SouthEnd High-Rise Projects

[Professor]

On 6/20/2023 at 6:16 PM, AirNostrumMAD said:

People say Atlanta, Dallas & Houston are sprawling and they have pretty large cores outside their primary downtown. Buckhead & Midtown rival many downtowns in skyscraper prowess in the nation. 

Nor sure how this links to "Southend-high-rise projects?

[videtur quam contuor]

376 parking spaces plus some apartments. Are you satisfied with 12+ levels of parking (e. g.) rather than a one acre parking lot? This is a rhetorical question.

[15895]

37 minutes ago, Larry Singer said:

Nor sure how this links to "Southend-high-rise projects?

You don’t understand how that comment links to the post I responded to below? 

“Same here - I think though, that it’ll still be some time (maybe 2025 or lil later) before South End burgeoning Skyline begins to supplant others in NC as being more dense and tall.  Anyone care to guess in what order will be the top 5 skyline in the State in 2025?

(Raleigh, North Hills, Greensboro, Durham, Charlotte, Winston, South End, etc.). Dang this is too easy, nevermind.  Funny that Charlotte was dubbed  ‘Sprawl City’ in that bloggers post but by far has the most dense urban core in the State and a least Top 5 in the Southeast.”

 

 

[RANYC]

41 minutes ago, videtur quam contuor said:

376 parking spaces plus some apartments. Are you satisfied with 12+ levels of parking (e. g.) rather than a one acre parking lot? This is a rhetorical question.

I think you raise a very interesting point that I’ve thought a lot about lately and haven’t determined where I stand.  

Had this 0.87 acre lot been used for, say, 40 townhomes, each with rear-entry garages accessed from inside of the block, and the townhome front-doors abutting the streetscape, would that have done more to advance the general “walkability” and pedestrian experience of the immediate vicinity, than stacking 375+ parking spaces on the same area.

In other words, could one argue that the high-rises getting developed in Charlotte reflect an intensification of auto-centricity than any sort of real urbanity?  The only way to offset such auto-centric intensity is by creating signature pedestrian experiences like the rail trail to pull pedestrians away from car-dominated adjacencies.

When I see time lapse photos showing American main streets once dense with occupied low-rise structures and now decimated by seas of surface parking, what do they often have in common: nearby High-rises.  Lonely high-rises surrounded by seas of parking.  What might the high-rises represent?  A clustering of car-centric users who became “drivers” of market demand for adjacent parking.  Because of that demand, surrounding, pedestrian-oriented,  low-rise building stock was the victim. 

Edited June 27, 2023 by RANYC

[kermit]

^ I agree, good questions and worth discussing.

IMO

• The post pandemic environment shows us that more residents is better for urban neighborhoods (so a high rise is likely better than townhouses) (e.g. Southend vs. Uptown)
• The PP environment also shows us that pedestrian friendly neighborhoods are seeing more growth than auto-centric ones (downtown Belmont vs the remainder of Gaston County)
• This risk in the half parking deck model of urbanism is that the cars are badly managed and they end up destroying the pedestrian character of the place where they are parked (parking deck entrance is pedestrian hostile, insufficient traffic calming, residents using cars too frequently)
• The risk of poor management increases with the size of the parking deck, and the amount the residents of the high rise rely on their cars for every trip

I think the real risk from this sort of development is bad parking entrance design (limited visibility), bad street design / limited calming and lousy neighborhoods (they are not interesting enough to get residents to walk at all so they use their cars for everything.  The only thing that can make a neighborhood interesting is lots of people (so bigger towers (even with parking) are better than smaller (even without parking).

Edited June 29, 2023 by kermit

[RANYC]

15 minutes ago, kermit said:

^ I agree, good questions and worth discussing.

IMO

• The post pandemic environment shows us that more residents is better for urban neighborhoods (so a high rise is likely better than townhouses) (e.g. Southend vs. Uptown)
• The PP environment also shows us that pedestrian friendly neighborhoods are seeing more growth than auto-centric ones (downtown Belmont vs the remainder of Gaston County)
• This risk in the half parking deck model of urbanism is that the cars are badly managed and they end up destroying the pedestrian character of the place where they are parked (parking deck entrance is pedestrian hostile, insufficient traffic calming, residents using cars too frequently)
• The risk of poor management increases with the size of the parking deck, and the amount the residents of the high rise rely on their cars.

I think the real risk from this sort of development is bad parking entrance design (limited visibility), bad street design / limited calming and lousy neighborhoods (they are not interesting enough to get residents to walk at all so they use their cars for everything.  The only thing that can make a neighborhood interesting is lots of people (so bigger towers (even with parking) are better than smaller (even without parking).

I do understand your point about more people clustered in an area.  I worry about the sustainability and long-term desirability of vertically-dense car-centricity versus low-density.  I should also frame my comments with the given that there is such a thing as low-rise urbanism.  Ultimately, I have real concerns about the desirability of a podium-laden South End in 20 years.

Edited June 27, 2023 by RANYC

[kermit]

2 minutes ago, RANYC said:

I do understand your point about more people clustered in an area.  I worry about the sustainability and long-term desirability of vertically-dense car-centricity versus low-density.  I should also frame my comments with the given that there is such a thing as low-rise urbanism.  Ultimately, I have real concerns about the desirability of a podium-laden South End in 20 years.

No doubt in my mind that big podiums are a) a huge financial drain on developers (and tax collectors); and b) a huge waste of space (that could be used for more housing). But if its true that people won't live in a place without parking (I have my doubts about this common assumption) then podiums (that can be converted to non-auto uses) might represent the best solution.

[videtur quam contuor]

So many of these photos taken of the South End high floor buildings (and elsewhere) under construction show the building from a block away or more. Go back a few pages if you wish to confirm this. Occasionally the view is STRAIGHT UP in a most unnatural view and disorienting as well. One reason is that from the sidewalk, or across the street it is difficult to tell what the structure is other than parking. The renderings always look different and with a view that does not occur in reality. The experience from a pedestrian or driving view is concrete parking and nothing else. All in the most transit served area of our city. 

[j-man]

[Nathan2]

On 6/20/2023 at 2:20 AM, Hushpuppy321 said:

Same here - I think though, that it’ll still be some time (maybe 2025 or lil later) before South End burgeoning Skyline begins to supplant others in NC as being more dense and tall.  Anyone care to guess in what order will be the top 5 skyline in the State in 2025?

(Raleigh, North Hills, Greensboro, Durham, Charlotte, Winston, South End, etc.). Dang this is too easy, nevermind.  Funny that Charlotte was dubbed  ‘Sprawl City’ in that bloggers post but by far has the most dense urban core in the State and a least Top 5 in the Southeast.

I mean just because the south end is one of the densest neighborhoods in the southeast doesn't negate the fact that it makes up just ~2 square miles of Charlottes sprawling 312 square miles. I think the tower size is blown out of proportion as well in south end since half of the buildings are equally just parking podiums. 

[Durhamite]

59 minutes ago, Nathan2 said:

I mean just because the south end is one of the densest neighborhoods in the southeast doesn't negate the fact that it makes up just ~2 square miles of Charlottes sprawling 312 square miles. I think the tower size is blown out of proportion as well in south end since half of the buildings are equally just parking podiums. 

Man, this is a different era and time, just excited to see all the progress cause one day it will slow down and folks will be fawning over a 10 story building...see Greensboro.  

[Nathan2]

19 hours ago, kermit said:

No doubt in my mind that big podiums are a) a huge financial drain on developers (and tax collectors); and b) a huge waste of space (that could be used for more housing). But if it's true that people won't live in a place without parking (I have my doubts about this common assumption) then podiums (that can be converted to non-auto uses) might represent the best solution.

I think people would live in car-free or car-lite structures, I just don't think the market has given anyone the chance. Lenders are so stuck in their old ways they don't take chances. Spacecraft has been successful so I would think something similar would work even better in Southend. 

 

 

17 minutes ago, Durhamite said:

Man, this is a different era and time, just excited to see all the progress cause one day it will slow down and folks will be fawning over a 10 story building...see Greensboro.  

This is exactly the problem. We shouldn't care about building height and skylines when the pedestrian environment is crap. You don't need 20-story towers to make a great dense neighborhood, especially if everyone is in a car anyways. Some of the densest cities in the world average buildings no taller than 4-5 stories.

[Durhamite]

9 minutes ago, Nathan2 said:

I think people would live in car-free or car-lite structures, I just don't think the market has given anyone the chance. Lenders are so stuck in their old ways they don't take chances. Spacecraft has been successful so I would think something similar would work even better in Southend. 

 

 

This is exactly the problem. We shouldn't care about building height and skylines when the pedestrian environment is crap. You don't need 20-story towers to make a great dense neighborhood, especially if everyone is in a car anyways. Some of the densest cities in the world average buildings no taller than 4-5 stories.

No, but developers are in the business of making money.  Isn't it possible to build mid/tall and densify?  It seems Southend is at least moving in that general direction, and other parts of Charlotte.  Cities in the south that were decimated by urban renewal, especially those that had small urban areas aren't going to suddenly shift gears, small steps my friend.  I really think this is just the beginning, and it will take time and of course demand for that to happen in the South on a larger scale.  Sure, places like Charleston have this but that boat sailed long ago, different era.

[atlrvr]

1 hour ago, Nathan2 said:

...Lenders are so stuck in their old ways they don't take chances...

That's because lenders upside is just getting their money back with interest owed.  Downside is getting back (a lot) less than what they lent.   Why would they take a chance when there is no incentive?

Equity investors / developers are the ones that could see greater financial success if you're right.  If they believe it's worth it, they'll bring  all the equity needed.

My guess (though certainly can be wrong) is that most developers perceive potential upside not worth the extra equity (replacing  debt from risk adverse lenders).

[kermit]

37 minutes ago, atlrvr said:

That's because lenders upside is just getting their money back with interest owed.  Downside is getting back (a lot) less than what they lent.   Why would they take a chance when there is no incentive?

Equity investors / developers are the ones that could see greater financial success if you're right.  If they believe it's worth it, they'll bring  all the equity needed.

My guess (though certainly can be wrong) is that most developers perceive potential upside not worth the extra equity (replacing  debt from risk adverse lenders).

How are the developers who are currently building parking light / parking free properties (like Grubb) financing these projects? Where is the equity for these residential projects coming from and how might the supply of it change if money continues to flee from the office RE market? How much of a track record of financial success for these projects is required before lenders start to believe?

[sorry for the rapid fire. Genuinely curious]

Edited June 28, 2023 by kermit

[j-man]

[Hushpuppy321]

14 hours ago, Nathan2 said:

I mean just because the south end is one of the densest neighborhoods in the southeast doesn't negate the fact that it makes up just ~2 square miles of Charlottes sprawling 312 square miles. I think the tower size is blown out of proportion as well in south end since half of the buildings are equally just parking podiums. 

I think part of the issue with Parking in these Residential buildings (Midrise & Highrise) is the fact that Construction Costs and Rents are so high that not having adequate parking (or no parking at all) could hurt Leasing Units.  Typical Midrise apartment rent in SE is fairly high, Highrise rents will be even higher and the people able to afford those rents will typically own a vehicle (or two).  Landlords could lose tenants to other competitors that offer parking included in the rent.

As far as Podium Structures - as long as the Ground Floor uses & Parking Screening is done well it should enhance the Urban Fabric.

[15895]

My personal perspective from the Lending side (I work for one of the worlds largest banks & a huge player in Multifamily.)

We go out of our way to fund transit oriented developments (both affordable & market rate). It’s usually the first thing we discuss on Vetting calls to determine whether we will fund the development. We also like retail in the apartments.

As a Lender, potential Borrowers come to us to fund - we’re not going to tell them to scrap retail or force them to have more parking because we are competing with other Lender’s and post 2008, the name of the game is Securitizations so we like the fluff of transit, retail which is more attractive to investors. Additionally, retail is such a small part of the NOI of the property, it doesn’t really affect our risk appetite or pricing. But it does increase the rent potential and makes leasing up easier (which again is important to lend out $ & immediately try to get it off our books to originate more loans.)

Developers & Local Laws (or lack thereof) are more of an issue than the Lenders I’ve worked for so far. 

[15895]

15 hours ago, Durhamite said:

No, but developers are in the business of making money.  Isn't it possible to build mid/tall and densify?  It seems Southend is at least moving in that general direction, and other parts of Charlotte.  Cities in the south that were decimated by urban renewal, especially those that had small urban areas aren't going to suddenly shift gears, small steps my friend.  I really think this is just the beginning, and it will take time and of course demand for that to happen in the South on a larger scale.  Sure, places like Charleston have this but that boat sailed long ago, different era.

There’s also just such limited opportunity for urban development in an area like Charlotte. The small footprint of area where dense urban development could go is such a limited and restricted supply (and consider there are some land owners who hold a ton of real estate) that it limits what will & won’t work. It’s easier to fund suburban-like Multifamily in Charlotte because for the most part,  (1) the laws make dense urbanity illegal outside a few key areas (2) Where there is a lack of transit, mobility issues, etc. you just have to Have adequate parking and building parking decks for apartments for middle class or lower income Charlotteans becomes too overwhelming (3) Charlotte is really bad with housing subsidies. 

That’s to say, there’s lots of opportunity to urbanize Charlotte further if the government actively coordinated efforts into densifying most of Charlotte, creating transit corridors, making affordable housing go to accessible areas etc. But that requires a lot of coordination and prioritization & would not be an easy or fast process. The government also needs to invest in mobility issues if they want the private market to build smart/more sustainable. 

Edited June 29, 2023 by AirNostrumMAD

[atlrvr]

15 hours ago, kermit said:

How are the developers who are currently building parking light / parking free properties (like Grubb) financing these projects? Where is the equity for these residential projects coming from and how might the supply of it change if money continues to flee from the office RE market? How much of a track record of financial success for these projects is required before lenders start to believe?

[sorry for the rapid fire. Genuinely curious]

I don't know any of these developers specifics, but I suspect there is still some debt involved, just a much lower amount on a % basis than in a "traditional" project.  That gap requires a larger equity contribution on a % basis to fill in the financing.  Certainly Grubb, Spacecraft, others (?) are making selective bets this ultimately results in a similarly profitable (Return on Equity) project.  For that to be true, the the reduction in rental income (technically Operating income, so Rents - Expenses) can't be as great as the reduction in building cost.  In other words, if a developer believes 20% lower rents (and probably 25% Net Operating Income since expenses are somewhat fixed), but 35% lower construction costs, then it would be worth bringing much more equity, because the investors can achieve a similar return.

The lender is going to assume more stressful assumptions in the absence of evidence to the contrary (higher vacancy and larger rent declines during a recession than a "normal" apartment).   It will take a while (at least a full economic cycle) for a developer to prove their parking-lite portfolio in Charlotte (and similar car oriented cities) didn't perform any worse on  relative basis in terms of changes in operating income during a recession, before a lender might consider this product mainstream (and therefore deserving of normal underwriting standards/debt pricing).

I don't think that any capital not being invested in Office is looking for a "riskier" section of the apartment market as the next best alternative.  Most of that capital is leaving CRE in general, not trying to find different property sub-types.

[atlrvr]

3 hours ago, AirNostrumMAD said:

 

As a Lender, potential Borrowers come to us to fund - we’re not going to tell them to scrap retail ... Additionally, retail is such a small part of the NOI of the property, it doesn’t really affect our risk appetite or pricing.

 But do you underwrite that retail space NOI assuming developer pro forma rent and 93-95% occupancy when sizing the loan?  Genuine question, but I would assume not, but maybe lending for multi-family has become competitive enough that "yes"?

[Nathan2]

5 hours ago, Hushpuppy321 said:

I think part of the issue with Parking in these Residential buildings (Midrise & Highrise) is the fact that Construction Costs and Rents are so high that not having adequate parking (or no parking at all) could hurt Leasing Units.  Typical Midrise apartment rent in SE is fairly high, Highrise rents will be even higher and the people able to afford those rents will typically own a vehicle (or two).  Landlords could lose tenants to other competitors that offer parking included in the rent.

As far as Podium Structures - as long as the Ground Floor uses & Parking Screening is done well it should enhance the Urban Fabric.

Part of the reason construction costs and rent are so high is because they are being forced to build podium parking. 

[CLT Development]

On 6/28/2023 at 3:42 PM, Nathan2 said:

I think people would live in car-free or car-lite structures, I just don't think the market has given anyone the chance. Lenders are so stuck in their old ways they don't take chances. Spacecraft has been successful so I would think something similar would work even better in Southend. 

 

 

This is exactly the problem. We shouldn't care about building height and skylines when the pedestrian environment is crap. You don't need 20-story towers to make a great dense neighborhood, especially if everyone is in a car anyways. Some of the densest cities in the world average buildings no taller than 4-5 stories.

There is a car-free apartment building in development beside the Bojangles on South Tryon

[CLT Development]

23 hours ago, kermit said:

How are the developers who are currently building parking light / parking free properties (like Grubb) financing these projects? Where is the equity for these residential projects coming from and how might the supply of it change if money continues to flee from the office RE market? How much of a track record of financial success for these projects is required before lenders start to believe?

[sorry for the rapid fire. Genuinely curious]

Spacecraft was largely self-financed, with extra investment from the builder, Swinerton. I believe the same is the case for second phase of the Joinery Millhouse, Inkwell, the last two of which has parking-lite and have parking lifts to maximize their parking spaces.  Based on the fact that Joinery was really their first project as Spacecraft, seems maybe you don't need too much track record. Now they have 2,600 units in their pipeline in Charlotte.

[videtur quam contuor]

The final luxury accessory: a car free life. 

Now that we have disintermediated life so that each can be a travel agent for oneself, a stock broker, a publisher, a photographer,  the true mark of luxury is for one to HAVE a stock broker, a travel agent, a publisher for instagram posts. The wealthy have people who work for them to provide these services rather than serving themselves. Carless is the way to show affluence. 

Take a black car service from your home to the Mint uptown for an exhibition to feel the mark of affluence. Live it. Love it. Be it.