Metro Atlanta ranks 10th of 15 big U.S. metros for future commercial investments, Trepp reports

By David Pendered

Metro Atlanta ranks 10th out of the nation’s top 15 metro regions for investment potential in commercial loans, according to a new report by the industry watcher Trepp. In a small way, the bankruptcy of a popular bicycle business with four shops in the region shows why metro Atlanta isn’t ranked higher.

The good news, in terms of regional bragging rights, is that Charlotte didn’t make the list of the 15 largest metro areas.

Metro Atlanta came ranked higher than the regions of Phoenix, Chicago, Washington, Detroit and Philadelphia. Atlanta trailed regions including top-ranking West Coast cities San Jose, San Francisco and Seattle. The usual suspects rounded out the top 10: Miami; Dallas; Boston; New York; Los Angeles, and Houston.

Trepp analysts indicated they may have been a bit puzzled by the 10-place ranking of Atlanta’s Metropolitan Statistical Area, given the strength of a basket of economic indicators. Trepp’s rankings track commercial mortgage backed securities, which are loans on commercial properties. These loans are backed by mortgages on commercial properties, just as residential loans are backed by mortgages on homes.

Trepp’s entire report on the 10th-ranked metro Atlanta CMBS market observes:

  • “The Atlanta-Sandy Springs-Roswell MSA is a unique entry on our list as the MSA’s current performance exceeds all annual statistics for the variables measured since 2010. While Atlanta’s current performance highlights its strong economic growth, it still came in 10th in our MSA ranking.”
  • “Atlanta’s most notable improvement over the past eight years is its dwindling delinquency rate. Following the most recent recession, Atlanta delinquencies rose severely and climbed to a peak
    of 19.93 percent in 2012. But the market has improved significantly since then as its delinquency reading has dropped to a mere 2.76 percent.
  • “To boot, average occupancy levels have grown since the most recent recession. The average occupancy rate for the Atlanta MSA hit a low of 86.7 percent in 2010. Since then, that reading has grown to 90.04 percent.”
trepp, atlanta market, cmbs, nov 2018

The delinquency rate in metro Atlanta on commercial mortgage backed securities has improved from nearly 20 percent in 2012 to just under 3 percent in November 2018, according to a report by Trepp. Credit: Trepp

CMBS are used to finance all types of commercial properties, including retail centers. This is where the softness in the retail sector can impact a region’s CMBS portfolio. Consider the case of Performance Bicycles, which the company reports was started in 1981 by a doctoral candidate in finance as a catalogue company.

In metro Atlanta, Performance Bicycles has long been an anchor in the region’s cycling community. The four shops in the metro area were regarded for hosting of bike rides for pleasure or training; for their fairly comprehensive inventory of bikes, components and parts; and for the skill of mechanics to keep bicycles at their best for riding roads or mountain trails.

All that ended Nov. 16, 2018.

That’s when the bike shop’s parent company filed for bankruptcy in Durham, N.C. as part of a reorganization strategy. Assets were valued at no more than $10 million and liabilities were estimated at up to $50 million, according to a report by bankruptcyobserver.com.

The parent company, Advanced Sports Enterprises, Inc. announced store closing sales at each of its 102 of its bike shops, according to a report by Gordon Brothers, a liquidating company. The list includes Performance Bicycle shops in Atlanta, Buford, Marietta and Roswell.

Eventually, the chain store will relinquish its floorspace. And that space will again be on the market at a time Trepp reminded in another statement of the pending store closures announced by two giants in the commercial real estate arena – Sears and Kmart.

On Tuesday, Sears filed paperwork to close a warehouse near Scranton, Pa. eliminating jobs for 121 workers, some of whom had worked there 27 years, according to a report by citizensvoice.com. In December, Sears announced the pending closure of a warehouse in Jacksonville, Fla., according to the same report. The company does not appear to have filed in Florida last year a WARN notice stating the number of jobs to be eliminated.

 

Trepp, cmbs, november 2018

Analysts with Trepp indicated they were puzzled that metro Atlanta didn’t rank higher on a list of the 15 largest metro areas in the U.S. being eyed for investments in commercial mortgage backed securities. A basket of mesurements indicate the region has recovered more fully from the Great Recession. Credit: Trepp

 

 

David Pendered, Managing Editor, is an Atlanta journalist with more than 30 years experience reporting on the region’s urban affairs, from Atlanta City Hall to the state Capitol. Since 2008, he has written for print and digital publications, and advised on media and governmental affairs. Previously, he spent more than 26 years with The Atlanta Journal-Constitution and won awards for his coverage of schools and urban development. David graduated from North Carolina State University and was a Western Knight Center Fellow. David was born in Pennsylvania, grew up in North Carolina and is married to a fifth-generation Atlantan.

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