When Cousins Properties named Larry Gellerstedt as president of its office/multifamily division last June, the decision was initially a surprise to many local real estate observers in Atlanta. After all, Gellerstedt's background was largely in the condominium arena. Meanwhile, Cousins was renown for its office developments like the suburban Wildwood office park and the architecturally unique Pinnacle tower in Buckhead. In hindsight, the match made perfect sense. Cousins had embarked on a diversification strategy in recent years, jumping heavily into the retail and industrial segments of commercial real estate.
In fact, Cousins had already been partnering with Gellerstedt on 905 Juniper, a $29.4 million condominium in Atlanta, before the company acquired Gellerstedt's firm, The Gellerstedt Group, for an undisclosed price last June. Now there are a number of projects in the firm's pipeline, many of which are mixed-use in nature, including Terminus, a $500 million mixed-use project in Buckhead, one of the key financial districts in Atlanta. NREI spoke with Gellerstedt about the direction of Cousins and the state of the mixed-use development industry.
NREI: Buying your company was quite a signal that Cousins was changing course. Why do you think the company, known mainly for its office developments, wanted to make this transition?
Gellerstedt: I think that the leadership of Cousins felt that more and more of the opportunities for a development firm that had our skill sets over the upcoming years were going to be of an urban, mixed-use nature. Traditionally, development companies had put retail, office and multifamily projects into silos, and for good reason. The thinking today is that if we can figure out a way to harness the skill sets across different disciplines internally, it will provide us a competitive place in the market.
NREI: Is there a clear definition of mixed-use in terms of components and design?
Gellerstedt: The key component of a well executed mixed-use project is that you don't see any of the aspects of the project compromised by other components of the project. We're still in what I consider the really fun part of the mixed-use phenomenon in that it's still very entrepreneurial. There's not a formula that you can just take project to project.
NREI: What regions nationally hold the most opportunity for mixed-use development?
Gellerstedt: If you look at population growth that's projected nationally and the household growth that's projected for the country, and you look at where that growth is going to take place, I think we're sitting in about as good a spot as you can be sitting. Between 35% and 40% of that growth is going to take place in Texas, Florida, Georgia, North Carolina, and California; and we've been active in all of those markets.
NREI: In terms of selling mixed-use projects, do you see more value to a single buyer of an entire mixed-use project or selling residential and office to different buyers?
Gellerstedt: You have to make sure that when you're designing these projects that you take into account a few important points: Whether it's allocation of the space in the parking deck or whether it's allocation of maintenance charges, you don't do anything to preclude a buyer who wants just want one component of those assets from being able to carve out that component and buy it. Generally, the market is still somewhat traditional in terms of the buyers. You tend to have buyers who like office product, or retail product, or multifamily product. I think that will change over time, but not real fast.