An Atlantic Station Condo Declines 39%
Decatur Metro | November 29, 2008 | 6:23 pmToday’s AJC talks about a couple that got in WAY over their head in the real estate market craze and now are paying for it in spades.
But the number that caught my eye in the article wasn’t their $419,000 Smyrna home that costs $100,000 less than it did a few years ago. Suburb declines are well documented at this point. Personally, I was struck by the condo at “Twelve” Atlantic Station, which was purchased for $387,000 in 2005-6 and is now worth $150,000 less.
This is the Atlantic Station that everyone (including the AJC) touted as the new wave of smart growth development. Massive, single developer cities that could do no wrong as long as they threw a bunch of residential and commercial in the same general vicinity. Atlantic Station was so awesome because it had its own zip code and organized mommy stroller walks. Yeah well, the economy may have played a part in exacerbating this problem, but a 39% decline in home values is nothing short of damning market critique of this project, which shows that all smart growth (just like everything else) isn’t created equal. You can’t cut corners, you can’t overestimate demand, and I personally believe you can’t build a town from scratch and expect it to compete with areas that have developed over time.
A 39% decline? How does anyone that bought one of these properties early on recover from a blow like that? Maybe some of them can wait it out, but a heck of a lot more of them are going to end up hurting. And what does Atlantic Station end up looking like 5 years from now? H&M or no H&M. Ugh.
This is a real downer because I think it will lead people to draw erroneous conclusions. The culprit is not what Atlantic Station is *in theory.* The problems lie in its execution.
The lessons to be learned, some of which DM mentions, are:
1) Architecture and construction are not formalities. Cardboard, faux-stucco crap does not engender long-term confidence. People respond to forms and materials that show a genuine ability to stand the tests of time.
2) Retail area with condos next to a bunch more condos with a couple big box stores mixed in does not necessarily equal the fine grained, mixed use urbanism people respond to. It’s too programmed and relies on too many conventional real estate lessons.
However, I have to disagree with DM that new places can’t be created from scratch and compete with historic places. As with many things, the devil is in the details. Take a look at Glenwood Park, a new neighborhood down Glenwood Ave. Like Atlantic Station, it was built on a toxic industrial site and was master planned. But it differs at the level of the details and, today, is a delightful, mixed use neighborhood with scads of organic charm.
Bottom line: Atlantic Station could have been a new, in-town Atlanta neighborhood with all the criteria necessary to stand the tests of time. But they approached it as an elaborate outdoor mall type project instead, and now they’re paying for that mistake.
There is a crime reputation there too which I believe has had an impact.
Living just down the block from a Nordstrom or Saks could have a certain prestige for some people, and AS was priced based on that; unfortunately, living just down the block from a Dillard’s is just kind of … lame.
Decatur is a great example of smart Smart Growth. While there was already a strong neighborhood infrastructure, adding density and creatively reusing existing structures over the last 10 years has resulted in relatively “organic” growth into a bustling main street. Would be interested in where condo prices are in Downtown Decatur relative to the peak and relative to Atlantic Station at the peak and today.
What a joke…
1) The title is VERY misleading, IMO- “Real estate a trap for metro Atlanta couple.”
2) They bought a house in Smyrna for $419,900, then a condo in Atlantic Station for $387,700, THEN a condo for Mom in Smyrna (no price given). These 2 gambled and lost…lost BIG. And it’s nobody’s fault but theirs…they fell into their own trap.
Love that they are going to default on their main home but apparently still have 2 kids in private school. At this point I would favor making all mortgage loans recourse loans. Letting people just walk away from these loans — and now, essentially foist them on the taxpayers — is ridiculous. These folks appear to have some ability to pay, but refuse to really adjust their lifstyles to accomodate the financial commitments they foolishly made. Of course, the fact that they needed a family member to co-sign for the condo loan is proof that they had no business buying it in the first place.
That said, I am not sure I agree with your takeaway DM. The article says that this building was crazy popular when it opened. So the developers did not overestimate demand at the time. It seems like they timed it perfectly. The initial buyers obviously did not see the market crash coming, but few did, even though it seems obvious in hindsight. And it may well be that AS properties are now marginally less valuable than other condos, but the fact remains that we’re in the middle of a crisis that has caused huge price reductions almost everywhere, and the Atlanta condo market is overbuilt. I think it is very hard to look at this limited data and conclude anything about the market’s particular views toward AS, as opposed to any other condo project in the area. I’d be curious to know what market losses look like in more established buildings in Buckhead and Midtown. I would bet it’s pretty ugly across the board.
Atlantic Station has always reminded me of the Center in Jose Saramago’s The Cave.
DEM, again its what you deem “timed it perfectly”. In terms of making a profit right off the bat, then yes. In terms of creating a profitable, sustainable economic center, then no.
I agree that I would have a stronger argument if I compared condo price declines at AS with those in more established areas. However, I was short on time when I wrote the post, as I am now…so I will just have to go with my gut instinct for now.
Scott, I don’t know much about Glenwood Ave, so I’ll have to take your word for it. But while I do believe that better construction quality (which can only be changed in this country if we rewrite the tax code regarding depreciation) benefits any newer project, I also believe that the historic component plays an important role (something about being connected to previous generations), which can’t be mass produced by the new.
It’s not just the tax code DM it’s the cost of construction and the fact that unskilled labor is cheaper.
For instance the house in the article on Emory Grove is a flemish bond brick shell, as in solid brick not a brick fascia over ballon frame. This kind of construction that would be extremely expensive today if you could find brick masons capable of the work.
There’s a reason why a lot of modern developments look the same.
I really think you’re right, it’s impossible to manufacture community.
DM – good point…accellerated depreciation is a huge factor to lack of quality construction in modern development…
The point is that there was a time when people wanted into AS badly enough to wait on a waitlist for the opportunity to buy. What’s changed between then and now? The essential character of AS? No. The mortgage and condo market in general? Very much so. I think you and I agree that AS has the feel of a movie set, and we’d never live there, but this is Atlanta and, sad to say, this kind of manufactured ambiance usually sells. Heck, you can probably explain the lack of demand for existing condos there by the fact that they’re building another massive supply a brand new condos right next door.
By the way, you have to love what the AJC did with this headline. “Hard working couple” = one spouse collecting unemployment. I guess she works up a sweat picking up her check. Investing “wealth” = gorging on easy credit and having relatives co-sign for loans. But let’s not let facts get in the way of putting a spin ion the story, AJC.
Scott — back to your point about AS vs Glenwood Park.
You referred to GP as a new neighborhood, but it’s really a subdivision. And I think that speaks very much to one of the major details that made a difference between AS and GP.
The bigger the development, the more there is that must be financed all at once. That’s an expensive proposition. That’s not to mention how AS will age all at the same time, too.
GP will likely experience much of the same as AS, but on a much smaller scale. Despite promises that were made early on that GP will include some affordable units (specifically, basement units similar to what can be found in many older homes), those promises were eventually dropped.
That being said, GP will probably age much more gracefully than AS — the quality of the construction is better, and the construction work is taking place over a much longer period of time.
The stories I’ve seen on real estate values nationwide say that intown (urban, walkable) values have held much better than those in suburban areas. But Atlanta is the exception.
What I’m curious about is whether Decatur is the exception’s exception.
Joe, you make good points about the housing crash being felt on a variety of fronts. The big constant is that areas overbuilt in a particular product type (condos in Midtown; McMansions in the burbs) will suffer most. It certainly seems to be playing out that way in Atlanta.
One quibble. You describe GP as a subdivision, which I’d suggest is inaccurate. Subdivisions are typically defined by a single use, a single housing type, and a confined price range. Neighborhoods, on the other hand, are typically mixed in housing types, scales and prices; include both residential and commercial uses; and feature various forms of civic/park space.
Glenwood Park certainly meets this definition. Druid Hills and Inman Park (as just two examples) were both master planned but that doesn’t prevent anyone from thinking of them as neighborhoods. The term “neighborhood,” it’s true, was been perverted by subdivision marketers but I don’t think we should paint guys like Charles Brewer (who did GP) with that same brush. GP has weaknesses, sure, but so do all of our historic neighborhoods.
[…] Metro notes yesterday’s AJC article about Nadege Adam and Jude Valles, a couple who’ve overextended […]
Scott — having a planning background, I’ve not heard of a definition of “subdivision” that specifies it as single use, or of “neighborhood” as mixed. A subdivision is merely a plot of land that have been subdivided into smaller lots.
Technically speaking, I believe Glenwood Park is part of the Ormewood Park neighborhood. The Atlanta Development Authority conveniently has a nice map.
I don’t mean to paint dissimilar things with a single brush — just getting a little technical
On a side note…
There actually has been some criticism of New Urbanism in the literature that specifically refers to NU developments as dressed-up subdivisions. While I think the criticism is a bit overstated, there’s a bigger point — a word of warning, of sorts. DM makes a very similar point in the original post here. The point is that so long as NU developments do not connect (or connect poorly) with their surrounding areas, they will not be sustainable. They may be better than the typical single-use subdivisions, but they’re still not the panacea they’re touted to be.
My personal opinion is that this is true for some developments that have been touted as NU, but it’s not quite so true for GP. Connectivity with the surrounding neighborhood there COULD be better, but it’s still superb compared to many other NU developments I’ve seen.
Another key part of the problem is simply the overwhelming GLUT of condos being built all over the metro area. The retail market for condos in high-rises and mixed-use developments is limited; a certain percentage of buyers will always want new single-family homes, which is why they keep buying farther and farther out in sub/exurbia. Yet in the past few years, developers have built more and more in both “hot” and “maybe it’ll become hot if we build enough” neighborhoods, while the number of potential buyers has remained the same or declined. Some people may like Atlantic Station, but if they can find one of the hundreds of similar condos for a lower price in the same general area, they’ll choose that instead and just drive/MARTA over to AS when they want to shop. Atlantic Station would’ve been wildly successful if it was one of a handful of condo developments within a five-mile radius. Classic supply and demand – the demand is the same, but supply has grown to ridiculous levels, depreciating the market all around.
Yeah, I sound anti-condo, but I’m not. I’d love to buy one if I were in the market to buy (but I also know that no way in hell could I afford one, which is why I’ve stayed OUT of the market all along. Renting this apartment can be a drag, but I’m self-aware enough to know that I would’ve been in foreclosure months ago if I’d gotten a subprime mortgage.)
But while I do believe that better construction quality (which can only be changed in this country if we rewrite the tax code regarding depreciation) benefits any newer project, I also believe that the historic component plays an important role (something about being connected to previous generations), which can’t be mass produced by the new.
I think we have to remember that historic properties were once new construction themselves. What makes those buildings stand the test of time? What made other buildings built during the same period not stand the test of time.
I don’t think that the debate should be old vs. new, but quality and good design vs. bad design. There are plenty of examples of both regardless of whether you’re talking about 1920’s construction or new construction.
I need a lesson: How does accelerated depreciation (yes, I know what it is…) affect construction quality? Isn’t there a recapture provision too at the sale of the depreciated project? What affect does that have, if any?
Sometime in the 50’s the govt changed the tax code to allow a commercial owner to write off the depreciation of a building in as little as 7 years (when before it used to take decades). the owner could turn a real profit, but due to depreciation could make it look like a net loss thus getting tax free income (somehow…).
since they were no longer using the building for more than a few years, they usually dumped the project for the next person to depreciate so they could move on…
To answer your question to the best of my knowledge: there is no incentive to construct with quality if you knew you would be out of it as an investment in just a few years.
Admittedly I have limited knowledge on this, I’m sure there are others than can speak more intelligently to the subject…
I think also it could only be used on new construction, so old downtown’s couldnt do the depretiation on their taxes…
I am certainly not a tax expert, but accelerated depreciation, I believe, has a provision whereby, if the property is sold, the accelerated part is charged back, thus providing a dis-incentive to do that.
And, I’m not sure the seven year thing applies to real property, only furniture, fixtures, etc., but I’m open to correction (like I said, I’m not a tax expert).
Decaturguy, I’m not talking about historic buildings on an individual level, I’m talking about the concept of one developer constructing entire communities and whether such a place could compete with an urban environment that evolved over time.
Design is a HUGE part of Atlantic Station’s problem…as I’ve detailed in previous snarky posts. But I still think that any single developer project that attempts to produce an entire city will have trouble competing with a more organic area, which was built up by countless developers over time.
Its a difficult argument to make because if you were to sit down and look at two identical towns, one developed over time and another constructed yesterday in exact replica, it could be assumed that both would function similarly if not the same under similar conditions. However, I still assert that the replica is working at a disadvantage. It doesn’t have the layers of history that is a key unquantifiable piece of our attraction to places that matter.
Now that doesn’t mean that 100 years from now, a constructed city wouldn’t have its own constructed history (lord knows Napoleon reconstructed half of Paris), but unfortunately, thanks to things like accelerated depreciation we won’t ever find out since these massive developments are designed to last.
But maybe some politico will smarten up in the near future and see how this aspect of the tax code is so exceedingly wasteful, and take a moment away from talking about fuel-efficient cars and look at rewriting this unsustainable piece of our tax code.
What interests me with AS is that there is, due to the declining values, some poor construction, etc is that it opens up the possibility for an organic evolution for the site. I wonder if eventually those condo’s/apts on 17 couldnt one day, soon, be redeveloped. What if 25-30 years from now someone changes those sites with new construction…The IKEA is gone and somthing new is there, the detention is changed somehow, better connections are made…
I think there may be wiggle room for redevelopment in the future…till then its an all encompasing mono-design, but with time it could evolve.
A slightly tangential coincidence… Today, I came across a post about Gall’s Law — which I hadn’t heard of before:
Though I’m kinda skeptical that this idea is true universally, Gall’s Law sure seems relevant to Atlantic Station.
Its a difficult argument to make because if you were to sit down and look at two identical towns, one developed over time and another constructed yesterday in exact replica, it could be assumed that both would function similarly if not the same under similar conditions. However, I still assert that the replica is working at a disadvantage.
I definately see your point, and I agree to an extent. However, without very strict zoning codes requiring such, if areas like this were allowed to just develop organically over time, it would probably be difficult to get some of the “smart growth” benefits of these mass developments that was part of the master plan (like density, walkability, mixed use central underground parking instead of surface lots). Instead, each property owner would do with their property whatever they’d like. That has benenfits, and can add character, no doubt, but you must acknowledge that there are downsides to this approach as well, no?
DM, your analogy is comparable to that of the wise old man and his clone, an infant recently hatched from a petri dish. Of course there will be differences as they relate to accumulated wisdom but the DNA is the same.
Zoning is the DNA of the built environment. Get it right and places with good form will emerge and stand the tests of time. Get it wrong and, well, how well do you think Gwinnett County will adapt to the next century?
The zoning governing Atlantic Station was average at best. So AS is average at best.
London was built on the lessons of Rome. Boston was built on the lessons of London. DC was built on the lessons of Paris. The good lessons endure.
Umm… wow..
Zoning is not really that old.
Who said it was?
You referred to London, Boston and DC — all of which were built long before zoning laws were enacted.
I didn’t say zoning had anything to do with them. I said they had taken lessons from elsewhere. That’s my point. Emulating other, older places that work when creating new places is not a new phenomenon. It’s how most of the world was built.
Today, if your zoning allows you to continue that tradition, then you can build a pretty good place with form that can evolve over time. But Atlantic Station was the product of a conventional zoning/PUD system with a lot of auto-centric attributes. That’s a big part of its problem. Newbie made some interesting points about its long-term prospects but, even if they came true, the road network in AS is still very suburban in nature.
Okay.. that’s cleared up.
Now I’m confused about something else. Are you also saying that zoning dictates a road network? What I learned in school is that infrastructure will have much more lasting effects than zoning ever will. Zoning is just a set of laws, which can be changed, mangled up, taken to court, etc.
Not necessarily directly. Conventional zoning on a huge tract, for instance, might dictate excessive parking requirements that are more suburban in nature than urban. That makes a developer want to maximize leasable commercial space to cover the cost of the infrastructure which, in turn, attracts retail that operates on a large scale, auto-dependent model. Which ultimately encourages the developer to stick with a conventional, car-friendly street system that’s familiar to the national retailers he hopes to attract.
You’re absolutely right that infrastructure has the lasting effect but, currently, the DOT has basically three street types and is only just now discovering “context”. Not nearly enough to serve the complexities of an urban environment. So, without good, urban-friendly “rules” on their side, most developers have little incentive to take on the DOT (which is darn near impossible). It’s easier to just take an arterial out of the Green Book and be done with it.
I think part of the problem is, these are not mom and pop shops, but large corporate chains. Not really a neighborhood feel to it where “everyone knows your name,” but more of a destination shopping mall. It is not a cohesive community where people feel they have a stake in it.
My defintion of a great neighborhood is where a car is not a necessity. A place where I can walk to work, walk to transit, walk to groceries, walk to dine, walk to coffee, walk to beer and walk to a park. It is a place where the sidewalks are busy and shaded by trees. It is a place where I greet my friends and neighbors on the streets and where I shop.
In my opinion Midtown will emerge as the most succesful neighborhood in Atlanta – if (and it is a fairly big “if”) additional greenspace and public spaces are created. Midtown has great bones: a grid street system, four MARTA stations, Peachtree Street walking and cache, Piedmont Park, theater, arts, Georgia Tech, employment centers and a mixture of housing types. It is large enough and dense enough to support a walking community. It is probably the only Atlanta neighborhood where a car is not a necessity.
Most of Atlanta inside the perimeter are a series of isolated developments and neighborhoods. Many are superior designed places like Glenwood Park, Inman Park, Druid Hills, Grant Park, Va-Hi, but none are large enough to be 24 hour, walkable, self-contained comunities except Midtown.
Deatur is great place, but unless you live in a condo near downtown it is still an auto-centric Atlanta neighborhood. Downtown shopping and eating is excellent, but how often does one walk from the Great Lakes area, or from any neighborhood south of the RR tracks to eat in downtown? The challenge for Decatur will be to build an office market. The tax base needs it badly, and it will lead to more condo development inside the Commerce loop, which will also improve the retail market. Many employers say that Decatur is difficult to commute to, and the east line is inferior to the north/south MARTA line. Decatur will never attract the major firms that Midtown draws, but the City needs to implement a strategy for growing its employment base. Downtown also needs more public spaces, plazas and parks. Decatur has made great strides, particularly with retail tenents. However in the last building cycle it only added 5 significant condo developments, and no new office space. Church Street from Trinity to Commerce is a great opportunity for re-development. I wonder if Decatur residents will allow their downtown to grow to the point that it can become a self-contained, walkable community?
I was recently in Manhattan for 10 days on the upper east side in a mostly residential area. Let me tell you, they don’t sweat the details like we do here, and it still works. There are neighborhood super markets, bakerys, coffee houses, bars, cafes, shops, churches, parks, etc, etc. It is all there. It isn’t perfect, but what is? I’m not advocating that Manhattan densities are appropriate for Atlanta and certainly not Decatur, but the small details in zoning and design that we worry about and obsess over, are really not very significant in the overall quality of life in Manhattan. What I realized during my stay in New York was that the rich diversity of shopping and street activity – the choices that were available to me – were directly related to the intensity of development. Midtown has embraced that intensity in some areas, and I think it will serve them well.
D, Decatur needs to grow its office market? Umm…I believe they did that from 1960-1990 with VERY mixed results.
I’m not sure if D was advocating for the construction of more office space or for the City to develop a strategy for filling the current unused office space we have. I don’t think there is really enough demand for new space, but I would be all for a campaign to get more small businesses to locate in Decatur’s existing office space. The Fidelity building (corner of Commerce and Clairemont) is almost completely vacant last time I checked.
The other problem with more office space is that offices tend to be a dead zone after dark and on weekends.
First, the lack of results doesn’t equate to a bad goal. Ultimately a neighborhood or a community must exist in a market. As a location, downtown Decatur must compete with other places for retailers, homebuyers, renters, and employers. A place cannot be successful doing one thing, and some places can’t compete doing just two things. For years downtown Atlanta tried to exist on the office market. Then it saw its retail fall away. It began to emphasise tourism as well as its office. Finally it has embraced housing and downtown Atlanta has now stabilized.
Currently the Decatur retailers must also draw buyers from beyond the rooftops of downtown condos. A larger office market and daytime population would strengthen the retailers. A larger commercial tax base would lower the highest(?) residential property taxes in the state. More retailers and more jobs would strengthen the market for condos and surrounding single-family homes.
Secondly, Decatur and the metro region have evolved. Decatur is in a better position to compete for office users than it was prior to 1990. It is a better position because of its careful planning of streetscapes, emphasis on main street retail, the protection of single-family residential neighborhoods, and perhaps most importantly the strength of its public school system. Downtown Decatur can become a thriving place, but I believe it will be critical for it to diversify and attract offices. I don’t know how much emphasis was placed on growing the office market in the past, but even if it that strategy didn’t work before, it doesn’t mean it isn’t appropriate now, and it doesn’t mean it won’t be successful now.
D, sorry to be so glib earlier. I was short on time.
When I said that it was “tried” from 1960-1990, I meant that that was when Decatur built all of its office buildings, destroying a great deal of the historic fabric of the city, with little initial success at luring cash back inside the perimeter or out of downtown.
But for all of the problems that its created, you are correct that office space is an important part of the city’s landscape today. But as Decaturguy mentioned, I took you for advocating for more office space in the city; ie new office buildings….when some are still have high vacancy rate.
But if you’re saying that the city has to do more to attract local business to its office space, I believe you should look into what the city is already doing….with its most recent success the 1 West Courthouse building.
But this is all a side issue…on the idea of high densities creating a truly walkable community, I concur that Midtown has the best opportunity to become this. For Decatur, the issue is finding a happy medium between Va-Hi and Midtown…and every person in town has a different opinion on which route they think the city should take.
For the short term, the office market is dormant and the spec market in Decatur is non-existent for the foreseaaable future. However as the recession ends, recruiting local businesses or even national businesses that own their own space would be advantagous to downtown. These buildings can be mixed use as well – certaintly with ground floor retail, and some could be partially residential.
The block that is southeast of the Marta station is wasted on a surface parking lot, a government agency and a handful of small busineses. What a great location! I would think this property should be assessed too high to make the low intensity uses unprofitable. The owners must have friends.
That property does raise an interesting question. Should property adjacent to a MARTA station have the same parking requirements as building that is non-adjacent? I say it doesn’t. Let the free market figure it out.
I saw this at kottke.org and thought it was an interesting story about how the good intentions of urban planning can go awry:
“Southdale was the first mall ever built and still stands today (I visited many times during my Minneapolis residency). The mall’s designer was an immigrant from Austria, Victor Gruen, who wanted to bring the community feeling of the European arcade to the suburbs.
Oddly, this most suburban American invention was supposed to evoke a European city centre. Hence Southdale’s density and its atrium, where shoppers were expected to sit and debate over cups of coffee, just as they do in the Piazza San Marco or the Place Dauphine. Gruen exiled cars, which he thought noisy and anti-social, to the outside of his mall. Most contemporary critics thought Gruen had succeeded in bringing urbanity to the suburbs. Southdale was “more like downtown than downtown itself”, claimed the Architectural Record. Another asserted, in a rare example of journalistic hyperbole that turned out to be absolutely right, that the indoor shopping mall was henceforth “part of the American way”.
Ironically Gruen’s creation only served to strengthen the suburban car culture that he despised. Later in life, Gruen became disillusioned with malls and their unintended consequences.
He revisited one of his old shopping centers, and saw all the sprawling development around it, and pronounced himself in “severe emotional shock.” Malls, he said, had been disfigured by “the ugliness and discomfort of the land-wasting seas of parking” around them. Developers were interested only in profit. “I refuse to pay alimony for those bastard developments,” he said in a speech in London, in 1978. He turned away from his adopted country. He had fixed up a country house outside of Vienna, and soon he moved back home for good. But what did he find when he got there? Just south of old Vienna, a mall had been built — in his anguished words, a “gigantic shopping machine.” It was putting the beloved independent shopkeepers of Vienna out of business. It was crushing the life of his city. He was devastated. Victor Gruen invented the shopping mall in order to make America more like Vienna. He ended up making Vienna more like America.”
I don’t understand this mentality that you can just stop paying on a mortgage and everything will be ok. The bank will, of course, foreclose, sell the house at a loss and then seek to recover that loss. Also, they might report the loss to the IRS, for which you are responsible for. It may take several years, but these folks should expect to be sued by the bank and maybe by the IRS.
Their best bet is to work with the bank and try to negotiate some sort of a short sale. In the very least, they should seek financial counseling. Walking away is the worst thing they can do.
These people are not victims. As previous poster said, they gambled big time and they lost.