Paces Putting Downtown Apartment Project On Market
A litmus test for Downtown Atlanta living has been successful enough that it will soon be put up for sale.
The Office apartments, the 20-story former office tower at 250 Piedmont Ave. rising next to Hilton Atlanta, will be put up for sale in the next few weeks, Paces Properties CEO David Cochran said during Bisnow's Midtown + Downtown event Wednesday. Paces acquired 250 Piedmont back in 2014 in a joint venture with Tampa-based DeBartolo Development, at time when the office building had been vacant since SunTrust moved from it a decade before. The two developers then embarked on a $55M redevelopment of the property into a 327-unit apartment tower.
The property is now 90% leased, Cochran told Bisnow after the panel discussion. Cochran said Paces did encounter a lot of skepticism about the success of an apartment in the Downtown Atlanta submarket, and the deal was “extraordinarily difficult” to finance. But he said he was determined to prove that people wanted to live in Downtown Atlanta.
“Our mindset was to be poor man's Midtown,” he said. Paces initially expected to achieve rents at $1.60/SF. During leasing of the property, Cochran said he would even get calls from then-Post Properties CEO David Stockert about the rents they were achieving when Post was evaluating whether to move forward on Post Centennial. Post has since been acquired by MAA, and is underway with the project.
Paces is achieving $2/SF, Cochran said.
“We were the first data point” on rents in Downtown Atlanta, he said.
The Office's success also has helped Paces get financing on some other Downtown projects, including the Atlanta Dairies redevelopment, Larken on Memorial shopping center and 1599 Memorial Drive, the redevelopment of an older shopping center.
But some panelists expressed concern about how well demand will keep up with a deluge of new apartment deliveries heading to the city, especially in Midtown. Atlantic Realty Partners CEO Richard Aaronson said that leasing up new apartment projects will be “challenging” in the near term.
“I think the next couple of years are going to be challenging for Midtown,” Aaronson said. Noting that the market has been absorbing 2,000 units a year, The Trillist Cos. CEO Scott Leventhal said that the metro area's job growth will help with apartment demand.
“When we talk about 8,000 units in the pipeline, that's certainly a very daunting number to think about,” Leventhal said. “And the truth of the matter is high-rise living in Atlanta is pretty new. We're just kind of finding our footsteps at this point.”
Leventhal also said the rise in electric vehicles is having an impact on multifamily development, and Trillist is having to install electric charging stalls at its projects.
Electric charging stations are “really becoming the dominant factor for residents to choose a building,” he said.
Leventhal said some residents are even going without vehicles, especially as the cost to park is on the rise, and could be “indicative” of where things are headed.
“We're definitely seeing a reduction of parking requirements,” Aaronson said.