Developer turns to controversial federal program for pair of projects
A Charlotte, N.C., developer detailed plans to build apartments and commercial space through a federal tax program that has faced scrutiny in recent months.
Grubb Properties said it is under contract on two properties: the Herrin Brothers Ice Co. building on 36th Street near the light rail station, and another site near the intersection of State Street and Turner Avenue in the Seversville neighborhood.
At that west Charlotte property, Grubb will build up to 140 multifamily units, according to a rezoning petition. Half of those units will have rents aimed at those making 80% or less of the area median income, which is about $63,200 for a family of four, according to the city.
On the site at the edge of NoDa, Grubb said it plans to develop apartments, office space and retail. Still, Eric Applefield, Grubb's director of development, said they're still conducting due diligence and getting input from neighbors and other groups.
Grubb is raising funds for the projects through a tax incentive enacted as part of the 2017 tax overhaul and championed by Pres. Trump.
Designed to pump capital into low-income neighborhoods, the program gives investors a break on their capital gains tax levied after the sale of an asset, such as stocks if they put money into projects in certain census tracts known as opportunity zones.
But the initiative has come under scrutiny as news reports have found that the wealthy and politically-connected are using the tax benefit to build hotels, luxury apartments and other high-end projects.
Grubb has raised over $140 million from investors for a fund that is used for multiple developments in opportunity zones, the firm said. It plans to use around 10% of the money for projects in the Historic West End, which includes the Seversville site. For those projects, Grubb is capping its returns at 10%, and will give anything above that back to community groups.
"There's obviously been a ton of press around opportunity zones, and a lot of it has been, if not negative, at least skeptical," said Clark Spencer, senior vice president of investments at Grubb and manager of the opportunity zone fund. "We wanted to really be seen as a positive actor in the (opportunity zone) program."
Seversville and surrounding areas have seen rents and property values jump in recent years.
J'Tanya Adams, program director for Historic West End Partners, said she hopes the building can house some of the residents who have been displaced, especially seniors.
"We're hoping that what Grubb is doing is going to give some of these folks an opportunity to come back home," said Adams, who is also president of Seversville's community organization.
Malcom Graham, the city council representative for the area, said he's pleased with the project, but would like to see Grubb include some units for those earning less than 80% of the area median income too.
"(80%) just excludes so many people," he said.
Grubb said it is still determining the income breakdown of the units.
The company expects both of the sales to close in the summer. The 6.7-acre Herrin property is valued at $3 million, and the west Charlotte site at $375,600, according to county records.