Uptown Charlotte office building sells for 1/2 its previous sales price
High office vacancy rates in Charlotte could lead to significant drops in local tax revenue
The following article appeared in the December 16, 2024, edition of The Charlotte Ledger, an e-newsletter with smart and original local news for Charlotte. We offer free and paid subscription plans. More info here.
Big discount: A nearly empty uptown office building sells for 1/2 of previous price — and 1/4 of tax value
One of uptown Charlotte’s most vacant office buildings has been sold — and at a price that’s half as much as it sold for in the 2010s.
The Wake Forest University Charlotte Center building on North College Street was sold on Friday for $32.7M, according to the county register of deeds office. It previously sold for $72.5M in two transactions in 2013 and 2018.
The sales price is about 1/4 of the $133M that the tax assessor’s office figured that the building was worth in 2023.
This example illustrates how much the value of older office buildings has fallen — and how one of the downsides of this nationwide phenomenon could be a huge drop in tax revenue for local governments. The problem is that if the actual market sales prices are dramatically below the estimated tax values, the tax values and the taxes owners pay will plunge. That will leave residential taxpayers shouldering more of the tax burden.
The Ledger has reported that there are at least 10 office buildings uptown that are more than half-empty. The citywide office vacancy rate is estimated at more than 20%, or more than double the typical rate, as work-from-home and hybrid arrangements have persisted after Covid.
We’re only at the early stages of seeing how this will play out, because there have been few recent sales of office buildings to be able to understand how much those values have dropped. Until Friday, that is.
The Wake Forest University Charlotte Center building is a 5-story brick structure that tax records say was built in 1988.
SOLD: The Wake Forest University Charlotte Center office building sold for $32.7M on Friday, far below its previous sale price and its tax value. It is more than 90% empty.
Although it carries the Wake Forest name, the building was primarily office space for Bank of America, until the bank’s lease expired in February 2023, with workers moving to the new Bank of America Tower at Legacy Union. Wake Forest leases only about 7% of the 458,000 s.f. building.
With the space mostly vacant and hardly anybody paying rent last year, the owner — connected to Philadelphia-area real estate company Alliance HP — defaulted on a $37M loan, and lenders led by Wells Fargo sued to have a receiver appointed, court documents say. At the time, it was 92% vacant, and the building owner owed $35M on the loan and had stopped paying, court documents say.
The court appointed a receiver, who took control of the property and started making moves to fix it up for sale, to pay back the lenders.
The property consists of four taxable parcels. In 2018, the office building and parking deck had sold for a combined $54.5M. The land that the block sits on had sold for $12.5M in 2013. (There’s also a hotel — the DoubleTree by Hilton Charlotte City Center — but it’s not a part of these sales.)
Earlier in 2023, county tax assessors calculated that the offices, parking deck and land were worth a combined $132.9M, based on formulas and comparable sales from recent years. As the result of appeals, the assessed value was reduced to $114.6M.
In the spring of this year, before the property went on the market, a buyer called AH Real Estate Holdings indicated it was interested in buying the property, and the receiver and the company negotiated a sales price: $32.7M, or about $71 per square foot. In court documents, the receiver called the amount a “fair market price for the Real Property in its current condition.”
Apartments in the future? The contact for AH Real Estate Holdings, listed as a Dallas businessman with a background in hospitality technology, did not return an email from The Ledger. Sales broker Cushman & Wakefield said in a press release Monday that the buyer “plans to redevelop a portion of the property to include a multifamily units and ground-level retail space.”
As part of the closing, the deal presumably included paying the outstanding property tax bills for the site, which total $907,000 for 2024. If it were taxed on the amount it actually sold for, as opposed to the assessed value, the taxes would be just $259,000. Now imagine if you applied similar drops to a whole bunch of other commercial parcels.
Emerging trend? We’re starting to see a trend of office buildings selling for far less than previous sales prices — like, 40-50% less — which are also far less than their assessed property tax values. The Johnston Building on South Tryon Street sold in 2019 for $32.25M, then sold again in May for $19.3M (or $112 per square foot) — a 40% reduction. Its tax value had been assessed in 2023 at $45.4M (reduced to $37.4M on appeal).
As we wrote last week, it’s being turned into a hotel. —Tony Mecia
Related Ledger articles:
“Whoa: At least 10 uptown office towers are more than 50% empty” (June 5, 2023)
“How much is a half-empty uptown office tower worth? Owner of Trade and Tryon building requests 41% reduction from 2019 sales price” (🔒, June 30, 2023)
“Charlotte’s slumping office market sounds alarms” (🔒, Dec. 6, 2023)
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Executive editor: Tony Mecia; Managing editor: Cristina Bolling; Staff writer: Lindsey Banks; Business manager: Brie Chrisman