2 Fulton rental housing projects sought tax breaks. The results differed.

When a developer says a property tax break is needed for a project to make sense, the debate usually centers on one big question.

Does this project provide enough public good to justify taxpayers subsidizing a private company’s tax liability?

That question was brought to the forefront of the Development Authority of Fulton County’s meeting Tuesday when the board considered tax break requests for two projects focused on rental housing. The authority’s board came to different conclusions for each request.

DAFC, which also goes by Develop Fulton, gave preliminary approval to a $5.2 million property tax break for GuildHouse at Upper Westside, a 349-unit rental housing project with retail and coworking spaces. The board, however, failed to progress a $2.9 million tax break request for the Grove at Zephyr, a 163-unit rental townhome project near the Beltline Southeast Trail.

The two votes differed as multiple DAFC board members questioned whether the latter project’s financing gap was something taxpayers should help fill, or if it was a real estate deal that didn’t make sense.

“That seems like a real estate investor problem, not a taxpayer problem,” board member Mike Kennedy told the Grove at Zephyr’s developer Pine Grove Acquisitions during the meeting when discussing the nearly $3 million delta.

The differing results highlight the factors at play when developers request public financial assistance for projects aiming to turn a profit. In both cases, the developers said the tax breaks were justified by brownfield mitigation costs, challenging debt markets and the losses associated with incorporating housing rents below market rate for some units.

But DAFC’s board found the GuildHouse request — and its purported community benefits — more convincing than the other one.

“This is about creating a development that contributes to the surrounding community and strengthens Fulton County’s long-term economic vitality,” Kwanza Hall, the authority’s chairman who voted in favor of both incentives, said in a news release.

“The GuildHouse project represents the kind of comprehensive economic development that can create value well beyond the boundaries of a single property,” he added.

What is GuildHouse at Upper Westside?

Vida Cos. began pursuing a mixed-use project at 2085 Marietta Blvd. more than four years ago.

The Atlanta-based developer, which specializes in build-to-rent housing and apartments, paid about $13 million to assemble the 6.7-acre site in Atlanta’s Bolton neighborhood. The Atlanta City Council rezoned the property in 2022 with the backing of the area’s neighborhood planning unit.

Jim Martin, the chair of NPU-D, told DAFC on Tuesday that he did not support the incentive request, adding that Vida Cos. indicated in 2022 it would not seek a property tax break.

“This site is on a high-growth corridor where numerous projects similar to this one have been developed without public subsidy,” Martin said. “The location itself has been incentive enough.”

Joe Martinez, president of Vida Cos., responded that the site is a brownfield and that the scope of the necessary cleanup to safely house people was more than expected in 2022. He also said the financial landscape has changed since then.

“At the time, interest rates were in a very different place,” Martinez said. “Unfortunately, we’re all gritting our teeth in terms of the cost of capital these days, so our borrowing costs have increased dramatically.”

Anamaria Meanes, legal representation for Vida Cos., said Georgia’s brownfield remediation program helps cover the cleanup costs but doesn’t address other financial hardships.

“It only offsets the cost of making the land usable,” she told the DAFC board. “It does not fill the project’s financing gap. It does not pay for housing or workforce units or any of the retail or community improvements, and that is why the authority’s incentive is still needed to make Guildhouse financially feasible.”

The $107.6 million GuildHouse project is slated to include 310 apartments, 39 rental townhomes and 7,200 square feet of coworking and retail space, the latter intended to land a restaurant, according to Martinez. The developer will also reserve 15% of each unit type at rents affordable for residents who make up to 80% of the area median income — $64,000 for an individual or $91,360 for a family of four.

The project is projected to generate nearly $13.8 million in new property taxes over the next decade despite the abatement, which ramps down over a 10-year period. Vida Cos. said GuildHouse will deliver $12.4 million in other community investments, ranging from environmental remediation and infrastructure improvements to a pocket park and enhanced public spaces.

Tuesday’s vote was preliminary, meaning there will be a second vote to finalize the incentive. The authority’s board has rarely reversed course and denied a project’s tax break request after providing initial approval.

What is Grove at Zephyr?

Pine Grove Acquisitions made many of the same arguments in favor of its tax break request.

The Atlanta-based developer, which also specializes in build-to-rent projects, is under contract to pay $12 million for the land at 1305 Boulevard SE. near Chosewood Park and the Beltline. Empire Homes is the seller and has built housing on much of the surrounding area, working with Pine Grove to fit the area’s master plan development.

Billy Stark, managing partner at Pine Grove, said the acquisition cost and rocky nature of the site helped justify the tax break request. But Kennedy, the DAFC board member, said Empire’s success brought that into question.

“Explain to me why the taxpayers should subsidize the development cost on a challenging piece of property as opposed to the seller?” Kennedy asked Stark.

Stark said Empire is “not a distressed seller,” meaning the company isn’t under pressure to sell, so the land could stay undeveloped if this deal falls through.

Stark said the project would generate an estimated $7.7 million in property taxes over the next decade despite the abatement, arguing that increase in revenue is in the public interest. The land currently generates only $12,000 annually in property taxes.

Grove at Zephyr is also required to reserve 15% of its units at 80% of the area median income because of its proximity to the Beltline.

“The tax numbers are not too high,” he said. “ … So you can put it in production for a better community use, or it’s just going to sit there.”

Laura Kurlander-Nagel, another DAFC board member, said she wasn’t convinced.

“I don’t really understand the need for an incentive here,” she said. “This is just blocks away from the Beltline — a very, very busy area.”

The vote tied 4-4 but needed five affirmative votes to progress. A second attempt later in the meeting also failed to pass.