Dive Brief:

• Arbor Realty Trust is foreclosing on 41 Marietta St., a 13-story, 135,000-square-foot office tower in downtown Atlanta that was slated to be turned into a 120-unit apartment building, according to Bisnow.
• The owner, 41 Marietta Street Main GA LLC, is an affiliate of Plano, Texas-based Wolfe Investments, which took out a $20 million loan in July 2021. The building is slated to be auctioned on May 7 at the Fulton County Courthouse.
• Wolfe Investments bought the property in 2018 for $11.5 million, according to Fulton County property records. Renovations on the 1976 building, which had already begun, included plans for a post office, lounges and retail offices on the ground floor, according to Atlanta Agent Magazine.

Dive Insight:

The number of adaptive reuse projects in the U.S. multifamily construction pipeline grew from 77,000 units in 2022 to a record 122,000 in 2023, according to RentCafe’s latest Adaptive Reuse Report. Atlanta, like many cities, has plenty of conversion candidates. However, those projects come with challenges. 

There are a lot of under-utilized office buildings in “prime residential locations,” including Sandy Springs, Roswell, Alpharetta and Peachtree Corners, Connor Ball, vice president of investments at Atlanta-based real estate investment and development company Holder Properties, told Multifamily Dive. However, there is no proven approach to converting them.

“Trying to convert the existing infrastructure into an apartment is proving cost-prohibitive due to the way office building cores are designed versus apartments, among numerous other structural issues,” Holder said.

However, David Laube, principal of Atlanta-based Noell Consulting Group, said 41 Marietta St. checks many boxes for conversions.

“From what I understand about the floorplate and the layout, it worked for conversion,” Laube said. “We do a lot of office conversion work around the country and maybe like 10% to 15% of office building stock can actually work as a conversion. That one did.”

With those advantages, Laube was a little surprised by the issues at 41 Marietta St., though he said the building, like many older offices, didn’t have dedicated parking. 

“I think they had it for a low enough basis that I would have expected that one to work,” he said. “I think [the foreclosure] probably says more about that particular sponsor and their experience than it does about the deal itself or the market.”

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