Keep Your Eyes Open: Crescent Communities Suddenly Has A Lot More Money To Spend

When Crescent Communities was purchased by Japanese company Sumitomo Forestry America Inc., its corporate debt was paid off. So what is the Charlotte, North Carolina-based developer going to do with all the extra money, now that it doesn’t have to pay interest?

“Our activity level will increase,” Crescent Communities President and CEO Todd Mansfield said. Keep your eyes open, Denver, Austin, Dallas and Charlotte: This means you.

“We’d like to be more active in Denver. We have team members in Denver and for whatever reason we’ve just not made investments; we’ve looked at a number of things and we’ve tried to make some investments, but the economics have been challenging,” Mansfield said.

Crescent has a strong presence in Texas, and Mansfield expects growth there. “We’ve been active in Austin in the past in apartments and in residential, but we haven’t done a multifamily in recent years, so that’s a good market,” Mansfield said. “If the right opportunity presents itself, we would certainly consider that.”

With the Dallas market, Mansfield said Crescent is drawn to the growth in employment in the area. “It’s a red-hot market in terms of its economy.” There are two Crescent mixed-use projects underway, Bishop Arts and Deep Ellum. “We have an office in Dallas and team members there, always looking for the right next opportunity,” he said.

Larger Mixed-Use Projects Would Include Office, Multifamily, Retail

In Charlotte, a development project that will span two Uptown blocks is attracting Cresent’s attention.

“We have entered our name as an interested party in the request for qualifications for the Seventh & Tryon project,” Mansfield said. “That is a project the length and the duration of which, perhaps under our existing owners, we would not have pursued.”

“We still have to learn a lot more about that before we know if it’s sensible, but I think that having ownership with a very long-term horizon may give us a little added flexibility for larger longer-term projects like Seventh & Tryon.”

Crescent has done larger-scale mixed-use projects before, ones that combine office, multifamily and retail. It has a project called Bigby under construction near Nashville, with more in the works — including one yet to be announced in Nashville, Mansfield said.

“We’re still very committed to the markets that we’re in.” The nine states that Crescent has chosen for development projects will capture 50% of the population growth over the next 10 years, Mansfield said.

In addition to Dallas, Austin, Denver, Charlotte and Nashville, other markets include Atlanta, Phoenix, Houston, Orlando, Tampa, Jacksonville, Durham, Washington, D.C., and Denver. “I don’t foresee us moving to some whole new geography broadly, to the Northeast or the Northwest or something like that.”

Love At First Sight

Sumitomo and Crescent aren’t strangers; their love affair began about 18 months ago when they began working on a mixed-use project together in Charlotte called Crescent Atherton. “It’s just interesting how aligned our company and their company are in terms of the underlying kind of values culture and velocity of the company,” Mansfield said. “I think that ultimately is what brought us together in terms of this negotiation.”

Both companies are idea- and future-oriented, Mansfield said, with similar mission statements that focus on bettering communities and people’s lives. “They’re extremely advanced and committed to sustainability, as are we, and I think we’ll learn a lot from them on that front.”

Crescent was founded by Duke Power (now Duke Energy) in 1963. Duke sold its half interest in the company to Morgan Stanley in 2006. After a bankruptcy filing in 2009, the company has been owned by two private equity funds in New York City. The current owners’ plan was never to keep the company for long, Mansfield said.

“This is a new chapter with a long-term, well-capitalized owner,” Mansfield said.

Members of the Crescent team traveled to Japan before the sale was finalized and Mansfield said they were impressed with not only the 320-year-old history of the company, but also the density, transit and use of mixed space in Tokyo. “There are very few cities in the United States that even remotely compare to the quality of the development in Tokyo,” he said. “I’m hoping we are able to learn from our new shareholders about some of that kind of development activity in Japan.”

Mansfield was also impressed with the company’s advanced building technologies, including homes built from large timber that have excellent seismic protection. “The large timber has some advantages for seismic design, and it’s just really beautiful too, so we’re hoping that there are some things there that we might be able to learn from and import into our work here,” Mansfield said. “The architectural beauty of these large timber structures is just extraordinary. It has a tremendous amount of character and warmth.”

Crescent employees were thrilled with the announcement that Sumitomo had purchased them, Mansfield said. “This was a perfect outcome. We have a company that aligns with the historic approach and values of Crescent, and so it was a little bit like a dream come true.”

Terms of the transaction were not disclosed. The commercial and mixed-use business development portfolio includes nearly 1.5M SF of assets in the Sun Belt, including the 742K SF Ally Charlotte Center project in Charlotte. Sumitomo Forestry America is also receiving Crescent’s development pipeline of nearly $2B of real estate projects, including 5,500 multifamily units, 2,200 single-family units and 2.5M SF of office and industrial assets.

The sale is set to be finalized at the close of Q2.