Hours after deal approved, 'shocked' developer of $2B Forsyth project could walk away

The developer of a planned $2 billion arena project is considering walking away from a deal negotiated last night with Forsyth County officials.

At a special-called meeting Tuesday, the county's board of commissioners voted 4-1 to approve an agreement to issue $225 million in bonds for The Gathering at South Forsyth (read the agreement here). The project would be anchored by a 18,500-seat arena, aiming to lure a National Hockey League franchise to the northern suburbs.

But at the meeting, Forsyth officials inserted stipulations related to the phasing of the project. The changes would require more than 500,000 square feet of office, retail and hotel space to be built and ready to occupy before a certificate of occupancy could be issued for a first phase of 600 apartments.

There were also requirements added that said 50% of the arena construction would have to complete before a second phase of 600 apartments could be occupied.

The Gathering team, in a press release issued just after 1 p.m., said it had not agreed to those terms and it would require further attorney review.

"I was quite frankly shocked and extremely disappointed by the last-minute changes after intense negotiations over the past few months – let alone the past year and half since I purchased the property," the Gathering developer Vernon Krause,?a local businessman known for auto dealerships,?said in the release. "My team and I will review the changes to see if we can work toward finalization or end our efforts."

Krause is aiming to put the deal together in a difficult commercial real estate market. High interest rates and construction costs make it challenging to finance new ground-up development, especially office projects. The scale of The Gathering — proposed to include 1.6 million square feet of office and retail — is staggering. It would be enough to fill Atlanta's tallest skyscraper, Bank of America Plaza, to the edge of its golden spire.

The deal Forsyth County negotiated last night was scaled back from initial discussions earlier this year. County officials were considering $390 million in public subsidies for the arena.

The investment from Forsyth would be contingent on The Gathering landing the NHL team, which could be a long shot. The NHL recently said in a statement that it has no expansion plans in process. Atlanta also has a track record of losing NHL teams to Canada: the Atlanta Thrashers in 2011 and the Flames in 1980.

Krause had said in a county-issued press release last night that he is "more confident than ever that we have a concrete plan to present to the NHL for consideration as they possibly consider expansion."

But the next day, his tune had changed.

Funding structure

If the deal moves forward, Forsyth County would issue a?$225 million bond through its development authority, possibly from a Tax Allocation District?or other district funding sources, to pay for its investment in The Gathering, according to the agreement. The annual debt service payment would be about $18 million, according to financial projections shown Tuesday.

The county would pay back the bonds through a variety of sources, including property taxes generated on the site, an increase in hotel/motel tax, rent payments for the arena from The Gathering of $100,000 per year, and a $1.50 per ticket fee to county, according to the document.

“It does not come without some risk,” said Forsyth County Commissioner Cindy Mills, who voted in support of the MOU. “This has been a very, very difficult decision.”

Commissioner Todd Levent was the lone vote in opposition.

Along with office and retail space, the Gathering would include the 700,000-square-foot arena, 1,800 multifamily units, 500 hotel rooms and 150 single-family homes. It would rise on 84 acres off Georgia 400, on a site once pitched for a regional mall.??

Public support

Most of the residents who spoke Tuesday during a public hearing supported The Gathering. Several said it would be alternative to going Downtown for sporting events and concerts.

“I think it’s awesome to have an opportunity for people somewhere else to come to Forsyth County to have fun, leave their money that will improve our community long term,” said Derek Brooks, who said he’s lived in the county for 48 years.

"I would hate to disappoint these residents if we cannot get the commissioners to negotiate in good faith going forward,” Krause said Wednesday in the release.

A second proposal recently emerged to try to lure a NHL team to metro Atlanta's northern suburbs. Alpharetta Sports & Entertainment has formally requested the NHL initiate an expansion aimed at bringing a franchise back to Georgia.

The new group, which has ties to minor league hockey and Major League Baseball, is seeking to build a hockey arena and mixed-use development at North Point Mall in Alpharetta.