LAND CASE STUDY: Developer Turns Negative Cashflow & Guarantee Obligations into Profitable Venture
A prime piece of land in the heart of the “Capital of the South” had become mired in economic difficulties that saw the parcel in limbo and the developer upside down. Rather than go the foreclosure route, the financial and development principals wisely reached out to market – and marketing – leader Bull Realty. From mixed results at best came maximum recovery and major mixed-use momentum in Midtown Atlanta.
“The lenders, United Bank and Synovus Bank, were able to maximize their recovery by cooperating with the original developer to market the property,” said Michael Bull, president of Bull Realty and host of America’s Commercial Real Estate Show. “When you add the cost of demolition to the slightly more than $59-per-square-foot land price, it’s a good sign for the commercial real estate recovery. There was tremendous interest with 10 competing offers.”
Representing the seller, developer Thirty Third Latitude Properties, Bull Realty Partner Daniel Latshaw brokered the short sale for $6.51 million in early August. It comprises the entire block — bounded by Ponce De Leon Ave., North Ave., Piedmont Ave. and Juniper Street — except for St. Paul’s church, which was home to the well-known Abbey Restaurant from 1977 to 2005. The 2.5-acre site includes famed architect I. M. Pei’s first office building, located at 131 Ponce de Leon Ave.
Bull Realty collaborated with all parties involved in order “to both lift the burden off the borrower and maximize asset recovery for the lender,” Latshaw said. In exchange for release from financial obligations, the borrower added value throughout the transaction by providing existing due diligence, assisting with complicated zoning/development issues and continuing proper management of the existing office buildings. The lender avoided the cost and aggravation of foreclosure, as well as the liability and responsibility of property ownership.
According to submissions to a Midtown Development Review Committee meeting in July, the buyer, a joint venture involving Sereo Group and Faison Enterprises, plans to develop a new mixed-use project that will feature 321 luxury apartments and 8,600 square feet of retail space. The very accessible property in one of Atlanta’s strongest submarkets had been entitled for a 1.4 million-square-foot mixed-use development.
“The concept not only preserves the façade of the Pei building, but makes it a centerpiece of the design and celebrates Pei’s architecture and legacy,” said Latshaw of the other “mixed-use” aspect of the dynamic development to be delivered.(The video on Bull Realty’s web site provides an interesting look at the previous developer’s original plans for the property.)
Do you have a property under water? Don’t throw in the towel. Foreclosure does not have to be imminent.
“Just because a property is distressed doesn’t mean it has to be sold wholesale,” Latshaw affirmed. “If the parties agree to work together to properly market the property, it can be sold closer to a retail value. Perhaps most importantly, all parties [above] were able to avoid the stigma of ‘blood in the water’ that comes with a foreclosed property.”