In November 2019, the Avondale Estates DDA voted unanimously to sell a publicly-owned building for $7 million. No public deliberation on whether to sell appears in any accessible record. The Purchase and Sale Agreement (PSA) voted on that day simultaneously fixed the price and surrendered all lease negotiation authority to the buyer. The buyer secured a 20-year government lease worth $43 million in contracted payments — more than five times what the public received as payment for the property.
What this case study shows: The end result was a private company acquiring a 20-year government lease worth $43 million in contracted payments for $8 million in public consideration. The DDA board acted in good faith. It retained legal counsel, commissioned a professional valuation known as a Broker Opinion of Value (BOV), and negotiated the price above the BOV ceiling. But two structural failures bracket the transaction. The first preceded it: between the bond's retirement in May 2018 and the PSA vote in November 2019, no public deliberation on whether to sell the building appears in any accessible record — even as the DDA transferred $2.5 million from the building's operating account into its downtown fund. Well-informed observers writing about a month before the vote still described an active lease negotiation as the DDA's plan. The second failure was in the transaction itself: the BOV was based on a lease that had just collapsed, and the PSA required minimum lease terms that implied a building worth 2.7–3.8× the sale price — with no mechanism to reconcile the two numbers. Both failures are structural. Neither requires bad intent to explain.
The DDA built the building at 3408 Covington Highway in 2002 and issued a revenue bond to pay for it. The State of Georgia and the Department of Juvenile Justice occupied the building under annual leases that were renewed each year, with lease payments structured to cover the bond's debt service. That arrangement ran for approximately 17 years — through the life of the bond and one year beyond. In May 2018, the bond retired. The DDA owned the 98,220 sq ft building free and clear.
The board that voted in November 2019 did most things right by small-city governance standards. It retained outside legal counsel (Seyfarth Shaw LLP). It commissioned an independent BOV before voting. It negotiated the price upward. The final sale price of $7.45M exceeded the BOV ceiling of $7.3M. The vote was unanimous. The problem wasn't the decision in isolation — it was the premise, and the process, or absence of one, that produced it.
After bond retirement, the building was generating approximately $190,000 per month in rent against average management costs of roughly $33,500 per month — approximately $1.88 million in net annual income, with no debt. Over 2019, the DDA transferred $2.5 million from the DJJ building's operating account into its primary downtown operating account. Then, in November, it voted to sell the building itself.
Whether the DDA should sell the building at all was a major policy question — one with a very large financial dimension. But the public record contains no open meeting at which that question was formally deliberated and decided.
The first documented board discussion of what to do with the building after bond retirement is a February 13, 2018 internal presentation. That presentation described exactly two options going forward: negotiate a stabilized 15-year lease with the State, or wait. Selling was not presented as an option. The board was told that the building's value was primarily determined by lease terms — "leases have most the power" — and that a rental rate comparable study was being prepared for the next meeting. The board was educated on income-based valuation. Nothing in the presentation suggested the DDA had already decided to sell.
The DDA's November 2019 public letter stated that selling was the "stated intent" once a new lease was secured — that the DDA was "not equipped to be an ongoing landlord at that scale." That framing was reasonable. But it appeared publicly for the first time in the letter that announced the sale had already happened. No deliberation on whether to adopt it as policy appears in any accessible public record.
The evidence that this decision was invisible even to well-informed observers is striking. In early October 2019 — about a month before the sale vote — a candidate for City Commission who had attended nearly every DDA and BOMC meeting since 2014 described the DDA's situation in a published candidate questionnaire: the authority had "recently become self-funded and managed the Department of Juvenile Justice building responsibly" and was "currently renegotiating the contract with the tenant for the next 15 years." She called the building "a valuable asset in our city." There is no hint in her account that a sale was being considered. A sitting BOMC commissioner, also responding to the same questionnaire, described the DDA's prior role as "just managing the Juvenile Justice building" before the BOMC expanded its downtown development mandate around 2016. Neither candidate described a sale — because there was no public record of one.
The September 2019 treasurer's report — issued six weeks before the November 12 vote — explicitly noted that DJJ rent "will likely be adjusted when a new lease agreement is finalized," confirming that lease negotiations were still being tracked as ongoing. The two new DDA board members selected to fill open seats were interviewed at the November 12 DDA meeting — the same meeting at which the PSA was voted on. They had no vote on the sale.
The first the public knew the building was being sold was a letter announcing that a purchase and sale agreement had already been signed.
Through most of 2019, the DDA and the State negotiated a new long-term lease to succeed the annual arrangement that had been in place since 2002. The State's proposed terms included provisions the DDA's legal counsel at Seyfarth Shaw characterized as presenting "significant risks." The DDA's November 2019 public communication described the situation: the State's requirements "would result in the building being valued at a lesser amount than the BOV estimate above... In fact, given these new terms the State clarified, brokers contacted were not sure how to calculate a value."
Those negotiations ended without an agreement. What the public record does not explain is why the State — which had just presented lease terms the DDA's counsel characterized as presenting "significant risks" — subsequently agreed to a 20-year lease at $21.97/sqft with the private buyer, a rate and term more favorable to the landlord than what the State had offered the DDA. Whether the State's objections were to specific provisions the DDA was insisting on, to the DDA as a counterparty, or to something else is not addressed in any public document. The State's role in this outcome remains an unexamined thread in the public record.
Into that gap came an unsolicited offer from Forum Management — the building's sitting property manager — and the DDA accepted it. No other buyers were approached or invited to bid.
Prior to voting on the sale, the DDA commissioned a Broker Opinion of Value (BOV) from an independent commercial real estate broker. The BOV produced a range of $6.2M to $7.3M. According to the DDA's own public communication, "This BOV factored in location, the proposed new lease, building quality and other items to estimate the market price."
Critically, the BOV range incorporated the $1.67M Tenant Improvement Allowance that would have been due upon execution of the State's proposed lease. The DDA stated: "This $7M figure is quite fair given that the new owner will be responsible for the Tenant Improvement allowances in any new lease — so the DDA nets the entire $7M — towards the higher end of the BOV when the TI allowance is factored."
The BOV's fundamental limitation: it was calculated against the terms of the State's lease proposal — the very proposal that had just collapsed. At the moment the DDA voted to accept $7M, the lease the BOV modeled did not exist and would never be executed.
Forum Management — the building's sitting property manager — submitted an unsolicited offer to purchase. No competitive solicitation was conducted. After negotiation, the DDA voted unanimously to accept a Purchase and Sale Agreement at $7,000,000.
Article 8.6 of the PSA specified the minimum lease terms the buyer was required to achieve as a condition of closing. The buyer — not the DDA — would negotiate directly with DJJ after signing:
Article 8.6 also specified: "all lease negotiations with the Tenant shall be conducted solely by the Purchaser." The DDA stepped out of lease negotiations entirely at the moment of signing.
The PSA simultaneously set the sale price at $7M and required the buyer to secure lease terms that implied a building worth far more than $7M. The two provisions sat in the same document, approved in the same vote.
At $13.50/sqft across 98,220 sq ft, the minimum lease terms required a starting annual rent of $1,325,970. With escalations of $0.50/sqft every three years over a 15-year term, the rent schedule looks like this:
| Lease Years | Rate per Sq Ft | Annual Rent |
|---|---|---|
| Years 1–3 | $13.50 | $1,325,970 |
| Years 4–6 | $14.00 | $1,375,080 |
| Years 7–9 | $14.50 | $1,424,190 |
| Years 10–12 | $15.00 | $1,473,300 |
| Years 13–15 | $15.50 | $1,522,410 |
Applying standard cap rates to the starting NOI (net operating income — the annual rent the building generates) of $1,325,970 produces the following implied building values — the value the property would carry at the moment a minimum-terms lease was signed:
| Cap Rate | Building Value at PSA Minimum Lease Terms | Amount Above $7M Sale Price | Amount Above $8M Total Paid to DDA |
|---|---|---|---|
| 5.00% | $26,519,400 | $19,519,400 more | $18,519,400 more |
| 6.00% | $22,099,500 | $15,099,500 more | $14,099,500 more |
| 7.00% | $18,942,400 | $11,942,400 more | $10,942,400 more |
The "building value" column is the estimated market price a buyer would pay for a building with these lease terms, using standard commercial real estate methodology (annual rent ÷ cap rate). Cap rate is the market's expected annual return on a property investment — a lower cap rate means investors accept a lower return, which means they pay more for the building. The range shown reflects typical market rates for a government-tenanted office building on a long-term lease. Starting rent: 98,220 sq ft × $13.50/sqft = $1,325,970/year. The TI obligation ($1.67M year one, $491K year seven) is a buyer cost that does not reduce the building's income-producing value.
The gap the DDA created: Even at the most conservative cap rate in this range — 7%, appropriate for a building with lease-up risk and a short history — the PSA's own minimum terms implied a value 2.7x the sale price. The DDA set those minimums believing they were protective. They were. They just weren't connected to the price.
The buyer exceeded the PSA minimums significantly. Georgia State Properties Commission Lease #5784 confirms a 20-year lease (five years beyond the 15-year minimum) at an annual base rent of $2,158,259.76 — roughly $22/sqft, versus the $13.50 minimum. The lease commenced July 1, 2020, the same day as closing.
At these terms:
| Cap Rate | Building Value at Actual Lease Terms | Amount Above $8M Total Paid to DDA |
|---|---|---|
| 5.00% | $43,165,000 | $35,165,000 more |
| 6.00% | $35,971,000 | $27,971,000 more |
| 7.00% | $30,832,000 | $22,832,000 more |
Annual rent of $2,158,259.76 confirmed via BLLIP Lease #5784. See cap rate explanation above.
The PSA closed July 1, 2020 at $7,450,000 — $450,000 above the original $7M, added during a renegotiation over parking. A $550,000 administrative fee was paid to the City, bringing total public consideration to $8,000,000.
DeKalb County's post-closing assessment provides an independent benchmark. In Georgia, property is assessed at 40% of its appraised market value for tax purposes — so an assessed value of $22M implies a market value the county believes to be approximately $55M. In the first tax year following the sale, the county assessed the property at $22,019,200 — a 537% increase over the pre-sale assessed value of $3,456,300 (which had reflected the building's status as DDA-owned and therefore exempt from normal assessment). A 15-year full tax abatement runs through 2035; the taxable value has been $0 every year since closing.
| Year | Appraised Value | Taxable Value | Note |
|---|---|---|---|
| 2018–2020 | $3,456,300 | $0 | Pre-sale; DDA-owned (tax-exempt) |
| 2021 | $22,019,200 | $0 | Post-closing; abatement in effect |
| 2025 | $21,511,500 | $0 | Abatement continues through 2035 |
Source: DeKalb County Tax Records, Parcel ID (PARID) 15 231 05 001. publicaccess.dekalbtax.org
The 15-year full tax abatement — approved by the DDA board as part of the April 2020 bond resolution, with no vote by the county or school district — is not a technicality. It is a measurable, ongoing transfer of public revenue to a private owner. At the 2025 assessed value of $21,511,500 and current millage rates, the abatement costs three separate public entities approximately $457,000 per year in forgone tax revenue:
| Entity | Millage Rate | Annual Forgone Tax | 15-Year Total |
|---|---|---|---|
| Avondale Estates (City) | 9.55 | ~$82,200 | ~$1,233,000 |
| DeKalb County | 20.81 | ~$179,000 | ~$2,685,000 |
| DeKalb County Schools | 22.78 | ~$196,000 | ~$2,940,000 |
| Total | 53.14 | ~$457,200 | ~$6,858,000 |
Millage rates: Avondale Estates 2024–2025 (9.55, confirmed adopted); DeKalb County 2025 (20.81 combined, unchanged from 2024); DeKalb County Schools 2025 (22.78). Annual figures calculated on Georgia assessed value of $8,604,600 (40% of 2025 appraised value of $21,511,500). Actual forgone revenue will be higher as assessed values adjust over time. 15-year totals use current assessed value as a static baseline.
Two findings stand out. First, the cumulative forgone taxes across all three entities over the full 15-year abatement term — approximately $6.86 million — nearly equals the original $7 million sale price.
Second, the distribution is unequal. The City received a $550,000 administrative fee at closing — but is forgoing approximately $82,200 per year in city property taxes, meaning the fee is exhausted in about seven years. The county and school district received nothing. The school district alone is absorbing $196,000 per year in forgone revenue — $2.94 million over the abatement term — with no vote, no compensation, and no notice beyond the public record of the bond resolution. Under Georgia law, the DDA had the authority to grant this abatement unilaterally. No school board approval was required.
In a 2025 post on the city's official blog, the DDA Chair offered a substantive public defense of the sale price. His core argument: a search of CoStar data (a commercial real estate database used by brokers and investors) found that office buildings of similar size and class sold in Metro Atlanta between 2023 and 2025 for an average of $7.4 million — slightly below what the DDA received in 2020. On that basis, he argues the post-sale DeKalb County assessment of $22 million is "a meaningless number" and that the sale price was at or above market.
It is easy to understand why this argument feels compelling. When most people want to know what a property is worth, they look at what similar properties sold for. That is how residential real estate works — find three comparable homes in the neighborhood, adjust for size and condition, and you have a value. The intuition is sound and the data is real.
But commercial income-producing properties are valued differently, and for a straightforward reason: what an investor is buying is not primarily the building — it is the income stream the building generates. A 98,000 square foot office building with vacant floor space and a 98,000 square foot office building under a 20-year government lease at $2.16 million per year are not the same asset, regardless of how similar their physical characteristics may be. They would not be priced the same by any lender, appraiser, or commercial investor in the market.
This is not a contested point in commercial real estate. J.P. Morgan's commercial lending guidance notes that while the sales comparison approach works well when comparable properties are plentiful, it "plays a secondary role in commercial valuation due to the uniqueness of income-producing assets." The income approach — dividing net operating income by a market capitalization rate — is the standard methodology for leased commercial buildings precisely because it captures the value of the contract, not just the structure.
The DDA's own 2019 BOV was built on this same logic. In explaining the valuation to the public at the time, the Chair wrote that "the most important variables in valuing the building are the terms specified in the lease." That is exactly right — and it is why the BOV broker struggled to assign a value when the State's proposed lease terms were unfavorable, and why the BOV explicitly incorporated a $1.67 million tenant improvement obligation into its range. The income approach, applied to uncertain lease terms, produced an uncertain value. That was the correct result given what was known at the time.
The sales comps the Chair cites in 2025 may well be accurate for what they are. But to evaluate whether they are genuinely comparable to the DJJ building, we would need to know the occupancy status, lease terms, and tenant quality of each building at the time of sale. An office building sold vacant or with short-term tenancy would naturally sell at a lower price than one with a 20-year government lease — and that difference is the entire point of the income approach. Without knowing the profiles of those $7.4M buildings, the comparison cannot be evaluated.
There is also a simpler way to see the issue — one that requires no methodology at all.
Over the full 20-year term of the lease signed on July 1, 2020, the DJJ building will generate $43,165,195.20 in gross lease payments from the State of Georgia. That figure is a contracted obligation, backed by the full faith and credit of a sovereign state government, confirmed in Georgia's public BLLIP lease database. It is more than five times the $8 million total the DDA received for the building.
Commercial real estate markets do not price a 20-year A-credit government lease at a 27% cap rate. If the Chair's CoStar comparables included buildings with lease profiles genuinely similar to the DJJ building's actual lease, they would not have sold for $7.4 million. The market simply does not price assets that way.
DeKalb County's jump from a pre-sale assessment of $3.4 million to a 2021 assessment of $22 million reflects this same reality. County assessors use income capitalization — not sales comparison — for income-producing commercial properties. What changed between those two assessments was not the building. It was the execution of a 20-year lease at $2.16 million per year.
None of this reflects on the DDA's good faith in 2019. The board had a legitimate valuation instrument for the conditions that existed at the time — uncertain lease terms, a significant tenant improvement obligation, no executed agreement. Under those conditions the BOV produced a defensible range, and the sale price exceeded it. The Chair's 2019 instinct — that lease terms are the most important variable in valuing this building — was exactly right. The deeper problem is what happened at the moment the PSA was signed: the DDA simultaneously fixed the price and surrendered all lease negotiation authority to the buyer. Whatever the buyer negotiated with the State — higher rent, longer term, more favorable economics — would flow entirely to the buyer, with no mechanism to adjust the $7 million price the public received. The lease the buyer ultimately secured runs 20 years at $2.16 million annually — $43 million in contracted payments in exchange for $7 million.
A note on capital expenditures. One variable the public record does not resolve is the buyer's total tenant improvement commitment. The PSA required a minimum of $17/sqft (~$1.67M) in year one and $5/sqft (~$491K) in year seven — approximately $2.16M combined at minimums. The actual TI obligation in the executed lease has not been disclosed publicly. A larger TI commitment would reduce the buyer's effective yield and narrow the gap between the sale price and the implied value. It would not close it — the gap at minimum PSA terms already implies a building worth 2.7–3.8× the sale price before any TI adjustment — but the actual total capital expenditure is an unresolved variable the public record does not answer.
This transaction illustrates five structural reforms. The DDA board acted in good faith and used available professional tools. But the process had gaps that good faith alone cannot close.
1. Material Value Adjustment Clause. The BOV was based on a lease that fell apart. The PSA required minimum lease terms that implied a value 2.7–3.8x the sale price. Once a lease was actually executed, the building's value was knowable — and it was far above $8M. A Material Value Adjustment Clause would trigger re-appraisal when a material lease event occurs between signing and closing, with the seller retaining the right to renegotiate or terminate if the revised value exceeds the contract price by a defined threshold.
2. Dual-Advisor Rule. A Broker Opinion of Value is a less rigorous instrument than a full independent appraisal meeting professional standards (called a USPAP-compliant appraisal). More importantly, no advisor in this transaction had an unambiguous fiduciary obligation to the public: not bond counsel (fee contingent on closing), not the BOV broker, not transaction counsel. Any DDA disposal of a significant asset should require an Independent Financial Advisor with a documented fiduciary duty to the public to review whether the proposed terms represent fair value — separate from all fee-contingent advisors.
3. Conduit Bond Self-Check. Before approving conduit financing for a private buyer's acquisition of a public asset, the board must formally document a response to: "If the tenant's lease payments are sufficient to service this bond, what is the public benefit of selling rather than issuing the bond and retaining the asset?" The DDA's reasoning — that it was not equipped to be an ongoing landlord — was legitimate. But it should be a documented finding weighed against the financial consequences, not an assumed one.
4. Competitive Solicitation Requirement. No other buyers were approached or invited to bid. Forum Management's offer was unsolicited and the DDA negotiated exclusively with its own property manager. Any DDA disposal of real property above $1M should require a minimum 60-day competitive solicitation period before a PSA is executed. Under Georgia law, City-owned property requires open competitive bidding; DDA-owned property does not. Under the Downtown Development Authorities Law (O.C.G.A. § 36-42-1 et seq.), DDAs are granted broad authority to dispose of property in furtherance of their redevelopment mission — but the statute does not require competitive solicitation, independent appraisal, or a finding of fair market value as a condition of disposal. A DDA can sell a public asset to its own property manager at a negotiated price and remain fully within the law as written. The reform needed is not a legal remedy; it is a statutory one.
5. Pre-Disposal Public Deliberation Requirement. The decision whether to sell a significant public asset is a separate and prior question from the decision on price and terms. In this transaction, both questions were resolved in the same meeting — and the first was never formally asked in public at all. Any DDA disposition of real property above $1M should require a noticed public meeting at which the board formally votes to adopt a disposition policy, at least 60 days before a PSA may be executed. That meeting should include a documented staff analysis of the financial consequences of selling versus retaining the asset. Good faith is not a substitute for a public record.
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Public communication from the DDA Chair explaining the transaction. Confirms BOV range of $6.2M–$7.3M, that the Forum Management offer was unsolicited, unanimous board vote, and the failed State lease negotiation. Primary source for BOV existence, methodology, and the $1.67M TI framing.
PDF version of the same November 2019 communication, hosted on the City of Avondale Estates document server.
Full PSA between the DDA (seller) and KDP 3048 LLC (buyer). Original price $7,000,000. Article 8.6 sets minimum lease terms ($13.50/sqft, 15-year term, $17/sqft TI) and assigns the buyer sole control of lease negotiations after signing. Article 7 confirms no real estate broker represented either party.
Official DDA statement issued one day after closing. Confirms final sale price of $7,450,000, $550,000 administrative fee to City, 15-year full tax abatement, and buyer identity (KDP 3048 LLC).
Agenda packet from the meeting at which the bond resolution was approved. Bond terms: maximum principal $9,000,000; interest rate 6%; maturity December 1, 2035. KDP 3048 LLC served simultaneously as lessee (from the DDA), landlord (to the State), and bond purchaser. The DDA served as the bond issuer.
Confirms Lease #5784: tenant = Department of Juvenile Justice; landlord = KDP 3048 LLC; term = July 1, 2020 through June 30, 2040 (20 years); annual base rent = $2,158,259.76. The lease the buyer negotiated after the PSA was signed.
Pre-sale assessed value ($3,456,300), post-closing assessed value ($22,019,200 in 2021; $21,511,500 in 2025), taxable value $0 every year through present. Search parcel ID 15 231 05 001.
Internal board presentation briefing members on the DJJ building situation as the bond neared retirement. Describes exactly two paths forward: negotiate a stabilized 15-year lease, or wait. Selling is not presented as an option. Board is told lease terms determine value. A rental rate comparable study was commissioned for the next meeting; that study has not surfaced publicly. The November 2019 Chair letter echoes this presentation's framework nearly verbatim — but applies it to justify a decision the presentation never contemplated.
First treasurer's report following bond retirement. Year-to-date (YTD) DJJ revenues: $1,510,279 (7 months). Explicitly notes bond "now extinguished." Net income: $502,139 YTD. Establishes post-bond income baseline.
Monthly DJJ rent: $190,324.28. Average management expenses: ~$33,540/month. Net monthly DJJ income: ~$156,784 (~$1.88M annualized). DJJ cash balance: over $1.1M just six months after bond retirement.
YTD DJJ rent (5 months): $951,621.40. DDA had already transferred $1,000,000 from DJJ operating account to primary account YTD, plus received a $350,000 administrative fee. DJJ operating cash: $1,059,100. Building on books at $10,045,764 net. No DJJ policy deliberations appear in the public record of the same period.
Notes DJJ rent "will likely be adjusted when a new lease agreement is finalized" — confirming active lease negotiations as of six weeks before the sale vote. YTD DJJ rent (9 months): $1,712,918.52. Total DDA cash: $3,186,805.34.
YTD DJJ rent (11 months): $1,903,242.80 (~$2.28M annualized). DDA transferred $2,500,000 total from DJJ operating account to primary account in 2019 alone. Building carried on books at $10,045,764 net; $0 long-term liabilities. This is the final treasurer's report before the PSA was executed.
A candidate who had attended nearly every DDA and BOMC meeting since 2014 described the DDA in October 2019 as "currently renegotiating the contract with the tenant for the next 15 years" and called the DJJ building "a valuable asset in our city." Published about a month before the PSA vote. No mention of any pending sale. Corroborates the absence of any public deliberation on selling prior to the November 12 announcement.
The incumbent BOMC commissioner, responding to the same questionnaire weeks before the sale vote, described the DDA's prior mandate as "just managing the Juvenile Justice building" before the BOMC expanded its purview around 2016. Confirms the DDA's operational relationship to the building and contextualizes the sell decision.
First news coverage of the PSA vote. Reports that the DDA Chair was "unavailable for additional comment," that the BOMC's DDA liaison declined to comment, and that the Chair's letter (published simultaneously) was the public's first notification. Notes the BOMC and DDA "operate separately from each other."
Reports that two new DDA board members were interviewed at the November 12 DDA meeting — the same meeting at which the PSA was voted on — and formally appointed by the BOMC on November 18. They had no vote on the sale. One commissioner congratulated the DDA and said the DJJ building "has been one of the greatest gifts that Avondale has probably had." The BOMC's DDA liaison again declined to comment on the sale.
Post on the City of Avondale Estates official blog in which the DDA Chair responds to public questions about the $22M DeKalb County assessment. Argues that CoStar comparable sales of similar Metro Atlanta office buildings averaged $7.4M between 2023–2025 and that the county assessment is "a meaningless number." Primary source for the Chair's sales comparison methodology argument, addressed in the section above.