2 min read March 2022 — Beau McIntosh, managing partner at privately owned commercial real estate investment and development firm Catalyst Capital Partners, spoke with Invest: and discussed the firm’s landscape and strategizing around interest rates and inflation. McIntosh also talked about what Charlotte could look like after the pandemic.
How has the landscape for the firm shaped up in the past year?
As a development company, our two biggest assets are our relationships and our projects. With relationships, it’s both internal and external. I feel proud of the talent we’ve been able to recruit to join our company and fully build out our development team. It’s a challenging hiring environment, and we feel we’ve done a good job attracting some incredibly talented new team members to our company. On the project side, we have a variety of great projects and product types underway and have diversified our portfolio very nicely. For example, we are very excited to break ground on our 30-story apartment and mixed-use tower in South End that will begin in Q3 of this year and be completed in early 2025.
What has made multifamily front and center for a lot of people across the real estate market?
Rental housing has always been a significant portion of the overall housing stock in American society. With the changing preferences in lifestyle and mobility, multifamily housing has provided a means for people to live in higher quality units in better locations without the expense, responsibility, and inflexibility of owning a home. I think it has evolved alongside American society over the last several years. In recent decades, there’s been a great shift in individuals’ priorities and preferences in where and how they live, and with that, the location, amenities, and convenience that we can offer in newer multi-family communities came to be the preferred means of housing.
How is the company strategizing around inflation and interest rates?
It has certainly been a very volatile environment in terms of inflation, but it’s also supply chain constraints and labor shortage issues that everyone in the industry is dealing with. This combination of factors has caused us to be more conservative in our early writing of a project. The situation is not going to be corrected overnight so we’ve been conservative in projecting project costs and interest rate risk. In reality, it’s about getting ahead of any potential issues, which relates to everything I’ve mentioned. We’re asking more questions than we’ve ever asked before to stay proactive versus reactive and be best positioned ahead of any potential issue.
How do you see the local market changing with all the new residents and businesses that are flocking to the area?
I’ve been in Charlotte since I finished college and it has changed a lot. With that, there’s always going to be increasing pressure on infrastructure, such as roads, utilities and schools. This is one of my biggest concerns for this region. Recently, we’ve encountered some sewer and water capacity issues in various projects, which is an adverse effect of the rapid growth the region has undergone in the last several years. There are several reasons why companies and people want to be in the Carolinas, and I don’t believe our pace of growth is going to slow anytime soon.
Is there more competition in the region?
The market is more competitive than ever, especially in our space. Everybody is pursuing the right deal and the right story to capture opportunities in our high growth environment. It’s also super-competitive for capital. There’s a lot of capital chasing commercial real estate in general, especially in multifamily. With that, it provides numerous opportunities for us because when you have a good project, it’s going to be capitalized in this environment and that’s one less risk factor we have to worry about. We’re certainly being mindful of all the competition and the supply that’s pending, but the market fundamentals remain stronger than ever to support all of the current activity.
What is it about the Charlotte region that draws businesses and residents?
Our region is obviously a great place to enjoy life and have a prosperous career, especially with the remote work aspect that COVID-19 has accelerated. There is a great quality of life aspect that’s drawing a lot of people into the region, and there is also the economic growth that comes from the businesses that want to be in the Carolinas. It’s a great place to do business and grow your business given the quality of talent in the region – business growth feeds population growth and vice versa.
How will Charlotte change in the post-pandemic era?
I think it’s going to look similar to the Charlotte pre-recession in the early 2000s on the COVID recovery side of things. Charlotte is in a period of rapid acceleration right now, so, with that, everyone wants to be here. However, how do we deal with that? How do we accommodate our growth responsibly without turning into a congested mess?
Everyone who follows the market closely is concerned with interest rates rising too fast. We can all agree that they will rise in 2022 and beyond. I think the goal is to ensure that proper measures are taken at the macro level that don’t have extended consequences at the micro-level that adversely affect the great economic activity we are experiencing right now. I think it’s about setting a moderate pace in contemplating any greater policy change.
What is your general near-term outlook?
I’m very optimistic. We have experienced incredible rent growth and home value increases that were long overdue to bring Charlotte in line with other peer markets. If you look at what we offer, we’re still comparatively the affordable alternative to other cities, such as Nashville, Tampa and Austin. We offer a very similar high quality of life at a lower cost to the consumer.
From a commercial real estate perspective, there’s a lot of capital waiting to be placed – more so than ever before. Even with an inflationary environment and interest rates rising, we don’t see activity slowing down in our sector or in this region.
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