“It is way too easy to build a building here.”
That’s not a sentiment you expect to hear from the CEO of a real estate firm. But it was voiced by a rather prominent one at a recent breakfast briefing held by the real estate practice of Atlanta law firm Arnall Golden Gregory.
The speaker was Matt Bronfman, the chief of Jamestown Properties. Jamestown is the firm behind one of the city’s hottest developments: Ponce City Market.
Jamestown is not a typical developer. It aims for its projects to be distinct, so perhaps such a view shouldn’t surprise.
Bronfman praised the city for its investment in the Beltline and for its help in the monumental transformation of the hulking former Sears warehouse on Ponce de Leon Avenue into Ponce City Market. It’s now a thriving blend of shops, eateries, loft office space and residences.
Atlanta is a growing hub and a city on the rise, Bronfman said. But the region isn’t selective enough and sometimes requires too little of developers, he said, adding those are reasons why his firm doesn’t do more projects in its home city.
Jamestown has found fewer intriguing projects to take on in Atlanta because there’s little in the way of large adaptive re-use and iconic, challenging projects with plenty of upside to grow rents.
Jamestown, backed by pension funds and German investors – “dentists from Dusseldorf,” as Bronfman says – sits at a unique end of the market. The company likes to tackle projects where the work is both difficult and expensive. It doesn’t look to spend $10 million on a deal, but perhaps hundreds of millions.
Here are some of the topics Bronfman touched on in his recent talk:
On the region’s glut of available land and zoning standards…
Atlanta holds no shortage of available land, from surface parking lots to underdeveloped and low-density tracts, to make it inexpensive to build here. But that means there’s a low barrier to get into the game.
Metro governments also have permissive standards that allowed metro Atlanta to become full of what he called “commodity” real estate.
There aren’t many ancient treasures like Ponce City Market for creative re-uses, but there are lots of buildings that look just like everything else.
Metro Atlanta, he said, needs to get tougher, particularly along the Beltline which runs along Ponce City Market’s doorstep and has drawn not only Jamestown’s attention, but a raft of mid-rise apartments and other commercial projects.
“They let people put up too much schlock in this city,” Bronfman said. Developers should be accountable to themselves to build greater things for the betterment of the city and its aesthetic.
“Aesthetically pleasing” buildings are worth more, command more rent from tenants and fetch higher sales prices, he said.
On developing Ponce City Market…
Bronfman praised Atlanta Mayor Kasim Reed for seizing the opportunity to sell the former City Hall East and for cutting through red tape to support the project. The brick warehouse, he said, will age “like an antique car” and get better over time.
“Ponce is really cool now, but Ponce will be even better in 10 years,” he said.
Jamestown has experience with Chelsea Market in New York as well as properties in San Francisco. The company noted an early trend of tech firms seeking out unique digs and thought Ponce City Market would appeal to creative companies. But the firm really thought retail would be where the market would thrive.
It turned out office was the easy part, Bronfman said, while retail lagged.
Tech companies like athenahealth and Mailchimp signed on early, and that surprised the developers.
Bronfman also said his firm now wishes it had bought more property along the Beltline.
On downtown and interest in Bank of America Plaza…
Bronfman said his firm is intrigued by downtown real estate, but it’s hard to buy for a low price in the city’s core. Georgia State University, for instance, has helped bring life the downtown streets.
Bronfman also said the firm had some interest in buying the city’s tallest tower, Bank of America Plaza. The building went into foreclosure after the economic collapse and has struggled to regain tenants.
California real estate giant Shorenstein Properities recently bought the tower and netted the first major lease there in several years.
On the global economy…
Bronfman said he’s still bullish on the U.S. despite global economic turbulence. He said he does not expect the Federal Reserve to hike interest rates that much this year.