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May 1, 2014
Capital's Spring Awakening
They say that April showers bring May flowers, so hopefully Atlanta's largest post-recession construction loan—$180M secured by Jamestown in a recap for the development of Ponce City Market—is only a sign of greater things to come. (Or at least an indicator that our azaleas are going to come in nicely.)
CBRE EVP Jeff Ackemann and SVP Jonathan Rice of the firm's Atlanta debt and structured finance group (above) helped advise Jamestown in the financing, which was led by PNC Bank in partnership with SunTrust and JPMorgan. Jeff says it's one of the most iconic, historic mixed-use developments in the Southeast and there was an incredible amount of interest in the loan. Ponce City Market has three things construction lenders clamor for: “terrific sponsorship, the right location, and a well-thought out development plan.” Jeff says the deal signals the reawakening of Atlanta's construction lending market for retail, office, and industrial, following strong multifamily activity. (It's about time... it's taken a long enough nap.)
Lenders responded enthusiastically to the construction loan request, he says, recognizing the unique opportunity to be part of the project (above). Many of the interested lenders weren't competitive enough or weren't the right players for the deal, he says, calling the project a “living organism that changes every day” and one that demands a nimble and thoughtful partnership of lenders. Slated for a fall 2014 rolling opening, the 1.1M SF Ponce City Market—a restoration of the former Sears building—will include 330k SF of boutique retail and restaurants, 517k SF of Class-A office, and 259 residential units. (Tenants already include Jamestown's US corporate HQ, Athenahealth, Cardlytics, MailChimp, the Suzuki School, and Binders.)
The problem: There still aren't enough quality opportunities to meet the demand of capital that needs to be placed, Jeff says. That means lenders need to be aggressive. “We can get you to the right zip code, but you've got to prepare yourself for a lot of competition,” he says. Jeff's already heading a robust pipeline: He'll be coming to market in a few weeks with a large regional shopping center and a spec multi-tenant industrial park and has been helping a variety of clients with acquisition financing, he says. That means a lot of deals to celebrate—one of his new favorite post-closing spots is Kevin Gillespie's Gunshow (which recently came in at No. 7 on GQ's list of the 25 best new restaurants in America).
Downtown Hotels to Heat Up
While the Atlanta hotel market's recovery had lagged behind the nation, it's coming back full force. Thank growing business and group travel (for which Atlanta is heavily dependent) and employment and the economy picking up in both the city and region, PKF Hospitality Research prez Mark Woodworth told us yesterday. STR shows RevPAR was up 13.3% in Q1, almost double the national average, and combined with significant jumps in occupancy, room rates ticked up 4.5%. “That's a strong, terrific quarter for Atlanta,” he says. Above, he's with his family: son Sam, wife Mary Kay, son Harry and daughter-in-law Annie (on their wedding day), daughter Savannah, and daughter-in-law Katie and son Will. (Which reminds us: weddings can also help the hotel industry.)
Hotel performance in Atlanta for Q1 '14 was strongest in the outlying suburbs, but look for big gains in the Downtown submarket. These will come from activity at the Georgia World Congress Center (above, which is hosting the WasteExpo today... or perhaps the Hall of Fame Dance Challenge is more your speed) and a big push by the Atlanta Convention & Visitors Bureau, Mark says. There's been a significant amount of capital investment in Downtown in anticipation of the National Center for Civil and Human Rights and the College Football Hall of Fame, and many owners have been renovating and upgrading their hotels for the past few years (like the Days Inn-turned-Aloft at 300 Spring Street NW), a trend that will continue for the next three to five years.
And If GWCC's proposed 800- to 1,000-room hotel (above, what it could potentially look like) goes through, it will be Downtown's first major new hotel in decades, he says. As Downtown heats up, it will put pressure on Midtown and the airport submarkets, and Buckhead will follow. This year overall, PKF forecasts that Atlanta RevPAR will grow 6.3%, occupancy will rise to 1.9%, and ADR will increase 4.4%. Revenue then will continue its climb next year. Nationally, hotel profits are on pace to exceed pre-recession levels in 2014 as the combo of increasing ADR and the low-inflation environment means further double-digit profit growth through next year (and since it's been happening since 2011, that's the longest such streak for US hotels since the late ‘70s, according to PKF Hospitality Research).
Need more proof that the luxury condo boom isn't just for New York or Miami? Atlanta's getting a piece of that action, with three upmarket condos at the Residences at Mandarin Oriental in Buckhead selling recently for a combined price of $6.3M. The first unit closed in January, two others in March, and two more are under contract. Dorsey Alston Realtors' Karen Rodriguez, who's leading the sales effort, tells us that buyers are coming from all over. One buyer lives in Hong Kong full-time and was drawn to property because of its Buckhead location and modern interiors. (Thankfully, that buyer wasn't deterred by episodes of the Real Housewives of Atlanta being one of our few global faces.) American buyers have ties to Atlanta or have previously lived here, she says.
Atlanta, by the Numbers
Atlanta's been making the rounds on quite a few rankings recently. Our best showing was No. 3 on the EPA's sixth annual list of the 25 US metropolitan areas with the most Energy Star-certified buildings—that's 318 buildings totaling 70M SF saving more than $53M in energy costs annually, only to be outdone by LA and DC. (Though we've got to work a bit on the air pollution, coming in at No. 18 on the American Lung Association's list of cities with the most year-round particle pollution—but we've beat No. 3 LA in that department.) We've also earned a respectable spot (No. 36) on the A.T. Kearney Global Cities Index, jumping three places from last year and just edging out Houston. Last, but not least, we're one of the least nerdiest states in the nation, coming at No. 48 in the nation for folks interested in the likes of Star Trek, Harry Potter, Star Wars, Doctor Who, and Dungeons & Dragons, according to blog Estately.
Since we don't publish on Sunday, an early Happy Star Wars Day! May the Fourth be with you. (And who said Atlanta wasn't nerdy?) Email email@example.com.