Charlotte-based CitiSculpt is betting big that people in the Carolinas want to live and work closer to city centers.
I sat down with CitiSculpt co-founder and managing partner Lindsey McAlpine to talk about the firm’s projects in Charlotte, Durham and across North Carolina and South Carolina. The firm is developing or planning hundreds of apartments, as well as office buildings and a mixed-use development that could top $400 million worth of investment.
In CitiSculpt’s offices – located in a renovated waterworks building on West Morehead Street – McAlpine’s optimism about the area reflects his outlook on many of the company’s investments in redevelopment.
“Ten or 15 years ago, we might not have wanted to park our cars here,” said McAlpine. “Ten or 15 years from now, I think it will be tough to find a parking space.”
CitiSculpt, whose other managing partner is Shane Seagle, recently unveiled early plans for redeveloping a 12.1-acre auto mall in Durham with more than a million square feet of office, retail and apartments. The company will start soon on an apartment complex, the first phase, in a joint venture with Woodfield Investments.
In Charlotte, the company is building an office building on West Morehead, and its Southern Apartment Group subsidiary has high-profile projects set to kick off soon on West Morehead and in NoDa. McAlpine said other developments are in the works, but they’re not ready to go public yet.
Here are some excerpts from our conversation, covering Charlotte’s apartment market, the trend towards more urbanization and how much more density Charlotte needs.
Q: What are you focused on now? You seem to be developing projects in a lot of different areas.
Apartments have been a very busy part of the real estate business for a while. In our business, you kind of have to pick the tomatoes while they’re ripe, as they say, and that has been the product people wanted. But now I think it’s moving more to office and we’re actually looking at some senior living, assisted living, memory care, some storage products in the urban environment, and several Class A office buildings.
We’re looking at projects in Asheville, Greenville, S.C. We’re under contract for a project in Charleston. So, a lot going on.
Q: I keep hearing the question, “Do we have too many apartments in Charlotte?” What do you think?
It’s a national phenomenon. People want true urban communities. Take the West Morehead corridor. If you want to live here, there are limited opportunities. It also helps to support the retail and other things people can walk to. The movement into the cities from outlying counties is good.
There’s a lot of questions we get, too, about supply. I like to look at things somewhat on a bell curve. If you look at where the units that are under construction will be priced, most of them in the last few years are working toward the far end, the highest 20 percent of income. I think there’s still a little bit of a multifamily gap in the middle, and certainly the Housing Authority would tell you there’s a need on the low end.
Just lay out a map and put dots on the map of where the projects are happening – South End and uptown. A bunch of our supply are in those two markets, maybe 50 percent of our supply. Out in Ballantyne, Mt. Island Lake ... We have very little competition around us in those other markets.
Those apartments will fill up. They might not hit their exact budget number or their rents they’re trying to do, Charlotte will have a little bit of over-building, but we’ll work through it because of job growth.
Q: With all the focus on building apartments, are we getting behind in other product types?
I think there’s real demand. Look at the (office) submarket here on West Morehead and East Morehead: 95 percent-plus occupied. That suggests there’s an architect or financial firm that might want to grow but can’t find space to grow in the same area. They’re just stuffing more people into the same space now.
Q: You’re really bullish on infill and redevelopment projects. Why do you see that trend continuing?
If you look at the 100-year span of development, there’s always gentrification in and out of cities. They ebb and flow.
Now, you have all of the “echo boomers,” Generation X and Generation Y, that really want to be in a vibrant community. They’re waiting longer to get married, they don’t have kids, there’s a push to be very central.
The transportation opportunity is the mass transit we’re creating. That’s a game changer. You just couldn’t live in Charlotte 10 years ago without a car. Now it’s a possibility.
Q: That’s a hard proposition for a lot of people – Charlotte without a car.
Well, we’re not at the probability phase yet. But we’re working our way there.
Development really needs to have a lens that’s 25 years at least. You need to be thinking, “What products are in town that will survive that time?” They’re well-placed, well-built, they’re both aesthetically pleasing and correct for that site.
I actually fear that Charlotte is not growing dense enough. We’re sprawling to some extent. If we’re not careful, we’ll be like Atlanta. I am all in for the urbanization.
If there’s a demand for 100 people, just to take a round number, you can do that in single-family homes in Union County that might take 100 acres to produce. But if you do that in Charlotte, you can do that on an acre.
If you have to choose one over the other, given the sprawl the former example creates, and the vibrancy the latter example creates, I want to be involved in that vibrancy.
I think the city of Charlotte really should embrace that. In South End, for instance, we’ve got so many five-story products. I think 20 years from now, that will be considered very low-density. I hope so.
We still show up in front of City Council and have, I wouldn’t say arguments, but resistance to “X” units-per-acre. It’s usually fear rather than reality. Think of that sprawl. If you don’t do it now, the people will live in Union County and drive through your neighborhood to get where they’re going, whereas if they lived there, they would be out walking around, friendly people.
Q: The first phase of your project in Durham will be apartments. What’s the next phase?
We still have 8.5 acres left to develop. We’re working on a Class A hotel, corporate headquarters, 250,000 square feet, a multi-use parking deck that will have another product around it and will probably be retail on the bottom.
That’s all on four acres. We still have another two sites left to go. That will be a few hundred thousand square feet more.
The tax value of the city compared to what’s there now – the site’s worth maybe $5, $8, $10 million – it will be worth north of $500 million. The benefit of that to the city is huge.
Q: Are you working on anything similar in Charlotte?
We’re always attracted to that kind of a project.