City’s sale of Underground Atlanta delayed
By Maria Saporta
As published in the Atlanta Business Chronicle on October 2, 2015.
The sale of Underground Atlanta has been delayed until Jan. 15 as the city of Atlanta works through what Mayor Kasim Reed described as a “solvable problem.” The city of Atlanta’s sale of Underground Atlanta to WRS Inc., a real estate company based in Mount Pleasant, S.C., for $25.75 million included a parking facility that is owned by the state of Georgia.
As part of the Underground deal, the city and the state were supposed to have swapped property so that the parking facility could be included in the sale.
The parking facility sits between Underground Atlanta and Georgia State University — which could be the critical unifying bridge between both destinations.
WRS has said it will serve as the master developer of a project with an investment estimated to be $350 million to $400 million. Plans include new residential towers, commercial and retail space, as well as the revitalization of the historic area people refer to as Underground.
“We have to figure out a solution for a parking lot that the state of Georgia owns that Underground needs for the size of development that they are contemplating,” Reed said in an interview with a small group of reporters on Sept. 25. “In my opinion, all of the remaining issues except for that one are solvable. That’s the hardest problem. I think it’s solvable, but it’s hard.”
When asked about a possible land swap, the mayor said that the city and the state had not yet identified the appropriate parcels that made sense.
“We haven’t gotten far because I don’t have a comfort level with those ideas,” Reed said. “It’s still a solvable problem. I think we will solve it. There are two or three options that we are looking at to solve it, and I think we will.”
Asked to give the odds on whether the Underground deal will go through, Reed said: “I would put chances that it will be solved at greater than 70 percent.”
Meanwhile, T. Scott Smith, president and CEO of WRS, is anxious to get the deal done.
“We obviously would like to get started as soon as possible,” Smith said in a telephone interview on Sept. 28. “The only thing that concerns me is that we took over the management of the property several months ago. We are managing the center on behalf of the city for no fees. And we didn’t think it was going to take this long.”
So Smith said that because the deal closing has been delayed, “it’s longer before we can make any money.”
But Smith said he recognizes that it’s such a big project with 37 different pieces of property involved.
“We’re making sure all the documents are in order — the easements for the utilities and the property titles,” Smith said. “We are close to getting all that done.”
Smith said his firm is continuing to work on architectural and engineering plans for the site, which will include a major grocery store at street level.
“The lease has not been signed yet, but we feel very, very good about the deal going forward,” Smith said. “The grocery store should open in 2017.”
Smith went on to say that the delay “does not affect the delivery of the grocery store” because the work on the project is continuing during this period.
And the delay has done little to dampen Smith’s enthusiasm for the Underground development.
“From everything that we are seeing, we get more excited every day,” Smith said. “We think that the entire one-mile radius of Underground is going to be completely different in the next three to five years. We are more excited about this project today than we were when we went under contract.”
Also, Mayor Reed seemed more upbeat about the Underground deal on Sept. 28 than he had three days earlier.
“When this is all said and done, folks don’t have any idea about the size and scope of what we are working on with Underground,” Reed said. “I think you are going to be thrilled with what we come up with.”
Underground Atlanta is just one of several land holdings the city is trying to unload. Earlier this year, Atlanta City Council approved the sale of 330 acres of Fort McPherson to Atlanta filmmaker Tyler Perry. In September, city officials entered into an agreement to sell the Boisfeuillet Jones Atlanta Civic Center for $30 million to Houston-based Weingarten Realty Investors. And this month, a request for proposals is expected to go out for the purchase and redevelopment of Turner Field.
A.J. Robinson, president of Central Atlanta Progress, said the Underground delay is due to the complexity of the deal.
“From my perspective, I think both parties are working hard to close this transaction as soon as possible, and both parties are motivated to make it work,” Robinson said. “It remains a very good transaction for both the city and WRS.”
Underground Atlanta is made up of buildings that were constructed between 1866 and 1871. Because the buildings were at the same level as the railroad tracks, the city leaders in the early 1900s decided to build a series of bridges with plazas effectively turning the second floors of buildings into first floors at street level and placing the former first floor of the buildings to basements or other “underground” activities with music clubs and illegal drinking.
From the late 1920s to the 1960s, the five-block area of Underground storefronts were virtually abandoned. And then two Georgia Tech graduates opened Underground Atlanta as a retail and entertainment district on April 8, 1969. By 1972, Underground attracted 3.5 million visitors and had $17 million in sales.
But Underground suffered a blow when construction of the MARTA East Line beginning in 1975 led to the demolition and disruption of several blocks, and the complex closed in 1980.
The second incarnation came during the mayoral term of Andrew Young, who had pledged to reopen Underground as part of his vision for downtown. The Rouse Co. and the city launched a $147 million renovation that opened in June 1989. But Underground never was able to fully recapture the magic of its golden days.
Finally in March 2014, the city of Atlanta agreed to buy out the remaining part of an 88-year lease for Underground Atlanta from Underground Festival/CV Underground for $8.8 million. That moved cleared the way for the city to sell the 12-acre site and seek proposals in July 2014. The WRS deal was announced last December.