CarterBlog

Carter Pursuing $500 Million in Development, Investments

Firm’s Focus Centers on Multifamily, Student Housing Projects and Office Investments

ATLANTA (Dec. 8, 2011) - With the sale of its brokerage and property management groups complete, Carter is focusing on new investment and development opportunities as well as growing its program management and strategic consulting groups.

Moving forward, Carter will leverage its 54-year-old brand to create value through its strong relationships. Specifically, Carter is focusing its efforts on the:

• Development of mixed-use and for-rent multifamily projects in urban infill locations.
• Equity development of student housing.
• Acquisition of opportunistic and value-add investments in office.
• Growing its well-established project management and strategic consulting businesses.

The firm’s more than 100 high-caliber associates will serve clients using a high-performance team-based approach that results in delivering maximum value for our clients and investors. This approach allows Carter to leverage the firm’s strong expertise and deep knowledge base in a wide variety of markets and product types.

“The sale of our brokerage services and property management businesses marks a milestone for Carter,” Chairman and CEO Bob Peterson said. “This transaction was a major step for us in executing our strategy to narrow Carter’s focus on building high-quality projects, investing in real estate and providing strategic solutions to our clients.”

Carter’s development business expects new opportunities to emerge as corporate and educational development begins to rebound. Carter is the No. 3 commercial developer in the United States, as ranked by National Real Estate Investor, and currently is overseeing The Banks, one of the largest mixed-use projects in the Midwest. Carter is master developer of The Banks, a $600 million development on the Ohio River in Downtown Cincinnati, Ohio. Late last month, Carter announced plans to double the size of the retail and multifamily components along with new marketing efforts for the proposed office component.

In the K-12 education realm, Carter is currently overseeing a $107 million public school building program in Enid, Okla.

The firm’s Interiors group continues to be a leading third-party provider to top law and financial firms and grown its business well beyond Atlanta. The Interiors group currently has more than 500,000 square feet under construction for clients such as AT&T, RockTenn and Starwood Vacation Ownership.

Carter’s Higher Education and Campus Innovation team is currently leading a $100 million program at the University of Louisiana Lafayette that comprises 2,000 beds and 900 structured parking spaces.

“Our 54-year history of development across the Southeast and beyond positions Carter to take full advantage of new development opportunities,” said Carter President Scott Taylor. “Our Development group is well positioned when it comes to developing and building out corporate, institutional and educational buildings and facilities.”

Carter’s Investments group is actively seeking new opportunities across the country. Vice Chairman Jim Shelton, who leads Carter’s Investments group, said he expects to see more high-quality assets to come to the market at distressed prices. Carter recently invested in City Federal condominiums in Birmingham, Ala., and Valencia condominiums in Ponte Vedra, Fla., and played a key role on Piedmont Office Realty Trust’s acquisition of The Medici office building in Atlanta.

The firm also serves as a service provider to Carter Validus Mission Critical REIT, which is focused on acquiring mission critical facilities such as data centers and healthcare facilities. John Carter, a Carter vice chairman, serves as CEO of Carter Validus Mission Critical REIT.

In other areas, Carter’s strategic consulting group has performed advisory assignments for seven major clients in 2011 alone. Carter will continue to deliver high-quality service and results from its asset management division, which oversees more than $2.5 billion of third-party and Carter-owned properties.

“Moving forward, you will see Carter aggressively leveraging our thought leadership and experience to pursue and participate in high-quality developments and investments on behalf of our firm and our clients,” Carter’s Peterson said. “We will do this while continuing to build on our core values of integrity, commitment and excellence.”

About Carter

Founded in 1958, Carter is one of the country's leading real estate development, investment, and advisory firms. The firm has headquarters in Atlanta and operations across the country. Carter focuses on development of mixed-use and multifamily projects in urban infill locations, equity development of student housing, acquisition of opportunistic office, project management and strategic consulting. Carter’s high-caliber associates create value for clients using a team-based approach that leverages strong expertise and a deep knowledge base in a wide variety of markets. Carter is the country’s third-largest commercial developer, according to National Real Estate Investor, with strong higher education, k-12, interiors, and corporate specialty practices. Carter also focuses on value-add real estate investment opportunities, currently overseeing a $550 million portfolio. Carter’s asset management division manages more than $2.5 billion of third-party and Carter-owned assets. Its strategic consulting practice provides clients with customized real estate solutions. As it has for 54 years, Carter will continue to build on the firm’s core values of integrity, commitment and excellence and strive for a culture based on trust and candor. For additional information on Carter, please visit http://www.carterusa.com.

 

Carter Says City Federal is 93 Percent Sold

By John Akin, senior vice president, Carter

BIRMINGHAM, Ala.(Dec. 7, 2011) - The City Federal Building in Birmingham, Ala. is 93 percent sold with only six condominiums still available. Carter acquired the note for the 27-story, mixed-use building back in October 2010. At the time Carter took control of the building, 32 of the 84 condos were unsold. Carter also acquired 15,000 square feet of retail in the building that is currently being marketed by Harbert Realty.

In addition to condo sales, there have been some other exciting happenings at City Federal. Last month, six scrapbooks complete with photos, newspaper clippings, documents and memorabilia were found in a closet of the building.  The books covering decades of City Federal Savings & Loan history were moved around the building during renovations until Ingram & Associates’ Tom Loyd examined the scrapbooks. Along with several real estate agents from Ingram, I had the honor of presenting the scrapbooks to Jim Baggett, head of archives at the Birmingham Public Library. For the complete story, click here.

Added to the National Register of Historic Places in 1984, City Federal remains the tallest neo-classical skyscraper in the Southeastern United States. City Federal remained an office building until 1995, when it closed its doors. The building stayed vacant until March 2005 when the new owner began a $20 million renovation to convert the building into condominiums.

The renovated condominiums feature nine-foot ceilings, large windows, gourmet kitchens with granite counter tops and stainless steel appliances, ceramic tile in the bathrooms, hardwood floors in the living areas and kitchens, elevator lobbies with original tile floors and a restored original Grand Street-level residential lobby.

Carter's Investments group is actively seeking new opportunities, especially in multifamily and value-add office across the country. For more information, check out Carter’s Investment page.

 

Carter Expert Gives Update on Capital Markets

By Michael Seton, executive vice president of Investments and Advisory, Carter

NEW YORK (Oct. 19, 2011) - At Carter, we keep a close eye on capital markets. The commercial real estate finance market has seen a significant negative jolt over the past four months - the significant sell of the public equities and fixed income markets has had a correspondingly negative effect on the U.S. real estate debt markets.  

By way of example, in April 2011, AAA CMBS spreads were approximately 175 basis points over the 10-year swap rate but had backed up to over 300 bps over the equivalent swap rate in early October 2011.  

On a typical 60 percent loan-to-value loan, the coupon can be well in excess of 6 percent (versus sub 5 percent previously).  Despite Treasuries bonds dropping to all-time lows, lenders haven't necessarily dropped their absolute rates, which has led to spread widening to levels we only observed at the depths of the financial crisis in 2008 and early 2009.  

Borrowers are turning to balance sheet lenders in droves because the risk of the bond markets widening further is too great.  The challenge for borrowers is that insurance companies put out big dollars in early 2011, and are, as a result, largely getting full on quota.  

Banks remain under pressure from both residential mortgage woes (as evidenced by the constant headliners in the Wall Street Journal and The New York Times) and capital and other regulatory requirements, and as result remain reluctant to aggressively lend.  

Until the European crisis is resolved (which likely won't occur until more pain is endured, including the inevitable Greek default), we will continue to see volatility and lack of confidence by lenders in the real estate finance world.

 

The Story Behind The Medici

ATLANTA (Sept. 15, 2011) - Back in June, Carter sourced the acquisition of The Medici Office Building on behalf of Piedmont Office Realty Trust (NYSE:PDM). This morning at NAIOP Georgia’s September breakfast meeting titled “Deals Done in 2011...Diamonds in the Rough”, Carter Vice Chairman Jim Shelton shared the story behind the acquisition of the Medici in Buckhead. Check out coverage from the event below.

 

Other featured panelists included Duncan Gibbs with Jones Lang LaSalle, Jim Ingram with Parkway Properties and Jeff Kelley with Colliers International. Moderated by Justin Parsonnet with CB Richard Ellis, the panelists chatted about their recent deals and successes. Duncan shared insight into leases completed for Kilpatrick Townsend and Morris Manning & Martin, Kelley spoke about McGuire Woods, 22Squared and RockTenn and Ingram about the acquisition of 3344 Peachtree and his work for the Teachers Retirement Fund of Texas.

Near the end of the panel discussion, Parsonnet asked the panelists to look toward the future. “Which submarkets are best for purchase and have the best dynamics for your clients?” The answers were varied. Shelton and Ingram agreed on Buckhead, Midtown and Central Perimeter. However, Shelton added Carter is an opportunistic buyer and would go where the price was right. Kelley thought his focus would remain in the tech corridor in North Fulton, and Gibbs said he favored Atlanta’s urban markets due to the Echo Boomers’ desire to live and work in urban areas.

 

Carter Invests in Class A Apartment Community in Jacksonville, Fla.

By Malloy Peterson, vice president of marketing, Carter

ATLANTA (Dec. 28, 2010) - Carter has joined with Wood Partners and Lubert-Adler to invest in Magnolia Village Apartments, a class A rental community in Jacksonville, Fla.

The apartment community, located at 1620 Bartram Road in Jacksonville's desirable Southside neighborhood, comprises 168 units in six buildings. The Wood Partners-led investment group acquired the complex "on a short-sale basis at a significant discount to replacement cost," Wood Partners said today in a press release announcing the acquisition.

Carter decided to invest in Magnolia Village Apartments because of the opportunity to acquire a high-quality asset at a price well below what it would cost to replace it. Moreover, investing in Magnolia Village offered Carter the change to fortify its presence in the Jacksonville market.

"Magnolia Village presented an opportunity to acquire a class A multifamily asset at a price below replacement cost, in a market Carter believes in, with strong operating and capital partners," said John Akin, a senior vice president in Investments & Advisory who oversees Carter's multifamily investments. "It is the perfect complement to our recent acquisition of Valencia in Ponte Vedra."

In September, Carter Real Estate Fund II acquired Valencia, a distressed condominium complex just outside Jacksonville. Carter is marketing the remaining available condos at Valencia and has land for the development of future units there.

Magnolia Village is a gated apartment community offering one-, two- and three-bedroom apartments as large as 1,513 square feet. The landscaped grounds include a clubhouse, resort-style swimming pool and poolside Wi-Fi access.

"Magnolia Village fits the direct center of our strategy to buy well-constructed, well-located assets in stabilized submarkets that exhibit stabilized cash flow with room for growth," said Jay Jacobson, director of national acquisitions for Wood Partners. "We found the near-in Southside area attractive due to its infill nature, which was further enhanced by the adjacent redevelopment of a Publix grocery store that anchors a new neighborhood shopping center - a convenient amenity for our residents."

 

 

 

Be Patient, Market Distress Will Create Variety of Real Estate Opportunities

By Eli Green, Vice President of Investments, Carter

I recently had the opportunity to sit on a commercial real estate panel to discuss the “10 Things You Need to Know About Distressed Assets” from an investor’s point of view. The educational discussion, sponsored by the Atlanta Commercial Board of REALTORS took place in June.

The panel comprised myself, an attorney specializing in representing special servicers, a special servicer/asset manager and a broker with significant experience dealing with distressed assets. They were Chad Defoor, an asset manager with Trimont Real Estate Advisors, Harrison Coleman, a partner with Coleman Talley and John Leonard, Regional Director with Marcus & Millichap. Lance Healy, Cushman & Wakefield leasing manager, moderated the discussion.

As an owner/operator, we believe distress in the market will create a variety of unique opportunities for Carter over the next few years. Our investment strategy is to position ourselves to make strategic investments in office, industrial and mixed-use assets across the Southeast where we can leverage our operational platform and maximize our investor’s returns. In addition to investing our own capital, through The Carter Real Estate Funds, we generally partner with private and institutional investors who are seeking to align themselves with owner/operators like Carter who are stable organizations with a proven operational and investment track record.

There was significant discussion regarding the distressed asset acquisition process, which is often very unique and complicated.  One of the most important things to understand in the process is the seller.  Who is actually in control and what are their motivations?  Sellers of distressed assets range from owners/developers, banks, special servicers to bankruptcy auctions, to name a few.  Three years ago, sellers were focused on maximizing their gains, but today many sellers are focused on minimizing their losses.  Another consideration is the timing associated with the different level of required approvals resulting from the variety of parties involved in the deal on the seller side, like borrowers, lenders, etc.

Another topic focused on Atlanta’s distressed office market.  As everyone knows, this distress was ultimately caused by the confluence of easy money, job losses, overbuilding and corporate contractions. Overall office vacancy rates are higher than they’ve been in over 10 years, and we are still experiencing negative net absorption.  Until we see significant, sustainable job growth, this distress will remain.

Despite the challenges, though, distressed assets present opportunities for well capitalized investors.  Similarly, brokers have an unprecedented opportunity to add value to these complex transactions.  However, everyone involved has to be willing to roll up their sleeves, expand their areas of expertise, think outside the box and, most importantly, be patient!

As vice president, Eli's primary focus is day-to-day management of The Carter Real Estate Funds. His responsibilities include acquisitions, due diligence and financing of the Carter Real Estate Fund investments. Since joining Carter, Eli has been involved in the acquisition, development, financing and disposition of over $900 million of office, industrial, retail and residential properties in Georgia, Florida and North Carolina.