Streets project on hold again

By Rachel Tobin Ramos

The Atlanta Journal-Constitution

Construction on Ben Carter’s landmark retail district called the Streets of Buckhead has been delayed again.

The project dubbed the Rodeo Drive of the South, featuring top-drawer retailers like Van Cleef & Arpels, Hermes and other high-end boutiques like Oscar de la Renta, was once supposed to open in November. Now it looks like January 2011.

Carter halted construction earlier this year and had planned to restart this month, but now it could be as late as early next year. For now, the site includes several cleared lots, a partially built parking structure and construction cranes.

The developer says he doesn’t want to proceed until he has more leases in hand and the economy is stronger, which will be better for his tenants.

The continued delays raise doubts.

“There’s an old phrase in the real estate development business that time kills all deals,” said Phil Skinner, a partner in the real estate practice of Arnall Golden Gregory. “You’re on a continuum that the longer it takes to make things happen, the harder it is to hold everyone in place.”

The Streets of Buckhead has been planned as a landmark retail district where clubbers used to rock Buckhead near Peachtree and East Paces Ferry roads.

It is one of the most watched retail projects in Atlanta given its high-profile address, luxury tenants and Carter’s enormous gamble. Carter paid top dollar to buy, then shutter clubs and other commercial buildings in the Buckhead Village. His land acquisition costs alone were more than $169 million.

Carter said he halted construction last January to renegotiate with his contractors, which saved $10 million in costs. This time, he’s delaying construction to try to get more leases in hand before seeking a construction loan.

Skinner said Carter is right in trying to get more leases before approaching banks.

“It’s fundamentally true that if you get enough preleasing to satisfy a lender, you remove a substantial amount of risk, and can go forward,” said Skinner.

It takes the speculative nature out of a project because if they build it, the tenants are obligated to lease it, he explained.

Carter, a native Atlantan and mall developer, emphatically says he’ll get the job done.

“I think we’re known for perseverance and success,” said Carter. “I expect nothing different in this project. When I walk around the town, I get a number of comments that if anybody can do it, we can do it.”

He’s been told “never” before, he said: One of those projects, the Mall of Georgia, just turned 10 years old.

Carter said he just has to be patient now.

“This is just a very painful, very deep recession,” he said. “My preference would be to open in January 2011, because I think the economy will have a better chance of recovering by then. My tenants are signing 10- to 20-year leases. I want it to open up in the most successful environment possible.”

Carter said he has about half the 375,000-square-foot, $800 million project leased.

Another 100,000 square feet are in “final negotiations” and 50,000 square feet are in “active negotiations” with five restaurants, 10 “luxury/trend” retailers, “an entertainment concept” and a spa/health club.

“We’re delighted that kind of activity is in front of us. It’s fantastic,” Carter said.

The spa/health club would replace Equinox, a club that pulled out of the project.

Sam Massell, president of the Buckhead Coalition and a former Atlanta mayor, was behind the push to shutter the club district and supports Carter’s vision.

“I believe it will happen and most likely Ben will do it,” he said of the project. “In my eyes it’s the ground floor of a great development yet to come. Streets of Buckhead is not the only development in Atlanta or urban America that has been delayed or adjusted. It’s universal.”

To be sure, Streets of Buckhead has not proceeded smoothly. The project broke ground in August 2007, with plans to be open this fall. Since then, plans for an office tower were tabled and hotels stalled.

Carter is still moving forward with two apartment towers and the first phase of retail.

He said that stalling construction is saving him about $2 million a month in carrying costs. His project costs him about $1 million monthly now, and that will go up to $3 million a month once he restarts construction, he said.

He is currently funded through a bank, a pension fund, investors and his own cash. He said his leasing rates are about $50 to $130 per square foot.