ATLANTA | Development Thread V

[testarossa50]

A similar example I recall seeing in Mexico City:


http://www.panoramio.com/photo/30705180

They need to do something about the lower siding obviously, but it's far more attractive than the typical stucco/concrete deal. Probably traps less heat too.

[testarossa50]

Originally Posted by DPC

How much parking is required per unit anyway? I wonder if we will ever lower the parking requirement. Seems like the parking decks are what drives the cost up for these buildings. I'm sure even if they could make the parking decks smaller, it would make these projects easier to design and much cheaper. Most people don't prefer to use cars in Midtown anyway.

To my understanding none is required.

[gttx]

Originally Posted by simms3_redux

Let's pretend it adds $0.10 to rents (via 5% increase in construction costs). $1.85 to proforma is already pushing rents in Atlanta for "non-luxury" highrises (i.e. not Mezzo or 05 Buckhead). $1.95 might be beyond reach, and then leaves no room for rent growth and may result in concessions, taking down the net effective rent. This project is an investment, and will cost a good $200ish/SF to build with the deck to the side. Let's say gross revenue is about $20/SF (per annum) and expenses are at about $7/SF. Let's say interest on their construction loan brings that down by $9/SF on avg over the first 3 years ($50M loan, 5% int, 30 year amort, 250,000 SF - 800 SF avg unit size). That leaves them $4/SF per year to essentially distribute. They need strong occupancy of 95% or higher, really strong rent growth (investors often annualize prior 3 months of revenue over prior 12 months expenses for stabilized rental properties), and they need strong cap rates which will require Atlanta to remain a good multifamily market.

Pushing rents even $0.05/SF too high could be devastating to proforma as a project like this most likely depends on a strong reversion to attain a solid 15-20% IRR and a "profit" of at least 75% on top of their equity contribution (an equity multiple of at least 1.75).

I put together a completely juvenile proforma here -

Year 0 they put in $50/SF (20% LTC)
Year 1 they take back $4
Year 2 they take back $4.12 (let's pretend this figure grows 3% annually)
Year 3 $4.24
Year 4 $4.37
Year 5 $4.50 CF + ($13NOI*1.03^4/cap rate of 5.25%) = $280/SF - ~$194/SF loan paydown - net of $90.50

IRR = 18%

DCF yield capitalization at 7% discount = 22% CF and 78% reversion (very lopsided and reliant on reversion)


I think these projects are risky as hell and in Atlanta they are always teetering on the edge of feasibility. A podium could be the tipping point.

Therefore I direct my anger elsewhere and hope that we solve our transit problem by expanding rail, and that we keep centralizing so that walking/biking is encouraged, and then parking may not be an issue any longer and higher rents north of $2/SF may become market-rate (thereby making high-rise living much more lender friendly and easier to justify).

This is the problem with real estate development. You take an extraordinarily complicated thing (city building) and distill it down to 2 or 3 really important numbers to appease investors. And because it all goes into a giant spreadsheet, you end up pulling various levers until you reach those 2 to 3 numbers. In this case, the lever you are pulling is parking costs.

While it's great that you took the time to run these numbers, it does nothing but confirm what my real estate finance courses taught me in grad school (and working with developers has confirmed): that development is a risky business built on shaky information - and a terrible way to make better cities.

What you miss in all those numbers is the ability of good design and planning to create value over time. And the ability of bad design to destroy it. Worried about cap rates in a few years? A shitty building isn't exactly a hedge. I'd rather spend $1/SF (or whatever) to build a deck that is screened from view - with program, a facade, ivy, or something...anything - than put up this hunk of crap. Because that investment will pay off down the road as this part of town becomes a nicer place to live. I can't even believe that all those blank parking walls are still permitted in Midtown, but apparently they are.

It's also time for planners, developers, and even cities to rethink their approach to parking. It's insane to me that provision for cars takes up more space in a city than provision for people, and dictates project feasibility in a good number of cases. Does this not seem backwards to anyone else?

[shivtim]

Originally Posted by testarossa50

To my understanding none is required.

There is a requirement, but maybe it's only for commercial uses. Gilbert's is expanding and they had to apply for a Special Exemption Permit (SEP) to reduce the off-street parking requirement from 49 spaces required to 0 spaces.

I don't think there's a residential parking requirement though, considering there are many houses and older apartments in Midtown that don't have off-street parking... although I can't think of anything recently that was built without parking.

[pdpmishap]

^The side effect is everyone that winds up renting in one of the old houses winds up playing bumper cars trying to street parking their cars everyday. I love all the near accidents that happen along Juniper at 6:25 when people need to stake out their overnight parking and suddenly stop in what is still a traffic lane. Simultaneously Viewpoint's deck is never more than 60-70% full overnights/weekends even though the building is sold out.

It'd be nice if they cut the deck capacity by apt parking 30-40% or so and used the leftover room for more retail or rental units.

[TarHeelJ]

Originally Posted by pdpmishap

^The side effect is everyone that winds up renting in one of the old houses winds up playing bumper cars trying to street parking their cars everyday. I love all the near accidents that happen along Juniper at 6:25 when people need to stake out their overnight parking and suddenly stop in what is still a traffic lane. Simultaneously Viewpoint's deck is never more than 60-70% full overnights/weekends even though the building is sold out.

It'd be nice if they cut the deck capacity by apt parking 30-40% or so and used the leftover room for more retail or rental units.

Or maybe they could sell parking spaces to nearby residents in the neighborhood? That would solve some of the problem...

[simms3_redux]

Originally Posted by pdpmishap

^The side effect is everyone that winds up renting in one of the old houses winds up playing bumper cars trying to street parking their cars everyday. I love all the near accidents that happen along Juniper at 6:25 when people need to stake out their overnight parking and suddenly stop in what is still a traffic lane. Simultaneously Viewpoint's deck is never more than 60-70% full overnights/weekends even though the building is sold out.

It'd be nice if they cut the deck capacity by apt parking 30-40% or so and used the leftover room for more retail or rental units.

I live in 1280 West and our deck is only 60-70% full as well. We have plenty of residents without cars, my roommate has a bike/scooter, many have bicycles. I don't think car use is what developers think they are.

I do believe that retail space, especially restaurant space requires a parking ratio somewhere in the ballpark of 1 space per 100 SF. General retail in other parts of the city are 3-5 spaces per 1,000 SF. Restaurants are all that can lease up in Midtown at this point, so you have to figure Novare planned for that for a chunk of its ~20,000 SF of commercial space. 10,000 SF of restaurant space in other parts of the city would require 100 spaces right there. (that's essentially 2-3 restaurants)

[trainiac]

Originally Posted by simms3_redux

I live in 1280 West and our deck is only 60-70% full as well. We have plenty of residents without cars, my roommate has a bike/scooter, many have bicycles. I don't think car use is what developers think they are.

I do believe that retail space, especially restaurant space requires a parking ratio somewhere in the ballpark of 1 space per 100 SF. General retail in other parts of the city are 3-5 spaces per 1,000 SF. Restaurants are all that can lease up in Midtown at this point, so you have to figure Novare planned for that for a chunk of its ~20,000 SF of commercial space. 10,000 SF of restaurant space in other parts of the city would require 100 spaces right there. (that's essentially 2-3 restaurants)

Especially if you want a liquor license: the second that comes up every NPU meeting is about parking spaces. Very annoying. I'm in L5P's and of all the hurdles the Wrecking Bar had to clear to save that building and open a brew pub the worst involved parking (they even had to change city code and *that* was easier than the parking crap). Why should bars revolve around parking? Shouldn't we encourage drinkers to take a cab or bike or walk??

BTW, this photo:


.... just makes me miss McCrays 6th Street!! It was right where the circle is they closed in August of 2007 and the building could have been spared until more towers were going up. We missed out of 5 years of awesomeness. Taco Mac and Cypress Street Pint help a little, but still

[smArTaLlone]

Originally Posted by gttx

This is the problem with real estate development. You take an extraordinarily complicated thing (city building) and distill it down to 2 or 3 really important numbers to appease investors. And because it all goes into a giant spreadsheet, you end up pulling various levers until you reach those 2 to 3 numbers. In this case, the lever you are pulling is parking costs.

While it's great that you took the time to run these numbers, it does nothing but confirm what my real estate finance courses taught me in grad school (and working with developers has confirmed): that development is a risky business built on shaky information - and a terrible way to make better cities.

What you miss in all those numbers is the ability of good design and planning to create value over time. And the ability of bad design to destroy it. Worried about cap rates in a few years? A shitty building isn't exactly a hedge. I'd rather spend $1/SF (or whatever) to build a deck that is screened from view - with program, a facade, ivy, or something...anything - than put up this hunk of crap. Because that investment will pay off down the road as this part of town becomes a nicer place to live. I can't even believe that all those blank parking walls are still permitted in Midtown, but apparently they are.

It's also time for planners, developers, and even cities to rethink their approach to parking. It's insane to me that provision for cars takes up more space in a city than provision for people, and dictates project feasibility in a good number of cases. Does this not seem backwards to anyone else?

Excellent point. Where is the "like" button.

MY question is how in the world is an entirely separate parking deck without any screening or facade treatment still allowable in Midtown?

[shivtim]

^ I suggest everyone show up to the NPU-E meeting on the first Tuesday in June (assuming this is on the agenda, which it should be) and make those exact points.

[simms3_redux]

Just heard some interesting conversation on multifamily in general and some specifics on Atlanta. Not to be too in depth or talk about something that I have no local or defined familiarity with, it seems a lot of folks are thinking Atlanta is a safe bet for rent growth and that it will continue for some time. We have 3,000-4,000 units for sure under construction or financed in the pipeline, which is well below our historical cyclical highs of 15,000+ (for years on end). Job growth has been MUCH stronger than the BLS originally anticipated and many analysts are favoring Atlanta as a job center. In addition, some projects I did not think had financing yet are good to go (infill projects). Finally, as has been my public thought on this very board, someone is going to come along soon and retrain lenders to look at condo projects. Inventory is gone and with rents skyrocketing it makes sense for a lot of people to buy condos again. The trick will be relaxed conventional financing for buyers of new condos in a market that got burned.

[Tuckerman]

There is a role here for planners, civil society and residents. It is obviously better to stop the building of space eating parking buildings than to try and retrofit them - although, if it can be built, it can be torn down and/or retail added to the ground floor and/or hanging plants, etc. Nonetheless, I think ATL as well as mid-town will continue to see the need for excessive parking until density increases and MARTA (and pub transit) grows into a comprehensive system. Consider, e.g., the Clifton Rd corridor where CDC and Emory have had to build massive parking complexes.In theory there is no reason why students need cars on a campus and no reason every CDC worker needs to bring a car. But consider that a CDC worker at Clifton has to go to a meeting at CDC Chamblee-how does he/she get there without a car? If the Clifton connection to Lindbergh on MARTA existed a trip Clifton to Chamblee might be feasible and quicker - but this is the future.

[simms3_redux]

^^^But see that's still the problem with Atlanta even with the Clifton corridor. You have to take a train to Lindbergh, wait for a Doraville train, and then be on your way. With headways and the transfer there you might as well take a car because driving up to Buford Hwy would be quicker and more convenient, and assuming you are going to get lunch on the way or coming back...you would still need to drive (what are you going to eat at Longhorn at Lindbergh?).

For me, as a resident of Midtown, I would like to be able to spend $0.50 or less to go one stop down from Art Center to Midtown station for the grocery, and I don't want to wait 10+ minutes for a train each way. Instead, I either walk if it is on the weekend, or I swing by on my way in from work (whereby I drive because my office is in Vinings). Also, it would cost me nearly $3 each way just to take a train to Publix, even if it is literally half a mile away, so no matter how outrageous gas prices are it is WAY cheaper for me to drive (and less time consuming to walk considering MARTA headways).

MARTA is not good for anything beyond going to the airport or commuting to events downtown or commuting in from the burbs...so it accomplishes precisely what it was designed to do, but it doesn't function as a "usable" and "convenient" hastle free system, nor is it cheap.

[Tuckerman]

Well of course I agree Simms3. The current system is hardly convenient. I just came back from Brazil yesterday and of course I took MARTA to and from the airport. But you make the correct points: a system needs to be rapid and convenient and the one fare is not conducive to the short trip. It is only because marking downtown is more expensive than 2 ways between Lindbergh that I take MARTA,BUT if the wife goes with me it is cheaper to park downtown than taking transit - go figure.

There are so many things that can be done. For example, residents of many German towns (Switzerland too) simply have an all time all pass card for all transit in the city. In fact when I stay in a hotel in Berne or Geneva they give you a transit card for free for all transit in the city. Of course they pay a high price for transit infrastructure - but one most compare with the high price of car ownership, highways, etc.

[ATLaffinity]

Speaking of ViewPoint, they have no condo board. Can you imagine being at the whim of a developer.

[shivtim]

Simms3 and Tuckerman, I understand what you're saying, but I think the issue is even more nuanced than you describe.

For example, with the Clifton line and having to transfer at Lindbergh, I don't really see that as an issue. Traffic is beyond horrendous in the Clifton Corridor. I lived on N.Decatur Road for two years, and it became a parking lot at rush hour. The traffic there is way worse than anything I've seen in downtown or midtown. So, if you were headed to somewhere on the gold or red lines, in many cases it would still be much faster to take rail transit than drive, even if you had to wait for a transfer. Another assumption you're making here is that people have the option to drive. Many transit riders in Atlanta don't own or don't always have access to a car. So saying that people would just drive instead of taking transit isn't the case. Some people have no option but transit, even if it's some god awful bus to train to bus 90 minute route.

I object to the statement that "MARTA is not good for anything beyond going to the airport or commuting to events downtown or commuting in from the burbs." I used it for over a year to travel daily from Midtown to Buford Highway (rail to doraville, then bus transfer). I know a lot of people who live in Midtown and take the train to their jobs in Downtown. I often use it for getting from Midtown to Decatur or Inman Park. Yes, it can be inconvenient, but that doesn't mean it's only good for getting to the airport and bringing in suburbanites to their jobs. I think you're looking at it from the perspective of a privileged car-owning Midtown resident. I do not mean that as an insult whatsoever. I'm just pointing out that there is a tendency to think of trying to improve MARTA for "choice" riders, because that's what most of us who post to this board are. While this is indeed a laudable goal, we can't forget all of the riders who are essentially forced to use MARTA because they have no other option, regardless of how inconvenient it can be at times.

And now I realize I'm incredibly off topic for the Atlanta construction thread. Oops. Uhh... so how about that Skyhouse... shooting up like a weed...

[testarossa50]

Originally Posted by Tuckerman

Well of course I agree Simms3. The current system is hardly convenient. I just came back from Brazil yesterday and of course I took MARTA to and from the airport. But you make the correct points: a system needs to be rapid and convenient and the one fare is not conducive to the short trip. It is only because marking downtown is more expensive than 2 ways between Lindbergh that I take MARTA,BUT if the wife goes with me it is cheaper to park downtown than taking transit - go figure.

There are so many things that can be done. For example, residents of many German towns (Switzerland too) simply have an all time all pass card for all transit in the city. In fact when I stay in a hotel in Berne or Geneva they give you a transit card for free for all transit in the city. Of course they pay a high price for transit infrastructure - but one most compare with the high price of car ownership, highways, etc.

This is one of the main problems with having a high marginal cost of using transit: it mainly serves to discourage use on the margin. So you end up paying a huge amount to develop a system, but when you try to recoup operating costs through user fees you encourage people not to use it and instead stick to their cars. The worst of both worlds in a sense.

The idea of free use for people within the MARTA zone is an interesting one. MARTA's fare revenue accounts for $116 million of its $410 million in annual costs (source). Finding $116 million would be difficult. But if you could manage to do that, many, many more people would most likely choose to ride--the improvement in the total utility of the transit system would be enormous. Driving on your commute from Dunwoody to Midtown would be seen as a significant luxury, considering cost of operating the car, tolls, and parking would push $10/day compared to nothing. Add to that decreased air pollution, road congestion, vehicle deaths, etc: all the hidden costs of driving that aren't factored in properly for various reasons.

The whole point of public transportation is that it has very, very low marginal costs: the additional burden placed on the system by an additional rider is basically nothing. With driving, the marginal cost of extra driving is always the same (or increasing, when you factor in the costs of congestion). If pricing could reflect that, you'd get a ton more value out of the transit system.

Mexico City does this, more or less. The 3 pesos it costs to ride the metro is nominal (14 pesos to the dollar). If you're paying billions to develop a metro system designed to get people off the roads, you might as well encourage them to use it.

Not saying I advocate this necessarily, but it's food for thought.

[sunking1056]

Originally Posted by simms3_redux

MARTA is not good for anything beyond going to the airport or commuting to events downtown or commuting in from the burbs

While it is probably best for those things and most efficient in those cases, your statement is absolutely misguided. Also, when did $2.50 become "almost $3"?

[TarHeelJ]

Originally Posted by shivtim

Simms3 and Tuckerman, I understand what you're saying, but I think the issue is even more nuanced than you describe.

For example, with the Clifton line and having to transfer at Lindbergh, I don't really see that as an issue. Traffic is beyond horrendous in the Clifton Corridor. I lived on N.Decatur Road for two years, and it became a parking lot at rush hour. The traffic there is way worse than anything I've seen in downtown or midtown. So, if you were headed to somewhere on the gold or red lines, in many cases it would still be much faster to take rail transit than drive, even if you had to wait for a transfer. Another assumption you're making here is that people have the option to drive. Many transit riders in Atlanta don't own or don't always have access to a car. So saying that people would just drive instead of taking transit isn't the case. Some people have no option but transit, even if it's some god awful bus to train to bus 90 minute route.

I object to the statement that "MARTA is not good for anything beyond going to the airport or commuting to events downtown or commuting in from the burbs." I used it for over a year to travel daily from Midtown to Buford Highway (rail to doraville, then bus transfer). I know a lot of people who live in Midtown and take the train to their jobs in Downtown. I often use it for getting from Midtown to Decatur or Inman Park. Yes, it can be inconvenient, but that doesn't mean it's only good for getting to the airport and bringing in suburbanites to their jobs. I think you're looking at it from the perspective of a privileged car-owning Midtown resident. I do not mean that as an insult whatsoever. I'm just pointing out that there is a tendency to think of trying to improve MARTA for "choice" riders, because that's what most of us who post to this board are. While this is indeed a laudable goal, we can't forget all of the riders who are essentially forced to use MARTA because they have no other option, regardless of how inconvenient it can be at times.

And now I realize I'm incredibly off topic for the Atlanta construction thread. Oops. Uhh... so how about that Skyhouse... shooting up like a weed...

I wasn't really going to respond, but I totally agree with you. MARTA may not be good for anything but the airport and events to one person, but to the next it is excellent for getting to work and/or school and other places...and it is very useful for people who cannot afford or choose not to own a vehicle. So simply because it isn't useful to one person certainly doesn't mean that it isn't useful to everyone.

[Tuckerman]

"The whole point of public transportation is that it has very, very low marginal costs: the additional burden placed on the system by an additional rider is basically nothing. With driving, the marginal cost of extra driving is always the same (or increasing, when you factor in the costs of congestion). If pricing could reflect that, you'd get a ton more value out of the transit system."


These points are spot on.

Unfortunately a significant problem in ATL (and most of the US) is that public transit is seen too often as merely for those without a car and that usually translates into "the poor". For some reason the "middle class" here fail to see the enormous cost they pay for personal car transportation (in roads, congestion, ownership,etc.), but have no difficulty in seeing the high cost of building rapid transit. They do not see an analogy between extensive highway and road infrastructure and rail infrastructure. I shudder to think what would happen if we had no rail infrastructure in ATL (or elsewhere) and all the freight carried would be in trucks - what a horrific mess.

Anyway, I guess this belongs in transportation and not construction, although, as always, these topics are all highly interrelated.