After a tension-filled discussion, council members and the attorney for the developer of the Kennesaw Crossing Shopping Center hashed out the details of the encumbered project prior to Kennesaw City Council approving $385,000 in economic incentives.
Varner Developers, doing business as JLV Kennesaw II, LLC, developed a plan for the 13-acre site that included 274 residential units, a 140-key hotel, about 20,000 square feet of retail space and 10,000 square feet of office condos. They obtained zoning entitlements in 2018 and secured Newport Development Partners to build the eight acres of residences.
The project would replace an existing shopping center anchored by the Electric Cowboy nightclub.
“At the time of the zoning approvals, Varner Developers made clear that the site and the project would be challenging to accomplish due to different economics associated with lease buyout, with the acquisition costs, with infrastructure improvements, and then with the abatement and demolition of the entire shopping center, but they did not have all the details at the point of zoning approval,” said Robert Fox, Kennesaw’s economic development director. “They just made note to the City Council at that time that they felt they would need incentives to effect the plan as it was approved.”
Developers initially requested $800,000 in incentives, but after the economic development staff performed an internal cost-benefit analysis and Georgia Tech completed a fiscal impact analysis, the economic development committee recommended $385,000 in permit fee abatements.
Attorney Garvis Sams of Sams, Harkin, Luff & Balli told the council that the stipulation requiring demolition of the existing shopping center within 24 months created many of the economic challenges. Developers were forced to buy out businesses in the existing shopping center, including the Electric Cowboy, which had another 5 to 7 years left on its lease. The owners of Electric Cowboy are overdue a payment of $300,000.
Council member David Blinkhorn requested at last week’s work session that the developers return with a plan B in case the council denied the request. According to Sams, Varner Developer’s construction loan is dependent upon them receiving the incentive, so if they are denied, they will be unable to pay the money owed to the nightclub. At that point, Electric Cowboy would be able to exert their rights over the parking lot, stalling the project with litigation. Other possible scenarios include scaling down the project, a change in the time frame, or a “lesser quality of product,” Sams said.
“The fact that we put that stipulation on there seems to be the crux of everything, and we’re at this point today because we put that on there,” Blinkhorn said. “I would have appreciated at the time, instead of today saying ‘or else,’— at the time being informed, you know what, this is really gonna change the project. That if you put this stipulation on there, we may have to change this and we may bail out on it. As opposed to now, when you have your hand out for $385,000, we’re getting the ‘or else.’”
Council member Chris Henderson clarified that the $385,000 would not be coming from taxpayer funds, but rather the city would simply not collect certain fees from the developers.
“I see the benefit of spending a dime to make a dollar,” said council member James Eaton. “We’re not really spending that dime, we’re just saying we’re not going to collect it … That makes sense to me, but we’ve been burned before. We don’t want to have 250 housing units become additional rental spaces that we have in our inventory and then not have the presents under the tree … The hotel has got to be a reality, the retail has got to be a reality, the condos for the offices have got to be a reality.”
Ultimately, the incentive agreement was approved 4-1 at Monday night’s council meeting with Blinkhorn as the lone nay vote.