When Bernie Marcus, founder and chairman of The Home Depot home-improvement stores, decided to give something really big back to his company's hometown city of Atlanta recently, he decided to pony up $200 million for a new Georgia Aquarium. He also decided to build it next door to one of Atlanta's longest-running real estate sagas called Atlantic Station.

Years ago — 1993 to be exact — Jim Jacoby had a similar choice to make. The chairman of Atlanta-based Jacoby Development Inc. and Atlantic Station LLC could either jump headlong into a new development being cobbled together with the Metropolitan Atlanta Rapid Transit Authority (MARTA), or he could tackle his biggest project of all just north of downtown Atlanta — the largest redevelopment of a brownfield site in the country.

Today, despite numerous setbacks in the past eight years but with the promise of a shiny new aquarium and concrete finally pouring around the Atlantic Station site, Jacoby says he has no regrets about his decision. “When they [MARTA] came back with their RFP [request for proposals], I had already put Atlantic Station under contract and I knew that was my path. I absolutely chose this. We looked at what we could do here and the scope of it and it was just too powerful.”

Looking out over the 140-acre site just west of the main downtown connector highway of I-75/85 from the 17th-floor sales center to the east, it's easy to see that construction is well underway on infrastructure and an underground parking garage. When Atlantic Station is fully built out by 2010, the $2 billion development will feature 12 million sq. ft. of retail, office, residential and hotel space, as well as 11 acres of public parks.

For a time, though, the whole thing looked to be on the verge of collapsing before it could get out of the ground. In late-2000 and into early-2001, three high-profile national real estate firms — Arlington, Va.-based The Mills Corp., Houston-based Hines and Atlanta-based Post Properties — pulled out of the project for different reasons. They were quickly replaced by Atlanta-based apartment developer The Lane Cos., Atlanta-based homebuilder Beazer Homes Georgia and Baltimore-based retail designer Development Design Group (DDG).

Swimming with the fishes

Right now, though, all eyes are fixated on what the new Georgia Aquarium really means to the project. Remarkably, Jacoby, Marcus and Georgia governor Roy Barnes hammered out the deal over breakfast in September 2001. Locally, it is touted as the biggest economic development catch since the 1996 Olympic Games.

“One of the reasons Bernie [Marcus] picked Atlantic Station to develop his aquarium is because of the synergism that happens between the retail and the entertainment and the aquarium,” says Jacoby. “We're good for him and he's good for us. Here, we'll have 20 million visitors a year coming to Atlantic Station. For Bernie Marcus, one of the most admired retailers in the world, to say location, location, location is a validation of what we already knew.”

Other observers agree. “Having the aquarium located adjacent to Atlantic Station does immediately differentiate it as a true entertainment and tourist destination, as the two will play off each other and provide the necessary synergy for the success of each project,” says James E. Ledbetter Jr., executive director of New York-based Insignia/ESG's Atlanta office. “While there's definitely some work to go on the Atlantic Station project due to current market and overall economic conditions, that site is very valuable and the master plan is sound, so I'm confident that the project will eventually be a success.”

Ground was broken in January 2002 on another big traffic driver — a new bridge at 17th Street which will cross over the connector freeway, physically linking Atlantic Station to the rest of the burgeoning Midtown office and cultural market just to the east. The bridge will feature pedestrian walkways, bike paths and landscaping in addition to automotive lanes.

The combination of the aquarium deal, the bridge and the project's proximity to Midtown has Jacoby convinced that enough Atlantans will embrace a live-work-play environment in a city known for its love of the almighty automobile.

Ledbetter is convinced it can happen, based on the mounting daily commute times and developers' willingness to build more mixed-use projects. “While this city was built on the idea of the automobile, the idea of living intown near where you work has gone beyond the initial trendsetters and is now evident in how housing prices inside I-285 [Atlanta's perimeter highway] continue to rise. While Atlantic Station is certainly the biggest mixed-use project under way or planned, it's by no means the only one.”

Overlooked urban opportunity

Building all of this space on such a large plot of land sitting inside a major city's urban core is unusual, but the site was home to the Atlantic Steel Co.'s mill from the early-1900s until 1997.

“The real winner here is the fantastic location, to be able to take a brownfield which is usually in industrial areas or where you don't have the opportunity to do true mixed use with a residential component or retail,” says Jacoby.

A veritable who's who of Atlanta power brokers looked at the site and gave it a pass. “We were so fortunate because the cleanup potential at Atlantic Steel was so unknown and so threatening. [Ted] Turner looked at it for Turner Field, it's been looked at for an Olympics venue, for malls. There were always two unknowns — the environmental cleanup and the access situation,” said Jacoby.

He's also looking to expand his vision to other cities. “People want to call it visionary, but I call it evolutionary. We're looking for opportunities where we can reclaim degraded land or we can redevelop. We're going after brownfields that other people have turned down because they didn't want to take the risk. Having proved that we can work with the EPA, other federal agencies and the state, we're willing to take on the challenge because there's probably a lot of great locations with great real estate that have just been bypassed because of the environmental concerns,” says Jacoby.

Conversely, state and federal agencies increasingly seem ready to show that they can partner up with developers to get once-moribund projects off the ground. After all, no city can maximize its tax collection from raw land. Instead, revitalization projects can help to create jobs, clean up inner cities and foster so-called “smart growth.”

But, developers have to get something in return. “Hopefully the reward will be there. We took the challenge and look where we've gotten. Other developers need to look at us and say they took the shot and at the end of the day they made it happen and they were well rewarded,” says Jacoby.

Leasing in a downturn

Timing is critical to any project, and while the U.S. economy was buzzing along in the late-1990s when Atlantic Station was first seeing the light of day, Jacoby is hoping his leasing program in the early-2000s nets the expected rewards. Given the present economic downturn, he's still optimistic about his chances.

“I can't say it [the economy] totally hasn't affected us. But I think the Gap is a good example. There was a very strong interest from them in three different brands and we're still in a dialogue with Gap right now. They're looking harder at certain things. The leasing is going very well as far as the letters of intent and the number of retailers that have shown an interest. When we talk to retailers, a few have said if they can only do three deals this year, they want us to be one of them. People have wanted to be in Midtown with all the growth for a long time but there really never has been a site. Here, there are no competing sites. If an Abercrombie & Fitch wanted to be in Midtown, this is the only place they could go.”

Surprisingly, at least one strong retail developer sides with Jacoby.

“As an Atlantan, I would love to see something really special down there,” says Joel Murphy, president of Cousins Properties Corp.'s retail division. “If the right thing is done there, it can be quite successful. It's uniquely located in the heart of a market. It's got great access, unbelievable visibility and in a trade area in the one place in Atlanta where there's a dearth of quality retail space. I hope it's wildly successful.”

Prospects are also good that a large national grocer will take about 28,000 sq. ft. soon. “We feel real good about it, let's put it that way,” Jacoby said.

When it comes to the project's office component, however, he admits he's treading into a big unknown, even though discussions are underway with potential tenants. “We're talking to tenants with a total of about 2 million sq. ft. One is Norfolk Southern with half a million sq. ft., a couple of law firms with 200,000 sq. ft., and others who want to be in a true mixed-use environment where the executives can live in the community, walk to work and have their seat at the restaurant,” Jacoby says.

In February, Jacoby and financial partner AIG Global Real Estate Investment Corp. said they will develop a 400,000-sq.-ft. speculative office building, scheduled for late-2003 or early-2004 completion.

If the proof truly is in the pudding, in the case of Atlantic Station, Jacoby admits that seeing may be believing. “Now is the time that the project is coming to fruition. We had a few nonbelievers in the beginning, but people are believing now.”

Three go into one

The Atlantic Station project is developing into three distinct sections:

The District:

• 1 million+ sq. ft. of open-air retail and entertainment
• 6 mixed-use retail buildings with entertainment, shops and restaurants
• 6 million sq. ft. of office space in mid to high-rise office buildings
• An additional 150,000 sq. ft. of office space atop retail locations
• 200 two-story loft apartments above retail
• 90 single-family townhomes

Construction of The District and its parking garage is now underway. Jacoby says leases on 200,000 sq. ft. of the retail and entertainment components are in various stages of negotiation, including several restaurants in the 5,000 sq. ft. to 15,000 sq. ft. range. Delivery of the first phase is set for October/November 2003, which will include at least 1 million sq. ft. of retail space, 1,300 residential units and either 500,000 sq. ft. of office space overlooking the retail components or one build-to-suit of 300,000 sq. ft. to 500,000 sq. ft.

The Commons:

Encircling a two-acre lake, The Commons will encompass the majority of the residential properties at the Atlantic Station development, with a minimum of 1,150 units.

The first phase of development will include:

• 233 one- and two-bedroom affordable apartments and townhomes
• 284 one-, two- and three-bedroom luxury apartments and townhomes
• 59 one-, two- and three-bedroom condominiums

Construction on The Commons began in spring 2002 with completion of Phase 1 scheduled for fall 2003.

Tech Village:

• Mass retail locations surrounded by neighborhood retail shops, such as cafes, video stores and delis in a mixed use building and urban setting
• 200,000-300,000 sq. ft. of office space designed for high-tech tenants
• 400 apartments/lofts above retail and office space, occupied by residents with mixed incomes and varied ages

Construction on Tech Village started in spring 2002 with completion in fall 2003.