Adventus Realty Collapse Lands Office Portfolio in Foreclosure

The downfall of Rick Charlton’s Vancouver-based REIT has triggered a chain of events leading to the foreclosure of eight office complexes across suburban Atlanta and Chicago.

The collapse of Adventus Realty Trust, exacerbated by a $350 million default and nearly two years of unpaid debt, has pushed its portfolio into foreclosure, the Atlanta Business Chronicle reported.

The portfolio, including properties in Alpharetta, Kennesaw and the Cumberland/Galleria area of Atlanta, spans 2.2 million square feet. Once appraised at $439 million, their value has dropped sharply, with the Atlanta portfolio’s worth falling by 26 percent to $231.7 million by last year. The local addresses are 701 Barrett Lakes Boulevard in Kennesaw; 1000 Parkwood and 1600 Parkwood in Atlanta; 11175 Cicero Drive in Alpharetta; and 125, 175 and 225 Townpark Drive Northwest in Kennesaw.

Foreclosures seized $253 million in property in Cobb and Fulton Counties. Riveron Consulting has assumed control as the court-appointed receiver. Operations at the properties won’t be interrupted, said David Putro of Morningstar Credit.

Suburban office buildings are increasingly becoming liabilities in many parts of the U.S., with high vacancy rates and owners burdened by unsustainable debt loads. In Atlanta, nearly 39 million square feet of office space is vacant, leading to an annual rent loss of more than $1.2 billion.

Office landlords in suburban Chicago are facing similar challenges. Chicago’s suburban vacancy rate was above 31 percent in the third quarter, up from 29 percent a year previously.

“Each submarket is going to have to shake out,” said Tony Waybright of Brightway Concepts Real Estate. “There’s still too much property out there that has not hit bottom.”

Even though landlords in Atlanta and Chicago are struggling to fill empty office space, some buyers and investors are stepping in to take advantage of the lower-priced assets.

Menlo Equities is one of the companies buying distressed office assets in Atlanta, as they have agreed to acquire the vacant office building at Lincoln’s Echo Street West development.

Additionally, Atlanta investment firm ANiMAL, founded by Max Cookes and Alex Hay, has invested $200 million in distressed properties across the Southeast, including Atlanta. So far, the firm has enhanced its portfolio with the addition of the former Atlanta Humane Society property and a neighboring city block, in the West Midtown area.

— Andrew Terrell