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Air rights take flight

Air rights are not an exotic concept limited to mega cities like New York or Boston. They’re an important part of the real estate and construction game happening all around –– or at least above –– the Queen City.

That was the message David Jones of Troutman Sanders delivered to members of the Charlotte chapter of Commercial Real Estate Women at its monthly luncheon Tuesday at Charlotte Country Club.

A crowd of about 140 gathered at the Charlotte Country Club Tuesday for the monthly meeting of the Charlotte chapter of Commercial Real Estate Women to discuss air rights and development in Charlotte. Photo by Scott Baughman

A crowd of about 140 gathered at the Charlotte Country Club Tuesday for the monthly meeting of the Charlotte chapter of Commercial Real Estate Women to discuss air rights and development in Charlotte. Photo by Scott Baughman

A crowd of about 140 gathered to hear a panel discussion on air rights moderated by Jones and including Fred Klein III of Childress Klein, Laura Smith of Foundation for the Carolinas and Doug Stephan of Vision Ventures.

“People hear stories about air rights being secured and they think this is the latest trend in Charlotte real estate,” Jones said. “But there have been air rights transactions in Charlotte for the last 25 years.”

Jones went on to explain that air rights can be thought of as similar to subdivision arrangements.

“Each of you are familiar with subdivisions and how they horizontally divide the land into different sections,” he said. “Now, turn that dividing line 90 degrees and instead of dividing horizontally, divide the property vertically. That’s how you deal with air rights.”

Jones added that securing the air rights to a property is similar to buying a condominium. Buyers purchase the finished surfaces and the “air” inside the already completed building, but they don’t own any of the superstructure underneath their feet. With air rights, owners have the space above a building, they just don’t have any physical structure except for a bottom.

“The air rights are defined by lines in space and they are usually described as some number of feet above sea level,” Jones said. “And there is no boundary at the top, they are usually assumed to go up forever.”

But Jones cautioned that just because it is easy to understand air rights, it doesn’t mean working on projects in the sky is a breeze.

“Until we have buildings that hover, it is important to have a secondary document like an air rights agreement that deals with the nitty gritty details of developing one building on top of another,” he said.

Stephan discussed a project he worked on that didn’t have all the necessary rights spelled out.

“The documents we had in place were missing the majority of important things,” Stephan said regarding the construction of two hotels at the Epicenter. “It is important before a project starts to have a joint construction agreement. We had a fully occupied building that operates 20 hours a day (on the bottom). Logistically, it was a bit of a nightmare getting the two hotels built even though the developer had secured the air rights some time ago.”

Stephan explained that the worst part of the process came about five years ago when the construction work on the towers meant that Tryon and Fourth streets had to be closed off around the Epicenter.

“We got a call that Hugh McColl was complaining about the road closings,” he said. “He wanted to know if we could get the beer trucks delivering beer to the Epicenter to stop parking on Tryon and blocking the road where he wanted to turn and go down to B of A plaza. That was not good to hear.”

On the other end of the spectrum was Childress Klein’s Museum Tower apartments project. Klein said that most of the preliminary work for the project went well, and acquiring the air rights above the Mint Museum was relatively easy. The 43-story Museum Tower building starts about 120 feet in the air and is being constructed on top of the uptown museum. Klein said the company expects it to be completed by December.

But Klein said sometimes working with neighbors on an air rights deal can be a challenge.

“Working with Wells Fargo was interesting,” he said, referencing the bank’s facility across the street from the museum. “At one point they told us that it wouldn’t matter how much money we offered –– it could have been hundreds of millions of dollars –– but if we dropped something during construction on their stock trading floor at the bank and shut down the trading floor for a while, they’d lose a bunch of money in the deal. We had to get a special kind of crane that would not have to move construction materials over Wells Fargo as part of our deal to get the air rights.”

The crane, called a walking crane, can traverse the surface of the Museum Tower without the need for a large tower or crane boom usually seen on traditional construction cranes used for high altitude work. The air rights agreement for Museum Tower stipulated certain “no fly zones” in which construction crews are not allowed to lift or maneuver stacks of materials over any Wells Fargo buildings nearby.

Jones had one more word of caution about developing on different levels at the same time.

“You’re developing the building affixed to the ground and at least part of the building on top more or less simultaneously,” he said. “You need to make sure you coordinate rights and construction so that the building on top does not lag behind the base building and is left unfinished and sitting there like some strange hat.”

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