Developer: Midtown Boutique Office Project Could Break Ground Within Next Year
Charlotte Business Journal - Dec. 5, 2018 - The first phase of a mixed-use project in midtown Charlotte has wrapped up, with the next phase potentially breaking ground within the next year.
Charlotte-based CitiSculpt first proposed the development two years ago. Plans called for 255 apartments, a shared parking deck and what's now a seven-story, 90,438-square-foot office building on a site generally bounded by Kenilworth Avenue, Greenwood Cliff and Harding Place. CitiSculpt and partner Armada Hoffler Properties have finished the apartments, called Greenside.
CitiSculpt hopes to begin construction on the office portion "sometime in 2019," said Charles Lindsey McAlpine, managing partner at CitiSculpt.
"We're being cautious about entering the office market," McAlpine said, adding the proposed office building has a unique floorplate size (approximately 13,000 square feet) compared to a typical office building layout. That size might be a good fit for groups like high-net worth offices, back offices of larger companies or similar types of tenants versus a large corporate user, McAlpine said.
The group is currently out in the market for pre-leasing and fundraising, McAlpine said. Cushman & Wakefield is marketing the office space. A rooftop restaurant on the building's top floor is planned, he added, but the group is waiting on the right user to lease that space. Ground-floor retail is also expected, according to a leasing brochure for the project.
McAlpine said CitiSculpt has gotten "somewhat positively distracted" on other ventures, including opportunity zone funding programs. Opportunity zones, a tax break introduced in last year's federal tax overhaul for which the IRS issued proposed regulations this fall, allow investors in a qualified opportunity fund to defer tax on capital gains made in that fund, pay reduced capital gains taxes after five- and seven-year holding periods, and pay no capital gains tax on the appreciation of capital gains invested in the fund if held for at least a decade.
Opportunity zones — economically-distressed areas identified by state governors and approved by the federal government — have become popular among real estate developers and investors since the regulations were issued this fall.
"There's a lot of hype and fear that people will invest in projects that wouldn't work otherwise (without the tax break)," McAlpine said, adding his firm is hoping to mitigate that by investing in projects that are a natural progression of a growth area. Several other real estate groups, including locally-based Grubb Properties and Origin Investments out of Chicago, have cited similar investment theses in their own opportunity funds.
CitiSculpt is rolling out several smaller opportunity zone funds that target projects in specific markets rather than one large fund that targets any and all opportunity zone investments, McAlpine said. It has a $75 million fund out for a $100 million mixed-use project in Greenville, South Carolina, but is eyeing additional opportunities in the Triangle; Charleston, South Carolina; the South Carolina upstate; and two in Charlotte. McAlpine declined to specify projects being considered for Charlotte but said the funds would occur over the next three years.