South Downtown developer’s buildings listed for foreclosure

Deal to sell downtown Atlanta redevelopment project scuttled and 18 properties advertised for foreclosure
Aerial photo shows Broad St SW between Mitchell Street and MLK Jr. Dr., Wednesday, August 9, 2023, in Atlanta. (Hyosub Shin / Hyosub.Shin@ajc.com)

Credit: HYOSUB SHIN / AJC

Credit: HYOSUB SHIN / AJC

Aerial photo shows Broad St SW between Mitchell Street and MLK Jr. Dr., Wednesday, August 9, 2023, in Atlanta. (Hyosub Shin / Hyosub.Shin@ajc.com)

Editor’s note: This story has been updated with Newport RE’s confirmation that its deal with Braden Fellman Group has been terminated.

A deal by German firm Newport RE to sell dozens of downtown Atlanta buildings and parking lots to a Decatur developer is off, and key pieces of Newport’s real estate portfolio have been advertised for foreclosure.

In a Friday post on social media, South Downtown developer Newport confirmed its deal to sell more than 50 properties to Braden Fellman Group has been terminated by the buyer. And after the deal fell through, Newport’s largest lender initiated foreclosure proceedings on 18 key parcels, including 222 Mitchell Street and buildings in downtown’s historic Hotel Row, the post said.

“At our core, we are devastated,” the post said.

Newport — then little-known in Atlanta — entered the city several years ago with an audacious vision that it called South Downtown, buying up and restoring neglected buildings across 10 blocks near the Five Points MARTA station.

But in July, Newport stunned many in the real estate world when it announced a deal to sell its holdings and exit the city, citing global economic challenges. The deal to sell to developer Braden Fellman Group was seen as a best-case scenario to keep the properties under the control of a local firm known for adaptive reuse projects.

A rendering of South Downtown's 222 Mitchell building.

Credit: Handout

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Credit: Handout

Last week, some 18 Newport properties — including the former C&S Bank headquarters building at 222 Mitchell Street and others along historic Hotel Row — were advertised for foreclosure, according to a Fulton County legal notice first reported by real estate publication Bisnow. An auction is scheduled for November 7 on the Fulton County Courthouse steps.

The Newport properties are secured by a $75 million loan with Miami-based lender BridgeInvest, according to the notice. A foreclosure notice does not guarantee the properties will be returned to the lender and a deal could be arranged in the days ahead to forestall such a move.

“We are working with BridgeInvest and our other lenders and partners regarding next steps. We will share further updates as we’re able,” April Stammel, a Newport executive in Atlanta, said in an email to The Atlanta Journal-Constitution.

On Friday, Newport said in its Instagram post that the team “hoped our work would show that the heart of Atlanta’s resilience, culture and spirit lives downtown,” what Newport called “the greatest part of our city.”

Newport’s U.S. operations, based in Atlanta, are winding down.

The future of Newport’s other Atlanta holdings is still to be determined.

Atlanta Business Chronicle first reported the deal with Braden Fellman was terminated, citing unnamed individuals. Andrew Braden, principal of Braden Fellman, declined to comment.

Mitchell St SW  is near the Mercedes-Benz Stadium in Atlanta  (Steve Schaefer/steve.schaefer@ajc.com)

Credit: Steve Schaefer

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Credit: Steve Schaefer

A.J. Robinson, president and CEO of civic group Central Atlanta Progress, said Newport should be credited for their vision and the work they put in to rehab their holdings, which will pave the way for potential new owners to come in and finish what Newport started.

“I look at foreclosures or potential foreclosures as terrible for the owners and terrible for the lenders, but the buildings don’t go anywhere and somebody is going to benefit ultimately from the work that’s been done,” he said.

Downtown is still seeing significant investment from the ongoing Centennial Yards project, new ownership at Underground Atlanta and the city’s plans to find a partner to refurbish the hulking 2 Peachtree Street tower, which will include residential.

“I’m just hopeful that someone will see these positive trends and will show up and do something and continue the work that Newport did,” Robinson said.

The Federal Reserve’s efforts to tame inflation by hiking interest rates have wreaked havoc on the commercial real estate market. Rising rates and a post-pandemic purging of office space by many companies has led to a glut of available space and put pressure on landlords with mortgages coming due.

Office space availability in Atlanta is at a modern high, several office and hotel buildings are either in danger of foreclosure or have returned to their lenders and banks are pumping the brakes on commercial real estate lending.

Newport CEO Olaf Kunkat told the AJC in August that global factors including the pandemic, war in Ukraine and interest-rate hikes led Newport and its investors to “reprioritize capital investments.”

Braden told the AJC that month he hoped to continue to collaborate with the Newport team and aimed to bring the vision of a bustling South Downtown to life. Though the company planned to continue development and leasing, some elements of Newport’s plans were expected to change.

But the potential return of so many properties to their lender and an uncertain future for the other Newport holdings raises questions about what comes next. Prior to Newport’s buying spree, the properties it bought were controlled by dozens of owners, many lacking the funds to revitalize them.

In the years before the pandemic, downtown saw a wave of new investment. Newport gobbled up much of South Downtown, new plans for Underground Atlanta got under way and developer CIM Group launched Centennial Yards, a $5 billion mini-city in the tangle of parking lots and rail lines known as the Gulch.

Brian McGowan, president and CEO of Centennial Yards, said the rapid development of Midtown is pushing growth south into downtown.

“The economic center of gravity continues to shift downtown,” he said. “I don’t think this is a statement on downtown’s direction.”

The CIM team has completed the redevelopment of the former Norfolk Southern offices along Ted Turner Drive and Mitchell Street into luxury apartments that are almost fully leased. A Wild Leap brewery is also open there.

Two other buildings within the project are under construction. Though the timing of planned office buildings will depend on tenant demand, McGowan said, tenants are under active recruitment. Development of Centennial Yards, McGowan said, is not slowing down.

“Centennial Yards is full steam ahead. We remain as excited about downtown Atlanta as we always have been,” he said.

-Staff writer Zachary Hansen contributed to this report.

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