Charlotte February 2024 – Key Take Aways
Hannah Beavers and Mark Talbot – Freedom Communities – Freedom Communities is a nonprofit organization that addresses the challenges faced by families living in the Freedom Drive corridor with the home zip code of 28208. The organization focuses on creating affordable housing options, improving access to quality education, and supporting families with programs such as Moms Moving Forward. They aim to break the cyclical patterns of generational poverty by collaborating with a wide range of community partners, identifying gaps, and investing in solutions.
High prices and financing challenges are barriers faced by low-income families in purchasing homes. One solution proposed involves renting properties like Marlborough Woods over the next 10 years, renovating these units as tenants move out and later selling them to first-time homebuyers to preserve housing affordability.
In 2020, Evoke Living at Sugar Creek required an expenditure of $165,859. Four years later, the cost of constructing Evoke Living at Morris Field required $303,873. The rise in construction costs is evident and making it almost impossible to work with. Despite this, Freedom Communities and CSE Communities have partnered yet again and are currently in the process of finalizing its closure of Evoke Living at Ballantyne. This new and exciting development will be situated at Providence Road West and Ballancroft Parkway.
Low-income housing tax credits (LIHTC) are granted by the federal government to support affordable housing initiatives. These tax credits come with certain restrictions, such as rent limitations based on income and various parameters to ensure affordability for everyone. To utilize these tax credits, Freedom Communities sells them to investors over a period of 10 years. Investors purchase the tax credits, providing upfront financing for projects. Upon purchasing the tax credits, the investor assumes ownership of 99% of the property for the duration of their involvement. Typically, this process involves multiple LLCs, with one company acting as the property’s owner, another as the tax credit investor and a third LLC serving as the housing manager. Over time, the ownership percentages between these companies may change, with the 99.9% and 0.01% ownership roles switching positions. After the agreed period, the original owner of the property has the first right to buy back the property for a nominal amount ($0-$100). This strategy effectively solves the financing challenges and provides a reliable means of funding the projects.
There is no singular solution to address all housing challenges. Instead, a continuum of housing options is necessary, and each idea contributes to the collective effort of providing suitable housing opportunities for all.
Mark Carpenter – CH Land Company, LLC – Most apartment deals are not financially viable unless significant investments are made, which may not be desirable. However, storage facilities can still be profitable, although challenging due to high interest rates. Mark notes that many home builders are shifting their focus to Charlotte and reducing involvement in secondary and tertiary markets, especially for non-single-family homes like townhome projects.
Brent Kubitschek – Waterstone Multihousing Advisors – There has been an increase in activity and confidence among investors in Charlotte since the beginning of the year. However, people are grappling with the challenges presented by pricing. Some sellers are still holding out for the original underwriting values from a few years ago. A gap remains to be bridged between buyers and sellers in terms of pricing expectations, which has resulted in a higher-rate atmosphere. Nonetheless, Brent believes the market will gradually align over time.
Ajamu Stoner – SirusAMC – The industry faces significant slowdown due to the unfavorable prospect of paying higher interest rates for homes, as the financial returns may not justify the expenditure. Despite the potential tax benefits, deals are incredibly difficult to pencil in under these circumstances. Ajamu hopes the CPI numbers will stabilize and drop, as this would help restore normalcy and improve business conditions.
John Culbertson – Cardinal Partners – John discusses his diverse range of projects including the closing of a deal in Reading, PA, involving his Japanese coal mining company client and their desire to expand into the neighboring biker bar, the entitlement of 2000 lots in the Carolinas and a recreational venture, involving live animals and approximately 1,000 acres, between Columbia and Rock Hill. He mentions his long-standing efforts to facilitate Bojangles’ move into their new headquarters, which has been delayed due to construction plans and pricing concerns.
Joe Marek – Johnston Allison & Hord – Joe shares active buying and selling activity including the sale of undeveloped property in Stanly County that will be used for industrial warehouse and upcoming closings on an apartment complex in South Charlotte and a 4-acre warehouse in Gastonia. He acknowledges minimal office leasing activity but mentions an ongoing project on South Blvd. and multiple leasing and development projects related to automobile development, such as oil change locations and car repairs.
Matthew Martin – Federal Reserve Bank of Richmond – January’s inflation numbers are “squirrely” and Matt advises against placing too much emphasis on them. The numbers are expected to come down in the next few months. Despite strong job numbers, the labor market is not particularly hot. Charlotte payroll numbers indicate a stall in job growth, specifically with job losses in the banking and manufacturing sectors. Truist Bank is cutting more than ever, and Wells Fargo and Bank of America are hiring less than usual. He believes this is only temporary.
Brian Schoeck – Johnston Allison & Hord – The City of Charlotte is working on acquiring land at the south of North Tryon for the purpose of creating a tree-save conservation area. The land will be resold to developers under an agreement guaranteeing the preservation of trees on the property.
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