Foreclosure Auction Slated for Downtown Atlanta Office Building Conversion Project

The future of converting a downtown Atlanta office building into an apartment complex hangs in the balance, with the project’s lender moving to foreclose on a $20M loan.

An affiliate of Arbor Realty Trust, the multifamily lender, filed a foreclosure notice against the owner of the 41 Marietta St., a 13-story, 135,000 square-foot office tower located at the intersection of Forsyth and Marietta streets in Downtown Atlanta. The owner, 41 Marietta Street Main GA LLC, is an affiliate of Plano, Texas-based Wolfe Investments, as per state records.

Foreclosure Auction in May

The $20M loan, which was originated in July 2021, is set to be auctioned off on the steps of the Fulton County Courthouse on May 7th, as indicated in the foreclosure notice.

Wolfe Investments, along with joint venture partners Ike Bams and Jon Williams, who are both co-founders of Texas-based residential developer Bluelofts, had plans to convert the nearly 50-year-old tower into a 120-unit apartment project. Proposed amenities for this project included a post office, lounges, and retail spaces on the ground floor.

State of the Conversion Project

Johnny Latzak, an attorney with Atlanta-based Bryan Cave Leighton Paisner who represents Arbor Realty, refused to comment on the foreclosure but confirmed that the developers had initiated the conversion process. He said, “I know they did some work out there. I don’t know exactly what level of work has been done.”

Wolfe Investments purchased 41 Marietta in 2018 for $11.5M, as per the Fulton County records. In 2023, the county valued the property at $11.8M.

Issues for Arbor Realty Trust

Difficulties with loans have been mounting for Arbor Realty Trust, which holds a portfolio of more than $12B of commercial real estate loans primarily within Multifamily in the Sun Belt. The lender reported over $262M of delinquent loans on its books by the end of the last quarter, a considerable increase from $150.3M at the end of the third quarter.

As of January, a quarter of Arbor’s securitized debt was in arrears, according to the Wall Street Journal. The once thriving multifamily boom of 2021 and early 2022 has come under scrutiny as rising interest rates have put pressure on borrowers trying to pay off their short-term debt.

In spite of these challenges, Arbor executives remain confident about the company’s stability. During a February earnings call, Arbor’s President and CEO Ivan Kaufman said, “We’re experiencing elevated delinquencies. One of the many reasons this is occurring is certain borrowers are taking the position that they will default first and negotiate second, which is not a strategy that works well with us.”

Looking Ahead

As the auction approaches, the fate of the planned conversion project remains uncertain. While work had commenced on the building, it is unclear to what extent the conversion process had advanced before the developer fell into financial difficulties.

If the auction proceeds as planned on May 7, the tower’s new owners will inherit a property in transition, and a decision would need to be made about whether to continue the original vision of a housing project or rollout a different development strategy.