For a couple of years, Atlantic Station, the 138-acre mini-city west of the Downtown Connector, has had to battle not only a bad economy, but also harsh perceptions.
Intown shoppers bypassed the complex’s mix of chain stores and restaurants for hipper retail and entertainment hubs. Foreclosures had hurt property values. Some residents complained of crime and that the promising mixed-use dream on a former steel mill site had turned into a rowdy cruising and party zone.
Tweaks to the original tenant mix have made the complex fresher, shoppers say, and storefronts are almost full. Property values are up along with the broader housing market, office towers are filling and the new owners are talking about something once unthinkable: new development.
“People continue to identify Atlantic Station as an opportunity to do business,” said Mark Toro, managing partner in Atlanta of North American Properties.
Thirteen untapped acres at the complex could be ripe for more apartments, hotels, office space or potentially an entertainment venue, Toro said.
North American and CBRE Global Investors acquired key portions of Atlantic Station for $173 million in late 2010, during some of the darkest days in Atlanta real estate.
The complex’s developer, Jacoby Development, transformed a polluted industrial site and eyesore into one of the nation’s most ambitious brownfield redevelopment projects. But Jacoby’s financial backer in the venture, AIG Global Real Estate Investment Corp., was forced to sell its holdings after the financial crisis hit.
Jacoby and AIG deserve tremendous credit for developing an icon for Atlanta, said Abe Schear, a real estate attorney with Arnall Golden Gregory.
The complex’s acclaim was demonstrated in the dozens of groups that wanted to buy it and bet on not only its return, but Atlanta’s, real estate observers said.
“The initial ownership took great risk and had great vision as to how to use a property (the former Atlantic Steel mill), which was a long-term eyesore in the community,” Schear said. “The new ownership has had the good fortune of making tweaks to a project that was already coming into its own.”
Atlantic Station includes three office towers, along with several apartment and condo projects, a town center and retail district with the region’s first IKEA store.
The North American and CBRE Global partners control two of the office towers, the town center and 13 acres of undeveloped property. That includes sites near the skyscrapers along 17th Street and a large surface parking lot to the north of the Dillard’s store where the BB&T Atlanta Open tennis tournament is being played this week.
Retail occupancy was around 70 percent when the partners arrived. Today, it’s about 90 percent, Toro said.
Holiday sales at Atlantic Station were up 14 percent over the prior year, better than triple the national average, Toro said.
A new strategy has helped boost Atlantic Station, but so, too, has an improved economy.
The region’s jobless picture is brighter and office vacancy in Midtown is better than when the ownership changed. New apartment projects nearby are rising and overall apartment vacancy in the immediate area is half what it was at the end of 2010.
That all means thousands more potential customers at the complex’s doorstep, said Jeff Myers, a Boston-based real estate economist at The CoStar Group.
“Atlanta is doing much better now than it was three years ago,” Myers said.
Atlantic Station stepped up its private security to try to crack down on loitering. Restaurants that had become more like nightclubs, such as Geisha House, closed, and the managers improved signage and lighting along the labyrinthine parking decks.
In addition to Geisha House, 10 Pin Alley, Dolce and Fox Sports Grill closed after new ownership took over. Toro said the complex took a $4.2 million hit to annual food sales.
But three restaurants that replaced half of that space — Yard House, BGR and Meehan’s Public House — added $11.2 million in annual food sales, he said.
“De-leasing in some respects was as important as re-leasing,” Toro said of the decision to part ways with some former tenants.
In a 24-month period, North American signed 24 leases, including the Shaun Doty restaurant Chick-a-Biddy and retailers Athleta.
Penelope Cheroff, who lives in Ansley Park and chairs the local Neighborhood Planning Unit, said she used to shop Atlantic Station maybe twice a month, typically at Dillard’s or shoe store DSW, and usually just out of convenience. For lengthy shopping trips, she went to Lenox Square.
But the complex has gotten more family friendly, she said, and the mix of restaurants makes it a destination, as do the newer lineup of boutiques.
“It’s a more comfortable place to walk,” said Cheroff, who also runs her own retail leasing company, the Cheroff Group. “It’s obvious they are paying attention.”
Many of the core tenants signed by Jacoby, like Publix, Target and IKEA, remain.
Additions like furniture retailer Z Gallerie and restaurants like Yard House are known but are not on every corner. That can attract folks from far away, said Jim Bieri, a retail analyst in Detroit with Stokas Bieri Real Estate.
Atlantic Station’s new managers launched an aggressive social media blitz, attracting more than 40,000 Facebook likes and 18,000 Twitter followers. The complex solicited ideas for events and retailers, and promoted events. It now has movies for families, improv and other events in its Central Park.
The biggest coup might have been the Atlanta Open tennis tournament, now in its second year at Atlantic Station. The event draws tens of thousands of spectators who also shop in the stores and eat in the restaurants, Toro said.
The improved retail environment has helped boost the office market, said John Gilb, who heads the investment committee for CBRE Global. The new shops and other amenities help in attracting companies that want to appeal to younger workers.
The two office towers that North American and CBRE Global control — at 201 and 271 17th Street — were less than 50 percent occupied when the new partners took over. The towers are on pace to be at least 80 percent full by year end, Gilb said.
The team invested in office interiors to lure startup companies. Office spaces within the slick glass towers feel almost like industrial lofts with brick finishes and exposed piping. Floors have movable walls to allow small companies to quickly grow into larger spaces.
The team has recruited coveted office tenants like streaming music service Pandora, payments processor Square and marketing giant Ogilvy Mather.
Leasing the space means more cash flow from rents and makes the property more valuable, but a significant financial appeal of the Atlantic Station complex was the potential to sell the undeveloped land to new developers, Gilb said.
“We invested in this property for two key reasons,” Gilb said. “We believe in Atlanta. The second reason is we saw a tremendous value in this real estate.”
The untapped property has zoning in place for as much as 6 million square feet of potential development.
To give some perspective, that’s equal to the square footage of four Lenox Square malls or four skyscrapers the size of Bank of America Plaza.
Toro said neither the scope nor nature of that development has been determined, and the owners are early in the process of figuring out what kind of development would complement what Atlantic Station already offers. That could encompass office buildings, entertainment facilities, student housing, apartments, condos and hotels.
Who might develop that land also is in question.
But with the condo market improving, apartments continuing to be hot and a desire of the so-called young and restless to live in the city, Toro said, demand is building for new development.
