One year after opening Charlotte office, Alliance gets to work on local deals
As evidenced by the number of projects recently delivered or under construction, Charlotte’s multifamily market has enjoyed substantial success, with record-level unit delivery, absorption and rental growth.
It’s compelled more out-of-region developers to wade into the market, including Alliance Residential Co., which opened its office here about a year ago. The Phoenix-headquartered firm says it has nationally invested in more than $10 billion of real estate and manages a $15 billion portfolio across 19 states.
But despite having a substantial multifamily portfolio, the company approaches development in a conservative manner, according to Donald Santos, director of the Charlotte office, which works throughout North Carolina.
“We’re taking a very disciplined approach,” Santos said. “I feel like a lot of folks are trying to carpet-bomb the market with a ton of units. We’re taking a much more thoughtful approach. When that stress or softness comes to the market, we want to be in a position where our assets are impacted the least.”
In Charlotte, Alliance has two deals in the works. The company filed a rezoning petition last month to develop a 350-unit community at the intersection of Wilkinson Boulevard and Suttle Avenue. Alliance also has a high-profile site bounded by Winnifred, West Morehead and South Tryon streets — the intersection of uptown, South End, the Gold District and Dilworth, as Santos put it — pegged for another project, though Santos declined to elaborate on details.
“We expect it will be very well received in the market,” he said. “We’re looking at a few opportunities to differentiate ourselves. It’s going to be a really cool project.”
Part of Alliance’s approach is developing communities that are experience-driven, Santos said. He estimated between 60% and 70% of a community’s amenity package is consistent across all deals while 30% to 40% is tailored to the local market and individual asset’s brand.
With its urban multifamily deals, Santos said retail and co-working come into play as ground-floor amenities.
“It changes from deal to deal,” he said. “People are spending less and less time in their apartments, so (we’re adding) amenities that conform to the lifestyle that they want and trying to offer the best in-class across the spectrum.”
Though the two sites Alliance plans to develop locally are in more urban locations, the firm is eyeing opportunities outside of the center city as well. Santos indicated interest in partnering with commercial developers in master-planned, mixed-use developments growing in popularity in the suburbs.
Portfolio differentiation is a key strategy for most in real estate, and Alliance is no exception.
“We try to develop across all building types,” Santos said. “It’s healthy from a diversification standpoint and also recognizing that there is a rent spectrum. If you’re focused solely on that $2 a square foot rent market, you’re leaving a big component of the market out. When the market moves on you, you want to be able to have various offerings, hitting those various targets, just from a safety perspective.”
But there remains pent-up demand for multifamily product in urban locations, which explains why so many developers, Alliance included, are targeting sites in close proximity to center city and Class A office and retail.
Santos said Charlotte’s apartment market should remain strong but at this point in the cycle, only the best projects are going to get financed and cross the finish line. Job growth in Charlotte has propped up the local apartment market; as that tapers off slightly, so will demand for apartments.
He predicted 2017 will see substantial delivery that will slow in 2018 and 2019.
“It’s been interesting to see banks showing that discipline to not necessarily turn the valve off, but turn it down,” Santos said. “I think it’s good for the market. Supply and demand is the driver (for rent growth) — anything that restricts supply is going to influence pricing. We need a steady supply of new product coming online.”
To view the article, visit the Charlotte Business Journal.