2 min read March 2023 — In an interview with Invest:, Brian Natwick, chairman and CEO of real estate investment and development company Crescent Communities, reflected on 2022 and his company’s latest business lines. Natwick also said that interest rates have made it challenging to underwrite new investments but Crescent is taking a long-term view and remains committed to the Sun Belt markets and their strategic plan.
What have been some key highlights for Crescent Communities over the last year?
Crescent is celebrating its 60th anniversary this year so that is a big milestone for us. Last year was important as we were able to successfully launch many components of our five-year strategic plan that we laid out in 2020. During that process, our strategic plan outlined three “big bets” that we were going to focus on in addition to ongoing business lines. That includes the launch of mid market multifamily brand RENDER, single-family build-to-rent brand platform HARMON and an investment management business line. We have three RENDER communities under construction with another eight that we plan to start and we have four single-family build-to-rent communities under construction with six more in the pipeline. We successfully raised our first fund in the investment management platform, totaling nearly $200 million, all with Japanese investors. Its focus is on opportunistic multifamily development.
Regarding HARMON and single family build-to-rent, we successfully raised $300 million of third-party equity that will allow us to expand and grow that business and allow us to develop over 4,000 units, totaling over $1 billion in capitalization over the next three years. NOVEL is our oldest product line but now with HARMON and RENDER, we have created a complete suite of offerings. We were able to launch those initiatives on top of the ongoing business, which is equally compelling and dynamic.
We are certainly not immune to headwinds but we believe that our strategy is designed to not only survive in turbulent times but also to find opportunities to thrive.
How have interest rates impacted you?
It has certainly put a compression on returns and has made it difficult to underwrite new investment opportunities but that applies to all of our competition. Every institutional equity partner that we work with also has those same challenges. Still, we are finding opportunities to underwrite. It just takes a lot more work and we are prepared to roll up our sleeves to continue finding compelling investment opportunities. We are taking a long-term view of real estate as interest rates will continue to change and be volatile. We cover 16 markets, all in the Sun Belt, so we believe that is fertile ground for investing both today and tomorrow. We remain committed to those markets.
Are there any projects in particular you want to highlight?
Carson & Tryon is a good example of a comprehensive view of what we do at Crescent. It is a mixed-use development that will include office, multifamily, retail and hospitality. It is a full city block at the intersection of South End and Uptown, which are important submarkets. We plan to start construction this year, pending the obtaining of a significant lease for the office component.
Do you believe there is a shift to urban living?
The spectrum of real estate development we do all has purpose and meets the needs of consumers and investors, from living solutions to work and entertainment. We don’t look at it from the perspective of migrating from suburban to urban but rather a status quo to places of purpose and intentionality. We very much are focused on creating places that have deep experiences and allow for connections to occur. We believe people desire and are attracted to those kinds of communities and environments where those experiences occur.
Are there areas where you see potential for a stronger ROI?
We are big fans of many submarkets in Charlotte. We are very active in the South and North end and have historically been active in South Park. We are active in both the University Research Park area to the north and down into Ballantyne, Weddington and Matthews. We are following the people and where they want to live and play. We are also seeing a lot of interest from an investor perspective.
What are some pain points around growth for Charlotte?
I see a long and successful runway for Charlotte overall and expanding the light rail is an important component of that. We are going to need more. Denver, for example, decided to install all of their lines at once, which creates significant disruption initially but is the right solution for long-term economic stability.
What trends are you keeping an eye on?
2021 and 2022 were robust years for new development in the asset classes we focus on and the markets we cover due to both pent-up supply and demand coming out of the pandemic and favorable economic stimulus. All that additional development created complexities in both the materials supply chain and labor. The materials are stabilizing and will meet demand in the long term whereas labor will take longer to address current challenges. The need for skilled labor is at an all-time high, particularly in the high skill trades. We need to continue to invest in those trades and make sure they are seen as attractive professions.
There is a wonderful group called ROC Charlotte and they do a wonderful job promoting skilled trades in the construction field and partnering with Charlotte-Mecklenburg Schools and the community college. They are creating careers in the construction technology field and I can see that model being very successful in markets outside of Charlotte.
What is your outlook for the next two to three years?
The outlook is uncertain and unpredictable, but we are very optimistic on the long-term future of all the markets we are in. 2024 and beyond will be robust and compelling and I believe that those who are committed to strategy and willing to take a long-term view will be rewarded for moving forward rather than standing still or moving backward.
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