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>> KRIS HUDSON: We've got Mark Toro here with North American Properties. We're going to
talk a little bit about this project so you get more of the history and more of the changes
that North American made when it acquired the property ... So Mark, can you tell us
a little bit about the background of your company and then we can get to Atlantic Station?
>> MARK TORO: Sure, North American Properties is a six year old company based in Cincinnati.
I founded the Atlanta office in ninety-six. We have been engaged in multi-family and retail
primarily and we put about nineteen million square feet of retail in the ground and fifteen
thousand or so residential units and we currently got thirty two hundred units of residential
in the works and about five hundred and fifty million dollars worth of development including
mixed use and retail underway.
>> KRIS HUDSON: Now North American wasn't necessarily the original developer of this
property, if I am correct you purchased it later in its life. We can start with either
... either the history of this property and how it started on development or how North
American purchased it and why.
>> MARK TORO: I'd like to start with the the genesis of Atlantic
Station - a gentleman by the name of Jim Jacoby a visionary developer in Atlanta who had acquired
the rights to to develop that a steel site and a steel site called Atlantic
Steel and very high profile projects as you can imagine just by virtue of its location
and did a phenomenal job working through enormous regulatory hurdles including the construction
of the seventeenth street bridge across the connector...lots of federal funding lots of
uh...uh... brownfield remediation funding efforts did a tremendous job uh... we came
to acquire it through a confluence of events that were kind of a perfect storm that was
occasioned I guess by the great real estate abyss in two thousand eight essentially shut
down our development machine nationwide after twenty-five years of full tilt boogie um ground
up, mostly suburban retail multifamily a program and it at that same time uh... I moved
into from a suburban um... lifestyle moved into town I live in the fourth building from
the right right over our shoulder here and became well acquainted with what Atlantic
Station was about as a patron as a neighbor uh... and Atlantic Station was offered for
sale by AIG who was struggling globally as we all know uh... and it was part of the you
know too big to fail program uh... offered Atlantic Station for sale now we had the opportunity
acquire it at a significant discount which gave us room to operate and really now have
the opportunity for this city within the city to realize its potential
>> KRIS HUDSON: Mixed use properties that I've covered its always seems like mixed use
is tinier in a sense because there are so many different components to it and very difficult
to get every single component right the first time so I imagine when you came in there were
some aspects that were working and some that weren't so would you identify offhand immediately
that needed to be fixed?
>> MARK TORO: When we came in there weren't many of the components that were working well
at all. The property was generally perceived to be struggling uh... in fact when I was
uh... I was uh... Midtown Alliance board meeting in the summer two thousand ten and I was speaking
to one of my mentors is on the board with me and I said "What would you do with Atlantic
Station?" And he said, "Burn it." Which which was generally the perception of the commercial
real estate industry relative to how this asset was struggling. Since then the retail
sales have climbed considerably office leasing has returned uh... residential has returned
a big way The Atlantic which you're gonna see later today is now ninety eight percent
occupied it was five percent occupied at that point had been foreclosed by chorus which
then failed and was taken over by FDIC so virtually every component with the exception
possibly of the office buildings that were relatively stable uh... was were struggling
in a big way.
>> KRIS HUDSON: What measures did you have to take to sort of start turning it around?
Did you cut prices, cut rents, re-tenanted some areas?
>> MARK TORO: One of the first things we did was reach out to the community through a social
media effort and through a group of well about twenty roadshow appearances with all of the
neighborhood groups and affiliated uh...stakeholders so SCAD across the connector is one of the
the most significant uh... creative class educational institutions in the region, Georgia
Tech um... the Home Park Neighborhood Association the Midtown Alliance, essentially you could
look around in three hundred sixty degrees and we reach out to each of these stakeholders
to assess what it is that they thought we needed to do to make it work uh...the resounding
um... response was fix the parking deck, resolve the perception of safety and security, get
us better restaurants and retailers and give us local operators and we set about doing
that and we conceived what we call the nine point plan which began with public safety,
parking and re-tenanting. One of the first orders of business was to remove a number
of retailers and restaurants who were not resonating with the community or what we call
bad actors who are attracting the kind of a late night club crowd that was not in keeping
with the residents who call this home.
>> KRIS HUDSON: Was that...uh...a lot of those retailers you may have been able to find anywhere
but they didn't really add any character?
>> MARK TORO: That's exactly right and the in town crowd as Jeff correctly points out
that Midtown is mecca for creative class in the Southeast it is very much where we find
a lot of the uh... designers and artists and programmers and others uh...this type of space
Ogilvy is a great example of that type of group who moved from the suburbs to Midtown
because this is the home of their brain trust but that group is not interested in a vanilla
retail offering so uh... White House Black Market and American Eagle and some of those
retailers were first to go because they just didn't fit here uh... and then we back filled
with local operators who are more in touch with especially from a fashion perspective
the style of Midtown relative to the suburban mall.
>> KRIS HUDSON: It seems like there are a lot more mixed use projects being done today
I think that might be for several reasons I think that maybe people are more in tune
with it being density being smarter growth and perhaps that we have more sites that need
to be redeveloped I know in my coverage of the shopping mall industry there are a lot
of regional malls that cities want to redevelop as mix use but it's obviously it's tricky
to get right. What would you say are some of the most challenging things to get right
and what are some of the things in mixed use that people often mishandle when they develop?
>> MARK TORO: I think the key from from this perspective is that you're building essentially
a community. Especially if you have residents on site, office workers, hotels, here at Atlantic
Station we call it a city within a city we got our own zip code we would be the fourteenth
largest city in Georgia if we were incorporated, ten thousand residents live and work here
every day and we got a million and half square feet of office and a million and a half square
feet of retail. That requires a very active hands-on experience ... police if you will
our group is engaged in creating an experience for our guests. Our customers or our retailer
or our office tenant or our hotel guest, their customer is our guest so if there if they
come on our property to shop our job is to create an environment that is memorable and
makes them feel good...And you'll get a feel for that when we tour later...and extend their
stay. The difference, especially in the retail aspect, is uh...as opposed to convenience
- park in front of the store run in run out get your stuff and leave. Our approach is
to extend the dwell time and get them to spend more money 'cause we're driving sales. I think
what that requires is a high level of control and what we see in many mixed use environments
is that the developer sells a piece to a hotel operator, sells a piece to a condo tower developer,
sells a piece to a retail developer and really is just putting stacking the pieces up either
vertically or horizontally but is not maintaining control of the experience on the street. That
we see as the biggest failing. And here at Atlantic Station because all the streets are
private and we own all the public space we can deploy the experience however we see fit
and we're taking a page out of Rick Caruso's the book of The Grove and following those
who do it best.
>> KRIS HUDSON: All the streets are private and I wonder with this type of project tend
to be more expensive because they're so dense and so many different uses is there always
gonna be a need for some type of public subsidy or tax increment financing for this type of
project or can a mixed use redevelopment project be done entirely privately?
>> MARK TORO: I think the subsidy is almost always gonna be a requirement in this case
a tax allocation district was created to fun all the infrastructure - the parking decks
and the streets and so forth uh ... we're under construction with a project in a North
Atlanta suburb called Avalon which was not subsidized but we were again able to buy it
at a reset basis at twenty three cents on the dollar after a foreclosure by Wells Fargo.
In that case, we've got room to create a reasonable return without a subsidy. But in most cases
especially in an urban environment where the density and the land value is so high gotta
have help.
>> KRIS HUDSON: For parking primarily?
>> MARK TORO: For all the infrastructure especially if we're sitting on, well, we're twenty one
floors above it, we're sitting on a eleven acre parking deck with seventy two hundred
cars and that in and of itself is a significant investment that in this case the tax allocation
district made on behalf of Atlantic Station.
>> KRIS HUDSON: And maybe one last question from me for you. You already segued into it
about Avalon and how that ground-up development...How does that differ from what you purchased here
at Atlantic Station?
>> MARK TORO: What we say is that at Atlantic Station we bought the box and created the
experience around it. At Avalon we created the experience and are building the box around
it. So that to the extent for instance that our Central Park is slightly too small to
fit a skating rink or a tennis court or whatever activation we may require. We changed that
at Avalon so we're able to build the physical space. The other thing is that we've used
Atlantic Station as an incubator for all these experiential tricks of the trade and we through
our study of The Grove and Santana Row and all those others we're able to knock them
off, literally, so the boulevard at Avalon is exactly the same boulevard at Santana Row
in San Jose. Our plaza is almost a direct facsimile of the plaza at Americana at Brand
at Glendale. So we were able to secure to study those properties and copy their best
practices.
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