Contact Us

Dreams Deferred: Big Mixed-Use Projects Waiting At The Starting Gate

The Integral Group was gradually moving forward on The Assembly, a big mixed-use project on the site of a former General Motors plant overlooking Interstate 285 in Doraville, just north of Atlanta.

The Atlanta developer already built Third Rail Studios, a movie production facility where big-budget films like Rampage, starring Dwayne Johnson, were shot. Serta Simmons Bedding Co. recently opened its corporate headquarters there. 

Rendering of The Assembly campus redevelopment at the site of the former General Motors plant in Doraville

The next step was for Integral to sell a couple of parcels to developers for an apartment complex and a boutique retail center. Then the coronavirus pandemic hit.

“We did have some delays in a couple of closings because of the crisis,” Integral Group Chairman Egbert Perry told Bisnow this week. Those sales were expected to kick off Assembly's next phase, but they have been pushed back months, Perry said.

For some developers with dreams to build Atlanta's grandest mixed-use projects, the coronavirus has been a cold dose of reality. The economic crash is chilling the market for ambitious construction loans with projects reliant partly on retail, office and hospitality.

“It is harder to raise money right now. Construction financing is harder,” CBRE Vice President Bill Leffler said.

There are no shortages of large-scale mixed-use projects in the planning stages in Metro Atlanta. CIM Group purchased a 40-acre sea of asphalt in Downtown Atlanta called The Gulch. After securing the largest incentive package in the city's history, CIM plans to transform the parcel into a $5B hub of office, hotels and retail that will even include a new street grid. Company officials could not be reached for comment, but they previously said construction would begin in 2020.

Boston-based GID is planning the $2B High Street project in the affluent Dunwoody community some 15 miles north, including offices, apartments and retail next to Perimeter Mall. 

Atlanta-based Urban Creek Partners, whose partners include former Atlanta Braves player Mark Teixeira, is striving for a 70-acre mixed-use project called Quarry Yards next door to the Bellwood Quarry. The $400M first phase is set to include 850 residential units, 575K SF of office, 75K SF of retail and a 300-room hotel. No groundbreaking date has been announced.

Instead of scaling back ambitions and project sizes, some developers say they are prepared to wait longer for their dreams to come to fruition.

“Other than [the delays], our plans really don't change very much," Perry said. "We were never going to be heavily retail-driven. As a result, we really didn't have a big retail component on which everything was dependent."

The Integral Group CEO Egbert Perry in 2017

The current state of the economy is forcing developers to have more of their own money tied up in projects before even being considered for financing, Leffler said. And that is pushing out the time horizon before mixed-use projects can break ground.

For the multifamily component in a mixed-use development — still one of the stronger performing asset classes — a developer can only get financing for up to 60% of the project cost. That's down from 70% last year, he said.

During the pandemic, capital markets have seized up and pulled back, focusing on only the projects that were deemed the least risky, Selig Development Chief Operating and Development Officer Steve Baile said. Developers are now competing for capital that is increasingly searching for distressed real estate opportunities, rather than expensive new projects.

“Capital will follow the simple, more reliable path at this point,” Baile said. “The more complicated [mixed-use projects] are, they usually are the first ones to get put on hold, and it takes them longer to come back.”

Selig is underway with 1105 Peachtree, a $530M three-tower project that includes a 31-story office building to be occupied by Google, a 178-room Epicurean Hotel and luxury condominiums. All three began construction before the spring.

“Capital isn't going out financing spec office buildings,” Baile said. "There's still lots of activity in the market, but unless you get some of the activity, it's going to be tough to finance it."

Selig Development Chief Development and Operating Officer Steve Baile

Of the five mixed-use projects JLL Senior Managing Director Ed Coco is attempting to arrange financing for, including the retail portion of GID's High Street project, none have been scaled back yet, he said.

In December, another prominent developer, North American Properties, pivoted away from engaging in complex mixed-use projects across its portfolio. As a result, North American pulled out of High Street and backed off plans to serve as master developer of a mixed-use project around Infinite Energy Arena in Gwinnett County.

These decisions, made before the coronavirus was even on anyone's radar, were driven by rising costs, North American Properties Managing Partner Tim Perry said.

“Costs continued to rise for large new developments at a rate that outpaced the income levels ... of the lease rates required,” he said.

GID officials said in February that they planned to start construction in 2020, but Coco said the developer hasn't approached the debt markets yet for construction financing.

Banks and other lenders are still interested in financing mixed-use, even in today's environment, Coco said. Projects that emphasize walkability and add residential components are likely to get more interest.

“Everything takes longer in this cycle. The nice thing they have is the ability to work through it. They've owned the land a long time,” Coco said of GID. “High Street is probably, in my opinion, one of the best mixed-use sites in the Southeast. That [project] will happen, and GID is a very experienced developer, and they're putting a lot of their own capital in the deal.”

The extra time is on top of what is already a long and arduous process to develop mixed-use, Tim Perry said. North American broke ground on its banner Avalon luxury mixed-use complex in Alpharetta in the summer of 2011. The project was finally completed in the spring of 2016. 

For Integral's Doraville redevelopment, an original de-emphasis on adding retail is helping the project to continue to move along, Perry said.

Integral is still under contract to sell parcels for two apartment projects and a townhouse development, in addition to the retail center. All four property sales are scheduled to close this year, he said. 

“I think it will be longer getting into full stride, but I think that's only months," he said. "I don't think that's years."