Reed proposes new deal to sell City Hall East

By Eric Stirgus

The Atlanta Journal-Constitution

Atlanta officials unveiled a new plan to sell one of the city's underused properties, City Hall East, to a revamped development group, saying the initial plan brokered with a developer five years ago is now "unrealistic."

Mayor Kasim Reed proposed the sale of the 2 million-square-foot building on Ponce de Leon Avenue to several developers led by Atlanta-based Jamestown Properties. The deal is $13.5 million down and $13.5 million later, city officials said. The proposed deal does not set a timeline when the remaining payments would be made.

The presentation came during a meeting with City Council members to discuss City Hall East and the potential sale to Fulton County of another underused property, Atlanta's jail. Several council members had strong objections to the latest jail proposal.

Councilman Kwanza Hall conceded the City Hall East plan is somewhat of a "gamble," but he and the mayor said they support the arrangement because it would add $13.5 million to city coffers. The city, they added, would not have to spend $1 million during the next fiscal year to maintain a vacant building. Until last year, City Hall East had served as Atlanta's police and fire rescue headquarters and housed offices for much of its Parks, Recreation and Cultural Affairs Department.

"It is the right deal right now because this deal has been open since 2005," Reed told reporters.

In 2005, the city struck a deal to sell City Hall East to developer Emory Morsberger for $27 million. Morsberger said he and Jamestown began discussions about a partnership about a year ago.

Morsberger said in an interview that the plans still include a mix of residential, office and commercial space. Jamestown has worked on several redevelopment projects across the county, including a 1.15 million-square-foot mixed-use project in Manhattan whose occupants include the Food Network and Major League Baseball. Locally, Jamestown was also involved in developing Glenwood Park in East Atlanta.

Councilwoman Keisha Lance Bottoms wondered whether the proposed deal "seems extremely low in this market."

Lanie Rea, research manager at Jones Lang LaSalle, a commercial real estate services firm, said the asking price seems low. However, she noted developers would need to spend a significant amount of money retrofitting the property if they want to use it for retail or residential space. Rea said the area is ideal for mixed-use development because of its accessibility.

Reed said he hopes to strike a deal by April but would consider extending the deadline.

The mayor said Atlanta is potentially facing a budget shortfall of about $50 million, and Reed said he is trying to close "open items" such as City Hall East to close the budget gap. Reed is scheduled to unveil his proposed budget at the end of April.

Senior policy adviser David Bennett presented to council members the latest proposal to sell the jail to Fulton County, which needs more beds to house its inmates. Atlanta is spending about $30 million a year on the jail, which has been used less since city leaders removed some duties from the city's court system several years ago. Bennett argued the city could save at least $10 million a year through a lease-purchase deal with the county.

Several council members, however, had strong reservations to the jail deal. Their concerns included whether the city will need more bed space as Reed plans to hire more police officers, which council members conclude will result in more people going to jail. They also question plans to lease four courtrooms to the county for $1 a year.

"You all need to go back to the drawing board," Councilman C.T. Martin said.

Councilman Michael Julian Bond, a former city corrections officer, agreed.

"That, to me, is getting played," he said of the deal.

Reed said he will work with council members on their concerns, but he believes the deal must be done.

"I don't believe it makes sense to end up losing $30 million a year," the mayor told reporters.