Foreclosure of 623-unit apartment complex in Buckhead area of Atlanta

A prominent property in the South Buckhead neighborhood has been foreclosed by its lender, Harbor Group International, which took control of the 623-unit complex after foreclosing on the mortgage on August 6. This occurred due to a default on the $104.7 million loan that this group had granted to the previous owner, Miami-based Westside Capital Group.

According to real estate tracking firm Databank, the property located at 2025 Peachtree Road NE was acquired through a foreclosure sale for $92.5 million, after having been purchased by Westside Capital Group in 2022 for $136 million. Westside had renovated the property but failed to lease all 623 units in the complex.

The nearly $105 million loan to finance the purchase of what was previously known as the Darlington apartments was obtained by Westside Capital from Harbor Group International with a three-year floating-rate repayment commitment. The purchase was made from the previous owner, Varden Capital Properties, which had acquired the complex for $30 million in 2017.

Because Buckhead is one of the most exclusive neighborhoods in Atlanta, prior to the renovation carried out by Varden Capital, the Darlington apartments were considered one of the few affordable housing options in the area, with units renting for between $600 and $1,000 per month.

When Westside Capital acquired what is now known as The Lofts, its founder, Jakub Hejl, stated in a press release that the company was attracted to the project because Buckhead and Midtown were becoming “walkable urban centers with excellent employment opportunities and diverse urban amenities.”

Once in the hands of Westside Capital, The Lofts was appraised at $149.9 million, an evaluation that turned out to be overly optimistic, as the new investor’s plan was to increase rents with the projection of achieving a 95% occupancy rate. This projection proved incorrect, as the rent increase, despite the building being in generally good condition, caused occupancy to drop from 58% to 26% between 2022 and 2023.

According to DBRS Morningstar, by February of this year, Westside had used up the entire $5.2 million interest reserve to cover its deficits and “had been making debt service payments out of pocket since November 2023.”

Morningstar reported that Harbor Group International divided the debt into multiple secured loan obligations, two portions of $36.8 million and a third for $24.1 million; and the interest rate on the floating-rate loan had increased to 9.1% in the last update before the foreclosure. In March, the owner made the last full monthly mortgage payment but made partial payments in April, May, and June, accumulating a delinquency of $586,000.

Undoubtedly, the current market conditions and floating interest rates caused the project to fail, making The Lofts the latest victim of the high-interest rates that are causing apartment values to plummet.

Available foreclosures:

Buckhead: 1 home available

Downtown Atlanta: 1 home available

By Elias DaSilva | October 2, 2024