Lender Foreclosing On Huge Swath Of Newport RE's South Downtown Holdings

A Miami lender is looking to foreclose on Newport RE’s South Downtown portfolio months after the German firm had agreed to sell the assets to another firm. 

BridgeInvest has scheduled a foreclosure auction for 18 parcels in Downtown Atlanta, including Newport's Hotel Row properties and 222 Mitchell St., which Newport had started turning into an office and retail mixed-use project, according to a foreclosure notice filed in Fulton County.

BridgeInvest provided a $75M loan to the German developer for construction to revitalize key portions of the South Downtown project in January 2022. The firm scheduled an auction for the properties on the Fulton County Courthouse steps on Nov. 7, according to the filing. 

Other properties subject to the foreclosure, according to the notice, include:

• The 76 Forsyth St. parking garage
• Parking lots at 133, 135 and 143 Forsyth St.
• The 0.35-acre site at 140 Spring St. SW
• A 0.85-acre site at 110 Spring St. SW
• The former Scoville Hotel at 223 Mitchell St.
• The former Sylvan Hotel, renovated for office and retail, at 227 Mitchell St.
• The Gordon Lofts retail redevelopment at 211-221 Mitchell St.
• The four-story, 37K SF office building at 142-150 Mitchell St.
• The retail building at 168 Trinity Ave.
• A retail building at 138 Peachtree St. SW
• Newport's marketing center at 170 Mitchell St.
• A small commercial building at 172 Trinity Ave. 

Bisnow previously reported the parking garage on Forsyth was set to be razed as part of a plan by Newport to construct two residential towers.

In the filing, a BridgeInvest affiliate, BI 68 LLC, said Newport defaulted under the terms of the loan by not paying principal and interest at the due date, failing to satisfy liens on the property and failing to “construct the improvements on the property in accordance with the construction schedule provided to the lender.”

Representatives for Newport and BridgeInvest didn't respond to messages seeking comment.

BridgeInvest is a short-term commercial real estate lending firm, according to its website. The loan for Newport was its largest in Atlanta to that point, the firm said.

The move to foreclose comes as commercial real estate players across the country are reeling from the rapid rise in interest rates, with many banks and institutional lenders balking at providing loans for commercial real estate projects.

"I’m really sorry that this is happening, because Downtown needed all the help it could," said Tim Holdroyd, president of City Realty Advisors and a longtime broker and investor in the city’s real estate landscape. "Those guys [at Newport] were doing the right thing. They just overplayed their hand."

Newport’s vision for the area, which it had dubbed South Dwntn, was to take a swath of independently owned properties, consolidate the ownership and move forward with a redevelopment vision that aimed to breathe new life into a long-struggling portion of the city.

Newport Executive Vice President Kevin Murphy told Bisnow in January that it had acquired 50 buildings and parcels in the neighborhood.

The largest piece of Newport’s efforts was transforming three buildings on Mitchell Street that were formerly home to Citizens & Southern Bank into 250K SF of offices and 70K SF of new retail space.

Newport had announced some leasing successes, including Tyde Tate Kitchen, which is now open at Hotel Row, and bowling concept Pins Mechanical Co., which was slated to open on the ground floor of 222 Mitchell. That planned location isn't listed on Pins Mechanical’s website. Newport also announced plans to build two residential towers, which were supposed to break ground this year.

The full-block Mitchell Street project was scheduled to deliver in the first quarter of next year, but construction had gone quiet in recent months. Newport declined to comment to press about the reasons for the halt, Urbanize Atlanta reported in July.

Soon after, the Atlanta Business Chronicle reported that Newport had agreed to sell its entire 53-building South Downtown portfolio to Atlanta-based Braden Fellman Group for an undisclosed sum. Braden Fellman vowed to continue to work on Newport’s vision for South Dwntn, with the sale reportedly expected to close during the fourth quarter.

The deal came months after Newport's Atlanta executives were told by the company's investors in Germany that they wouldn't provide additional funding for the project, the ABC reported. 

“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,” Newport CEO Olaf Kunkat said in a press release. “As a result, Newport will only be focused on investment and development opportunities in our primary market of Germany. As for South Downtown, this decision is incredibly hard and disappointing. We are convinced that the project needs to continue under a U.S. developer and are grateful to have found a uniquely qualified team with deep history in Atlanta to assume the entire portfolio with Braden Fellman.”

Officials with Braden Fellman didn't return calls seeking comment on the status of the pending sale. 

“That task was extremely difficult to start off with. The situation with the capital markets has made this a lot more difficult,” Holdroyd said. “Their failure to do so is not going to be positive for Downtown.” 

A.J. Robinson, the president of Central Atlanta Progress, a nonprofit created to support Downtown Atlanta, said he believes conversations between Newport and Braden Fellman are ongoing despite the foreclosure notice.  

“The rise in interest rates, the whole office remote work program, the rise in inflation over the last 18, 24 months, all of these things have had a negative effect on this particular project,” Robinson said. “It’s just having a devastating effect on real estate, not just in Downtown and not just in Atlanta. I think these guys just got caught up in it.”

Even if the properties fall into foreclosure and change hands, Robinson said there is enough momentum with other Downtown revitalization efforts — Centennial Yards, Underground Atlanta and the planned conversion of 2 Peachtree St. — to continue to make this portfolio attractive to other investors.

“Newport has done an amazing job of putting this part of Downtown real estate on the map again after 50 to 75 years of nobody paying attention,” he said. “I do think in this case, if the buildings do change hands, the amount of work, time, money that Newport has done has established South Downtown as a viable real estate market.”