For Sale

Michael J. Pallerino

July 1, 2008

O ne look at his resume and you quickly see that Alan Bullock knows a thing or two about the power of real estate. As the founder of Bullock, Terrell & Mannelly, which later became Bullock Mannelly Partners after he joined forces with Jay Mannelly in 1984, Bullock has been on the front lines of the real estate market here and abroad.

Since 2001, Bullock, the firm's principal in charge of investment and finance operations, has directed more than $2.5 billion in investment and
finance transactions totaling more than 8.8 million square feet. Bullock Mannelly Partners have developed and/or purchased approximately 4.5 million square feet in the Southeastern United States and the Caribbean.

It was Bullock who arranged the debt and equity financing for the development stage of Buckhead Station, the high-density, 230,000-square-foot retail development on the Buckhead Loop. He subsequently sold it and arranged debt financing for the purchaser, which was a major German investment group.


Business to Business: Define today's commercial real estate market. Is it as bad as everything else looks?

Alan Bullock: Currently commercial real estate is going through a de-levering phase due to lack of liquidity and different underwriting standards in the market. These are the same trends we're seeing in both investment banking and commercial banks. This trend is changing the way we structure transactions and, as a result, has most people sitting on the sidelines. Real estate fundamentals in commercial real estate remain strong except in single-family residential, condos and retail.

Other product types such as industrial and office are holding their own except for slower absorption due to slowness in the economy. Lack of recent rent growth and slower absorption are signaling a slowdown as new commercial projects come online. It is important for us to remember that most of these projects take two to three years to entitle and construct and, as a result, many of these projects as they are finished will be experiencing slower leasing activity.

BTB: In the wake of this economic downturn, builders are still building and investors are still investing. Why?

Bullock: Some of the residential builders are continuing to build to provide for absorption in their lot development. Transactions are definitely down and new development has come to a halt, and what we are seeing are projects continuing to develop that were started two and three years ago. Most of the capital in today's market is looking for a steal and, as yet, these transactions have not come to the surface. Large amounts of Wall Street capital have been assembled to play in these deeply discounted assets; however, most of these are going to be residential lots and most of these Wall Street players do not have the experience to play in this type of real estate.

BTB: How does Atlanta fare compared to the rest of the country?

Bullock:  Atlanta was the job Mecca for the past 10-plus years and will continue to be as the economy is much larger than it used to be. Atlanta is much more diversified and we continue to have considerable employment growth. As absorption of vacancy space occurs, the market will begin to stabilize.

BTB: Is now the time to negotiate on leases?

Bullock:  Certainly. With the slowing in the economy and as new buildings come online, vacancies will increase. In the office and industrial sectors, we don't expect this to manifest itself for at least another eight to 12 months.

BTB: Talk about the redevelopment of Buckhead and why it's important to Atlanta.

Bullock:  Commercial real estate investors always reward quality, and Buckhead is the highest quality Atlanta has to offer. The last development cycle in Buckhead has produced some of the best projects that Atlanta has ever seen. Buckhead will continue to be the shining star and will hold its own after absorption of vacancies is completed.

Finally, we should applaud Ben Carter and his efforts to clean up the downtown Buckhead district. When we look back at this cycle five years from now we will be excited to see Buckhead move to a whole different level than in the past.