Atlanta Business Chronicle - April 9, 2010 - by Lisa R. Schoolcraft, Staff Writer
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An Atlanta developer plans to build a $350 million luxury hotel on Peachtree Street in Midtown, across from the High Museum of Art.
Alvin D. James, a veteran broadcasting industry executive, has signed an agreement to purchase the property from metro Atlanta home builder John Wieland, CEO of John Wieland Homes & Neighborhoods Inc.
James plans a 250-room, five-star hotel on the site of Wieland’s proposed One Museum Place condominium project at 1301 Peachtree St. Wieland abandoned his 23-story, $325 million, 92-unit luxury condo tower in 2007, as the metro Atlanta housing market began to falter.
James is in talks with three international hotel brands as a flag for the hotel, which he plans to open in spring 2012.
He said a European hedge fund, which he did not name, is fully funding the $350 million project.
“We are very fortunate to have project funding with the current market conditions.”
Wieland confirmed the land is under contract to James and the deal is expected to close in mid-June. Both Wieland and James declined to disclose the sales price.
Wieland bought the nearly 2.3-acre site in January 2007 for roughly $18.3 million. He bought most of the land from the Robert W. Woodruff Arts Center Inc., according to Fulton County Tax Assessor records and Databank Inc., a commercial real estate research firm. The land was valued at $6.4 million in 2009, records show.
James has more than 25 years of experience in the broadcasting industry. In 1999, James co-founded Major Broadcasting Cable Network (MBC Network), which changed its name to Black Family Channel in 2004. In addition to James, it was co-owned by lawyer Willie Gary, former baseball star Cecil Fielder, entertainer Marlon Jackson, and former heavyweight boxing champ Evander Holyfield.
That channel was sold to Gospel Music Network in 2007.
The collapse of the financial markets in September 2008 caused many high-profile hotel projects in Atlanta to be delayed or scrapped altogether.
At least nine major hotel projects — with a combined 2,600 hotel rooms valued at upward of $700 million — had been announced for Atlanta, but none ever broke ground, including two five-star hotels in the proposed Streets of Buckhead project, a Mandarin Oriental in Midtown, and a Hard Rock Hotel in downtown.
James’ unnamed project faces significant challenges, industry experts said.
“Certainly, for the long term, Atlanta is a great hotel market and will continue to be a great hotel market,” said Paul Breslin, managing partner of Panther Hospitality. “But to do a project today in Atlanta, in that market segment, you must have some truly compelling reason. Just because the site is available doesn’t mean it is a good time or strategy.”
Luxury hotel rooms in Atlanta are over-supplied right now, he said, and will be for some time.
The first challenge to a successful hotel is location, and the 1301 Peachtree St. site “is an exceptional location,” said Horst Schulze, chairman and CEO of The West Paces Hotel Group LLC and co-founder of The Ritz-Carlton Hotel Co. “That’s an important challenge. It affects the hotel not just for the moment, but for the next 50 years.”
The second-biggest challenge is financing “and I can assure you, there is no financing available for new hotels in the United States,” he said.
Other challenges for a hotel project include permitting and, finally, running it correctly, Schulze said.
Breslin said several luxury brands could be interested in a hotel in Atlanta, including InterContinental Hotel Group Plc (NYSE: IHG), which has its North American headquarters in Atlanta, and the Mandarin Oriental.
IHG has a hotel in Buckhead and two of its Hotel Indigo boutique hotels, one in Midtown and another expected to open in July in downtown.
Mandarin Oriental has eyed a site in Midtown, but those plans are likely on hold after the property, owned by Atlanta-based Tivoli Properties Inc., went into foreclosure. Tivoli has challenged the validity of the foreclosure in court.
The Waldorf Astoria Hotels & Resorts and Conrad Hotels & Resorts, both luxury brands of Hilton Hotels Corp., might be interested, as well, Breslin said.
“I feel very strongly the markets will return and be strong again,” Breslin said. “I think Atlanta has great opportunities. The concern would be assumptions on the demand for that particularly luxury segment and the cost to build that quality property today and the return on investment. It’s a very challenging market right now.”
Metro Atlanta has seen several luxury hotels built in the past few years, including the St. Regis Hotel in Buckhead, The Mansion on Peachtree in Buckhead, and the InterContinental Buckhead Atlanta.
New hotels in the Midtown market include Hotel Palomar and Loews Atlanta Hotel, which opened March 31.
James admits there are many hotels in trouble because of the economy, but “all the research we’re seeing says the market will return in 2012.”
James’ mixed-use project also calls for street-level retail space and 24 residences above the hotel. He is also planning a separate condo tower with 50 units.
Wieland’s project had called for 92 condo units starting at $2 million, but James said his luxury condo units will start in the low $700,000s. Penthouse units will start at $1.2 million, he said.
James plans a spa, three restaurants, two pools and a fitness center, as well as an on-site fine art museum to house Wieland’s private art collection for the first year.
The museum will be named the John Wieland Gallery.
Construction will take 18 months to 24 months, allowing him to open as the market returns, James said. “And the construction companies are offering us attractive deals because of the downturn right now.”
“What we are going to have is going to be very special,” James said.
Design Reese Architects and Associates P.C. in Atlanta is designing the hotel.
Wieland believes a luxury hotel “is the most logical” use for the Peachtree site.
Wieland thinks James’ project will help that area of Peachtree Street “which looks like a jack-o’-lantern with a couple of teeth punched out. I think Alvin [James] and his people will go a great job. We wish we could have done it.”
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