(Bloomberg) -- A CIM Group affiliate is tapping the municipal-bond market to help finance a $4.2 billion megadevelopment intended to transform a downtown section of Atlanta from parking lots into apartments and shops.
JPMorgan Chase & Co. — which plans to provide a $175 million loan for part of the project — is serving as underwriter on two municipal debt deals totaling $556 million associated with the development. Both issues are being sold through the Atlanta Development Authority.
Real estate developer CIM Group is shepherding the project that will add more than 2,600 apartments and more than 2,900 hotel rooms, as well as space for retailers and a data center. The area is currently known as the Gulch, and it’s a defunct rail yard where Atlanta residents gather to tailgate in parking lots before NFL games.
The development, dubbed Centennial Yards, would transform that section of the booming Southern city. It’s backed by the co-founder of Ares Management and Atlanta Hawks owner Tony Ressler, who said he was undeterred by the fears around commercial real estate in the region.
High-Yield Muni Appeal
Both muni offerings are unrated and will only be sold to qualified institutional buyers, an indication of their risk level. Investors were scheduled to visit Atlanta this week to check out the development.
A $356 million sale of convertible capital appreciation economic development certificates will be used to pay for costs incurred by the developer, Spring Street LLC, which does business as Centennial Yards Co. Spring Street is an affiliate of CIM Group and has co-investors led by Ressler.
Those certificates are backed by fees on the sales of goods and services in the project area. They start to accrue interest in 2028.
Proceeds from a $200 million bond sale will help fund Spring Street’s project costs and reimburse the developer with some of the property taxes collected there.
The project is planned as a pedestrian-friendly mixed-used development spanning 16 separate blocks. More than 300,000 square feet will be developed for a data center and 480,000 square feet earmarked for the complex’s entertainment district. That will feature a hotel, according to the bond documents.
Since its inception, opponents have said that the plan provides an overly generous incentive to CIM.
The entertainment district is set to be completed before the 2026 FIFA World Cup. The Mercedes-Benz Stadium is located nearby and will host eight matches. It will be the first time any US cities have hosted the games since 1994, in what was the highest attended event in the tournament’s history.
Representatives from Centennial Yards declined to comment. A spokesperson for JPMorgan declined to comment ahead of the pricing of the bond sales.
Muni Demand
High-yield munis have been on a tear lately, returning over 6% in 2024, outperforming the investment-grade muni market by about 5 percentage points, according to Bloomberg indexes.
“It’s exciting when a dirt deal this big comes and is definitely something you want to pay attention to,” said David Mann, senior investment analyst at Manulife Asset Management. “The biggest piece is the entertainment piece and the hotels and the apartments or condos. Those are the biggest things that need to get done for the bonds to be successful.”
Earlier this year, high-yield municipal bonds were sold for Miami Worldcenter, a similar retail and residential development that CIM is spearheading.
Debt for the Miami project due in 2041 priced with a yield of 5.25%. The bonds have since tightened dramatically, with the securities last trading at a yield of about 4.8%, illustrating the strong demand for riskier debt in the muni market.
--With assistance from Jeremy Diamond.
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