The Atlanta Journal-Constitution
Sunday, June 28, 2009
On a recent steamy evening in Little Five Points, crowds packed the patio at Front Page News, a popular watering hole that once housed a dilapidated machine shop.
A few miles south in East Atlanta, an old elementary school sat vacant, as it has for well over a decade. Boards cover the windows, and the property is secured by a chain-link fence.
The two sites, one hopping and the other slowly crumbling, seem to have little in common. But both have been controlled by the same real estate developer: Inman Park Properties.
Over the past two decades, the small Atlanta company has quietly gobbled up dozens of buildings in some of the city’s trendiest neighborhoods, from Midtown to East Atlanta. The company has drawn praise for renovating several historic buildings. But many of the company’s properties have sat vacant, sometimes for years.
Now the economic slump has hit the company hard. In the past few months, a sizable chunk of Inman Park Properties’ holdings has either entered the foreclosure process or been put up for sale.
The lengthy list includes the gritty Clermont Hotel, home of the Clermont Lounge strip club; the Hilan Theatre, a stunning Art Deco space hidden behind a row of shops in Virginia Highland; and the Castle, a sprawling 19th-century house squeezed between Midtown skyscrapers and the Woodruff Arts Center. Even Inman Park Properties’ headquarters on Ponce de Leon has fallen into foreclosure.
The company’s woes are rippling through the local economy.
Inman Park’s lenders, mostly small, community-based banks, stand to lose money, holding property that may be difficult to sell in a deeply distressed market. Real estate experts warn the volume of Inman Park properties up for sale could push values down even further. And, records show, the developer owes tens of thousands of dollars in back property taxes.
Entire neighborhoods have been affected, such as East Atlanta, where Inman Park Properties owns much of the commercial district. Business leaders there worry banks will hold on to properties until the market turns, saddling the neighborhood with vacant storefronts.
“It’s going to be tough,” said Mark Takacs, president of the East Atlanta Business Association. “East Atlanta is not going to look very pretty for a little while.”
A polarizing figure
At the center of the crisis stands Jeff Notrica, Inman Park Properties’ founder. Notrica, 44, an Atlanta native, has become a controversial, polarizing figure in local real estate circles.
Some applaud him for having the guts — and the vision — to buy deteriorating properties like the Little Five Points machine shop and convert them into thriving businesses.
But Notrica has drawn sharp criticism for his practice of buying vacant, run-down properties and sitting on them for extended periods of time. Some blame him for not properly maintaining buildings, saddling neighborhoods and commercial districts with crumbling eyesores.
Shawn Ergle, owner of an East Atlanta furniture store, said by keeping empty for so long, Notrica buildings “basically robbed the community out of having businesses. I have no sympathy for him. He’s getting what he deserved.”
Notrica did not return three phone calls seeking comment for this article. A staffer answering his business phone declined to comment, and Notrica declined to respond to inquiries made through a friend.
Many developers, of course, have fallen victim to the extended economic slump. The recession and credit crunch has made it difficult for companies like Notrica’s to refinance loans, sell property or find income-producing tenants.
Interviews with real estate experts and others with knowledge of Notrica’s activities and a review of property records suggest that other factors may have played a role in the company’s troubles.
Inman Park Properties’ vast holdings included many old, deteriorating properties that Notrica left vacant for extended periods. It’s an unusual practice, real estate experts say, because empty buildings don’t bring in any revenue needed to pay off debt.
A building collector?
Notrica was able to take advantage of the booming real estate market earlier this decade, refinancing some of his property at much higher values. For instance, Notrica paid $1 million for Midtown’s Castle building in 2001, then refinanced it five years later for more than twice the original purchase price.
“He would keep refinancing [properties] to maintain the debt on other loans,” said Laura King, who was Notrica’s leasing and sales manager from 2004-2007.
That left some properties highly leveraged and vulnerable when the real estate market suddenly collapsed, King said.
Some industry observers say Notrica has a seeming compulsion to buy and collect buildings. In addition to his Atlanta properties, he owns clusters of office buildings in downtown Savannah and Birmingham. Most remain vacant and are now up for sale.
“I’ve never really been able to understand what his business model was,” said Mark McDonald, president of the Georgia Trust for Historic Preservation. “He buys buildings, never does any work on them, he has to pay taxes, and he never gets any return on his investment.”
Josh Sagarin, the owner of Front Page News/Tijuana Garage and a friend of Notrica’s since the early 1990s, said of Notrica: “He’s not really a developer. He’s an investor with an eye for value.”
Before Notrica got into real estate, he collected and traded rare coins, said Sagarin. Even after he got into real estate, Sagarin said, the hallways outside his office were often lined with bags of pennies that he would sort through in his spare time.
“He’s always looking for value when nobody sees it,” said Sagarin.
The other side of the coin is that Notrica also may be reluctant to sell or redevelop a property for less than he perceives it’s worth, and may sometimes buy a problematic building because of its beautiful or interesting architecture.
Prizes and problems
Inman Park Properties’ Web site carries the motto “preserving the future by saving the past.”
In some cases, Notrica lived up to that promise. He is credited with helping restore two Atlanta landmarks over the past decade — a historic, century-old firehouse on North Avenue in Midtown and a 1960s bank building in northeast Atlanta designed by noted architect Henri Jova.
The bank renovation was honored by Atlanta’s Urban Design Commission, and Notrica was asked to serve on board of the Atlanta Preservation Center. It was a controversial choice, said center executive director Boyd Coons.
“We hear people comment that he buys historic properties and then does not maintain them and they sit in a derelict condition for a long period of time,” said Coons. “I understand why he’s controversial, but I also think that some of the things he did do produced very good results, and he was honored for that.”
Other properties haven’t fared so well. The Castle in Midtown, for instance, was inspected by city officials last year who found substantial roof damage, said Coons. Two historic buildings in Ansley Park, a Daughters of the American Revolution building and the Ansley Inn, are in bad shape, neighborhood residents complain.
Still, Notrica is given credit for not tearing down any properties, something notable in a city known for demolishing older buildings, Coons said.
Sagarin said Notrica took on projects most people wouldn’t touch. He spent about $1 million to resurrect the building that houses Front Page News in 2002, and has been “great as a landlord” ever since, said Sagarin.
“He has a much more long-term vision than other developers,” said Sagarin. “It also makes him more vulnerable in economic downturns.”
Notrica is in retreat now, he said, because he’s having trouble finding lenders to refinance the short-term loans he used to acquire many of his properties. “His whole system is based on rolling those loans over,” said Sagarin. “Some of those banks don’t exist any more.”
But Sagarin said he believes Notrica is “consolidating on the good deals,” and will continue operating. When they talked recently, Notrica “seemed to be in the middle of a work out” with some lenders, said Sagarin. “I did not hear panic,” he said.