Lennar picks Charlotte to test apartment strategy

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CHARLOTTE — Lennar Corp. is making Charlotte’s Midtown part of a $1 billion leap by the Miami-based single-family homebuilding giant into the highly lucrative — and, observers say, highly volatile — apartment development and building business.

Lennar Multifamily, with East Coast headquarters in Charlotte, last month bought a 3.5-acre tract of land for $8.25 million in Charlotte’s Metropolitan district, according to Mecklenburg County property records.

Construction is scheduled to begin there in May on a 215,000-square foot complex, which will include two apartment buildings, with 261 Class A apartments, and a parking deck, said Todd Farrell, Charlotte-based regional president of Lennar Multifamily. One of the buildings will also house 8,000 square feet of street-level retail, Farrell said via cellphone from southern California.

With U.S. apartment occupancy rates topping out at around 96 percent — an 11-year high, according to New York-based Reis Inc., an analysis firm — Lennar CEO Stuart Miller announced last week that his company will invest an initial $560 million in multifamily projects this year alone.

The first projects, now under construction, are a $36 million, 316-unit complex in Jacksonville, Fla., in a partnership with the Carlyle Group asset-management firm, which has offices in Charlotte; and a $32 million, 264-unit complex northeast of Atlanta.

The Charlotte project — for which Farrell declined to give a total build-out cost, citing a corporate decision to not release the numbers — would be part of a second phase of Lennar’s push into apartments, which would also include new complexes in Texas and the Chicago area, Farrell said.

The new initiative by Lennar — which consistently ranks in the top 5 in annual surveys of the country’s biggest homebuilders by number of units sold and No. 1 in Charlotte in 2011 — is the latest evidence of a rush by investors and builders into a hot apartment market that continues to heat up as more homeowners and would-be homeowners are pushed out of owning.

But Ken Szymanski, president of the Greater Charlotte Apartment Association, had some words of caution for anyone jumping into the multifamily fray.

Szymanski said it’s “unusual historically” for a single-family homebuilder to lunge into the apartment business.

“But many companies are angling to become more versatile, and there’s a perception that apartments are more stable,” he said. “Whether they succeed at it remains to be seen.

“While it’s the darling of the real-estate types today, the depth of today’s apartment demand is not unlimited, and the chronology is not indefinite. We could be having a whole different conversation in 2015” about a glut of apartments. “Especially as rents begin to grow as high as a mortgage payment on a house.

Farrell said the Charlotte complex, which has yet to be named, would have studio, one-bedroom and two-bedroom apartments with luxury touches like lobbies, elevators and granite and hardwood finishes.

But “rents are undefined at this time,” he said.

Tony Brown can be reached at [email protected], (704) 247-2912 or on Twitter at @tonymecktimes.