A redevelopment deal has the potential to reshape downtown Atlanta by finally transforming a long-existing eyesore into a mini-city of office buildings, residential units, hotels, shops and restaurants.
The efforts by CIM Group and Colliers International in pulling together the land necessary for CIM to begin redevelopment of Atlanta's "Gulch" is the Land Deal of the Year in Atlanta Business Chronicle's Best in Atlanta Real Estate Awards honoring the significant deals of 2018.
The Gulch is a bleak, roughly 40-acre field of parking lots and rail lines below viaducts — about half of it owned by Norfolk Southern Corp. and the rest by a multiplicity of private and public entities — where Atlanta was born in 1837 as the terminus of the Western & Atlantic railroad line,
Located in close proximity to iconic Atlanta structures like Mercedes-Benz Stadium, State Farm Arena, CNN Center, Centennial Olympic Park, and other well-known attractions, the underutilized Gulch has led to many ideas about how to make it a productive part of the city’s landscape, a lot of them focused on assembling its component parcels and making it home to something like an intermodal transportation station.
The site is challenging in a number of ways for anyone wanting to do something with it, notes Colliers International Senior Vice President Rob Jordan.
“Its shape and configuration makes things difficult, while the fact that it sits about 40 feet below Centennial Olympic Park makes elevation a significant factor,” he said. Also, any buyer would have to keep in mind, even after the sale, “that Norfolk Southern will continue some freight rail operations in certain areas of the Gulch, and they have to keep certain engineering and design guidelines in place to continue to function.”
All this hasn’t scared off real estate investment firm and property manager CIM Group. Los Angeles-based CIM says that it “employs a holistic approach to creating value and enhancing communities through real estate and infrastructure.”
So why take on the Gulch?
"Throughout CIM's 25-year history, it is always investing in in-fill areas in cities,” said company spokesperson Billy Linville.
He adds that “CIM has been evaluating opportunities in Atlanta for more than a decade, and over the past few years began to focus on the Gulch, while in parallel continuing to explore other opportunities throughout Atlanta.
CIM has big plans for redeveloping the Gulch into a veritable “mini-city” comprised of office buildings, residential units, hotel rooms, shops and restaurants.
Currently, the phased plan calls for approximately 12-15 new city blocks of new infrastructure, roads, sidewalks, open space and parks; up to 9.3 million square feet of office development; up to 1 million square feet of retail uses; up to 940,00 square feet of residential development; up to 750,000 square feet of hotel uses; and three acres of green and plaza space.
CIM began implementing the plan in 2017, when it bought the former Norfolk Southern headquarters, an abandoned landmark sited on 9.5 acres on Spring Street near the edge of the Gulch, for $25 million, and began renovating the property into a 250-unit apartment complex.
CIM continued its Gulch acquisitions in 2018. They included 16.27 acres from Norfolk Southern for $115 million, a deal that closed in December. Atlanta Business Chronicle reported at the time that “Norfolk Southern is reportedly using the proceeds of the land sale to invest in its new Midtown headquarters, which was [previously] unveiled to Midtown in greater detail Tuesday night.”
Norfolk Southern was represented in this transaction by Jordan, along with Colliers Senior Vice President David Walmsley. CIM did the deal on its own.
CIM has assembled a number of other parcels, in addition to the two properties it has acquired from Norfolk Southern; the aggregate price of these was not available at press time.
In addition to topographic variables, the controversy surrounding public funding for CIM’s Gulch project did cause some unease, Jordan notes. After much discussion, the Atlanta City Council approved up to $1.9 billion in public financing to support the massive redevelopment, with a mix of funds from state Enterprise Zone bonds and the city's Westside Tax Allocation District.
In return, CIM committed to several things, including a $28 million investment into a citywide affordable housing fund; a minimum amount (200 or 20 percent of total) of affordable housing units within the project; a $2 million commitment for workforce training; a $12 million investment into a citywide economic development fund; commitment to unprecedented levels of minority- and female-owned businesses with a goal of at least 38 percent utilization; and $12 million commitment towards construction of a new fire station.
“It was great to see the city ultimately get behind this project,” said Jordan, “as well as Norfolk Southern being able to monetize their land holdings, which gave them the security to move forward with moving their corporate headquarters. With the 850 new jobs we’re getting as a result, this is another catalytic change for the positive for Atlanta.”
“The Gulch redevelopment is an incredible opportunity for the city to catalyze our next wave of growth, particularly in an area that can and should accommodate new residences, office space, and businesses that are necessary to drive our economy,” said A.J. Robinson, president of Central Atlanta Progress Inc. and the Atlanta Downtown Improvement District, “all at a site that is served by two MARTA stations, along with infrastructure that preserves the potential for future commuter rail access.”