Although Raleigh has seen a wave of new apartment construction over the past 18 months, no new projects have opened in the heart of downtown.
This, says John Nikolich of Chicago-based Banner Apartments, is one of the many reasons his company is excited about The Lincoln.
The 224-unit complex is to be built on a two-acre block just east of Moore Square, a 5-minute walk from the bars and restaurants around Fayetteville Street that are now regularly packed on weekend nights.
“This is a very unique block,” Nikolich, an executive vice president with Banner, said this week. “You have full access to the central business district, but it’s more of a residential feel because it’s not high-volume streets.”
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Banner and its two local partners in the project – The Florian Cos. and Hyde Street Partners – expect to begin construction on The Lincoln by early next year. Banner is putting up the bulk of the equity for the $35 million project and will manage it after it opens.
The Lincoln joins five other apartment complexes that either just opened or are under construction in the Glenwood South area near downtown and at Cameron Village farther west of downtown.
A growing market
But while The Lincoln will offer similarly priced apartments, Nikolich believes its central location will prevent it from competing head-to-head.
“The only other competition we see is really the Hue,” he said, referring to the project at Dawson and Hargett streets that has been widely successful since being converted from condominiums to rentals in 2010. “The stuff in Glenwood South, we include them on our comps, but it’s a different market.”
It’s worth noting that developers differentiating their projects based on walking distance to downtown speaks to both the area’s resurgence and the growing marketability of urban living.
Nikolich also doesn’t foresee direct competition from SkyHouse Raleigh, the 23-story luxury apartment complex that is planned for the southwest corner of Martin and Blount streets.
“It’s a great concept, but it’s vertical, and the cost structure will be higher ... that means they have to generate higher rents,” he said.
Banner owns about 6,000 apartments in nine states but none in the Triangle. The company has been making an aggressive push to expand into the Southeast. Nikolich said Banner’s investment committee was scheduled to discuss a Triangle acquisition Wednesday.
Like many developers who have moved into the region in recent years, Banner was drawn by the population, employment and wage growth.
The company also looked closely at North Carolina’s fiscal condition and its business climate, and whether it was friendly to owners of apartment complexes.
“That’s an important thing for us because we’re in the worst state,” Nikolich said, referring to Illinois.
He said Banner is looking at divesting itself of some of its assets in its hometown, largely because of concerns that cash-strapped Illinois is going to increase real estate taxes.
Nikolich learned about the Lincoln project after bumping into John Healy of Hyde Street Holdings at a real estate conference. Hyde Street and The Florian Cos. had put the property under contract but were looking for an equity partner to complete the deal, Nikolich said. The group paid $4.34 million for the land last week.
Nikolich noted that Banner owns and manages about 2,000 affordable units, something that city officials may seek to include in any redevelopment effort.
“We think we’re going to pioneer this neighborhood, be like the anchor to it,” Nikolich said. “We don’t want someone to kind of skate in and basically get the upside with no risk.”