The words "South Central Business District" scare Atlanta developers. They imply a type of urbanism that has been typically shunned by area developers. So when Harold A. Dawson Jr. unveiled a mixed-use development in Atlanta's south CBD, friends and associates - including Tom Cousins, chairman and CEO of Atlanta-based Cousins Properties Inc. - thought he was crazy and did not mind telling him so.
"Tom Cousins, who has been a mentor of mine, suggested on more than one occasion that maybe I think twice about it," laughs Dawson, president and COO of Atlanta-based Harold A. Dawson Co. (HADCO). "But we were confident, we had some good support and we just went for it. I think there are times when you just have to do that."
City Plaza is the result of Dawson's gamble, and it is a landmark achievement for HADCO. The $25 million mixed-use development features 154 residential units, 27,000 sq. ft. of retail space - including McDonald's and the nation's first downtown Kroger grocery store - and a 350-car garage.
More than just a financial coup for the often overlooked southern area of downtown Atlanta, City Plaza is also the first project in the city's history that is owned, developed, leased and managed by a black real estate firm. Further, the City Plaza project sparked new interest in downtown residential development and enabled Dawson to establish himself and his father's company as ones to watch in Atlanta's booming market.
Fate and finance When Harold A. Dawson Sr. founded HADCO in 1969, African-American real estate companies were few in number. But through the Dawsons' hard work, the full-service real estate firm - emphasizing in-fill, urban development - now boasts annual revenues of $10 million.
Watching his father struggle to succeed did not immediately draw the young Dawson to the family business. Instead, Dawson headed to Princeton pondering a career in politics. A study trip to the London School of Economics changed his mind, and, after graduating from Princeton, Dawson headed to Harvard to put his flair for numbers and finance to good use.
Harvard MBA in hand, Dawson went to Dallas to work for Trammell Crow Co./Trammell Crow Ventures. Between 1988 and 1992, Dawson served as senior associate and director of capital markets for Trammell Crow and made approximately $5 billion for the company. In 1993, Dawson returned to Atlanta to help run HADCO when his father was diagnosed with prostate cancer (The elder Dawson turned out just fine.)
In 1994, the city of Atlanta hummed with pre-Olympic activity. City officials wanted to do something to revitalize downtown before the Centennial Games and put out an RFP to promote housing on city-owned land across the streetfrom City Hall.
Dawson says winning the bid was easy. "But then came the real exercise of putting the deal together," he adds.
Securing capital is tough, especially for a project put together by a growing minority firm and for a project everyone expects to fail. "A lot of people were pretty scared by [the project]; it was very pioneering," says Dawson.
Dawson says it was a tax-and-bond type project that called for some creative financing. "Interest rates weren't anything like the rates we have today, so we did what's called a 'low floater,' which is a weekly, variable-rate finance project. We also were awarded an enterprise zone designation by the city and Fulton county, which is a property tax abatement and phase in over a 10-year period."
Dawson also capitalized on the pre-Olympic fervor with some timely building strategies. Knowing the state of Georgia needed housing during the Olympics, Dawson contracted the state to house the Georgia State Patrol, Georgia Bureau of Investigation and FBI at City Plaza during the Olympics. The net from that state contract went into the project."
Dawson financed the project through bond financing, property tax abatement, third-party equity (local and national investors), funds from state contracts and sales of tax credits from the bond financing.
The Atlanta Urban Residential Finance Authority issued $12.3 million of weekly variable-rate multifamily housing revenue bonds for the project. Dawson then got a letter of credit worth $12.4 million from Charlotte, N.C.-based First Union National Bank.
"Because these bonds were floating rate, what we did was hedge our interest rates through an interest rate cap and an interest rate floor, which is called an interest rate collar," says Dawson. "So if the rates skyrocket, they won't hurt me, and if they drop really low, I won't get the benefit, but it was a nice band to stay in."
First Union also provided a $1.9 million bridge loan, which was secured by a lease with the Georgia Department of Public Safety. The loan has since been repaid. Then, in December 1998, Dawson obtained permanent financing through Fannie Mae.
Dawson leveraged strong business relationships to get the project going.
"We tried to go after some guaranteed income streams with the retail and parking," he says. "We did a long-term leasing with United Parking for the garage - we gave them some upside, but we had a firm income stream. We then leveraged our relationship with Kroger and convinced them to do a long-term lease."
Dawson also convinced Sylvia's - a famous Harlem soul food restaurant - to put its first restaurant outside of New York in the City Plaza development.
The movement back into long-forgotten urban areas of Atlanta was just beginning, but City Plaza proved it is a viable trend and opened the doors for similar developments.
With Atlanta's urban core now set for renewal, Dawson says the City Plaza project deserves some of the credit. "Looking back, would I do it again?" he wonders. "I don't necessarily know. Part of it, at the time, was a bit of foolishness. But we also felt we could make this work. We were really confident in our abilities."
City Plaza remains viable with a retail occupancy rate of 98% and residential occupancy rate of 97%. The stabilized recovery rate from intown housing has gone from 95% to 90% due to new housing following City Plaza's success.
"There are a lot of challenges, but people are now starting to look at the city as a kind of new frontier," says Dawson. "But after those [urban in-fill] areas are ignored, the challenge is to get retailers to come in."
HADCO breaks Buckhead barrier Dawson now looks forward to an innovative develoment with Metropolitan Atlanta Rapid Travel Authority (MARTA), which will make HADCO the first black real estate company to develop in Atlanta's upscale Buckhead area.
MARTA has begun leasing land near its stations to developers to help alleviate Atlanta's traffic problem, as well as help spur retail, office and residential development. Atlanta-based Carter & Associates, Atlanta-based Post Properties Inc., Rockville, Md.-based Federal Realty Investment Trust and HADCO are the first to take MARTA up on its offer and will develop approximately 50 acres adjacent to MARTA's Lindbergh Station. Simultaneously, MARTA will spend about $40 million to redesign the station, and upgrade roads and sidewalks. Dawson calls the project "the preeminent case study in transit-oriented development."
Carter is hammering out terms of a 99-year lease with MARTA, which include 2.2 million sq. ft. of office space for BellSouth Corp. and 316 apartments developed by Post. Federal Realty Investment Trust will build 280,000 sq. ft. of retail space, while HADCO will develop 300 to 500 condominiums. By 2001, a new "Main Street" with shops on the ground floor and offices and apartments above should be completed.
Dawson is particularly proud of the Lindbergh project. He says it is hard enoug trying to break into the Atlanta network as a young developer, but is it even harder for minorities. "There are very few second-generation African-American businesses," he says. "The real estate industry hasn't been very open and inclusive to minorities. Real estate is still a fairly clubby industry and pretty incestuous - companies spawn other companies, which spawn other partnerships and ventures.
"That's one of the things I hope that, with my little success, I'm able to break down barriers so my company and other scan compete in the process," Dawson continues.
One of the challenges, Dawson says, is making sure HADCO's name is mentioned in the same breath as other top Atlanta developers. "It's not ego driven," says Dawson. "When someone comes to town and says, 'We want specialized real estate finance and development services,' Dawson Co. should be included on the list of five."
Dawson's ultimate goal is to keep HADCO focused on urban, in-fill development. "But not be so reliant on public-private type projects," he adds. "And really, I'd like to be perceived as a strong niche developer rather than as a black developer. And that's the goal - to have a select group of clients that provide specialized real estate development and services."
But Dawson also wants to develop in other underserved urban areas to create more redevelopment success stories. "We've been looking at Detroit," he says. "There are plenty of opportunities there, and there are some other areas in the Southeast. But Detroit [is a market] I've had my eyes on for some time. We'd like to do something like City Plaza in Detroit, and have talked to the Detroit Economic Development Corp. about it. They've been interested, but trying to put it together is a challenge."
Dawson trusts his ability to rise to that challenge when that day comes. After all, everyone said he was crazy to gamble on Atlanta's South CBD.