoody, sat at 24.5 percent in the first quarter, according to Colliers. A notable first-quarter transaction was Innova Solutions’ purchase of the 187,000-square-foot building at 1455 Lincoln Parkway in Dunwoody from Florida-based Parmenter Realty Partners. Innova plans to occupy the top two floors of the eight-story building.

—Quinn Donoghue

CORRECTION: The lender was misidentified in an earlier version of this story. It is Phoenicia Real Estate Holdings VII.