In 2017, the New York–based Northwood Investors spent $1.2 billion to purchase Ballantyne Corporate Park, a highly successful 530-acre (214 hectare) property in Charlotte. It was deemed the single-largest real estate transaction in North Carolina’s history.
At a ULI event on Kiawah Island, South Carolina, in mid-November, Ross Cowan—currently with Cowan Nakios Group and a former Northwood executive—interviewed Marshall Nevins, a managing director at Northwood who was deeply involved in the deal, to discuss the sale and the company’s plans for the office park’s future.
It was three years ago when Northwood first heard that Ballantyne’s owners were looking to sell the property. “We got a call in the summer of 2016 about the Bissell family—Smoky Bissell,” remembered Nevins.
Smoky Bissell developed Ballantyne in the mid-1990s, using land that had been owned by his wife’s family. He turned the property into a popular, high-end area that contained not only 4.5 million square feet (418,000 sq m) of office space for companies like MetLife, Wells Fargo, Snyder’s-Lance, and TIAA, but also four hotels and a golf course—all situated within a broader 2,000-acre (810 ha) neighborhood with a bustling retail center.
Bissell and his family had invested an enormous amount of capital to make Ballantyne a best-in-class corporate environment. But by 2016, they were thinking about estate planning and looking to do something with an investment that was relatively illiquid.
“We were introduced by a close adviser,” said Nevins. And Northwood, which then had about $6 billion in real estate assets in the United States and Europe, was definitely interested in a deal. The firm had mostly been investing in hospitality, multifamily, and retail properties, not office. But Nevins said, “We thought this brought an opportunity to have something that was already doing well but also had a lot of optionality.”
After all, Charlotte was thriving. After a slump following the recession, the city rebounded and then some, with population growth exceeding the national average; it is currently one of the fastest-growing U.S. cities. That definitely appealed to Northwood.
So, too, did the unique opportunity to own an existing, high-performing asset with cash flow that also had the potential for growth over time. “We knew it’d be a longer-term investment,” said Nevins—and that was all right with Northwood, which tends to take the long view when it comes to real estate investing, frequently using 10 to 12-year time frames.
As a result, the company purchased Ballantyne with fixed-rate financing in the low double digits, something it views as prudent, given concerns about a possible economic slowdown in the next few years. “Our practice is to close with full capital, including debt and equity,” he explained. “And that was important on this transaction because it all came together at once.”
In the financing, Northwood did not leverage the project’s development opportunities. That meant it did not have to rush into starting vertical development.
Now, two years later, plans are underway. The Charlotte Observer reported over the past few months that Northwood will eventually be building more than 2,000 multifamily units—some of which will be located in a 16-story luxury tower—as well as 300 townhouses, 300,000 square feet (28,000 sq m) of retail and restaurants, and 400,000 square feet (37,000 sq m) of office space.
The office space is a no-brainer, given the demand for it in Charlotte. But the rest is Northwood’s rethinking of what Ballantyne can be, something it is dubbing Ballantyne Reimagined. “We saw an opportunity to evolve this from office-dominant to mixed use,” said Nevins. “We need the scale [that Ballantyne has] to do it.” After all, he explained, 17,000 people work at the office park every day, giving it an enormous potential audience for retail, grocery, dining, and late-night activities with a pedestrian focus. And the new residential units will further animate the development.
But Northwood does not want to overbuild the property, cautioned Nevins. “We hope to have a walkable, urban format, but we also want to dedicate significant open space. If it’s well planned, it can be engaging and usable, as powerful an amenity as physical real estate. And we hope to have more of it than anyone else.”
Parking is a bit of a quandary. Technology seems to be pushing users toward eventually owning fewer cars. But currently, Charlotte is a very car-dominant city; and the denser a property becomes, the more parking it requires. Nevins said Northwood has not figured it out yet, but is considering building large central parking areas that allow people to park more efficiently—and that could eventually be turned into something else.
All of those plans could change, of course. “Within 10 years, there’ll probably be a slowdown, so we try not to be too locked into our base case plan,” said Nevins. “We can always reevaluate depending on the market.”
One thing the company doesn’t plan to do is break up the property and sell off parcels. “There’s a value and benefit in owning and controlling large, mixed-use assets in their entirety,” Nevins explained, adding that Northwood believes that mixed-use is gradually becoming its own asset class and benefits from having a single owner.
Meanwhile, Northwood is back on the prowl, looking for other promising opportunities. The U.S. real estate market is healthy, which means prices are a little high, but the company is not in a rush. “We’re looking at a lot, evaluating a lot, making a few investments—it’s a low-hit ratio,” said Nevins. He added that the company is making some investments at the distressed end of the spectrum, in properties like older office parks and malls in need of a reinvention. “We’re finding interesting things to do,” he said.