Friday, March 12, 2010

Mayor Reed: Atlanta needs to unload jail, City Hall East

Posted By on Fri, Mar 12, 2010 at 12:42 AM


The Reed administration did a full-court press this morning to persuade Council members to support selling off the city jail and the old Sears warehouse on Ponce.

Judging from Council response, the City Hall East deal is a good bet to happen soon, but the proposed lease-purchase arrangement with Fulton County looks to be in serious trouble.

Ironically, the jail deal is the one that would most benefit the city's bottom line — to the tune of $30 million a year — but it's being stonewalled by Council members with a variety of motives, some less savory than others.

"I don't understand how you can see a $30 million loss on your balance sheet and not do something about it," Reed told reporters during a break in the action.

Understandable or not, that's exactly what seems to be going on. But more about that in an upcoming post.

As for the City Hall East deal, the Council had a few complaints and pointed questions, but appeared to be on board after Reed put in a personal appearance. Back in 2005, the city agreed to sell CHE to the Morsberger Group for $27 million. That ain't gonna happen now, the mayor explained, because 1) The building is no longer worth that much in the wake of the real-estate collapse and 2) Morsberger can no longer get a loan of that size in the wake of the banking melt-down.

The city currently has an offer to sell CHE to Cobb-based Jamestown Properties, a national developer of large-scale projects, for $13.5 million in upfront cash and another potential $13.5 million in back-end payments if the project meets revenue goals.

Reed's sales pitch went something like this:

  • The city already spends $1 million a year in upkeep on CHE
  • The market value of CHE is likely only to decrease in the foreseeable future
  • Leaving the building vacant while the city "waits for the perfect suitor" would have a devastating impact on the surrounding neighborhood

"If we end up with an empty, 2-million-square-foot building, it would have massive repercussions for the Ponce corridor and place the revitalization of that part of the city in jeopardy," the mayor said.

How big is 2 million square feet? About the size of Midtown's One Atlantic Center, formerly known as the IBM Tower, Reed said.

Because it's backed by private-equity funding, Jamestown doesn't need bank financing to make the deal work, he said, explaining that the firm has redeveloped other impressive projects of similar scale, including the White Provision complex on Atlanta's westside; the Warehouse Row outlet center in Chattanooga; and Chelsea Market in Manhattan.

Reed told Council members he wants to sell the building next month, before it loses any more value. We'll see if he gets his wish.

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