Charlotte May 2023 – Key Take Aways
A lot of uncertainty can be said for all capital markets. The interest rates moved via the Fed – 500 basis points in under a year – and added about $6 trillion of stimulus in about 18 months. This seismic recalibration will be nationwide and even affect growth regions like the Carolinas. We will see continued interest in real estate, whether it be equity, mortgages, or other ventures because it’s a diversifier, even for foreign capital. However, real estate today is suffering from stagflation. Rent, taxes, insurance, and utilities are alarmingly high. Interest rates have more than doubled. Costs have quadrupled. If deals were bought in the last 24 months, the equity for those deals is underwater. The real estate economy can be described as being in an orderly bear market. Banks are a problem and are the biggest risks. Banks will be very discerning about who they lend to and how much they lend. They’ll look at loan growth, deposits, etc. Matt believes the banks need to merge, the associated return on invested capital needs to adjust and invested capital expectations need to return, which takes time. His advice to everyone is to wait it out. (Matthew Rocco – Colliers Mortgage)
Advanced manufacturing projects, in the Southeast and particularly the Carolinas, are booming thanks largely to foreign direct investment (FDI). Mark emphasizes the importance of attending Global Carolina Connections – a networking conference comprising three core topical panels and additional presentations on subjects of interest to foreign businesses operating in the Carolinas. It is to be held in Greenville, SC, on August 30th, 2023. (Mark Fletcher – Bohler Engineering)
Office is challenged, especially the older buildings in University City as well as cities across the U.S. Retail strip centers are still running strong. Industrial is softening on the larger projects. Multi-family short-term debt is maturing for many, and those projects may need help from an equity. (Joe Kinsey – CoStar Group)
Phase 1 ESA has dropped yet Terracon’s diversity in other ventures, such as the 1-85 corridor, multi-family brownfield projects, vapor mitigation, EV batteries, and permitting, keeps things very busy. Terracon continues to struggle in finding EXPERIENCED hirees. (Neal McElveen – Terracon)
Jeff has seen deals fall apart because of buyer disconnect. Buyers expect the bid-ask to shrink because of headlines, however, they are either the same or even widening. He believes stagnancy needs to end for price discovery to begin to occur and predicts it will not happen for another 12 months out. (Jeffrey Pirhalla – BankFinancial)
Deals are hard to make when acquisition opportunities arise, especially among the less experienced real estate buyers. David and his team are there to help his clients figure out the kinks and see these deals through. (David Turner – BankFinancial)
JenCon Builders is a small but mighty construction company busy serving and operating a great niche in the Carolinas from restaurants to medical to office and retail. (Kevan Smith – JenCon Builders)
Connor suggests developers and owners will open their doors back up in Q4 of 2023, although a select few have already aggressively “gobbled up” many opportunities out there. Counties like Rowan and Gaston are partnering with developers like North Point and Crescent and forming public private partnerships with incentives that are driving new business. (Connor Tomlinson – Poettker Construction Company)
Vision Venture’s strategy is to find undervalued real estate and redevelop or co-develop it. Doug has two hotels in Uptown that have recently finished after facing numerous challenges due to the pandemic. He sees the challenges continuing in the lending market with his current build – a 325-unit apartment complex in North End that is already 40% reconstructed – and is considering alternatives such as another partner. (Doug Stephan – Vision Ventures)
Groups are looking for longer-term assets to add to their portfolios. The larger, Southeast deals happening are coming from the groups that owned before the pandemic and have built enough equity to still cash out and retain their profits. On the other hand, other groups are not committed to the long-term and are selling out of markets for fear of it taking years to get back to where they are today. (Brent Kubitschek – Waterstone Multi-Housing Advisors)
John’s time is split between building his team and undergoing phase 1 of a partnership involving a New Zealand entity. (John Culbertson – Cardinal Partners)
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