Construction is underway on a 278-unit riverfront apartment development at 702 Manufacturers Road, a project city officials and developers describe as a test case for Chattanooga’s newly revamped affordable housing tax abatement program and a model for future mixed-income development in high-demand areas.
The development, led by The Atlantic Companies in partnership with American South Capital Partners, broke ground this week on a 7.3-acre site along the Tennessee River in the city’s Northshore neighborhood. Final completion is scheduled for the fourth quarter of 2027.
The project is among the first developments to move forward under Chattanooga’s Affordable Housing Payment in Lieu of Taxes, or PILOT, program, which was redesigned in recent years to encourage developers to incorporate income-restricted rental units into market-rate projects. In exchange for property tax relief, the sponsor has committed to reserving 42 apartments, or about 15% of the total units, as affordable for households earning up to 80% of the area median income.
City leaders say the program is intended to address what is often referred to as the city’s “missing middle” workforce: households that earn too much to qualify for traditional subsidized housing but struggle to afford rising rents in centrally located neighborhoods.
“If you work in Chattanooga, you should be able to afford to live here,” Mayor Tim Kelly said during the groundbreaking ceremony Feb. 3. “This is Class A riverfront housing that includes affordable homes right alongside luxury apartments, and that is the model we want to pursue going forward.”
How the PILOT program works
Under the PILOT structure, developers receive a property tax abatement that is directly tied to the number, size and affordability level of the units they commit to providing. Each affordable unit has a calculated “price” based on the potential revenue lost by charging below-market rents. That value is determined by the project’s ZIP code, unit size and affordability tier, ranging from 50% to 80% of area median income.
The program allows developers to model different affordability scenarios using a city-provided calculator, which estimates a project’s tax liability and shows how various combinations of unit types and income levels translate into property tax savings. The abatement applies only to the value of new improvements, not the land itself, and participating developments must maintain affordability requirements for at least 15 years.
During the PILOT term, title to the property is transferred to the city’s Health, Educational and Housing Facility Board, with developers making payments in lieu of full property taxes. Projects are monitored by city housing officials to ensure ongoing compliance.
Partnerships, financing hurdles
During the groundbreaking ceremony, Frank Reese, development principal with The Atlantic Companies, said the redesigned program was critical to making the project financially viable.
“Had it not been for the affordable housing program and the partnership of the city of Chattanooga, we would not be celebrating this project today,” Reese said. “Being first in a program is never easy. We were the pilot for the pilot.”
Reese said the project faced a lengthy and complex development process that stretched nearly two years before construction could begin. Challenges included navigating difficult capital markets, securing environmental clearance through Tennessee’s brownfield program, coordinating with Norfolk Southern to create two new public rail crossings and obtaining a Tennessee Valley Authority permit for riverfront development.
“Now you can see why it took two years,” Reese said. “But we believed in this site and in what it could become.”
Anchoring Northshore redevelopment
Once completed, 702 Manufacturers Road will include studio, one-bedroom and two-bedroom apartments, along with resort-style amenities distributed throughout the property. The development will offer direct river access, including a launch area for paddleboards and kayaks, and connect to a newly constructed multi-use path linking residents to downtown employment centers and Northshore retail and recreation districts. The project is designed to achieve National Green Building Standard Silver certification.
The site’s location carries particular significance for city officials. The development will be the only multifamily community in the Northshore neighborhood with direct frontage on the Tennessee River, land that has historically been dominated by industrial uses and largely inaccessible for residential development.
Reese said the apartment project is part of a broader transformation of the former industrial corridor. Adjacent to the site, RP Communities plans to build 112 for-sale townhomes, creating a mixed-tenure riverfront neighborhood that includes renters, homeowners and a range of income levels.
“We are transforming an old industrial landscape into a place where nurses, teachers, firefighters, police officers, professionals, retirees and families will live in a beautiful neighborhood right on the river,” Reese said.
Financing for the project includes a $24 million equity investment from American South Capital Partners, with construction financing provided by Ameris Bank. A portion of the equity, $12 million, comes from American South’s Real Estate Fund III, which focuses on affordable and workforce housing across 10 Southern states.
Tyler Epps, executive vice president of originations for American South Capital Partners, said Chattanooga’s growth and housing policy reforms made the project a strong fit for the firm’s investment strategy.
“The greater Chattanooga area has experienced phenomenal growth over the last 30 years,” Epps said. “This project represents the type of change the city has been striving for as a way to continue to uplift the community.”
City officials emphasized that while the PILOT provides temporary tax relief, the long-term fiscal impact of the development is expected to be substantial. According to Kelly, the vacant site previously generated about $9,000 annually in property taxes. Once fully built out, the project is expected to generate approximately $341,000 per year in tax revenue, including more than $142,000 allocated for schools.
“That economic benefit will only multiply as residents shop at local businesses and restaurants,” Kelly said during the groundbreaking ceremony.
Kelly also framed the project as a proof of concept for future housing production under the city’s revised incentive structure.
“We worked hard to reframe our PILOT policies into something that would be scalable,” he said. “If you want to do a little affordable housing, you can get a little incentive. If you want to do more, you can get more. This is project No. 1.”
Construction teams for the development include Brock Hudgins Architects, Kimley-Horn for civil engineering and McShane Construction Company as general contractor. Patterson Real Estate Advisory Group sourced the project’s financing.