Big names make deal for Charlotte construction firm
Plus: Tax surprise for PPP recipients; Will CMS really go back to school in 2 weeks?; Bulldozers work overtime in Dilworth; Novant foresees pandemic baby boom; 'Outer Banks' creators sued
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‘Transformative’ new investment group including Hugh McColl buys prominent minority-owned construction firm; City Council member to run company
A new investment fund has bought R.J. Leeper Construction in a deal that involves some of the biggest figures in the city’s business and political realms. (Josue Isai Ramos Figueroa / Unsplash)
by Tony Mecia
A new investment fund whose backers include former Bank of America CEO Hugh McColl has bought R.J. Leeper Construction, Charlotte’s best-known minority-owned construction firm.
It’s the first in a series of investments planned by the new fund, Bright Hope Capital, which was quietly established this fall to inject money and expertise into minority-owned businesses in Charlotte. The fund’s ownership group is composed of McColl and two well-known local Black executives: Malcomb Coley, Charlotte managing partner of Ernst & Young, who is scheduled to chair the board of the Charlotte Regional Business Alliance next year; and Lloyd Yates, a former executive vice president of Duke Energy.
Coley told The Ledger that the goal is to “create more wealth” — including “more African American and Hispanic millionaires in the Charlotte community” — by investing money as well as helping owners of minority businesses become successful and prosperous. The effects of that effort will then ripple throughout Charlotte, he said.
“The formation of this minority-based investment fund is huge, and it’s transformative,” he said. “… You have these minority-owned businesses that tend to be underserved and marginally capitalized. Our focus was, how do we take our financial capital and social capital and prop these companies up to scale?”
He added: “If we do that, everybody benefits. And hopefully it inspires some young kid to say, ‘You know what? I can grow a business.’”
He declined to give financial details about the new fund, other than to say its resources are “substantial.” A formal announcement is expected today. (The Ledger heard about it last week and started asking questions on Sunday.)
In an interview, McColl told The Ledger on Sunday that he has thought for years about creating a fund to invest in minority-owned businesses, and the new company grew out of discussions with Coley and Yates: “I’ve met a lot of very smart, young African American men and women who have run businesses. … One of the problems, everybody thinks, is it’s difficult to get credit. Credit is not always what’s needed. Sometimes, you need new capital to invest in a growing business.”
The fund’s investments will ensure that companies can pay a “living wage” of at least $15 an hour and offer health insurance and retirement benefits. Bright Hope Capital is putting the finishing touches on a second deal, expected to be announced in the next few weeks.
“The main thing we are trying to do is to build wealth in the African American community — not only build wealth, but preserve wealth,” McColl said.
Construction deal
The deal to buy R.J. Leeper Construction closed last week, Coley said. Founder Ron Leeper, a former City Council member who is in his mid-70s, will stay at the company in a consulting role. The new president and part owner of the construction company is at-large City Council member James “Smuggie” Mitchell, who chairs the council’s workforce and business development committee. He’s senior business development manager at JE Dunn Construction Co. Reached by phone Sunday, Mitchell said he was getting his hair cut and was unavailable to talk, as what sounded like clippers buzzed in the background.
Asked about the deal on Sunday, Leeper wrote in an email to The Ledger: “There is a lot of history here, and I would be glad to talk about my long relationship with Hugh and James Mitchell, but I do not want to get ahead of the buyers.”
R.J. Leeper Construction is one of Charlotte’s few minority-owned construction companies, and possibly the most prominent because of the civic involvement of its founder, who served on the City Council for 10 years in the 1970s and ’80s. In recent years, and especially since the summer’s renewed focus on racial equality, companies have faced increased pressure to diversify their workforces and suppliers. It will still be considered minority-owned after the purchase.
It’s Charlotte’s 9th-largest Black-owned company, according to the Charlotte Business Journal’s Book of Lists. The company is involved in joint-venture projects including the new Mecklenburg County uptown library, the renovation and expansion of the Charlotte Convention Center and expansion projects at Charlotte Douglas International Airport, according to the company’s website. It also helped build uptown’s minor-league baseball stadium, now known as Truist Field.
Business meets politics
The story of the company’s founding, and the deal to sell it, is a classic Charlotte tale of the intermingling between political and business realms.
Leeper won election to the City Council in 1977. He was a 32-year-old district manager at a wholesale supply company who was “bearded and with a four-inch afro [and] a member of the Black Panther Party,” according to a forthcoming biography of McColl, “Beyond the Bank: Hugh McColl’s Chapter Two” (from which The Ledger excerpted last month). McColl called Leeper shortly after the election, and the two started holding weekly lunch meetings. The story goes that Leeper learned to appreciate and support McColl’s vision for Charlotte, while McColl wielded his influence to help Leeper improve conditions in his impoverished west Charlotte district.
After Leeper left the council, McColl helped line him up with a job at a construction firm — and paid half his salary. Three years later, after Leeper had learned the construction business, McColl helped him with a loan to start his own company. He then picked Leeper’s new firm to build uptown’s transit center, according to the biography.
Leeper told McColl’s biographer:
I think Hugh really believes that for Charlotte to be what he wants it to be, and believes it has the capacity to be, that a lot of people have to be around the table contributing in a meaningful way. I’m not really sure why other people don’t get what Hugh obviously got.
Leeper also has close ties to Mitchell. A 2018 WBTV story describes Leeper as Mitchell’s mentor. In 1987, Leeper founded a leadership program called Focus on Leaders. It was a predecessor to Next Level Leadership, a nonprofit that Mitchell heads.
In a 2015 Business Journal article, Mitchell mentioned R.J. Leeper as an example of a local company he said should qualify for city economic development incentives: “We need to have the ability to allow (homegrown companies) to get incentives.”
Local construction companies, including R.J. Leeper, often have contracts with the city, and ethics rules say council members should ask to be recused if they have conflicts. As an employee of JE Dunn Construction, Mitchell was recused from voting at least 5 times in 2019, WBTV reported last year.
Construction is one of the industries that has held up well locally during the pandemic. While employment in the Charlotte area overall is down 6% compared with a year ago, the number of construction jobs are down just 0.1%, according to the Bureau of Labor Statistics.
Today’s supporting sponsor is Landon A. Dunn, Attorney at Law in Matthews:
Tax surprise: N.C. wants $$$ from PPP recipients
North Carolina companies that received Paycheck Protection Program loans last year might be in for an unwelcome surprise when they do their 2020 state income taxes.
About 130,000 businesses in the state received the loans — including more than 15,000 in Charlotte. They were intended to help businesses struggling because of the pandemic. In most cases, the loans actually turned into grants if they were used for qualifying expenses. Although forgiven loans are usually treated for tax purposes as income, both the feds and North Carolina have made clear that PPP loans don’t count as income.
But accountants tell us that as of now, there are still tax consequences for North Carolina companies that received the loans. The new Covid relief law approved in Washington last week clarifies that business expenses such as payroll can still be deducted as expenses on federal returns. But that’s not the case with North Carolina income tax returns. In other words, the loan doesn’t count as income — but for state tax returns, you can’t deduct payroll expenses if you used the loan to pay for them. That has the same effect as making the loans taxable, because it boosts a company’s income by the amount of the loan.
Instructions for the state’s 2020 tax forms say:
for N.C. income tax purposes, any expenses paid using the proceeds of the forgiven PPP loan that are otherwise deductible from federal adjusted gross income are not deductible when calculating NC taxable income.
Since the state’s income tax is a flat 5.25%, that means a tax bill of $5,250 on a $100,000 PPP loan. About 4/5 of the loans in North Carolina were for $100,000 or less, according to an analysis by the Raleigh News & Observer a month ago. The Ledger highlighted some of the best-known Charlotte companies receiving PPP loans a few weeks ago (🔒).
The state, though, plans to take a look at changing the law to make those expenses deductible, just as the feds do. Sen. Paul Newton, a Republican from Cabarrus County who co-chairs the Senate Finance Committee, told The Ledger in an email:
Conforming to the Federal Government’s treatment is something we will consider. A significant unknown is the extent of [the] NC revenue shortfall we are facing due to the pandemic. A consensus estimate is not expected to be available from non-partisan central staff until February. The Federal Government can print money. We cannot. So we will need more information to make an informed decision.
So it sounds as though it could be more than a month before we know if the state will make that change. —TM
Don’t hold your breath on CMS back-to-school plan
Does anybody really think that the school board is going to allow Charlotte-Mecklenburg Schools students to return to in-person classes on Jan. 19, as is the plan?
Since the CMS board voted on Dec. 8 to keep elementary school students home and push back the return of middle and high school students, Mecklenburg’s Covid numbers have worsened:
Then, the county was averaging 474 cases a day. Today’s it’s averaging 600 cases a day.
Then, 242 Covid patients were hospitalized. Today, 407 are hospitalized.
Then, 11% of Covid tests were coming back positive. Today, 11.8% are coming back positive.
N.C. Health and Human Services secretary Mandy Cohen said on Saturday: “We begin 2021 in our most dangerous position in this pandemic. We have critically high rates of spread in much of our state.”
National medical experts mostly agree that children belong in school, though they are typically vague about specifics. Last week, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, told CNN:
The bottom line, what I call the default position, should be that we should, wherever we are, try as best as we can to get the children back to school and to keep them in school and have a plan to try and keep them as safe as possible.
He said transmission in schools is “considerably lower than what we had thought, so it may be that the children are more safe in school than we would have thought they are.”
No health officials, at the federal, state or local levels, have given guidance about at what levels of community Covid transmission are safe or unsafe for in-person classes, so school boards are left to make their own decisions — which is what we elect them to do.
Don’t be surprised when the CMS board declares our public schools unsafe yet again and alters plans. The next regular meeting is scheduled for Jan. 12, but CMS has also been fond of emergency meetings to switch gears.
Also worth noting: The next group to receive the Covid vaccine is anybody aged 75+, which is expected to start this week. After that group, teachers and other frontline essential workers can start receiving the vaccine. —TM
Real estate deal corner
A few real estate deals of note filed in the final week of 2020:
Asana buys in to Ally Charlotte Center: A company affiliated with Asana Partners bought the retail portion of Ally Charlotte Center uptown from Crescent Communities for $6.5M. Asana specializes in mixed-use and retail developments. Crescent is finishing interior work on the new skyscraper at the corner of South Tryon and Stonewall streets. (We featured it in one of our “Flyover Friday” episodes this fall.)
Dilworth/Midtown office tower? A developer that has proposed to build a “mixed use office tower, parking, and multi family” on East Morehead Street closed on 2 parcels totaling 2.84 acres at Euclid Avenue for $17.8M. MOD CLT, affiliated with New York-based Spandrel Development Partners, had sued the previous property owner in August, The Ledger reported (🔒), after the deal had fallen through. MOD CLT had said it had trouble with financing for the purchase because of Covid and wanted more time to put the deal together.
Homebuilder purchase in SouthPark: A company affiliated with custom homebuilder Copper Builders has bought 6 parcels totaling 3.44 acres on the northeastern corner of Fairview Road at Park Road for $2.4M, property records show.
DEMOLITION IN DILWORTH: Bulldozers spent the long weekend knocking down several houses on East Boulevard at Lombardy Circle, in the commercial stretch of the Dilworth neighborhood. Developers filed plans with the city a year ago for three condo towers between 3 and 8 stories plus one 5-story office tower on the parcels, The Ledger reported at the time. There have been no public updates to that plan. The developer is believed to be Jim Gross, best known for building the 24-story pink residential tower The Arlington in South End.
In brief:
Vaccine plans coming: The Mecklenburg County Health Department plans to announce this week how it intends to distribute the Covid vaccine to residents aged 75 and up. “Vaccine supplies are still limited, and appointments will be made available as that supply allows,” it said in a news release. WBTV reported that the county will vaccinate residents at Bojangles Coliseum. Under state guidelines, people aged 75+ can receive the vaccine after it has been distributed to front-line healthcare workers and residents and staff of nursing homes.
Pandemic baby boom: Nine months after the spring lockdown, Novant Health says it is expecting a surge in births. Novant expects a 7.5% increase in births this month, compared with a year earlier, and a nearly 10% spike in June. “These numbers are a little bit higher than the increases we’ve seen the last few years, so I think part of that is just the growth and part of it is contributable to the pandemic as well,” said Dr. Jessica Deane-Wyman, a Novant OB-GYN. (WSOC)
Truist tech center: Truist CEO Kelly King says the bank’s technology and innovation hub is being built in the bank’s HQ on the site of the old Bank of America trading floor, and he expects it to open in late summer or early fall. “It’s going to be awesome. … It’s going to be the talk of the industry,” he said in an extended interview about the bank’s plans, its post-merger integration and King’s legacy. The publication apparently did not ask about Truist’s controversial new signs the bank installed on its HQ building in November. (Biz Journal)
Park Road Teeter to re-open: Harris Teeter is re-opening its Park Road Shopping Center store on Jan. 13 at 8 a.m., following a renovation. (Press release)
Field hospital: Samaritan’s Purse is building a 30-bed field hospital in Lenoir to help hospital systems that are overwhelmed with Covid patients. (WCNC)
Auto services IPO: Charlotte-based Driven Brands Holdings Inc., the parent company of Meineke Car Care and other companies, filed for an initial public offering that could be worth more than $700M. It has more than 4,100 franchise locations in 49 states and 14 countries. (Biz Journal)
Nelson Schwab was named non-executive chairman of Flagship Healthcare Trust, Inc., a private real estate investment trust (REIT) with medical office space in 18 markets in the Southeast and mid-Atlantic. J. Brannen Edge III was appointed as CEO. (PR Newswire)
Record homicides in 2020: The number of homicides recorded by Charlotte-Mecklenburg police eclipsed the number from 1993, police said last week. As of Wednesday, police had tallied 123 homicides, edging out the previous record of 122. A police lieutenant said there’s no clear explanation behind the rising numbers: “I think it’s just people’s willingness to resort to a firearm over really minor things. … It’s probably just younger folks, less mature decision-making ... and that’s costing a lot of lives.” (WFAE)
Small business aid: A west Charlotte outpatient mental health clinic was selected by the founder of digital media company Barstool Sports to receive charitable help to keep her business afloat during the pandemic. Barber Therapy and Associates was selected last week to participate in the Barstool Fund, which has raised $17.4M to help small businesses nationwide. Barber Therapy’s owner said she has been racking up credit card debt and dipping into savings to pay the bills and that the money would be a big help: “The number of suicidal cases we get from week to week is unbelievable. We have to keep this service going to give these folks a place to come that is safe.” (WSOC)
‘Outer Banks’ lawsuit: A high school English teacher who lives outside Winston-Salem is suing the creators of the Netflix’s “Outer Banks” for copyright infringement, saying the hit series has the same plot as his novel “Pennywise: The Hunt for Blackbeard’s Treasure!” The suit says the stories in the novel and the series both take place in the Outer Banks; have 4 young-adult protagonists with similar backgrounds; include antagonists consisting of a rich benefactor and corrupt member of law enforcement and include finding objects at the bottom of the ocean directing them to “more clues including old portraits, churches, mausoleums and eventually the treasure in the recess of a shaft.” (Variety)
Loves me some internet
No stock listings today — it’s the first trading day of the year.
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Executive editor: Tony Mecia; Managing editor: Cristina Bolling; Contributing editor: Tim Whitmire, CXN Advisory; Reporting intern: David Griffith