CarterBlog

Georgia's New State Government Will Have Substantial Impact on Commercial Real Estate

By Brad Alexander, partner, Georgia360

ATLANTA (Jan. 4, 2011) - The November 2010 statewide elections resulted in a historically large - some would say massive - turnover in Georgia's political leadership.

Georgia now has a new governor, attorney general, secretary of state, labor commissioner, school superintendent, agriculture commissioner and insurance commissioner. And when the 2011 Georgia General Assembly convenes next week, it will do so with abnormally large freshman classes in both the House and Senate.

This election - and subsequent party switches by elected officials -- have solidified GOP control of state government in the near term.

Combined with Georgia’s substantial budget deficit, the level of change expected in the next 12 months will be higher than anything residents have become accustomed to expecting. And, the implications for the commercial real estate industry will be substantial.

In terms of people, the leadership of Georgia's in-house real estate management agencies - Steve Stancil, Marvin Woodward, Frank Smith, Susan Ridley and their team - will remain intact.

Combined with the staff at the Board of Regents, the Georgia State Financing and Investment Commission will make most of the decisions regarding the state's new construction projects and real estate portfolio. In addition to being one the largest sources of new commercial construction starts in a down economy, the state’s taxpayer-owned real estate portfolio is one of the largest combined real estate portfolios in the state. While the state construction portfolio will shrink in terms of new starts as revenue falls off, it will remain more robust than the private sector in the near term.

In addition to the Board of Regents (which is in the early stages of a search for a new chancellor) and the GSFIC, the Department of Natural Resources and Department of Transportation are also highly relevant for the real estate purposes. Managing the owned and leased conservation and recreation portfolio at DNR will be newly appointed commissioner and former state representative from Southeast Georgia, Mark Williams.

On the DOT side, several board seats will change hands, but the commissioner's job will remain with Vance Smith. Smith's leadership and political acumen will be highly valuable as the state enters the election cycle where voters will approve or reject any new transportation funding mechanisms the legislature puts on the ballot.

From a policy standpoint, state real estate activity will be driven almost exclusively by value.

In terms of new construction projects, those that have appeal but do not fill a critical and immediate need will be delayed as policymakers try to maintain the state’s AAA bond rating in the midst of substantial cash shortfalls. This means the government’s appetite for financing structures outside traditional general obligation bonds (particularly in higher education) will continue to grow. This will include both traditional alternative finance mechanisms - such as fee-driven projects at universities - and more innovative structures.

Chief among the more innovative structureswill be energy savings performance contracts, which became legal in Georgia following passage of Amendment Four in the November elections. Initial estimates project that savings from these contracts will fund several hundred million dollars in facility and systems upgrades.

On the bright side, with historically high levels of unemployment, we can expect to see a proactive government role - led by Governor Nathan Deal and new Economic Development Commissioner Chris Cummiskey - in funding and otherwise supporting private sector projects that could create substantial numbers of new jobs. Cummiskey's corporate background (energy trading) and political connections (top staffer in the state House) combined with the new Governor's focus on job creation will give the Department significant heft.

From a development and leasing standpoint, this political dynamic will hopefully lead to new activity, particularly in the corporate HQ, data center, healthcare and logistics spaces. This effort will be substantially boosted if recommendations from the tax reform council that would turn automatic credits into a more discretionary system are followed. 

Additionally, legislation will be reintroduced to amend the Constitution so Georgia can execute multi-year real estate leases. While this change is two years away, its passage will almost certainly unlock an array of transactions as Georgia seeks to lower leased real estate costs by replacing annual leases with those with longer terms.  

Going forward, the primary challenge for the real estate sector in terms of Georgia public policy will be to prevent likely passage of broad tax reform and certain passage of major budget cuts from moving the ball backward. Additionally, the industry has a strong interest in ensuring Georgia's core infrastructure is maintained and upgraded.

In the near term, that means passing a transportation funding mechanism for urban parts of the state, dredging the Savannah harbor ahead of a bump in traffic when the Panama Canal expands, and supporting Atlanta Mayor Kasim Reed's visionary efforts to put Hartsfield at the same high level on air cargo rankings as it is on passenger transport. Over the longer term, building new reservoirs and connecting cities via high speed rail will be very relevant in terms of keeping commercial real estate activity robust in Georgia.

In sum, there's a great deal of reason to be optimistic about the future role state government can play in maintaining Georgia's future as not only a consumer of real estate services, but also an exporter of expertise in that area. They key challenge for the industry is staying engaged enough over the next several years to ensure that potential is realized as the process plays out.

 

Georgia Ranked in Top Five States in U.S. for Film and Television Productions

By: Ward Entrekin, senior associate at Carter

Georgia has recently, and very apparently, become a hot spot for the film industry. Over the past couple of months, celebrities have been spotted all over metro-Atlanta deeming the area a new hub for the industry.

A recent press release from the Georgia Film, Music & Digital Entertainment Office, a division of the Georgia Department of Economic Development (GDEcD), stated 16 Georgia counties have been named “Camera Ready Communities” as part of the new program.

In the state's ongoing efforts to bolster Georgia's growing film and television industry, the first 16 counties were designated Camera Ready at a special ceremony at one of Georgia's newest production facilities, EUE/Screen Gems Studio in Atlanta.

According to Heidi Green, GDEcD commissioner, "More than 50 Georgia counties hosted a film and/or TV production this year, making this a banner year for the industry in our state. Hollywood A-listers including Robert Duvall, Katherine Heigl, Sandra Bullock, and Jennifer Aniston have all experienced our unique locations, talented crew base and world-class southern hospitality, helping make Georgia the top filming location in the south."

The industry's economic impact in the state in FY10 came in at $1.33 billion, up from $1.1 billion the previous year. Georgia is now ranked number one in the Southeast, and among the top five states in the nation for film and TV productions.  Atlanta has been a welcome target for filmmakers and studios over the past few years due to statewide tax breaks and a low cost environment.

Another recent article in The Atlanta Journal-Constitution and one by CoStar suggest that legislature is closely examining the actual success of these incentives as it reviews the budget in light of cuts that will need to be made in 2011 to deal with the struggling economy.

Jennifer Brett, writer for The Atlanta Journal-Constitution’s Peach Buzz has been keeping the city informed with her filming updates and celebrity sightings. Some movies Brett has mentioned in her blogs include: The Fast and the Furious V starring Vin Diesel and Dwayne “The Rock” Johnson; Wanderlust starring Jennifer Aniston and Paul Rudd; Footloose starring Julianne Hough and Dennis Quaid; The Lost Valentine starring Jennifer Love Hewitt and Betty White; Marry Me starring Lucy Liu and The Change Up starring Ryan Reynolds and Jason Bateman.

In May, EUE/Screen Gems signed a 50-year lease with the City of Atlanta for the former Lakewood Fairgound property, which consists of 30 acres of land as well as the fairground’s Spanish Mission Revival Exhibition Halls, which will be converted into sound studios. EUE/Screen Gems chose the site because of its location between Downtown Atlanta and Hartsfield-Jackson International Airport, which is easily accessible to those travelling from out of state. Capital improvements of at least $6 million are required in the first two years, which will include the addition of approximately 40,000 square feet of new sound stages to accommodate TV, commercial, digital and film productions. This landmark deal is expected to generate up to 1,000 new jobs for the community, and should provide a boost to existing businesses in related industries.

This is good news for the West Midtown area of Atlanta, which is home to numerous recording and post production studios. The conversion of aging industrial/warehouse buildings has proven to be an attractive formula for a couple of reasons. First, the creation of sound studios in any building is expensive (it nearly always requires the demolition of any pre-existing build-out/improvements), so a less expensive building assists in keeping the overall costs at a manageable level. Second, due to the high profile nature of the industry and those that utilize the facilities, locations that are “below the radar” are preferred. Third, West Midtown provides a central location that provides easy access to the interstate highways and a short commute to the airport. 

At Carter, we have several active listings in the area, with many that could be optimized as facilities for this industry. For example, 348 14th Street which is pictured here.

Well-known recording artists and producers like Outcast, Dallas Austin, TI, and Ludacris have paved the way by establishing recording locations in West Midtown. While this industry has felt the impact of the recession, expect the trend to continue as the economy improves, and to accelerate as the impact of new film production on a grand scale begins to take shape at the former Lakewood Fairgrounds. As Atlanta Mayor Kasim Reed told the AJC, “This transaction will move Atlanta into the top 5 cities in the U.S in motion picture production…..once the Lakewood Studio is up and running, every TV and movie sound stage in the city will be in use.”

Since joining Carter in 2007, Ward Entrekin has specialized in urban land and investment sales. With nine years of commercial real estate experience, he provides an expert understanding of the in-town Atlanta real estate market to his clients. Ward primarily focuses on the procurement of owner-occupied real estate for his clients, as well as the disposition of a number of bank owned properties throughout Metro Area.

Carter's Long-Standing Commitment to Sustainability Continues to Grow

By John Jokerst, senior vice president, Carter

ATLANTA (April 12, 2010) – Recently buildings around the globe flipped off their lights to celebrate Earth Hour. Carter did the same for our 20 million square feet under management.

For us, this is not simply a one-hour-a-year effort. Conservation and sustainability are in our DNA. As one example, our Program Development Services (PDS) team alone is currently overseeing half a dozen LEED projects.

A little more than two years ago, Carter started The Green Team, an initiative led by a number of talented professionals from our brokerage, investment, property management and development groups to find ways to be more environmental sound internally as well as for our clients.  

Over that time a number of successful initiatives have come out of this group. These include our day cleaning program that has reduced lighting consumption by 15 percent  to 30 percent at our headquarters building at 171 17th Street, and BOMA 360 compliancy of the same office tower. BOMA 360 is a groundbreaking program designed to validate and recognize commercial properties that demonstrate best practices in all major areas of building operations and management.

Because Carter took the lead, we helped to create new policies that dictate the BOMA 360 designation. Talk about influence!

And that is just the tip of the iceberg. Our information technology team is in the process of replacing computers with those that are 88 percent more efficient. At our headquarters, we have eliminated bottled water and Styrofoam cups, implemented paper recycling and provided hand sanitizers and installed low flow auto faucets.

Further we have put into effect a toner cartridge recycling program, implemented building-wide recycling and made available electronics recycling for old home computers, televisions and the like.

Talking about the environment, and ‘going green’ are becoming more ‘en vogue’ in our industry.  At Carter we are committed to sustainability for the right reasons.  We are, have been, and will continue to be committed to implement responsible programs for the benefit of our clients, end users, and the evolving world in which we live.

Cooperation Among Business, Governments Key to Successful Downtown Revitalization

ATLANTA (Jan. 25, 2010) - During Atlanta magazine's recent Big Idea Roundtable, Carter President Scott Taylor spoke on the vital role cooperation among the business community, city and county plays in downtown revitalization initiatives - specifically in neighborhoods surrounding major tourist attractions and sports arenas.  

 Carter has already taken on this challenge in Cincinnati as co-master developer and project manager of The Banks, $1 billion mixed-use development on Cincinnati's downtown riverfront that will comprise roughly 2.8 million square feet of new mixed-use space to be built in phases over the next decade.

 

The topic is big news in Atlanta right now, as three major new attractions are in the fundraising and design stages in downtown Atlanta.  The National Health Museum, the Center for Civil and Human Rights and the College Football Hall of Fame are all scouting sites adjacent to the existing tourist draws including Centennial Olympic Park, the Georgia Aquarium and the new World of Coca-Cola. Carter has been hired by theNational Health Museum to help identify and acquire a site in downtown Atlanta. In addition, Carter will coordinate predevelopment activities, including working with various public and civic stakeholder groups and advise the board and museum staff throughout this process.

 

Taylor commented that a stronger partnership between the private and public sector is the missing link in Atlanta in the areas surrounding the Georgia Dome and Turner Field, shown in photo at left. “People that own sports teams don’t make any money off the team itself, they make it off the facilities, said Taylor. “And if you look at Cowboys Stadium, at the Patriots' [Gillette Stadium] just outside Boston, they used the economic engine from a hundreds-of-millions-of-dollars facility to revitalize areas. But it takes a significant amount of economic incentives in order to get those things off the ground. What these owners like to see is the commercial, the retail, the hospitality. It drives the game-day experience that allows the venue to thrive when the games aren’t there. Turner Field, I’d say yes, it will happen, but I don’t know when. But it will take some serious economic incentives to get it going.”

 “We’re working on a project now in Cincinnati,” Taylor is quoted as saying. “It’s in between Great American Ball Park where the Reds play and Paul Brown Stadium where the Bengals play (photo at right). It’s 18 acres on the Ohio River, a vacant parcel of land that’s been there for 30-plus years. It’s ripe for development, but it hadn’t been developed because of tension between the city and the county and the business community. 

"Now we’re coming out of the ground with 330 apartment units, 100,000 square feet of retail, office towers, and a hotel to anchor this wonderful part of the city. But it didn’t happen until there was great unity among the business community, city, and county.”