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Atlanta Outlines Unprecedented Accord With Developer to Transform Potential Amazon HQ2 Landing Spot

CIM Group Would Invest $40 Million for Affordable Housing, Economic Development, In Return for Properties to Develop $3.5 Billion Gulch Project
September 11, 2018

CIM Group's proposed redevelopment within the Gulch in Atlanta; Photo credit: CIM Group

Atlanta's mayor is proposing to offer a Los Angeles developer an unprecedented economic package to transform the city's downtown and possibly lure Amazon's second headquarters.

Under the plan, scheduled for a vote next week, development firm CIM Group would invest $40 million to create affordable housing and spur economic development while the city of Atlanta would trade two critical properties CIM needs as part of its planned $3.5 billion project.

CIM has proposed a massive mixed-use project in the area of downtown known as the Gulch. The site is a former railyard that covers 30 football fields worth of land near CNN Center and Mercedes-Benz Stadium, and has lain fallow for decades. One of CIM's key executives, Richard Ressler, is the brother of Atlanta Hawks owner Tony Ressler, who is overseeing the renovation of the Hawks' home at State Farm Arena next to the Gulch.

A birds eye view of planned development within the Gulch; Photo credit: CIM Group

Atlanta Mayor Keisha Bottoms released details of the proposed agreement about a month after advocating for an incentive package to help CIM affiliate CIM Spring St. develop the Gulch. The Gulch has been widely discussed as one of the city's top choices for development of Amazon's second headquarters, known as HQ2, should the world's largest retailer select Atlanta for the massive operation. Atlanta is one of 20 cities that online retailer Amazon is considering for the site of its second headquarters, which it said will bring 50,000 jobs and involve $5 billion in capital spending.

Bottoms put affordable housing and economic development at the center of the proposed agreement as part of her platform to increase housing and career options for city residents. Specifically, the proposed agreement calls for CIM Spring St. to invest $28 million in a trust fund used to increase affordable housing across the city. CIM also would agree to build at its mixed-use project a minimum of 200 affordable housing units, or 20 percent of all housing built, whichever is greater.

CIM also would invest $12 million in an economic development funds to spur citywide investment and $2 million toward the Atlanta Committee for Progress' workforce development plan. In addition, CIM would agree to renovate the office buildings at 185 Spring St. and 140 Trinity Ave. and demolish the building at 175 Spring St. to provide additional parking in the area.

For its part, the city would give CIM a warehouse at 2 City Plaza and the building's parking lots on Fairlie Street. The property, formerly home of The Atlanta Journal-Constitution's printing presses and a parking lot, would be used for 35 acres of new infrastructure, roads, sidewalks and open space, the city said.

The Atlanta City Council is scheduled to vote on the proposed agreement at its Monday meeting. When Bottoms initially announced incentives funded by sales tax proceeds and tax abatements, several City Council members demanded more information before voting on the package.

Before any incentives are finalized, Councilman Howard Shook said he would like to know exactly what would be built at the Gulch. "The Gulch has been the subject of various development concepts over the years. Although not officially stated, it is clear that this project is seen as a step to secure Amazon," said Shook, who chairs the council's Finance Committee. "I'm not a fan of publicly funded leaps of faith; I'd like to see an anchor tenant [like Amazon] an announced part of the deal."

If Atlanta approves the incentives and Amazon chooses another city for HQ2, Shook said, CIM and the city would have to work to recruit other companies to the development, which likely would have to be scaled down. "The developer's business plan recognizes several non-Amazon scenarios that would produce a less dense project," he said.

Amanda Shailendra, an economic development expert who has worked for both the Georgia Economic Development Department and Invest Atlanta, the city’s development arm, said incentives can be effective when used appropriately.

"The use of public funds to help ignite private development results in value when those funds provide thoughtful improvements to our community and spur increased private investment that would not have otherwise occurred," said Shailendra, founder of PATH Solutions and an affiliate of Pendleton Group, both consultancies that provide economic development and incentives advice. "In economic development we always look for projects that result in a public plus private investment of one plus one equals three."

Using incentives to help in the development of the Gulch could have the positive impact of increasing the city’s tax digest and creating jobs that pay higher-than-average wages, she said. "If the public support results in increasing the tax base and assists the recruitment of new jobs, it’s a good time to consider the project," Shailendra said.

An outline of the Gulch; Photo credit: city of Atlanta.

Councilman Amir Farokhi said he "generally" is supportive of private development of the Gulch, but only after thoughtful and calculated planning.

"It has the promise to be catalytic for the city. It could continue the ongoing transformation downtown, an area served with transit and hungry for more residential and commercial growth," Farokhi said. "But, it is definitely worth underscoring the word 'generally' when we talk about this. A considerable amount of thought needs to be put into the prospective design of any development as well as the structure of the financial package.

"If we are not thoughtful and intentional, we could undermine our ability to deliver services in the future."

Farokhi said the city needs to consider the proposed agreement with CIM separately from any consideration of Atlanta winning the Amazon HQ2 sweepstakes.

"As best I know, we are one city among 20 vying for Amazon HQ2. If that changes, we can act accordingly - with state support," Farokhi said. "But until it does, I decouple the Amazon and Gulch conversations completely. We should not provide billions in assistance based on a hypothetical."

Tony Wilbert, Atlanta Market Reporter  CoStar Group   
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