Bloomberg News
6:29 a.m. Monday, February 6, 2012
Bank of America Plaza, the tallest building in metro Atlanta, is going on the auction block Tuesday.
The 55-story, 1,023-foot building will be sold on the steps of the Fulton County Courthouse after landlord BentleyForbes missed mortgage payments.
The California-based commercial real estate investment firm bought the tower at the height of the real estate boom for an Atlanta-record $436 million. It has been working to avoid default.
The main $363 million loan on the tower went to a special servicer LNR Partners in February, while a second loan had been in default for nonpayment.
The foreclosure of Bank of America Plaza comes as delinquency rates for commercial mortgage backed securities, or CMBS, a type of loan for commercial properties, reached an all-time high in metro Atlanta in December, according to Trepp, a real estate research firm.
With a $12.8 billion CMBS balance outstanding, $2.73 billion, or 21.3 percent was 30-plus days delinquent or worse -- compared with 13.2 percent in December 2010, Trepp said.
If a buyer could snap up the tower at a major discount, they could offer space at below market rent -- a major competitive advantage, said Ronald Glass, a principal at GlassRatner Advisory & Capital Group.
"There is a lot of capital on the sidelines ... looking for opportunities," Glass said.
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By Elliott Brown, Wall Street Journal
Office-building construction is in the midst of a severe drought. This means higher rents may be on the horizon in some cities, if history is any guide.
In the U.S. last year, developers broke ground on office buildings with a total of just 56 million square feet of space, the lowest level tracked by McGraw-Hill Construction since at least 1960.
Even during the early 1990s, in the aftermath of a surge of construction a decade earlier that left cities around the country dotted with empty office buildings, the U.S. never dropped below 80 million square feet of new office-building construction a year, according to McGraw-Hill. And analysts don't expect construction to pick up anytime soon.
ClosePart of the reason for the low level of construction is that vacancy rates stood at 17.2% at the end of 2011, up from 12.3% in 2007, according to real-estate-research firm Reis Inc. And while the economy added 243,000 jobs in January, given the overall sluggish pace of the recovery, it could still take a few years to fill the empty office space. In addition, companies have been packing employees closer together in offices, reducing their needs for space, and putting off large decisions like signing long-term leases in new office buildings.
The arid landscape comes as banks have become skittish about lending, especially for high-risk ventures such as the financing of office buildings.
But if the economic recovery picks up speed, the construction lull could lead to higher rents and property values, particularly in some big cities such as New York and San Francisco, where demand for space can shoot up and companies can quickly gobble up the empty space on the market.
Yet office markets vary, and some hard-hit cities such as Las Vegas and Atlanta may take years to fill the vacant office space, making rents there unlikely to rise significantly.
The past few cycles show rents in some areas are prone to big jumps a few years after low levels of construction, as vacancy rates fall quickly. Following a big drop-off in construction in the early 1990s, rents rose more than 12% a year for four straight years in the top 50 metropolitan areas, according to Reis. For example, after a multiyear slowdown in development that followed the 2001 recession, rents in Manhattan jumped more than 30% between mid-2006 and mid-2007, according to brokerage Cassidy Turley.
Such is the paradox of the office-space market: Developers and lenders don't like to build until demand is strong. Rents must be high, vacancies low. But once those fundamentals fall into place, it takes years for buildings to be constructed. In the meantime, job growth leads to higher demand for space, which pushes rents higher.
"Aligning office construction with future demand can be really inefficient," says Tad Philipp, director of commercial-real-estate research at Moody's Investor Service.
Broadly for the economy, the current lackluster construction activity poses challenges. Fewer office buildings mean fewer jobs for construction workers, from plumbers to ironworkers, contributing to the construction sector's 17.7% unemployment rate.
With relatively few new developments, the existing stock of office buildings is aging. Some urban planners worry that U.S. cities could fall behind other global centers where there has been more construction of modern offices—complete with taller ceilings and other efficiencies—desired by many top-paying tenants.
However, office-building construction isn't likely to bounce back until there is some combination of higher rents and property values, and less restrictive financing. Prices in most markets are still well below their 2007 peak, making the cost of new buildings too expensive to justify in the face of cheap existing buildings.
There are a few markets where property values have come back quickly. Both New York and the San Francisco area, where a technology boom has pushed rents up rapidly, are seeing a few speculative office buildings break ground.
But generally, banks remain conservative in their lending. Unlike past peaks, when they funded construction projects with few or no tenants, banks now generally require developers to have prelease agreements for as much as 50% of a building before getting started. In addition, banks typically require that developers cover around half of a project's cost themselves.
In Portland, Ore., for instance, office builder TMT Development Co. started the foundation for a 26-story downtown office tower in 2008 and then searched for a lender to finish the project. The company shelved the project in November, unable to find a lender.
Traditional lenders "were out of the market," said TMT President Vanessa Sturgeon.
"The pendulum swung from one end of the spectrum to the other," she said.
Now Ms. Sturgeon wants to restart in late 2013. By that time, perhaps rents will be rising fast, giving lenders the comfort they need to come back to the table.
Write to Eliot Brown at eliot.brown@wsj.com
Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved
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Published: Friday, February 03, 2012, 6:04 AM
By Mobile Press-Register Editorial Board Press-Register
EAGER TO revive its central business district, Mobile is leading a statewide effort to give cities the tools they need to attract new investment.
Expect several bills to be filed in the upcoming legislative session that would use tax incentives to encourage investors, property owners, artists and others to consider downtown districts in Alabama when they’re planning projects.
The bills deserve legislators’ swift approval.
Because the tax incentives apply to new development, they would not detract from current revenues. This is an important point, especially at a time when cities are starving financially.
In fact, these incentives could turn dilapidated properties into revenue-generating ones — helping cities add to their coffers. Many other states have enacted similar measures, with good results.
One proposal for the upcoming session would give businesses and investors an income tax credit for investing in projects in low-income communities in central business districts. Another bill would give property owners a state income tax credit, similar to a federal one, for rehabilitating historic structures downtown or in historic districts. (These two would apply to Birmingham, Mobile, Montgomery and Huntsville.)
A third bill would encourage artists to live and work in cultural districts by exempting their works of art from sales taxes. Birmingham leaders, meanwhile, are backing a bill to encourage “angel” investors to provide capital for downtown startups.
Similar bills have been proposed in previous years, according to proponents, but Alabama’s special interests shot them down, contending that they would steal revenue from schools and state agencies.
But that’s just dead wrong. On the contrary, tax incentives for new investment can increase the size of the entire pie.
Moreover, developed properties would increase in value, resulting in more property tax revenues. The very process of building or revamping them would create jobs for construction workers and other employees later, sending positive economic ripples throughout the community.
Imagine, in a few years, a vibrant downtown district, known regionwide, that draws locals and tourists to visit shops, eateries and other attractions.
The proposed tax incentives provide a way — driven by the private sector — for cities to get there. What a boon that would be for Mobile.
© 2012 al.com. All rights reserved.
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Published: Friday, February 03, 2012, 4:50 PM Updated: Friday, February 03, 2012, 5:07 PM
By Marian Accardi, The Huntsville Times The Huntsville Times
HUNTSVILLE, Alabama -- Construction is about to start on an addition to the Huntsville-area apartment market - Providence Place Apartments in west Huntsville's Village of Providence.
The Sterling Group, based in Mishawaka, Ind., is co-developing the apartments with Todd Slyman and David Slyman Jr., the founders of Providence.
Lance Swank, the chief operating officer of The Sterling Group, said site work at the northeast corner of Providence Main Street and Biltmore Drive will start next week. The first phase of Providence Place has 226 units, with completion expected by April 2013.
"The first buildings will be available for occupancy in September," Swank said.
The project could potentially have another 90 units, depending on the success of the first phase, he said.
Why build in this area, and why now?
"We do an extensive amount of research in markets we're interested in," said Swank, and Huntsville has "all the characteristics that draw us to a community," including a diverse economy, a large white-collar workforce and sustained income and population growth.
"There are extremely high occupancy rates in the existing multifamily properties in the submarket" where the Village of Providence is, he said. "It's a supply-constrained market right now."
The property also will have a competitive advantage being in the Providence community, he said.
There are a number of other apartment projects under construction or planned this year.
In downtown Huntsville, Charlie Sealy III and his wife, Sasha, are converting the vacant Belk Hudson building on Washington Street into 75 loft apartments.
"We're under construction right now," said Sealy, who expects Belk Hudson Lofts to be open in the fall, sometime around September or October.
Sealy is the vice president of Tuscaloosa-based Sealy Management, which already owns and manages 2,329 apartment units in Huntsville.
Among other multifamily properties:
• Work is expected to start in early March on Franklin Hills, a 56-unit low-income housing tax credit property for ages 55 and older at 5300 Millennium Drive in northwest Huntsville. Mike Brandt, vice president of construction for the developer, Atlanta-based TBG Residential, said the project should take about 12 months.
• Construction should start in the late summer for roughly 240 luxury, urban-style lofts as part of a planned redevelopment of the former Councill Courts public housing site near Huntsville Hospital, a joint project between Bristol Development Group and PGM Properties.
"It's going to be a game changer for Huntsville," said Sam Yeager, one of the founding partners of Bristol Development Group.
• Depending on the weather, plans are to break ground in March for Limestone Creek, a 528-unit apartment complex in west Huntsville, east of Mooresville Road and north of the I-565 service road.
"We'll probably start with a little over 100 units for the first phase," said Jim Hall, who handles site planning for the developer Edward Rose Properties. "It will probably take us three to four years to build" the entire complex.
© 2012 al.com. All rights reserved.
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BIRMINGHAM, Alabama -- A long-planned mixed-use project in Lakeview is now under way, with plans to open its doors this summer.
29 Seven, the $15 million apartment and retail development at 29th Street and Seventh Avenue South, is moving forward after years of delays.
On Friday, a "Going Vertical" event was held, as officials with the city of Birmingham and developer Retail Specialists Inc. surveyed the building's steel frame and ongoing construction.
Plans call for a four-story building with 54 apartments and 19,450 square feet of retail space. It is expected to be complete by Aug. 1.
Huey's 24/7 Diner is the only announced tenant for the retail space, and there are four letters of intent from other potential tenants -- all restaurants, said Dick Schmalz, chief development officer with Retail Specialists Inc.
"(Lakeview is) already established as an entertainment district," he said. "Obviously, this project is going to add even more to that."
Schmalz joked that his company opted to skip a traditional groundbreaking, because the project has had several stops and starts. They figured guests would want proof that it was going to happen.
29 Seven has been in the works for more than six years, but it stalled amid the sour economy. Originally, it was to include 80 for-sale condos, structured parking and, at one time, a possible grocery store, but plans changed along with market conditions.
Schmalz credited city officials and Operation New Birmingham for assistance in getting the project back on track.
An incentives package approved for the project allows up to $1.5 million in sales tax rebates over 10 years.
Birmingham City Councilman Johnathan Austin said he is excited to see the project take shape, and anyone who wants to do similar projects in the city will get support.
Birmingham Mayor William Bell said 29 Seven helps the city create jobs, in addition to bringing more residents to the city center and enhancing a key entertainment district.
Lakeview, the mayor said, "will take on a new character with this project under way."
Join the conversation by clicking to comment or email Kent at dkwi@bhamnews.com.
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By Jill Nolin, Montgomery Advertiser, jnolin@gannett.com
The former Madison Hotel in downtown Montgomery, which has struggled to reinvent itself over the years, will undergo a $5 million overhaul and reopen later this year as Doubletree Hotel, a 130-room facility.
John Tampa, who bought the beleaguered hotel site late last year, said he plans to gut the hotel. He hopes his investment and the drastic renovation project will return the hotel to its former glory of the 1970s. It was most recently called the Clarion Hotel.
"Nothing will stay except the walls," Tampa said Thursday, adding that he hopes to open the new hotel this summer.
The hotel generated a buzz in the community when it was first built in 1973, according to local historian Mary Ann Neeley. At the time it was considered "quite a rarity" because of its decor and unusual mascots -- it kept live birds in cages in the lobby -- and its restaurant offered Montgomerians a chance to taste fine Italian food, according to Neeley.
"It was the first of the nicer hotels in downtown," Neeley said.
The possibility of the hotel seeing a rebirth has been intimated before, but those past failures have not dulled the enthusiasm among city officials. Mayor Todd Strange held a news conference on Thursday to announce Tampa's decision to renovate and reopen the hotel. Construction has already started.
Strange believes the suites that the hotel will offer will create ample space for the families that come to Montgomery for athletic events at Cramton Bowl and the sports complex that is still under construction. He also said the hotel project will allow the city to better market the convention center.
This Doubletree Hotel will serve as an overflow hotel for the Renaissance Montgomery Hotel & Spa at the Convention Center, but that does not mean it is skimping on features. The hotel will have a fitness center, a full-service restaurant and bar, and 10,000 square feet of meeting-room space that would accommodate as many as 500 people.
Tampa already runs three other hotels in the Montgomery area: Two Hampton Inn and Suites hotels -- one in downtown and one in Hope Hull -- and a Fairfield Inn and Suites in Hope Hull that will open in April.
Tampa attributed the site's past struggles with timing -- the momentum of downtown redevelopment just was not there -- and the way the hotel was operated. He also believes the Doubletree brand will lend itself well to the hotel.
"We believe the opportunities in downtown (Montgomery) are better than any other market," Tampa said. "We believe the growth is here."
It is unclear how much demand there is for more hotel rooms in the immediate future, but Dawn Hathcock with the Montgomery Area Chamber of Commerce anticipates a growing demand in the next few years.
The occupancy rate of hotels in 2011 was 52 percent, which was up only about 1.5 percent from 2010. The hotels that are the downtown grouping -- that includes the Embassy Suites Hotel, Renaissance and Hampton Inn in downtown and the Homewood Suites and Hilton Garden Inn off Exit 4 -- had an occupancy of 64 percent last year.
Montgomery currently has more than 7,000 rooms throughout the city. So far this fiscal year, the lodging tax proceeds are up 5.2 percent after a particularly strong month in December, according to city records.
"There's a lot of things on the books, but it always comes down to what translates into real numbers so you never know, but I'm optimistic about it," Hathcock said Thursday. "The hard thing, too, is that what we're selling today doesn't happen for two years."
Hathcock likes the location of the new Doubletree Hotel because it is in the middle of the new sports complex on Madison Avenue, government buildings and the convention center.
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Proposed Riverwalk site would combine residential and commercial units
By Patrick Rupinski
Staff Writer
Published: Saturday, January 28, 2012 at 3:30 a.m.
TUSCALOOSA | An Atlanta developer will present a new plan to the City Council on Tuesday for a mixed-use development on one of the prime locations for private development along the city’s Riverwalk.
Carter, the development company, has revised a plan it first presented in December to the city’s planning commission.
The original proposal for the development, called 115 Greensboro, had 270 apartment units for student housing. Student housing complexes typically are rented by the bed and that proposal showed 854 beds.
It also showed 7,500 square feet of retail space.
That plan ran into criticism from some city officials and planners, who said it had too little retail and commercial space and too high of a concentration for student housing for the size of the site — the former Tuscaloosa Chevrolet property at the intersection of Greensboro Avenue and Jack Warner Parkway. It also failed to win the planning commission’s endorsement, which deadlocked in 4-4 vote.
Since then Carter has revised the plan several times, and Carter President Scott Taylor said Friday that revisions are still being made to address concerns expressed by city officials.
Taylor said the final plan won’t be available until it is presented to the City Council on Tuesday and that he expects the plan will see changes up to the last minute.
Information circulated last week by Richard Chaffin, who co-owns the development site, showed a revised plan dated Jan. 20. That plan showed the number of apartment units reduced to 225 with 694 beds and retail space increased to 30,438 square feet.
That plan shows retail space along the ground floor of the development that fronts Jack Warner Parkway and an extension of Greensboro Avenue along the western edge of the site.
Drawings show the complex being three to four stories, compared to the four to five stories originally proposed. The complex still surrounds an interior parking deck, but the deck no longer would be higher than the surrounding apartments.
Mayor Walt Maddox criticized Carter’s original plan in December, saying it was not the best use for one of the Riverwalk’s key parcels.
On Thursday, he said he was not satisfied with the latest proposal.
He said the new proposal had more commercial space but only a small reduction in the student rental housing.
The Riverwalk’s master plan calls for mixed-use developments that have commercial, office and residential space, he said.
“This is one of the last major pieces of the Riverwalk available for development so it must be done right,” he said.
Student housing has a role in the Riverwalk’s mixed-use plan but it should not dominate it, Maddox said.
The mayor said he also was concerned about the development being sold after it is built. If that happens, commitments made by the developer to win City Council approval might not be fulfilled, he said.
Taylor said Carter enters into developments as long-term investment opportunities, but market conditions can affect decisions to sell a property.
He said the development’s apartments would be designed to appeal to young professionals, those who work in the area and students.
Copyright © 2012 TuscaloosaNews.com — All rights reserved. Restricted use only.
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SPANISH FORT, Alabama  -- A California investor paid $1.56 million for a newly built, 6,200-square-foot Advance Auto Parts store on 1 acre on Mill Lane, off Ala. 181, in Spanish Fort, according to Charlie Christmas of Christmas Properties. He is one of the developers of the store, which is across from the Eastern Shore Centre.
Eastern Shore Baseball Academy opens this week in a 7,000-square-foot building in Austin Place Commercial Park on Rand Avenue, off Baldwin County 13, in Daphne, according to owners Tim Cockrell and Jared Myrick. The indoor facility features batting, pitching and catching mounds for baseball and softball, as well as private instructors.
Local investors paid $450,000 for the 15-acre Appaloosa Commercial Park on U.S. 98 in Elberta, according to Peggy Summerville of ERA Class.Com, who represented the buyers. Skip Davis of ERA Class.Com worked for the seller. The property is 7 miles east of the Foley Beach Express.
Six months after paying $250,000 for the bank-owned, five-unit Surf Rider condominium complex on 10th Street in Gulf Shores, the local investor has sold it for $285,000 to Louisiana investors who were represented by Gloria Sims Crump of REMAX of Gulf Shores. Three of the five two-bedroom units were renovated, she said. The 1980's complex is are across the street from the beach.
Dependable Machining Services paid $444,000 for a 15,000-square-foot office warehouse at 23226 Grissom Drive in Robertsdale, according to Philip Hodgson of Coldwell Banker Commercial Reehl Properties, who represented the seller. Pete Riehm of Grubb & Ellis/Peebles & Cameron worked for the buyer.
Beauty & Beyond has leased 11,040 square feet at Westgate Shopping Center on Airport Boulevard in west Mobile, and plans to open in early spring, according to Matt Cummings of Cummings & Associates, who represented the landlord. Christmas Properties worked for the beauty supply business.
PS Services, a tire distributor, has leased an 8,360-square-foot office warehouse at 1800 E. I-65 Service Road N., according to Bob Cooper of Prudential Cooper & Co. commercial division.
Jay A. York PC has relocated to 2,325 square feet in The Executive Center at 917 Western America Circle, according to Janet Keene of Bender Real Estate Group, who worked for the landlord. Tricia Graham of Roberts Brothers West represented the law firm.
Birmingham-based law firm Heninger, Garrison, Davis has opened in 780 square feet at 169 Dauphin St., on Bienville Square, according to Lewis H. Golden of The Drummond Group.
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By MAURA WEBBER SADOVI
After a four-year hiatus on the sidelines, California investor Judah Hertz is buying office buildings in small cities with some of the highest vacancies and lowest demand in the country. That probably means more torment for other landlords in these markets.
Mr. Hertz is buying for such a low price that he says he is going to be able to undercut the competition, charging lower rents and offering more incentives to tenants. Competitors who can't match him might see their occupancies rise.
"I should be in a very competitive situation," Mr. Hertz says.
As his first test of this strategy since the downturn hit, Mr. Hertz is buying 15 properties in Richmond, Va., Memphis, Tenn., and Jackson, Miss., from Parkway Properties Inc., in a deal that values them at $147.5 million. The portfolio's 24% vacancy rate is even higher than those of the overall markets. Third-quarter vacancy rates were 16.1% in Richmond, 22.1% in Memphis and 17.5% in Jackson, according to Reis Inc.
But the price Mr. Hertz is paying is so low that the portfolio's net income represents a yield of about 10%. "By buying buildings at lower prices like $60 a square foot, I'm able to compete with other people who paid $100 or $150 a square foot for their buildings," Mr. Hertz says. On average, Mr. Hertz paid about $76 a square foot for the portfolio.
Attractive yields are increasingly luring investors like Mr. Hertz further afield to office markets in smaller cities and suburban areas. During most of the downturn, investors have focused on major cities like New York and Washington, but this has driven prices up and yields down, to under 5% in some cases.
Mr. Hertz's company, Hertz Investment Group of Santa Monica, Calif., owns a portfolio of 12 million square feet of office space in 16 markets, including the recent purchase from Parkway. Under the terms of that deal, Hertz will acquire the properties for about $105.8 million and assume $41.7 million in existing mortgages on the properties.
At closing, Mr. Hertz also hopes to put other mortgages on the properties, bringing their overall leverage to 75%. The rising availability of financing helped convince Mr. Hertz it was time to begin buying again, he says.
Mr. Hertz, 62 years old, knows his way around both big and small cities. A native of Brooklyn, N.Y., he first got into the real-estate business in the late 1970s buying industrial buildings in Manhattan's SoHo, and over the years he has bought and sold properties in Miami and Los Angeles.
Mr. Hertz says he stopped buying property after the downturn hit. But, like most active real-estate investors, he didn't escape the pain of the downturn and the rough-and-tumble earlier cycles unscathed. He says he lost money last year when he sold the Hyatt on Capitol Square in Columbus, Ohio, for $20 million as part of an agreement with lenders to accept a discounted payoff on a $32 million defaulted loan. Mr. Hertz paid $38 million for the property in 2007.
A little over a decade ago, Mr. Hertz says his bid to enter the Reno, Nev., casino market also failed after the Nevada Gaming Commission denied him a gambling license, citing concerns about alleged ties to organized-crime figures. Mr. Hertz says he has never been involved in organized crime but that he once made the mistake of being friendly with a reputed mobster. He also says it was a "blessing" that his casino plans were blocked because the office investments he has focused on have been profitable.
For Parkway, the sale to Mr. Hertz closes the chapter on a painful investment for a company whose market capitalization is about $200 million. Parkway says it will recognize a $58 million to $60 million fourth-quarter loss related to the sale of the portfolio as well as two remaining buildings it is still trying to sell in Memphis and Jackson.
Write to Maura Webber Sadovi at maura.sadovi@wsj.com
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Jan 18, 2012 10:50 AM, By Elaine Misonzhnik, Senior Associate Editor
With the increasing popularity of multifamily properties as an investment class, some industry pros are beginning to question whether the sector might end up overbuilt.
So far during this real estate cycle, developers have been extremely conservative in delivering new product to the market. In 2011, less than 40,000 units came on line, the lowest figure in more than 30 years, according to Reis Inc., a New York City-based research firm. Marcus & Millichap Real Estate Investment Services, an Encino, Calif.-based brokerage firm, estimates that multifamily construction completions last year totaled just 35,000 units.
Yet going forward, construction activity in the sector will undoubtedly expand.
In October, 47 percent of respondents to a quarterly survey administered by the National Multi-Housing Council (NMHC), a Washington, D.C.-based trade group, reported a substantial pick-up in land acquisitions, financing deals and permit applications for multifamily properties in their local markets. In 2012, Reis expects to see between 72,000 and 85,000 newly completed units, while Marcus & Millichap anticipates 85,000 new unit deliveries.
Given the abundance of demand for new apartments, that still won’t put the sector in danger of overbuilding in 2012. In 2011, the national vacancy rate for multifamily properties declined 120 basis points from the year prior, to 5.4 percent, Marcus & Millichap reports. Effective monthly rents rose 4 percent, to $995 per unit. This year, multifamily vacancy should fall another 40 basis points, to 5 percent, in Marcus & Millichap’s estimates. Effective rents will likely rise 4.8 percent.
About 43 percent of respondents to the NMHC survey said that multifamily development is near the right level given existing demand, while 54 percent said that demand continues to significantly outstrip supply, even with the expected ramp-up in new construction.
“It is improbable that we will face overdevelopment in 2012 because strong demand should remain in place through the coming year,” says John Chang, vice president of research services with Marcus & Millichap. “For example, the prime renter cohort, aged between 20 and 34, will continue to grow significantly and enjoy an outsized share of job gains. Although employment is not expected to grow at an exceptional pace, it should outpace 2011 performance in the coming year, generating significant housing demand.”
“Almost all markets will experience vacancy declines in the coming year as demand outstrips supply additions,” he adds.
Jubeen Vaghefi, managing director and national leader of the multifamily practice with Jones Lang LaSalle, a Chicago-based real estate services firm, echoes Chang’s sentiments. He anticipates that in core markets, multifamily rents will grow between 5 and 8 percent in 2012. In secondary markets, rents might rise another 3 to 5 percent.
“If you look back over the last five years, there hasn’t been much in the way of new supply, and most people are leaning toward renting versus buying,” Vaghefi says. “Occupancies in most markets are up, so in 2012, we see a continuation of last year.”
Beyond the bend
Things might get trickier, however, once 2013 comes around.
The NMHC reports that 22 percent of its survey respondents said that apartment market conditions in their regions were looser than three months ago, compared to only 3 percent in July. About 51 percent said that conditions remained the same, compared to 30 percent in July, and another 27 percent reported that conditions have tightened, compared to 67 percent in July.
The NMHC Market Tightness Index in October stood at 56, down from 82 in July and a peak of 90 in April. A reading above 50 indicates that market conditions are getting tighter; below 50 shows that market conditions are getting looser.
Even with substantial demand for new apartments, net absorption in the multifamily sector decreased significantly in 2011, to 153,000 units from 225,000 units in 2010, according to Marcus & Millichap. With less than 40,000 new units added to the market last year, lower absorption levels haven’t threatened to become a problem so far.
But as the number of new construction units spikes to between 105,000 and 250,000 in 2013, over-building may become a legitimate concern, according to Victor Calanog, vice president of research and economics with Reis. In the past 20 years, new multifamily construction peaked at 188,870 units in 1999.
As of October, permits for apartment buildings containing at least five units increased 45 percent year-over-year, to 232,000 units, reports Marcus & Millichap. Given a 12-to-18-month construction window, that means the industry might begin to see an imbalance between supply and demand starting in 2013.
“We’ve been bringing up the possibility [of overbuilding] for more than a year now,” says Calanog. “In terms of timing, we don’t think much of the supply will hit till late 2012—that doesn’t even account for the usual delays we experience in commercial real estate construction. If there is indeed a deluge of new buildings coming to the market, the sector will probably feel the brunt of any pain it might cause in 2013.”
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The Birmingham area's industrial real estate market has clawed its way back to pre-recession occupancy levels with prospects of getting better, while its office and retail segments continue to try to break the grip the sluggish economy has had on the market.
Year-end figures compiled by EGS Commercial Real Estate suggest the industrial market seems to have found a cure for its vacancy ills faster than the other two sectors.
Industrial space was 84 percent occupied in the metro area at the end of 2011, according to EGS's market report. That's up from 78.9 percent last year and the highest point since before the recession's impact began to be reflected in the real estate market.
"The biggest thing was how the southwestern market healed," said Mark Byers, head of the industrial division at EGS. "It just took a couple of nice-sized deals for it to happen."
Byers said it's encouraging to see how one or two big deals can take chunks of space off the market and quickly boost occupancy levels for an entire market.
It's going to take more of that to spur new development, though.
"I think the market is going to have to get a lot tighter before you see new construction, unless it's a build-to-suit," Byers said.
With a number of Mercedes-Benz suppliers looking around the market, the distribution sector expected to get a bump with the opening of the Norfolk-Southern rail hub, and companies having put off expansion for as long as they can, fortunes could change quickly, Byers said.
Overall, the market's rented industrial space filled 730,127 square feet more space than it vacated during the year, led by a 390,260 square-foot net gain of leased space in the southwest part of the metro area (which includes Bessemer, McCalla and Hueytown). The only part of the metro area that had a net loss in leased industrial space for the year was the eastern market (Trussville, Leeds, Center Point).
Industrial rental rates averaged between $3.68 per square foot in the eastern market to $5.67 per square foot in the Oxmoor Valley at year's end.
The retail market, meanwhile, ended the year exactly where it started it with an occupancy of 87.6 percent. Only the retail centers on the U.S. 31 South corridor (Pelham, Alabaster and parts of Hoover) broke the 90 percent mark with an occupancy of 94.6 percent at year's end. The western section of the metro area (Bessemer, McCalla) finished with the lowest occupancy rate of 83.3 percent.
Rental rates for retail space at year's end averaged between $8.81 per square foot in the northern market (Gardendale, Fultondale, Adamsville, Graysville) to a high of $31.75 per square foot in the Hoover-Riverchase market.
After ending 2010 on the verge of breaking the 90 percent occupancy barrier, the metro area's multi-tenant office market took a small step backwards in 2011, finishing the year 87.6 percent occupied. Weakest was the 82.6 percent occupancy in the Hoover-Riverchase market, while strongest was the midtown area (Birmingham, Homewood, Vestavia Hills, Hoover, Mountain Brook) at 91.3 percent occupancy.
Office rental rates finished the year averaging a low of $13.80 per square foot in the Vulcan-Oxmoor area to a high of $20.73 per square foot in the U.S. 280-southern market.
Graham & Co.
Graham & Co. is heading into 2012 boosted by a number of property sales and leases in the last quarter of 2011.
The Birmingham-based company completed 25 sales valued at more than $20 million and 40 lease deals with a value of $41 million in the quarter, according to Mike Graham, president of the company. That was up from the 14 sales and 33 leases completed in the third quarter.
"We are expecting the current trend to continue into 2012," Graham said.
One of the more significant property sales in the quarter included 34 acres in the Lee Branch Corporate center near Greystone, including the 50,750-square-foot former headquarters of AIG Baker Shopping Center Properties. BBVA Compass sold the property to Church of the Highlands. Graham & Co. represented BBVA Compass.
Graham & Co. also brokered the sale of the former Cathedral of the Cross in Center Point to another faith-based group and a 3,872-square-foot office building at 1314 Cobb Lane to a new owner. Other fourth-quarter sales included a former day care, partially developed subdivisions, warehouses and other properties.
Graham noted many of the deals seem to be tied to internal or local expansion, a good sign that local companies are growing.
"We see this is a particularly healthy sign," he said.
Leases in the fourth quarter included a 130,000-square-foot office lease in Meadowbrook and a 220,000-square-foot lease in the Jefferson Metropolitan Park-McCalla.
Dan Lovell, head of Graham's office division, said the office market is trying to bounce back.
A net drop in occupancy of 17,870 square feet in 2011 means the overall market was virtually flat, he said, and much more stable than the 450,000 square feet of net loss in occupied space the metro area dealt with in 2009.
But Lovell noted it's not bad everywhere.
"Some pockets of midtown are as tight as they have been in several years, therefore some owners are doing very well in this area," he said.
Michael Tomberlin covers economic development, commercial real estate, construction, media and advertising. Contact him at 325-3436 or mtomberlin@bhamnews.com. Follow him on Twitter: @MAJ_Chicken.
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Tornado damage and UA's increased enrollment goals have developers wanting to build, build, build for Tuscaloosa's student market
By Patrick Rupinski
Staff Writer
Published: Sunday, January 15, 2012 at 3:30 a.m.
TUSCALOOSA | When Carter, an Atlanta developer, proposed building a student housing complex along the city's Riverwalk last month, it ran into opposition from City Hall, which questioned whether the development was the best use for the site.
But the proposal and other plans over the past few months to build more student housing complexes sparked other questions about how much student housing Tuscaloosa needs, as well as where they should be built and what impact the additional student housing complexes might have on the city, its infrastructure and the existing rental market.
At least three student housing complexes have been proposed since last summer, and those who track the rental housing market say more proposals are likely.
Two primary factors are driving the interest in student housing:
n The University of Alabama's enrollment has increased by more than 50 percent in the past decade, and the university has said it hopes to increase enrollment, adding about 4,000 more students by 2020.
n The April 27 tornado destroyed or damaged about 12 percent of the city's housing units, including owner-occupied houses and rental units. It destroyed some
off-campus housing rented by students, but more dramatically increased the total number of people looking for housing.
Those factors, coupled with a depressed national market for construction, caused more developers to look at Tuscaloosa as a possible bright spot for new construction.
UA has enough on-campus housing for 7,700 students. But more than 75 percent of its 31,747 students live off campus. In recent years, the number of students living off campus has grown with enrollment, which was about 20,000 students in 2003.
The university is building more on-campus housing, but will also get rid of some of its older dorms, resulting in a slight decrease in on-campus housing next fall, when the new North Bluff I Residential Community will open with about 970 beds.
This summer, the older Rose Towers, which has 995 beds, will be torn down. And one of UA's Highlands buildings, which has about 30 beds, will not be in use this fall to make way for new storm sewer construction on the north side of campus, according to campus officials.
More on-campus housing will become available in future years.
The board of trustees has approved construction of a second phase of North Bluff, which is scheduled to open fall 2014 with about 860 beds, said UA spokeswoman Cathy Andreen.
Meanwhile, the university has set a goal of increasing its enrollment. UA President Robert Witt has said he wants to add about 4,000 more students to bring enrollment to 35,000 students by 2020, if not earlier.
That would further increase the number of students needing off-campus housing.
“From the city's perspective, we hope to encourage student housing as close to the university as possible, and we have adopted zoning ordinances in recent years to encourage this,” Maddox said in an email.
The mayor came out against Carter's $40 million, 856-bed student complex on the Riverwalk last month, saying the project was not the best use for that site.
The city's planning commission voted 4-to-4 in December on the project; the tie vote allows the developer to still seek City Council approval, but without the planning commission's blessing.
Planning Commissioner Steve Rumsey was among those opposing the Carter project.
“As a planning commission member, I want to see the city develop in an orderly manner,” he said.
There should be an independent, unbiased study on the impact of the university's growth to help determine how much additional student housing is needed, he said.
Rumsey, who rents some houses to students, said the planning commission and the city need to know how much of the rental housing was destroyed by the tornado and how much of that was rented by students.
The study also needs to assess whether enrollment will eventually stay at 35,000 students, or possibly peak and then decrease.
Rumsey said the city also should determine how all new large apartment complexes will affect the city's infrastructure, particularly the sewer systems.
The sewerage lines in some parts of the city are at or near capacity now, he said, and some areas might not be able to handle large new housing complexes unless sewer systems are upgraded.
Developers in Tuscaloosa do not have to pay an impact fee, which can be used to upgrade infrastructure in the future, he said. That makes the city more attractive to out-of-town developers, who might build a project and sell it before sewerage overloads occur.
And if that happens, it will be the taxpayers who will pay for the sewer upgrades, he said.
Tuscaloosa's Planning Department Director John McConnell and Deputy Director Philip O'Leary did not respond to several calls and emails requesting information on the student housing situation or the status of proposed developments and their effect on the city.
In addition to the Carter complex on the Riverwalk, two other proposals for new student housing complexes have been announced since the tornado. There is a $40 million, 868-bed complex planned by Tuscaloosa developer Stan Pate off Alabama Highway 69 South and Kauloosa Avenue and a $41 million, 774-bed complex by a Tennessee company for the old Delaware Jackson public housing site near DCH Medical Center and the UA campus. Both of those projects have received zoning approvals from the City Council.
Steve Kennedy, president of Sealy Management Co., which has about 4,000 apartment units throughout the Tuscaloosa area, said that before the city approves new projects elsewhere, it should give those in the tornado zone a chance to rebuild.
“From a basic fairness issue, I would like to see the people whose property was displaced by the tornado have a chance to rebuild before the market is saturated,” he said.
Grayson Glaze, executive director of the Alabama Center for Real Estate at UA, said, “Overbuilding will continue to be the primary concern for the local market today, tomorrow and in the future.
“The fact is the university's growth and the overall appeal of the Tuscaloosa community is very attractive to outside developers. This appeal has only increased since the events of April 27, as perceived opportunities jump off the pages of the Tuscaloosa Forward rebuilding plan,” he said.
“The phrase ‘Timing is everything' comes to mind. No market can defy the fundamentals of supply and demand. As long as delivery of new development, including UA on-campus housing units, remains in balance with the growth in both the student and the general population of Tuscaloosa, the multi-family market should continue to experience solid performance.
“Smart growth will be the key to the long-term health of this important housing sector in Tuscaloosa.”
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Published: Friday, January 13, 2012, 6:30 AM
By Michael Tomberlin -- The Birmingham News
HOOVER, Alabama -- Daniel Corp. is starting construction on a $35 million apartment community in its Ross Bridge development in Hoover.
The 250-unit Ashby at Ross Bridge has broken ground, and the first units should be ready to move in by this fall, company officials said.
The project will be the second apartment project in Ross Bridge, following the 240-unit Birchall at Ross Bridge built in 2008.
"We had a lot of success with the first project," said Pat Henry, chief development officer for Daniel. "I think we're going to be filling a niche the market is going to be excited about."
Henry said an analysis of the market, the fact that Birchall remains close to fully leased and Daniel's experience with the Ross Bridge development made the company comfortable with taking on the development at a time when new multimillion-dollar construction projects are still rare.
"When you're building a project, you do your best due-diligence and critical thought to how the market will support it and how it will fit into a community," Henry said. "We've got a lot of comfort with Ross Bridge. Even in the teeth of a very difficult economy, it's been a project that has not only continued to thrive, it's excelled."
Last year, the National Association of Home Builders named Ross Bridge the "Best Community in America" in recognition of its sense of place, numerous community events (farmer's markets, holiday gatherings, and hometown fairs) and through the execution of its master-planned vision.
"This is a very comfortable place for us to build," Henry said.
Ashby will have one-, two-, and three-bedroom apartments ranging in size from 640 square feet to 1,350 square feet. It will also have a resort-inspired clubhouse, fitness center, clubroom, business center, and professionally landscaped pool and gardens. It will include pocket parks, ponds, and access to more than five miles of activity trails.
Henry said Ashby will not begin taking applications for units until late spring or early summer, but there already has been interest.
In August, Memphis-based Mid-America Apartment Communities Inc. purchased Birchall at Ross Bridge from Daniel.
"Our project will not detract from Birchall by any means," Henry said. "It's something that will complement it."
Birmingham's Doster Construction Co. is building the project, which was designed by Atlanta-based Pucciano & English architects.
The master plan at Ross Bridge also has a number of acres dedicated for commercial development. Henry said some retail development could be close to starting.
"There is a certain density that needs to be reached for retailers to be able to thrive," he said. "While we've really reached that point, all of us continue to fight the national economy and we're just now sort of coming into a more positive environment in respect to retailers. I think in the very near future you will see further growth in the commercial arena in and around Ross Bridge."
Ashby is likely the first of several apartment community developments that Daniel is planning in the metro area.
"Birmingham has been a very under-supplied market," Henry said. "We think it's time for the delivery of this project. It will be the first of several we take on in Birmingham, we hope, in the months and years ahead."
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Published: Thursday, January 12, 2012, 12:38 PM     Updated: Thursday, January 12, 2012, 12:53 PM
By Stan Diel -- The Birmingham News
John "Chip" Moore and Susan Moore Hall (Special)
BIRMINGHAM, Alabama -- The Birmingham staff of Berkadia Commercial Mortgage -- a Berkshire Hathaway subsidiary with Birmingham roots -- has left that company to open Highland Commercial Mortgage, the new lender announced today.
John O. "Chip" Moore and Susan Moore Hall, previously senior vice presidents at Berkadia, are partners in the new Highland Commercial and have been joined by the entire Berkadia staff in the new venture, the company said in a prepared statement.
Moore and Hall are brother and sister and the children of John Moore, who was a co-founder of Highland Mortgage Co. in 1979. That company was sold to GMAC Commercial Mortgage in 2005 and subsequently became Berkadia Commercial Mortgage.
Highland Commercial will specialize in construction, refinance, acquisition, and redevelopment loan programs for multifamily, affordable housing and health care, Moore and Hall said in a prepared statement.
Pete Hodo III, a new addition, will serve as chief operating officer. The company's offices are located at 33 Inverness Parkway, Suite 140, in Birmingham.
© 2012 al.com. All rights reserved.
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Jan 3, 2012 12:17 PM, Staff Reports
LaSalle Hotel Properties has acquired the Park Central Hotel in New York City for $396.2 million. Located in Midtown Manhattan on Seventh Avenue between West 55th and 56th Streets, the full-service hotel features 934 rooms.
The transaction was funded with cash on hand, borrowings from LaSalle Hotel Properties’ senior unsecured credit facility and issuance of 296,300 operating partnership units valued at $27 per share. LaSalle received a $9.3 million reduction from the original purchase price, which is equal to the hotel’s income after debt service from September 2, 2011 through closing and is reflected in the $396.2 million purchase price.
The Park Central is located across the street from Carnegie Hall, three blocks south of Columbus Circle and Central Park, five blocks from Rockefeller Center and Radio City Music Hall, and seven blocks from Times Square and the theater district.
LaSalle Hotel Properties President and CEO Michael D. Barnello noted in a statement that his company is “excited about this well-located New York City asset and our ability to acquire the hotel at an attractive purchase price.”
The hotel features two food and beverage outlets—Cityhouse, an 88-seat contemporary steakhouse, and Bar Bella, the hotel’s lobby lounge—as well as 14,000 sq. ft. of flexible meeting and function space, including an 8,500-sq.-ft. ballroom and 4,800 sq. ft. of retail space.
Originally constructed in 1928, the hotel has undergone several renovations, with more than $33 million since 2004. LaSalle plans to undertake a $30-million-to-$35-million renovation of the hotel , planned for late 2012 to 2013, including the hotel’s lobby, guestrooms, guest bathrooms and corridors.
The Park Central will continue to be managed by Highgate Holdings, whose portfolio features over 20,000 rooms located primarily across the U.S. and in Paris.
“The location and scale of the Park Central Hotel has historically made it an outstanding performer in our portfolio,” Mehdi Khimji, a principal of Highgate Holdings, said in a statement. “And now with the planned renovation and LaSalle’s ownership, the hotel is poised to achieve its full potential,” he added.
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BIRMINGHAM, Alabama -- Massachusetts-based Colony Hills Capital said today it has purchased Riverchase Landing, a garden-style apartment community on 45 acres in Hoover, for $28 million.
"It is a momentous occasion for us to report the successful closing on our first property as a significant acquisition," Glenn Hanson, principal director and founder of Colony Hills, said in a statement. "Riverchase Landing is a wonderful community that is well located, and it holds tremendous promise for our investors."
Riverchase Landing has 468 units and is 98 percent occupied.
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Dec. 27, 2011, 5:35 p.m. CST
AP
NEW YORK (AP) — After a disastrous holiday shopping season, the parent company of Sears and Kmart will close at least 100 stores to raise cash — a move that sparked speculation about whether the 125-year-old retailer can avoid a death spiral fed by declining sales and deteriorating stores.
Sears Holdings Corp., a pillar of American retailing that famously began with a mail-order catalog in the 1880s, declared Tuesday that it would no longer prop up "marginally performing" locations. The company pledged to refocus its efforts on stores that make money.
Sears' stock quickly plunged, dropping 27 percent.
The closings are the latest and most visible move by Eddie Lampert, the hands-on chairman who has struggled to reverse the company's fortunes.
As rivals Wal-Mart and Target Corp. spruced up stores in recent years, Sears Holdings confronted falling sales and perceptions of dowdy merchandise.
Some analysts wondered if it was already too late, questioning whether the retailer can afford to upgrade stores as it burns through its cash reserves.
The sales weakness "begins and some would argue ends with Sears' reluctance to invest in stores and service," Credit Suisse analyst Gary Balter wrote in a note to clients.
"There's no reason to go to Sears," added New York-based independent retail analyst Brian Sozzi. "It offers a depressing shopping experience and uncompetitive prices."
Spokesman Chris Brathwaite said no one had determined which stores would close or how many jobs might be cut. He disputed doubts about the company's survival, noting it still has $2.9 billion available under its credit lines.
"While our operating performance has not met our expectations, we have significant assets," including inventory, real estate and valuable proprietary brands such as Kenmore and Craftsman, Brathwaite said.
Sears and Kmart were both retail pioneers. Sears' catalog and department stores were fixtures of American life stretching back to the 19th century before being hurt in recent years by competition from steep discounters and by missteps that included forays into financial services and the decision to sell off a lucrative credit card business.
Kmart helped create the discount-store format that Wal-Mart Stores Inc. came to dominate.
Some customers complained that they have a hard time connecting with the Kmart and Sears of today.
Preschool teacher Sara Kriz, picking up hair conditioner at a Kmart on Tuesday in Manhattan, said she used to shop at Kmart often but now goes there only once every few months: "Only when I have to," she said.
"It seems easier to go to Target and Wal-Mart to get the same thing at the same price," Kriz added. "The stores are cleaner, and they're better stocked."
Sears Holdings has watched its cash and short-term investments plummet by nearly half since Jan. 31, from about $1.3 billion to about $700 million.
The projected closings represent only about 3 percent of Sears Holdings' U.S. stores. And the company has actually added stores since the Sears-Kmart merger in 2005. It has about 3,560 stores in the U.S., up from 3,500 right after the merger, thanks to the addition of more small stores.
But the company hinted that more closings could be on the horizon as it focuses on honing the better-performing stores.
The closings announced Tuesday were expected to generate $140 million to $170 million in cash as the company sells those stores' inventory. Selling or subleasing the properties could generate more money.
In addition to the closings, the company announced that revenue at stores open at least a year fell 5.2 percent for the eight weeks ended Dec. 25, a crucial time because of the holiday shopping season.
Kmart's layaway program, meant to help cash-strapped customers buy presents by paying for them a little at a time, faltered as Wal-Mart brought back layaway for the holiday season after getting rid of the program in 2006. Sears stores reported softer sales of home appliances, usually a strength.
The company predicted that fourth-quarter adjusted earnings will be less than half the $933 million reported for the same quarter last year. It also expects a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn't expect to be profitable enough to use.
Part of Sears Holdings' problem is the weak economy that is hurting virtually all retailers that cater to low- and middle-income shoppers, who are being forced to cut back on spending.
But both Lampert and Lou D'Ambrosio, who was named CEO in February, have said the company needs to keep up with the changing retail landscape, where shoppers are going online for convenience and finding better prices on their smartphones even once they're in the store.
Andrew Jassin, co-founder at retail management consultancy Jassin Consulting Group, said his fashion supplier clients that sell to Sears aren't limiting orders, but they're watching to see what steps the company will take next.
"People are generally questioning the survivability long-term," Jassin said.
Hedge fund manager Lampert engineered the combination of Sears and Kmart in 2005, about two years after he helped bring Kmart out of bankruptcy. Skeptics criticized the combination as the marriage of two weak companies that would only hurt each other.
But both stores were once giants.
Sears, which started with a lone Minnesota watch seller in 1886, helped define the mail-order catalog industry, selling shoes, clothes, guns and even ready-to-assemble homes to farmers across the country.
Kmart, which started as a five-and-dime in Detroit in 1899, once commanded a retail empire that included Waldenbooks, Borders, OfficeMax and Sports Authority before spinning them off. A long sales decline and an ill-advised price war against Wal-Mart led to its 2003 bankruptcy filing, which let Lampert gain control of the company.
Analysts and investors were initially enthused by speculation that Lampert was combining the companies to unlock the value of their real estate. But years passed without a big move to do that — and commercial real estate values took a painful hit in the Great Recession.
Lynn Crosbie, shopping at a Sears store in Portland, Ore., said she wasn't surprised by news of the closings.
Crosbie said she goes to Kmart for stocking stuffers and was disappointed this year by messy, understaffed stores.
"The quality has gone downhill," she said, looking around the nearly empty store. "Even the cashiers aren't as happy or friendly."
___
Associated Press Writers Anne D'Innocenzio in New York and Sarah Skidmore in Portland, Ore., contributed to this report
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Upgrades planned for McFarland, 15th Street
One of Tuscaloosa's busiest intersections may get more turn lanes, wider right of way
By Jason Morton, Staff Writer
Published: Tuesday, December 27, 2011 at 3:30 a.m.
TUSCALOOSA, AL | Property owners at one of the city's busiest intersections said they are surprised to learn they may be forced to sell their land for traffic improvements.
Last week, the City Council voted not to reopen Seventh Avenue East, in an abandonment proceeding. It is part of an agreement with the state Department of Transportation to improve traffic management at the corner of McFarland Boulevard and 15th Street.
Buildings on all four corners there were damaged or destroyed by the April 27 tornado.
The plan is to is to add several turn lanes and upgrade alignments. It will require a wider right of way along both sides of McFarland Boulevard, from 13th Street East to beyond 15th Street.
“That will involve having the property appraised, making offers to the owners, overseeing the condemnation process if needed and (business) relocation, if needed,” said L. Dee Rowe, chief engineer of ALDOT's Fifth Division, which includes Tuscaloosa County.
The right-of-way acquisition, which ALDOT expects will take six to eight months at an estimated cost of $570,000, likely will require condemning property where two businesses were located before the storm.
City Engineer Joe Robinson said he expects the site of the former Shell station at the southwest corner of 13th Street East and McFarland Boulevard and the former BP station at the southwest corner of 15th Street and McFarland will have to be seized for the traffic plan to be implemented.
That was news to the owners of both properties, who were contacted for comment by The Tuscaloosa News on Thursday.
Todd Turner, general manager of Friday Oil Co., which operated the Shell station on 13th Street, said Friday Oil intended to rebuild the station on the property owned by a member of the Friday family.
Efforts to rebuild have so far been stymied by bureaucratic hurdles. Turner said the first site plans developed by Friday Oil were rejected by the Office of Planning and Development Services and the city's Zoning Board of Adjustment over parking requirements. The agencies said the site plan did not have enough parking spaces.
“In the past, you've always been able to count your gas dispensing spots as parking spaces,” Turner said, noting that a similar plan was approved in 2006. “But the lot is small. Obviously, we'd like to have a lot three times that size.”
Turner said he wasn't opposed to selling the lot to the government for the road improvements, but he also wants to be sure the owners are paid what the land is worth.
Turner said he intends to weigh his legal options.
“The original plan was to rebuild the store, but we've heard so many rumors that I don't know what ultimately will happen,” Turner said. “We're not 100 percent opposed to selling the lot, and we want to work it out cordially.
“But at the same time, we don't want to be forced into selling something for less than what its worth.”
City officials have said taking the entirety of the lots will be necessary because the proposed road improvements will leave each tract, both of which are less than an acre, too small for any future development.
This move may prove particularly costly to Charles E. Wyatt, owner of the lot where the gas station at the southwest corner of 15th and McFarland stood until the tornado blew it away.
Wyatt said he has a sale pending for $1.165 million to a private developer who intends to add a retail site to complement the nearby Midtown Village shopping center.
“I'll probably wind up in court with them,” Wyatt said.
He said previous plans to lease the land to title loan company TitleMax was stopped by City Hall. He said he was told that kind of business was no longer allowed in the area because of rebuilding restrictions imposed following the April 27 tornado.
Now, his plan to sell the property may also be in jeopardy.
“Right now, I'm just so sick of it, I want to sell it,” Wyatt said. “I can't put what I want there. And if I can't sell it, I'm going to put gas pumps on it and start selling gas again.”
Also included in the land acquisition is a 20-foot strip from the McFarland Boulevard businesses bordered on the west by Seventh Avenue East, and city officials have said one goal of the abandonment is to make up for the land lost by the turn lane.
One of the reasons the Office of the City Engineer endorsed closing Seventh Avenue East to traffic was to eliminate a dangerous intersection. Since 1999, 15th Street and McFarland has been the site of 31 accidents with five serious injuries there.
A budget for the project was not immediately available, but the funding will be shared by both the city and state, with ALDOT handling 80 percent of the costs and the city paying the remainder.
Additional details of the traffic realignment plan call for the addition of a third left-turn lane for motorists turning from McFarland Boulevard onto 15th Street or Veterans Memorial Parkway, a right turn lane from 13th Street East onto McFarland Boulevard, and an improved right turn lane from Veterans Memorial Parkway onto McFarland Boulevard, as well as other traffic improvement measures.
Reach Jason Morton at jason.morton@tuscaloosanews.com or 205-722-0200.
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Site of Proposed River Front DevelopmentBy Patrick Rupinski, Staff Writer
Published: Wednesday, December 21, 2011 at 3:30 a.m.
TUSCALOOSA | An Atlanta developer wants to build a $40 million, 856-bed student apartment complex along the city's Riverwalk.
But the proposed four- to five-story development is running into some opposition from city officials.
Carter, the development company, has proposed a mixed-use complex on the old Tuscaloosa Chevrolet property on Jack Warner Parkway near Greensboro Avenue.
The property is now a vacant lot used for recreational vehicle parking during the football season.
Carter representatives presented their plans Monday to the city's planning commission, which deadlocked in a 4-4 vote on whether to recommend the project to the City Council.
The tied vote means the project could go before the City Council without a recommendation.
Mayor Walt Maddox said Tuesday that he opposes the development.
“Tuscaloosa's riverfront is a tremendous asset that belongs to the entire community, which is why the city has invested millions into the development of infrastructure, trails and venues along the water's edge,” he said in an email. “As presented, I cannot support concentrating 800 beds into one of the most important riverfront sites because it does not align with the master plan nor will it strengthen our citizens' investments over the decades to come. I trust the City Council will weigh this issue carefully as it deliberates the development plan.”
Philip O'Leary, the city's deputy planning director, said Carter has requested that its proposal go before the City Council.
“Once we have received a complete application, we will be able to place it on the council's agenda,” O'Leary said.
The planning department staff “is opposed to the development as presented,” he said.
Jonathon Barge, a vice president of Carter, said company officials will meet today or Thursday to discuss their options and decide their next step.
Carter is a major Atlanta developer that has offices in 20 states, according to its website.
The company's president, Scott Taylor, told the Atlanta Business Chronicle earlier this month that Carter was looking at at least $500 million in new building projects outside the Atlanta area. He said the projects included student housing complexes in Alabama and South Carolina, as well as commercial projects in the Midwest.
He did not specify where the student housing projects would be and it appears the Tuscaloosa project is the first such project that Carter has made public.
Richard Chaffin, a co-owner of the land where the complex would be built, said he believes the Carter development meets the city's criteria for developing the Riverwalk area and would be a welcome improvement for the area.
“I don't see why anyone would object to it. These people want to spend $40 million that will provide a lot of tax money and jobs.”
Chaffin, who owns the land along with the heirs of his late partner Roy Woodley, said they have agreed to sell the property to Carter if the project is approved. He did not disclose the sale price. Carter also has an option to buy a radiator repair shop site adjacent to his property, Chaffin said.
The city has not offered a better plan for the property nor has it offered to buy the land, he said.
Carter's plan shows the student housing complex would be four stories and would wrap around a five-story parking deck.
The 600,000-square-foot complex would be built on seven acres. It would include about 7,500 square feet of retail space, according to information provided to the planning commission.
Proposed rents would be $642 a month per bedroom.
Steve Rumsey was one of the planning commission members who voted against the project.
He said he questions whether such a large complex is the best use for the site.
“I don't know if I have ever seen in Tuscaloosa a 120-beds-per-acre development,” he said.
The city has chosen a hotel developer for the site, which is a couple of blocks from the Carter project site.
“This is a very important piece of real estate. With the city of Tuscaloosa owning the proposed hotel site, the city is very sensitive to what goes in there,” he said, referring to the city parking lot at the intersection of Greensboro and University Boulevard that was the old CityFest site.
Jay Evans, a member of the city's Riverfront Advisory Committee, also opposes the Carter project.
“I was shocked when I saw the development only had 7,500 square feet of retail and had approximately 850 bedrooms,” he said.
“When only 1.25 percent up to 2.5 percent can be retail and the rest apartments, I feel it should be called a student apartment complex that has a little bit of retail space.”
Evans and Rumsey also questioned the impact such a large development would have on traffic flow in the area.
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BIRMINGHAM, Alabama -- Moody's Investors Service changed its outlook for the paper and forestry products industry to negative from stable as price and demand of products in the industry are expected to weaken over the next 12 to 18 months, the credit rating agency announced yesterday.
"The sluggish economic conditions in Europe and North America and reduced use of printing paper as consumers in developed regions continue to shift to electronic devices are behind the weakness," Moody's said in a statement announcing the downgrade. "Additionally, new paper and paper-packaging supply coming on-line in China will likely exceed domestic demand, boosting inventory levels and further pressuring prices."
Forestry is a significant industry in Alabama. According to the Alabama Development Office, the state's forestry sector consists of more than 850 forestry-related manufacturing facilities and employs more than 170,000 people, or about 10 percent of the state's work force. In 2005, it generated $15.39 billion in sales.
North American producers will see declined consolidated operating profit over the next 12 to 18 months, Moody's said. The weak U.S. housing market and reduced use of printing and writing paper will contribute to demand and price pressures. The continent generates about two-thirds of the industry's operating income. Other regions of the world, such as Europe and Latin America, will also see weakened prices and demand.
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