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Dirt moving for light rail to UNCC – raising high hopes for development

Construction’s ramping up on the new light rail line to UNC Charlotte, raising hopes for new development to revive aging north Charlotte neighborhoods and plant a walkable town center in the heart of the University area.

All along the 9.3-mile Blue Line Extension corridor, workers are digging dirt and preparing to run tracks from the shadow of uptown’s skyscrapers to the university’s campus. City leaders predict a wave of new development will eventually follow, reshaping the northeastern side of Charlotte.

But even as work plows ahead on the $1.1 billion project, it’s not clear whether the new line can match the economic spark supplied by the Blue Line, which fueled the South End’s rebirth and touched off nearly $2 billion in new construction in its first three years.

The northbound line, set to open in 2017, faces a more challenging development landscape: a predicted slowdown in apartment-building, and a concentration of struggling low-income areas along North Tryon Street, Eastway Drive and Sugar Creek Road.

“I just don’t anticipate the kind of activity you saw in South End,” said Fitzhugh Stout, senior managing director in the Charlotte office of Integra Realty Resources. “It’s going to be more moderate.”

City transportation and planning officials acknowledge the challenges, but remain optimistic. They say the 11 planned light rail stations should eventually spur 10,000 new housing units, as well as nearly four million square feet of offices and 1.3 million square feet of retail.

It’s already accelerating growth in the popular NoDa district, where asking prices for prime parcels have topped $1 million per acre. Some are already worried about potential congestion as trendy shops and loft apartments keep sprouting there.

But less certain is what light rail will mean for the redevelopment prospects of the aging shopping centers and struggling neighborhoods sandwiched between NoDa and University City.

For those areas, they say, a rail-inspired economic revival could be decades away, if it comes at all.

Stout, a consultant who studied the Blue Line’s development impact for the city, said today’s construction comes amid a potential slowdown in the main driver of Charlotte’s development scene: apartment building.

He said a likely market glut will drive apartment vacancy rates higher in the next couple of years – making apartments riskier to build.

“This extension is going to be different,” he said. “There are huge areas in decline.”

City transit and land use planners don’t necessarily disagree.

While they expect the Blue Line Extension to carry some 25,000-plus daily riders – thousands more than the original line – they acknowledge that tougher post-recession lending standards and the possible downturn in apartment-building could slow the pace of redevelopment.

“I don’t think that’s necessarily bad,” said Tina Votaw, a development specialist with the Charlotte Area Transit System. “It allows things to be built and designed well, and going forward we’re seeing a pace that’s probably more sustainable.”

Values rising near NoDa

NoDa, the one-time mill village turned artsy residential district, is already seeing benefits as the transit line’s construction magnifies its appeal to shoppers, prospective residents and developers.

As with the original Blue Line, landowners with parcels near stations have been seeking rezonings from old industrial uses to mixed use, a classification that allows developers to reap much more profit per square foot.

That in turn is pushing up asking prices.

Legacy Real Estate Advisors, a Charlotte investment group, bought a nearly four-acre parcel on North Davidson Street near Amelie’s French Bakery in 2006 for $1.6 million, figuring the light rail line would eventually boost its value.

Greg Godley, a principal with Legacy, said the property has more than doubled in value since the firm won rezoning from industrial to mixed use.

It’s listed for $4 million to $5 million – more than $1 million an acre. Legacy says it could accommodate 200 apartments, as well as office lofts and retail.

Godley said several national apartment development groups have inquired.

“I wouldn’t necessarily say it’s a bidding war, but there’s a tremendous amount of interest from very qualified developers,” he said.

One recent sale suggests the asking price might not be out of the question.

Woodfield Investments is building a 241-unit mid-rise apartment complex on a three-acre parcel in the heart of NoDa, at 36th and North Davidson streets. The land sold in December for $4.5 million.

Walter Fields, a former city-county planner turned development consultant, said he sees so much interest in NoDa that he worries there won’t be enough parking to accommodate all the growth.

For some landowners, it’s been a windfall.

Tim Mullaney’s family owns .68 of an acre in the nearby Optimist Park neighborhood, spread across four small parcels along Parkwood Avenue between East 16th and East 17th streets.

He said his father bought one parcel in 1999 for $120,000, then purchased the other three for as much as $140,000 total. With the Parkwood Avenue station slated to go in just a few blocks to the north, Mullaney listed it for $795,000 – about three times what his dad paid.

The parcels went under contract to a real estate investment group last week, said Mullaney, who runs the family’s commercial printing shop near NoDa.

He didn’t get the asking price, but he estimates that his family roughly doubled his father’s investment. When considering the offer, he recalled musing to his real estate agent that he could likely hold the land five years and watch its value double again.

But, the agent asked, couldn’t you use the money now? He approved the sale.

“It’s definitely a good deal for me,” he said. “I’ll probably just tuck (the money) away and save it for a rainy day. It’s nice to have a dollar every now and again.”

Troubles on North Tryon

But head just a few miles north of the planned NoDa-area stations, and the asking prices start to fall.

That includes the biggest vacant parcel along the entire Blue Line Extension: a 61-acre tract near where Interstate 85 freeway traffic merges onto North Tryon.

An appraisal last November recommended pricing the land at $10.2 million, or $165,000 per acre. The property owner: a holding company tied to the McKinney family, which ran the former Young Ford dealership on North Tryon.

The company, led by David and Tim McKinney, bought the land for $6.5 million, securing the first half in May 2012 as the new line moved toward the final design phase. They bought the other part in December as officials prepared to start construction.

“We saw an opportunity,” said David McKinney. “We think it’s a wise investment.”

The family is marketing the property as the future gateway between North Tryon’s old commercial corridor and the newer University area.

They envision an ambitious mixed-use development, featuring office space, retail, apartments, a hotel and even a movie theater.

They have received inquiries from national retail, apartment and grocery store builders, McKinney said, declining to identify them.

“We have discussed numbers with clients, and we’re very impressed with how the numbers seem to be moving up,” he said. “I field calls on that property daily. Not all of them are serious, but I do field calls.”

Stout, the real estate consultant who studied property values along the Blue Line, was less optimistic about prospects along that middle third of the line.

The North Tryon corridor from around Sugar Creek Road north to University City has been in decline for years, he said, pointing to the old Tryon Mall property as an example.

“Most of the developers, they don’t want to be there right now,” Stout said. “They want to be somewhere in NoDa or closer to uptown. They don’t want to be pioneering.”

Further clouding the outlook: the fact that trains running between Old Concord Road and UNCC’s campus will travel in the center of North Tryon’s north- and south-bound traffic lanes. Real estate investors and developers wonder whether that will hurt car access and land values.

Farther north in the University area, the city plans big changes. Planners want to use the light rail system to transform the traffic-choked stretch of Tryon near W.T. Harris Boulevard into a walkable town center.

With trains running in the median, they are calling for broader sidewalks and pedestrian-friendly development reminiscent of Birkdale Village.

George Maloomian, president of Cambridge Properties, a firm that owns land in that area, said NoDa and University City give the line two strong redevelopment anchors.

But, he added, “the distance is too much for those two barbells to reach each otherright around Eastway and North Tryon, the city is really going to have to focus its attention on planning, redevelopment and reinvestment.”

City planners say rail-related development won’t happen at the same rate everywhere.

For areas such as the Sugar Creek and Old Concord Road stations, “you don’t just look (to see impact) five or 10 years out,” said Kathy Cornett, a senior planning coordinator with the Charlotte-Mecklenburg Planning Department. “You look 20, 30, even 50 years out.”

Holding out hope

Still, some property owners are hoping for a shorter-term revival. Kimbrell’s, the furniture store, owns about eight acres of the old NorthPark Mall site. Mostly vacant, it is one of the major commercial properties near the Old Concord Road station.

In anticipation of the light rail line, Kimbrell’s decided to stay put, said Ken Thornburg, president of Kimbrell’s Investment Co. Kimbrell’s refurbished its store at the mall and has about 41,000 square feet available for lease to other businesses.

Asked how long he thinks it will take for light rail to revive the area, he replied: “We re predicting 12 months. Hopefully this time next year we’ll see some real interest.”

Next door at North Pointe Plaza, an official said that shopping center is nearly full and enjoyed strong demand even before light rail became a certainty.

“We followed what happened along South Boulevard. We are optimistic,” said James Sharples of Neighborhood Revitalization Group, which owns the center. “It’s really too early in the cycle,” though, to say what exactly will happen.

It might turn out that not all sections of the line need to spark massive redevelopment for the Blue Line Extension to be judged a success. The original line, while highly praised, hasn’t spurred extensive redevelopment past South End.

Charlotte City Council member Michael Barnes said he’s aware of the questions people have raised about the new line. He, too, questions what will happen to the middle third of the line.

Still, he’s optimistic.

“What’s happening in many instances is people are trying to figure out what they want to do based on the alignment of the train and the corridor,” he said. “I think it’s putting us in a position to see a tremendous revitalization and transformation of the corridor.”

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