Charlotte developer Peter Pappas is back to developing new projects and, for the first time in his firms history, he is branching out into other Southeastern markets.
A developer who built his brand creating high-end master-planned communities and mixed-use projects centered on luxury condominiums, Pappas has retooled his strategy. He has joined other developers catering to young professionals expected to rent instead of own their home.
Last fall he broke ground on a $52 million apartment project near the corner of Fairview and Sharon roads. He has land under contract in Atlanta. His firm is eyeing potential sites in Nashville, Tenn.
And in December, the firm closed on 22 acres near Crabtree Valley Mall in Raleigh, where he plans to build 292 luxury apartments. He said he has received his zoning and site plan approval. Plans call for 250,000 square feet of office space and a hotel to be built during a second phase. More residential units could follow later. The land sits about 80 feet above the mall, so some apartments will have great views, he said.
Its nice to be busy, Pappas said from his conference room at the Metropolitan near uptown Charlotte, where renderings and site plans cover one wall.
Started in 1999, Pappas Properties has specialized in building mixed-use projects centered around high-end condos and luxury retail. They include the award-winning Nantucket-themed Birkdale Village in Huntersville that mixes homes with shopping and dining, and Phillips Place in SouthPark, where luxury retail, high-end restaurants and residences are nestled amid a backdrop built to resemble a main street.
The company was finishing up Metropolitan, a $225 million retail, office and condo project built on the edge of uptown near Interstate 277 it was developing with Colonial Properties Trust and Collet & Associates, when the financial crisis hit and real estate markets crashed.
Pappas said the company put plans for new projects on hold and focused on completing projects under way and creating as much value as we (could) and getting our assets to perform as well as could be expected.
Metropolitan tenants include grocer Trader Joes, Best Buy, west elm, Modern Salon & Spa and various restaurants.
Of the projects 101 condominiums, four in the MetTerrace tower are still available for sale.
National investors have eyed the project, which is close to being sold, according to people familiar with the deal. Pappas declined to comment.
Betting on apartments
As condo sales stalled after the meltdown, the apartment market was heating up. Lenders were willing to lend money for new apartment projects. Projections showed a growing number of young professionals would want to rent instead of buy a home, which would boost occupancy rates and rents.
In September 2011, Pappas tapped Trammell Crow apartment veteran Alan Dean to lead Pappas multifamily division from a new office in Atlanta. Dean was charged with expanding the divisions operations throughout the Southeast.
Apartment analyst Engle Addington with Real Data said Pappas moves are well-timed.
The apartment markets hot right now. Demand is strong. Rents are growing, she said.
Addington also said that while some pockets may be close to being overbuilt, the Southeast in general is still ripe for new apartments.
In Charlotte and Raleigh, for example, rents have been increasing at around 5 percent a year, which she called really strong growth.
Pappas Charlotte project, Sharon Square, is catered toward people who want to live in an urban setting and walk to restaurants and shopping, a common theme among Charlottes many proposed multifamily developments. Most of the new units proposed for Charlotte are near uptown along the Lynx light-rail line.
Farther south, Sharon Squares key was landing the popular Whole Foods Market, which opened last year, Pappas said. One 133-unit five-story building will be built adjacent to the grocer. A three-story building will sit on the opposite side of Ashley Park Lane. The project will include outdoor amenity areas with catering kitchens so residents can socialize outside.
Pappas bought the land with partner Allen Tate in 2008 with the idea of creating a mixed-use project with condos or a 120-room boutique hotel. When the economy soured, plans were dropped.
One project that remains stalled is a mixed-use development near the Scaleybark light-rail station. Pappas is partnering with the city of Charlotte for the project, which is supposed to include apartments for low-income residents. The developer still must secure funding for the affordable-housing piece. The project lost out on tax credits in the past because it lacked nearby shopping and other services for residents. Pappas said he continues to talk to potential tenants for the roughly 20-acre site.
Pappas said one reason his company fared well during the downturn was his investors continued to pump money into their deals. With the SouthPark project, for example, Pappas said his partners were willing to wait and hold the land, confident the location would pay off when the economy turned.
Ultimately, Pappas plans to develop retail and office buildings on either side of Ashley Park Lane where it meets Sharon Road.
Pappas is talking to potential tenants, both locally and nationally owned, he said. The site plan, he said, allows for ample outdoor seating.
The market obviously changed, Pappas said. Multifamily is where the activity is. We just took what we were doing before and added multifamily experience to our team.