Ackerman, MDH Embark On 'Recession-Resistant' Retail-Focused Redevelopment

Two Atlanta developers are forging ahead with construction on a new retail and restaurant project, even as the industry faces a historic crisis.

Ackerman & Co. and MDH Partners are moving forward with the redevelopment of Lee + White, a 433K SF warehouses park dating back to the 1950s and 1960s at the corner of Lee and White streets in the historic West End neighborhood.

Ackerman plans to renovate two existing buildings at the park into 127K SF of loft office and 30K SF of retail space. Currently, both are unused warehouses. 

The developers, who are entirely self-funding the project, also are adding a 12th building on the property, a 17K SF food hall with loft offices on the second floor and an outdoor amphitheater, MDH CEO Jeff Small said. The developers also are seeking to partner with a multifamily developer for a future 250-unit apartment project at the site, they told Bisnow.

The project fronts 3,000 feet of the Atlanta BeltLine, the 22-mile pedestrian path in the city that has quickly become Atlanta's equivalent of The High Line in New York, and where property along the path has become a hot commodity.

“Lee + White … can offer what nowhere else in Atlanta can offer: a half-mile of paved BeltLine and less than half a mile from a MARTA station,” Ackerman & Co. Retail President Leo Wiener said. “It's tough to find those two together.”

Lee + White's transformation began in 2017 under its previous owner, Stream Realty Partners, which purchased the aging industrial park and began to retrofit and re-tenant it with breweries and small food operators.

Under Stream's ownership, Lee + White became home to a host of local beverage merchants, including Monday Night Brewing, Wild Heaven Beer, Best End Brewing Co., Hop City Craft Beer & Wine and ASW Distillery. It also has a handful of food makers, including Honeysuckle Gelato and kombucha maker Cultured South Fermentation Co., alongside a restaurant, Boxcar.

Ackerman and MDH purchased the Lee + White redevelopment from Stream for $40.3M last year with plans to capitalize on the momentum of a wave of new development on Atlanta's west side.

But the world has changed dramatically since the project's early success, especially for retailers. Most non-food retailers closed during shelter-in-place orders nationwide, and many businesses aren't reopening again once those orders are lifting. Even major retailers like Starbucks are haggling over rent payments.

While overall first-quarter data was positive for Atlanta retail, analysts expect that news to change in coming months.

"As real estate is often a lagging indicator, the true impact of this pandemic will likely not begin to show in the numbers until later this year," Avison Young officials wrote in a recent report.

At Lee + White, rent relief requests have been “very minimal,” Wiener said, and all existing tenants remained open to an extent throughout the pandemic.

“Monday Night's Garage and Wild Heaven both have active retail distribution, as does ASW to some extent, so they weathered the storm,” he said.

The other tenants offered takeout and, in some cases, are reopening to the public with patio seating. Wiener said the developers remain bullish on the project, and on the West End neighborhood, despite the current economic reality.

“We're not starting from scratch or looking at a lot of ground-up development, so we're ahead of the game in the area," Wiener said. "Our existing tenants give Lee + White a great head start as they are well-run and known names in the Atlanta community."

Ackerman and MDH aren't the only developers attempting a major redevelopment in the West End. The West End is 6 miles south of the Westside Park at Bellwood Quarry, the up-and-coming park near Georgia Tech's campus that has become the focal point for much of the new development in the city and is becoming an extension of the hot Midtown community.

Over the past two years, the father of the Atlanta BeltLine, Ryan Gravel, and a partner have been attempting to redevelop the Mall at West End into a mixed-use complex that could include 450 apartment units, 550K SF of office, 170K SF of retail and 420 hotel rooms. The project has yet to break ground.

Gravel said he and his partner remain bullish on the area despite the sudden recession spurred on by the pandemic, even as social distancing has become the norm, and restaurants have been forced to operate at a diminished capacity to keep people apart.

“It's terrible what's happening obviously, but long-term, people still want to be connected to each other. There's something still very human about wanting to share space together,” Gravel said. “Long term, I don't buy all those doomsday scenarios.”

Lee + White will have asking rents for shops and restaurants between $20 and $30 per SF and office space rents set for the mid-$20 per SF range, Small said. Those rents are actually a discount to what tenants are paying to be in the Westside and Upper Westside communities, where retail rents  can range from the high-$40 per SF to the low-$60 per. SF range, according to The Shopping Center Group.

Small said the new reality forced upon restaurants by the pandemic actually may play into Lee + White's favor. Restaurants at the project have access to abundant patio seating that fronts the BeltLine, as well as roomier former warehouses where social distancing designs may be easier to accomplish.

“If you're in Midtown or Buckhead in a very dense location with high rents … how does that become financially feasible if you can only operate at 50% capacity?” Small said. “If we enter into kind of a longer, new reality of food and beverage design ... all of that really seems to give us the confidence that retailers are going to need space like this.”

The rents the developers are seeking are still on the high side for the West End neighborhood, Skyline Seven Real Estate Senior Vice President Ryan Holzer said. But the project's BeltLine presence and its patio space could make the high rents worth it.

“I don't think there's anything there to support these rents, but they're planning on it being a destination project. And millennials are more likely to forget about this [pandemic],” Holzer said. “If you look at Inman Park 10, 15 years ago, we'd have said no way.”

The joint venture hired Cushman & Wakefield to lease the office space, and the brokers already have letters of intent for 20K SF, with a second tenant in negotiations, Wiener said. Ackerman also is fielding interest from a lifestyle retailer, he added, declining to identify any of the potential tenants. 

“We do believe that the draw of the BeltLine is so unique, and I think you've seen that in the worst of this crisis: People crowding the BeltLine,” Small said. “We've had tenants there who still have been able to make a profit in the downturn. I don't know if anything is truly recession-proof, but we think it's very recession-resistant.”