CIM Group Changes Tack On Gulch Master Plan
But any work on what now is a sea of asphalt and railroad tracks is on hold until Los Angeles-based CIM's legal fight over a portion of a city-approved incentive package is resolved in the courts.
“Until the bonds are validated, there are some significant limitations on what can be done,” Atlanta Deputy Chief Operating Officer Jon Keen said during the Aug. 26 meeting of the Atlanta City Council's finance/executive committee.
The incentive package, the largest ever approved by the city for a single private development, is nearly $2B in tax abatements and bond financing pivotal to CIM's acquisition and redevelopment of the project.
CIM offered the first glimpse of its potential vision for the $5B megadevelopment when it released renderings to city officials in August 2018. CIM is planning a massive project, encompassing more than 9M SF of office, 1M SF of retail, 2,100 apartment units and 1,500 hotel rooms.
Now, CIM is making revisions to the master plan, said Brigitte Broyard, CIM's equal business opportunity manager in Atlanta. Broyard didn’t detail what those changes may entail or why the developer is changing course.
“Based on our experience in creating master plans for projects across the country, we always strive to incorporate the best ideas throughout the development process,” a CIM spokesperson said in an email to Bisnow. “We bring this same approach to Centennial Yards, with its unique infrastructure challenges and critical importance to downtown Atlanta, and we will be revealing updates in the fourth quarter.”
In August 2019, CIM officials named the project Centennial Yards and told the Atlanta Journal-Constitution it was putting the finishing touches on its master plan.
In the meantime, CIM has worked on portions of the project around the periphery of the Gulch, including redeveloping Norfolk Southern's former office buildings off Spring Street into a residential mixed-use complex. According to the presentation, the developer is finishing 125 Spring St. to include 162 apartment units and 32K SF of retail space. CIM is expected to complete the project by Oct. 26.
While work on the second former Norfolk Southern building at 99 Spring St. has yet to begin, Broyard told council members that CIM is considering turning it into a co-living facility, “which is something that is really hot in the market right now.” But those plans are not definitive, she said.
Atlanta City Councilman Howard Shook expressed frustration with CIM over the presentation during the meeting, especially since the developer had repeatedly bumped its required quarterly presentations to the city in the past. The August presentation was the first in 2020.
The main presenter for CIM was not present for much of the assigned time slot of the finance/executive committee meeting until very late into the segment. CIM Vice President J. Shannon Crowell told members he was tied up in another meeting.
“This is the finance committee; as the senior member, that used to mean something,” Shook said. “This presentation looks like it might have been put together by Camp Best Friends. Are they running this project?”
Council member Jennifer Ide, who chairs the finance/executive committee on the city council, echoed those frustrations.
“This didn't go well,” Ide told CIM attendees. “I gave you a lot of flexibility today. That's not going to happen in the future, so please get your ducks in a row. If we can all agree to come together with respect and protocols, I think we will have a much better relationship.”
When asked about the council members’ responses, a CIM spokesperson said, “Clearly, there is excitement and pent-up anticipation throughout the Atlanta community about the transformative Centennial Yards project, and its positive impact to downtown and the city in general."
“We believe that the anticipation will continue to grow as more details are revealed during Q4 2020,” the spokesperson said.
The ambitious project was greenlighted in November 2018 after the city council approved a $1.9B incentive package for CIM — the largest single incentive package in the city's history. That package allows CIM to use sales taxes to pay back $1.25B in Enterprise Zone Bonds, the use of up to $40M in Westside Tax Allocation District financing that is secured by property taxes, and to receive up to $625M in supplemental financing also secured by property taxes.
Those arrangements spurred some neighborhood activists and residents — through the group known as Red Light The Gulch — to file lawsuits against the city and CIM over the deal. The Georgia Supreme Court upheld part of the package in June, guaranteeing that CIM will be able to repay $1.25B in bond financing with sales taxes generated by tenants in the project.
The fight over the use of Westside TAD financing, though, is now in the state appeals court, which is delaying CIM's ability to move forward on the heart of the Centennial Yards project, officials said.
“We expect a decision from the Court of Appeals by March 16, 2021, or possibly as late as July 2, 2021, depending on the term of court in which the Court of Appeals dockets the cases for argument,” CIM officials said in the presentation.
Officials added they expect opponents to appeal the case again to the Georgia Supreme Court if the appeals court rules in CIM's favor. That could push a final ruling on the case out to mid-2022, according to the presentation.
But some question whether the delayed start to Centennial Yards is solely due to the litigation, or if the realities of a world and economy ravaged by a pandemic may be tempering CIM's ambitions. The first major step on the Gulch redevelopment is a three-year, $500M process to elevate a new street grid 40 feet above the site’s current height and in line with CNN Center.
“The future has never been more clouded, at least for the next couple of years, as it is right now,” Legacy Ventures founder David Marvin said. Marvin is a major commercial real estate stakeholder in Downtown Atlanta, having developed and owning a number of hotels and restaurants in the area.
“The pandemic has changed the way people are renting office space, and accelerated the way people are building brick-and-mortar retail,” Marvin said. “I think the rational thing to do would be to reflect on all of this.”
When asked whether the pandemic has affected CIM’s master plans for Centennial Yards, a spokesperson told Bisnow via email that the master plan “was already state-of-the-art with a forward-looking vision.”
“I don't see anything going forward with the Gulch,” Atlanta Downtown Neighborhood Association President Robyn Jackson said. “I think they purchased that property to sit on it. Just like WRS has done with Underground [Atlanta].”
Jackson, a lifelong Downtown Atlanta resident who has hosted tours of the historic Oakland Cemetery for the past eight years, said CIM and WRS — which is planning to redevelop the iconic tourist attraction Underground Atlanta — are benefiting from the $88M in revitalization work on a collection of older buildings in South Downtown Atlanta that Newport is engaging in, including 222 Mitchell St., which will be transformed into an office and retail center. That work, Jackson said, will pump up property values at both the Gulch and Underground Atlanta.
“Once Newport puts all that in, my property value is going to go through the roof,” said Jackson, who lives at Kessler City Lofts off Martin Luther King Jr. Drive, four blocks from the Gulch.
Sherise Brown, a resident and community organizer in the Peoplestown neighborhood — two-and-a-half miles south of the Gulch — also said she is skeptical of CIM’s ability to accomplish the project. Brown is a member of Red Light The Gulch.
“I thought about that when the pandemic came. I thought they won't be able to reach some deadlines and do what they say in a timely manner,” Brown said. “Because of the economy, too. So, no, I don't think they're going to meet their promises.”
Brown said she would rather see an affordable-housing community for the poorest of city residents built at the Gulch site along with facilities that would house a host of services targeted to vulnerable residents, including healthcare, mental health and job training.
As part of the incentive package, CIM has vowed to develop more than 200 affordable housing units at the project, which will be designated as such for 99 years, and to donate $28M to an affordable housing trust fund that will be used by the city to create units outside of the project.
City Realty Advisors founder Tim Holdroyd, a veteran broker who has focused on Downtown Atlanta, questioned how CIM plans to get financing for the office, considering where Downtown Atlanta office rents are today. According to Q2 2020 JLL’s report, the average Downtown Atlanta office rent was $29 per SF.
“Construction lending in office is way off and difficult to achieve, especially now,” Holdroyd said. “I think it's difficult to find construction financing anywhere at this point for new projects.”
A CIM spokesperson told Bisnow the company is “in preliminary discussions” for construction financing.
“Several leading financial institutions have expressed keen interest in participating [in] the financing as well as being associated with Centennial Yards,” the spokesperson said via email. “CIM is an owner, operator, lender and developer with approximately $30B in assets under management that has a proven track record of executing on projects and securing attractive financing over its 25-year history.”
CIM officials previously told media they expect the Gulch redevelopment to take 15 years to reach completion.
Legacy’s Marvin said, though, that getting a major corporate tenant to agree to anchor the project would go far in putting momentum behind Centennial Yards.
“I think they're going to create a unique place. And if they get one of the movers and shakers to rent with them, to office with them, I think they’ll be fine,” he said.