Wolfe, Bluelofts face $20M foreclosure on office-to-resi deal

Arbor Realty Trust noticed Dallas firms planning conversion in downtown Atlanta

Arbor Realty Trust to Foreclose on Wolfe, Bluelofts in Atlanta
Wolfe Investments' Kenny Wolfe and Bluelofts’ John Williams and Ike Bams with 41 Marietta Street in Atlanta (Loopnet, Wolfe Investments, Bluelofts)

A Texas development duo’s vision to turn a downtown Atlanta office building into apartments is in jeopardy, as it faces foreclosure.

New York-based lender Arbor Realty Trust has filed a foreclosure notice for the 13-story office building at 41 Marietta Street, after Dallas-based Wolfe Investments and Bluelofts defaulted on a $20 million loan, the Atlanta Journal-Constitution reported

An auction is scheduled for May 7, although there’s still a chance the owners could negotiate a deal with Arbor or conjure up enough funds to pay off its debt before then. If neither of those happen, Arbor likely will seek another developer to complete the project. 

Wolfe and Bluelofts bought the 135,000 square-foot building for $11.5 million, $85 per square foot, in 2018. Its only tenant upon acquisition was a U.S. Post Office branch. The firms unveiled plans last summer to convert the 48-year-old building into 120 apartments, targeting completion in February. It’s unclear how much progress the developers made.

They have been at the center of the office-to-resi craze in North Texas.

Two of their office-to-resi projects in North Texas met a similar fate. In February, a lender moved to foreclosure on the iconic Oil & Gas Building in downtown Fort Worth, which the developers had been planning to convert into apartments, along with the adjoining Star-Telegram building. 

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Also in February, a downtown Dallas office building that Wolfe Investments bought with office-to-resi ambitions last year fetched $8 million at foreclosure auction, just $42 per square foot. The firm, led by Kenneth Wolfe, defaulted on a $13.2 million loan from Thistle Creek Capital. 

Such conversions have become increasingly common as an answer to surplus office space caused by the trend of remote work. 

However, office-to-resi conversions are tricky to pull off. They can be incredibly expensive, and floor plates in certain buildings aren’t always conducive to residential use. High interest rates and tight lending have made conversions even tougher to finance since last year.

The project at 41 Marietta isn’t Wolfe and Bluelofts’ only conversion project in Atlanta. They also have plans to redevelop the historic W.D. Grant Building at 44 Broad Street into 165 apartments, with completion slated for next January, the outlet reported. That 10-story building spans 130,000 square feet and was constructed in 1898.

—Quinn Donoghue

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