Well-known Atlanta developer Portman Holdings is rethinking its development plans for stretch of Ponce de Leon Avenue near the Beltline in response to current financial headwinds.
Portman confirmed it will scale back its large mixed-use development called Ponce & Ponce, deciding not to purchase three properties on the edge of the project site along the popular thoroughfare. The announcement and delayed timeline allows some existing businesses to keep their doors open for longer than expected — a point of contention among some residents who worried the area’s character was being erased.
The decision to shrink the project’s scope is in response to a tight investment and lending market that’s grappling with prolonged high interest rates and construction costs, according to Portman’s Vice President of Development Mike Greene. He said all projects in planning phases have to be reevaluated, even in high-demand areas like along the Beltline.
“The general feeling — I’m sorry to say — is that we’re kind of at the beginning,” Greene told The Atlanta Journal-Constitution. “... The financing market is crunched right now.”
From March 2022 to now, interest rates have increased 11 times in an attempt to stifle inflation by making it more expensive to borrow and tempering economic expansion. After years of low interest rates and abundant credit, the higher costs to borrow are now biting property owners and developers seeking loans. Unlike most home mortgages, commercial loans are typically not fixed-rate, meaning they correspond to changing interest rates.
Portman struck a deal last year to purchase blocks of dive bars and nightclubs across from Ponce City Market to transform into three glitzy buildings. The vision included more than 350 apartments, roughly 38,000 square feet of new retail space and 470,000 square feet of office space.
Credit: Portman Holdings
Credit: Portman Holdings
Greene said its hard to get financing for any project amid a high-interest rate environment, but he said proposed office projects are effectively dead on arrival. A record amount of available office space is on the market in metro Atlanta due to low occupancy and continued demand for remote work.
“Right now, it’s not even remotely close to being a reality to finance office in any place,” he said.
The properties spanning from 752 to 774 Ponce de Leon Avenue, which house the Local bar and restaurant as well as fitness gym VESTA Fitboxing, are no longer included in Portman’s plans. The Local posted on Instagram it is “just as surprised as you are” that it will stay open, sarcastically saying it was “just kidding” about having to close to conform to Portman’s construction schedule.
Missy Mostrom, co-founder of VESTA, worked at the Local as a bartender for a decade before starting her own business, saying she “pretty much grew up on Ponce and has seen a lot of changes.”
“I think Ponce is going to be a little more congested and quite a construction zone for the next few years,” she said, adding that VESTA will move to the Krog District along the Beltline later this year.
Even businesses on land Portman still plans to buy have extra time, since the developer doesn’t expect to break ground for at least two years. The owners of some spots, like the Bookhouse Pub and the Drunken Unicorn music venue, said they’ll remain open until construction is imminent.
Ryan Purcell, a co-owner of the nightclub MJQ which houses the Drunken Unicorn, said Portman’s delay doesn’t drastically impact his plans. He announced in March that MJQ will move to Underground Atlanta, taking over the dormant Dante’s Down The Hatch space with the goal of opening the new location around the end of this year.
He dashed any hopes of both locations operating at the same time.
“We want to focus all of our energy into one place,” Purcell said. “Trying to split our crowd into two different places doesn’t make a whole lot of sense.”
Credit: Jenni Girtman
Credit: Jenni Girtman
Greene said Portman will redesign Ponce & Ponce as a two-building project, which will likely focus on residential and shrink its office footprint, if not eliminate workspaces entirely. He added that the developer will meet its obligations to the Virginia-Highland neighborhood, which include off-site traffic improvements, connecting the project to the Beltline and abiding by density and design requirements.
For now, Portman will focus on the existing tenants and cleaning up the area, Greene said.
“There’s probably some insurance claims waiting to happen out there,” he said. “Busted asphalt, inadequate handicap parking and just landscaping that hasn’t been taken care of in a long time.”
Credit: Miguel Martinez
Credit: Miguel Martinez
Federal Reserve Chairman Jerome Powell said Friday that more interest rate hikes may be needed to tame still-sticky inflation. Shrinking the Ponce & Ponce project will prevent Portman for overcommitting to one area, Greene said, while allowing the developer to pursue other projects.
“Let’s keep the two parcels that are the most meaningful,” he said. “Let’s reform how the two buildings interact with each other, and we can still make a phenomenal development.”
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