Cashing out

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Charlotte leaders pride themselves on the fact that the Queen City is the second-largest banking center in the county.

So when Charlotte-based Bank of America confirmed this month that it’s selling two of its Uptown skyscrapers, Hearst Tower and Fifth Third Center, it wasn’t surprising that it stirred speculation about the city’s future as a financial hub.

But some say the sale could be a good thing for Charlotte, pointing out that it would diversify the ownership of buildings in Center City, which relies heavily on the banking sector.

“I think it is very healthy for any downtown to have a great diversity in building ownership,” said Michael Smith, president and CEO of Center City Partners, an organization whose goal is to promote economic development in Uptown.

“Maybe having more diversity of ownership will help encourage some of that pure-play office development to occur.”

Although no details on potential buyers – or even if there are any – have been released, Bank of America would be parting with more than 1.64 million square feet of office and retail space in Uptown with the sale of the two buildings.

Like Smith, Andrew Jenkins, managing partner for Charlotte-based Karnes Research Co., a commercial real estate data company, said the sale could be good for Charlotte by helping to move it away from its reliance on banking.

Bank of America CEO Brian Moynihan has said the bank will seek to get rid of properties it owns as it implements a companywide efficiency plan that will slash as much as $5 million in annual expenses by 2014.

Smith said it’s common for large, public companies to own many properties and occasionally sell them.

“There was some overreaction to the Bank of America announcement,” he said. “Bank of America is clearly managing their balance sheet.”

Misinterpreting the sale of the two office towers as meaning the bank is leaving Charlotte is a mistake, he said, adding that the sales are simply a “balance sheet move.”

“Sometimes, you’ll see them bringing property on to their balance sheet. Other times you’ll see them selling it,” he said. “It’s a real mistake to misinterpret their moves. They are very clear to their commitment to Charlotte.”

Smith said building ownership diversity removes risk concentration, and he pointed to various groups that own buildings in Charlotte: pension funds, real estate investment trusts, private equity groups and real estate developers with “great strong national names” from all over the country, he said.

Still, he said, it’s important for Uptown to have buildings that are not owned by banks.

“Part of our future needs to be office towers which are not bank-sponsored,” he said. “That was a large part of how we developed our office space over the last three decades.”

Hearst Tower, 1 Bank of America Center and the Duke Energy Center, which is owned by Wells Fargo, were all built in the past decade.

Jenkins agreed that Charlotte’s future should not rely soley on banking.

“I think at end of day, unless there is some kind of huge rebound in the banking sector, we’re going to have to find other ways to grow locally,” he said.

Still, Smith said there could be benefits when a company like BofA owns a high-rise building.

“Bank of American is able to be an incredible partner and make moves that kind of appeal to the triple bottom line,” which is composed of shareholders, the community and the environment, he said. “A pure real estate owner will have less interest in that. It kind of cuts both ways.”

Jenkins speculated that the timing of BofA’s announcement could have something to do with the Democratic National Convention that is set to take place in Charlotte in September.

The DNC will bring to Charlotte lots of people who might be interested in buying some real estate, like an office tower, while they’re here, he said.

RAMSEY can be reached at [email protected].