“Our vision was right but our timing was off, and we have the highest hopes that South Downtown will continue becoming a cool, historic, downtown neighborhood that Atlanta deserves,” Newport CEO Olaf Kunkat said in a news release. “Simply put, the market changes coming out of COVID, prolonged war in Europe and recent rise in interest rates led Newport and our South Downtown investors needing to reprioritize capital investments.”
Braden Fellman will continue Newport’s vision for the project, which is often stylized as South Dwntn, the release said. The redevelopment includes Historic Hotel Row, the 222 Mitchell Street building and several surface parking lots that Newport envisioned as new apartment buildings. The financial details of the agreement, which is expected to close in the fourth quarter of this year, were not released.
April Stammel, Newport’s senior vice president, said selling the entire portfolio would help preserve the overall vision. She added that Newport’s team on the ground in Atlanta will remain involved through the transition, and she hopes they can continue to contribute to the project after the ownership change.
“We want to make this as smooth as possible for the neighborhood, the community, our tenants, our partners and Braden Fellman, who’s got a big job ahead of them,” she said.
The agreement to sell the South Downtown portfolio, which was first reported Wednesday evening by the Atlanta Business Chronicle, sent shockwaves through the Atlanta’s real estate ecosystem and could represent tough times ahead for developers trying to keep their projects on track.
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.
“We are in challenging times right now, and it’s very hard to make any ground-up development or significant renovation projects work financially,” said Scott Taylor, CEO and president of Carter, which is revitalizing the Summerhill neighborhood surrounding the former Turner Field. “Until we have better visibility on interest rates, construction costs and the capital markets, things will be choppy.”
Coming out of the Great Recession, downtown saw a surge in new development.
Mercedes-Benz Stadium replaced the Georgia Dome, Philips Arena transformed into State Farm Arena and several new hotels took to the skies. The $5 billion transformation of more than 50 acres of parking lots known as the Gulch into CIM Group’s Centennial Yards mixed-use development became the centerpiece project of downtown’s revival campaign.
There have also been renewed attempts at remaking Underground Atlanta. But Newport become one of the most intriguing players when it joined the fray.
Known for redeveloping city centers across Germany, Newport became infatuated with Atlanta after Mercedes-Benz bought naming rights to the new stadium. Newport scooped up dozens of smaller buildings with the goal of returning the streetscape to its former glory.
Brian McGowan, the leader of the Centennial Yards project, said he expects Braden Fellman to keep the project on track.
“We think the world of the entire Newport team,” he said in an email. “And I’m optimistic they will find a solution to this and keep (South Downtown’s vision) moving forward.”
The complexity of assembling so many run-down properties and figuring out how to fix and lease them was not only a challenge for Newport, but it will be a challenge for Braden Fellman. As part of the sale agreement, Stammel said the buyer will be responsible for paying all outstanding bills and construction costs accrued so far by Newport.
Andrew Braden, a principal at Braden Fellman, said his company is “a natural fit” to continue Newport’s work.
Credit: Courtesy of South Downtown
Credit: Courtesy of South Downtown
‘Patience and deep pockets’
The only completed phase of South Downtown is Historic Hotel Row, which consists of blocks of century-old hotels that Newport converted into restaurants, retail and office and artist spaces.
Braden Fellman will continue to lease space and manage tenants with the row, which is a short walk from Mercedes-Benz Stadium. The project’s first restaurant, TydeTate Kitchen, opened in April, and several tenants are in the process of building out their spaces.
Braden Fellman will also resume construction at 222 Mitchell, a large mid-rise office building and former bank headquarters. Stammel said 222 Mitchell will be converted into housing and retail, a pivot from Newport’s plan to transform the 8-story, 252,000-square-foot building into offices. Energizing Mitchell Street and the retail aspects of the area should be priorities, she added.
A pair of apartment buildings that Newport announced last fall, which would have combined to create 650 new homes, are indefinitely on hold, Stammel said, citing the difficult lending environment.
A.J. Robinson, president of downtown civic organization Central Atlanta Progress, said Braden Fellman has a reputation in Atlanta for delivering quality adaptive reuse projects, adding that Newport’s prior work helps lay a solid foundation — even if it takes another firm to get an ambitious project across the finish line.
“You have to have patience and deep pockets,” he said. “And sometimes the cycle just doesn’t work out.”