Two years into negotiations to buy Underground Atlanta and facing a looming deadline in a few weeks, a South Carolina development firm says it will complete a deal to buy the struggling downtown mall.
Other development groups, meanwhile, are waiting in the wings to make offers to the city if WRS Real Estate Investments is unable to close in early January on the more than $25 million transaction, two people with knowledge of the situation told The Atlanta Journal-Constitution.
A WRS official insists that won’t be necessary as investors and financing are in place. WRS executive Kevin Rogers said the firm will seal the deal soon after New Year’s Day.
Wrapped up in the sale and planned redevelopment of Underground is no less than the future of downtown’s revitalization and the legacy of a mayor entering his final year in office; one who has made real estate development — from the future of Turner Field to Ponce City Market to Mercedes-Benz Stadium — a central tenet of his two terms.
Whether the sale is finished by WRS or someone else, the attention around Underground is at a high not seen in decades.
The Underground sale, Rogers said, has been delayed recently not by a lack of cash to buy the 12-plus-acre site, but technicalities of the sale, including ancient property surveys and real estate records, and complicated easements for MARTA and railroad companies.
“We are quite confident [we will close] as soon as possible after the New Year,” Rogers said. “To date, 90 to 95 percent of the effort on our end and the city’s end has been problem-solving. How do you get to the point there’s clean and clear title to this maze of real estate.”
Underground Atlanta has vexed the city for years. In the late 1960s, the site was a bustling hot spot for nightlife and the original home of Dante’s Down the Hatch. But by the early 1980s, the party had stopped and Underground was largely closed.
The city embarked on a $142 million makeover of Underground into a shopping mall and it opened in the late 1980s to rave reviews. But Underground couldn’t maintain its mojo, and has largely been an under-performing mall since the 1996 Summer Olympic Games.
The city put Underground on the market in 2014 to get the money-losing complex off of its books , and WRS was the sole bidder.
On Monday, Mayor Kasim Reed pushed through controversial legislation to “abandon” or essentially privatize parts of several downtown streets he said was essential to keep an Underground deal alive.
In an interview before a City Council vote, he told members they needed “to make a decision of whether they want to move forward with a $350 million investment for Underground or leave it as it is.”
The city has other downtown projects in the pipeline, including a deal in principle with the Atlanta Hawks to renovate Philips Arena, a project Reed and Hawks officials have said will help revitalize downtown’s moribund stretch of rail beds and parking lots known as The Gulch.
Reed has said investors — including foreign groups — are interested in bringing revitalization to downtown. Finishing the Underground transaction is clearly a priority.
The street abandonment is the second controversial move pushed by Reed this year to help close an Underground sale.
Earlier this year, the city and state of Georgia consummated a complicated land swap that saw the city take on state-owned land near Underground, while the state took over the city-owned Bobby Jones Golf Course in Buckhead. The land swap was necessary, Reed has said, to help provide needed parking for the Underground redevelopment.
Rogers said his firm needed the city to give up parts of streets including Upper and Lower Alabama and Upper and Lower Pryor, to help create a cohesive and walkable pedestrian campus.
WRS has considered removing parts of Upper Alabama, “daylighting” lower sections of the original historic street grid. The merchant carts that stand on Lower Alabama are actually sitting on a city street, Rogers said, and WRS needs private control for the development plans to work.
WRS has released renderings showing a grocery store, high-rise student housing, a hotel and apartments over a retail core at Underground. But Rogers said the development plans remain in flux, and the team expects to begin the process of seeking any necessary rezoning and building permits soon after closing.
Rogers estimated planning and permitting could take 18 months. Rogers said WRS will begin outreach to the community and signing tenants after the purchase.
“There’s been no lack of interest — quite the opposite,” he said.
Other groups emerge
WRS is best known as a suburban strip mall developer, particularly Walmart-anchored shopping centers.
Underground would appear to be the most complex project WRS has ever undertaken. It sits above MARTA and heavy rail lines. The property stands on aging viaducts, and two of the spans – the Pryor Street and Central Avenue bridges – are in need of expensive overhauls that have been scheduled for 2020 and 2022.
In a Facebook post Wednesday, City Councilman Kwanza Hall, wrote the pending Pryor and Central construction projects were potential hang ups in the deal. WRS plans to open its redevelopment in 2020, Hall wrote, when the Pryor Street project was set to begin, while the Central Avenue project would be getting underway two years later.
Hall said giving up part of Pryor would put the onus on WRS to repair that bridge and free up money for the city to move faster on the Central Avenue project all while staying within a schedule that works best for redevelopment.
Rogers said his firm has had discussions with about a dozen groups — mainly from outside the Atlanta area — about becoming partners in the deal. Those discussions have centered on apartment developers or hotel groups handling portions of the project where they have greater experience, Rogers said.
Rogers said if investors or partners are added WRS would remain the lead developer and not be replaced. Parcels might be sold to individual tenants, he said, such as a grocery store.
None of the other groups that have emerged as potential interested parties in Underground have moved to break up a deal, nor are they meddling with negotiations between the city and WRS, two people with knowledge of the situation said.
But multiple firms are monitoring the situation and the looming January deadline.
One of them is the U.S. arm of a German development and investment firm, Newport Holdings. Jake Nawrocki, the president of Newport’s U.S. division, declined to comment for this story.
Newport has brought on at least two former executives from Jamestown, Katharine Kelley of Green Street Properties and Nawrocki, who were key players in Jamestown’s redevelopment of Ponce City Market. Both are experienced in complicated real estate transactions and adaptive reuse projects such as Ponce City Market, the former hulking Sears, Roebuck & Co. warehouse reborn as a hive of offices, apartments and high-end retail and restaurants.
The two people familiar with the situation, who were not authorized to speak publicly on the matter, said the plan to “daylight” Underground was initially Newport’s idea.
Newport officials, including German principal Olaf Kunkut, held a meeting in recent months with Reed and key city staffers about historic preservation and redevelopment in downtown, two people familiar with the matter said.
A Reed spokeswoman declined to comment on other potential development groups.
Newport is not a party to the Underground transaction with WRS, but at one time was seen as a potential investment partner, one of the two people said.
Rogers has previously said that WRS could expand the Underground project beyond the current site to involve a number of aging buildings along Peachtree and Broad streets.
But the AJC has learned Newport is the sole investor behind the pending or completed sales of about 20 downtown buildings that were previously identified as ones targeted by WRS to expand the Underground footprint.
On Thursday, Rogers acknowledged WRS does not have an ownership stake in those transactions, but he said WRS is a partner in the deals. He said Newport is the owner and would call the shots on the future redevelopment of those buildings.
“The integration of the two — Underground and the parcels on Peachtree — are two different groups of properties, but mutual success is good for both of us and [downtown] development overall,” Rogers said.
Rogers said when his firm first entertained the idea of developing downtown, other Atlanta area developers weren’t interested in Underground. He said he is not surprised others have taken note, but he insisted WRS will complete the long-simmering deal.