Atlanta Approves Late-Night Gulch Deal As Amazon HQ2 Hopes Fade
After a long-fought battle, Los Angeles-based CIM Group claimed victory for a $1.9B incentive package with the city of Atlanta to redevelop the Gulch into a towering mini-city, complete with the potential for eight office skyscrapers, hundreds of hotel rooms and apartment units.
But that victory came at the same time as Atlanta's dreams of being the host city for Amazon's second headquarters, with the Gulch as the favored site, have all but evaporated.
The Atlanta City Council approved four measures — two of them by narrow margins — that ushered in a sweeping package of tax abatements and bond incentives for CIM Group to redevelop the 40-acre lot in Downtown Atlanta. The vote came late Monday night after hours of deliberation and public commentary as citizens came out in force to speak both for and against the project.
Opponents expressed concerns about the further gentrification of the city, which has made portions of Atlanta too expensive for people earning average incomes to live. Others cried foul at the financial benefits CIM is receiving.
But supporters of the measures included some heavy hitters, such as former Atlanta Mayor and U.N. Ambassador Andrew Young, who maintained that development of the Gulch ultimately would not cost taxpayers any money.
“There's always a balance of power, and it's always a balance of judgment,” Young said. "But we never had an offer to my knowledge to put money in any way into the Gulch. And it does continue to cost us money. Doing nothing does cost us money."
Young likened the Gulch redevelopment to past major city projects that were initially met with a lot of controversy, and maintained that those projects now produce revenue for the city.
“I don't believe I've ever been wrong, unless you consider the [1996 Summer] Olympics wrong. Unless you consider Georgia 400 wrong. Unless you consider MARTA wrong,” he said. "But I have cast my lot with meaningful and successful visionary development."
“We need a catalytic project of this size and magnitude … to be an economic wealth booster for Atlanta,” H.J. Russell & Co. President Jerome Russell told the council during public comments.
Russell cited how CIM needed to ensure that 38% of the cost of the project would use minority- or female-owned vendors.
“Bottom line, this project will create thousands of jobs and millions of dollars for the city of Atlanta,” he said.
The vote on the deal — pushed heavily by Atlanta Mayor Keisha Lance Bottoms in the first real legislative battle of her new administration — had been delayed numerous times in the past few weeks as support among council members flagged.
But city officials and CIM Group renegotiated certain provisions of the deal that helped it pass muster with council members this time, including forcing CIM Group to be the sole purchaser of all tax allocation district bonds that will be used to finance the construction of the project, while at the same time reducing the TAD proceeds from $500M to $32M.
Other provisions of the deal include:
- A $28M affordable housing fund that can be used anywhere in the city.
- Demanding that CIM designate 20% of the residential units as affordable.
- Creation of a $12M economic development fund.
- Development of a new, seven-bay fire station.
“Never in the history of our city has a single development deal been negotiated in a way that will have such far-reaching, generational impact,” Bottoms stated in a release early Tuesday. "The Gulch redevelopment will not only physically bridge the gap between the east and west sides of Atlanta, bringing economic vitality to a long-undeveloped part of downtown, but also affordable housing, workforce training, enhanced public safety and job opportunities throughout the city.”
Officials with CIM Group did not return calls seeking comment. But it still could be years before the developer goes vertical, considering it needs to spend at least $500M in elevating and creating a new street grid above the parking lots that exist today.
The Gulch deal appears to pave the way for Norfolk Southern to move its headquarters to Atlanta from Norfolk, Virginia. In the lead-up to the city's vote, Norfolk Southern CEO Jim Squires had warned that a failed deal could kill Atlanta's chances of landing the headquarters. Norfolk Southern owns a portion of the Gulch land, and is expected to use the proceeds from the sale to finance its relocation.
“The initial phase of relocations would occur in the summer of 2019 to offices in and around our existing Goode building [in Midtown Atlanta], and it would comprise employees from our executive offices, accounting, audit and compliance, finance, investor relations and taxation,” Squires wrote in an internal email to employees earlier this week, according to the Virginian-Pilot.
While CIM officials maintained that the Gulch project was never contingent on Amazon' HQ2 — and was first planned well before the retail giant announced its "Game of Thrones"-like competition to claim the $5B project and 50,000 high-paying jobs — the downtown parcel was widely viewed as the region's favored site to land it if Atlanta were selected.
The Gulch proposal even left language in the agreement that could allow CIM Group to seek additional incentives if it lands a major headquarters relocation that, while not naming Amazon, hewed closely to what Amazon was asking for.
Those chances for Atlanta dimmed greatly this week after numerous reports surfaced that Amazon was close to naming a city: in fact, splitting the HQ2 project between two cities, including possibly Crystal City, Virginia, and Long Island City in Queens, New York.
During a press conference Monday, Gov. Nathan Deal dismissed speculation that Atlanta was no longer in the running for the project.
“I don't believe we're out of it,” Deal said. "It's never over until the fat lady sings, and I haven't heard a fat lady singing yet."
The region's economic development office said it has heard little from Amazon in regards to HQ2 in recent weeks, the Atlanta Business Chronicle reported. And Deal conceded that the project could be lost already.
“I think a lot of us have known all along that Northern Virginia was one of their top choices,” he said. “We don't need an Amazon. We stand ready to do whatever we need to do ... but we're not going to have our hearts broken if they decide to go somewhere else.”