An exemplary project loses its financial footing

Vickery, winner of a 2006 Development of Excellence award from the Urban Land Institute’s Atlanta District Council, was, for five years, arguably the most prominent new urbanist project in greater Atlanta. Now two-thirds complete, Vickery enjoyed rapid absorption of residential units until last year, when the economy turned downward and sales started slumping, according to Lew Oliver, a designer who serves as “town urbanist” (essentially town architect) for the 214-acre Hedgewood Properties development.

Oliver attributes Vickery’s recent financial problems partly to a lack of price diversity. “Vickery tends to be a luxury product,” he says. “There is some average Joe product, but for the most part, it is upper end.” Although Hedgewood provided a range of housing types, including condominiums, townhouses, cottages, middle-sized houses, and large houses, two of those categories encountered resistance — condo units and townhouses over retail.

Suburban mixed-use, density
“Condos were the weakest in sales,” Oliver says. “That’s characteristic of the far reaches of the Atlanta suburbs.” Townhouses over retail proved challenging because, he says, “this costs more per square foot, and the public perception is that it should be cheaper to buy it.” The commercial portion of this mixed-use product pays for the land, but the construction is more expensive because of more stringent fire protection standards and more complicated ventilation. Venting must be threaded up through the residential levels, consuming some of the townhouses’ square footage.

“In a more urban setting, I think selling residential above commercial works better,” says Oliver. In Vickery’s location 35 miles north of downtown Atlanta, high gasoline prices also hurt, suggests David Goldberg of Smart Growth America.

Despite Hedgewood Properties’ being dragged into foreclosure talks this summer, Oliver thinks Vickery’s high quality, its busy restaurant-retail area, and its relatively unusual housing types — such as mid-century Modern townhouses clustered around a communal courtyard within a single-family neighborhood — increased the popularity of traditional neighborhood development (TND) in the Atlanta area.

Hedgewood was working with lenders to restructure Vickery’s finances in early October. The builder expects construction to resume after that — but houses will sell at a lower price point. Attached units, for example, averaged $436,500 in 2007-2008, but they will likely range from $300,000 to $325,000 going forward, says co-owner Pam Sessions. “We believe the lower pricing is in step with the other market pricing decline,” she says.