Graycliff Capital Partners is a multi-family development and investment company with focus on the Southeast and Mid-Atlantic regions of the United States. Since its founding in 2010 in Greenville, SC, Graycliff has acquired and developed more than 14,000 apartment units, executing approximately $3.0 billion in transactions. Graycliff’s core strategy is based on investing in areas with established economic growth and high barriers to entry. Over the past decade, Graycliff’s geographic reach has extended beyond the Carolinas to other parts of the Southeast, including Tennessee. Graycliff’s portfolio also includes multi-family communities in the Mountain West, including Utah and Idaho.
Seth Peterson is Graycliff’s Director of Development. In this role for seven years, Peterson is responsible for executing new construction multi-family development opportunities, which entails deal origination, underwriting, due diligence, entitlement and re-zoning efforts, and the design and programming of communities. For Peterson, site selection is a critical responsibility – to foresee a location and market not only through the lens of “today” but also five or 10 years into the future.
GroundBreak Carolinas recently chatted with Peterson to gain insight into the firm and the world of multi-family community development, including trends in our region.
What sets Graycliff apart?
We are certainly not your typical real estate development company, with younger leadership and a vibrant, fast-paced atmosphere. Graycliff has female-led executive leadership at both the CFO and COO roles, something not seen at similar development companies. It really is our greatest asset to have diverse leadership. It is exciting to see young people starting their careers here and thriving in this fast-paced environment. Overall, what makes us different is that we identify opportunities that competitors may overlook because the deal is outside their comfort zone, or simply looks like too much work.
What’s the state of the multi-family housing market sector in the Carolinas, the Southeast and beyond?
The Sunbelt, which extends from the Desert West to the Southeast, is on fire right now. Multi-family housing in these markets is known for being more affordable and less dense than other parts of the country. The COVID-19 crisis has only increased these population shifts to growth in the South and Mountain West, which are the key regions that Graycliff is currently engaged in, and in which we are actively looking for new opportunities.
Some cities like Charlotte, for instance, have a lot of multi-family projects under construction that will finish up, but new starts are slowing down.
When we enter a new market, we research the local metrics of the multi-family market. The major metrics to analyze include market rent growth, population growth, and new job announcements. If new deliveries are being leased and absorbed at competitive market rates, then new construction starts will continue to occur. We are not in the business of oversupplying markets.
What is your vision when looking to develop a property?
The initial vision is asking the question, “Why would someone live here?” The entire community should be inclusive to a wide range of resident lifestyles. It should have designs and amenities that appeal to everyone from the millennial to the retiree, to a family with children. Residents are calling this place home, and it is important to create a positive experience during their time there.
What is your long-term vision for the community you are developing?
The long-term vision is a classic design that ages well. It should blend in with the neighboring area. Following “new” trends is important, but how will that design trend look in 5 or 10 years? Unique amenities are crucial to make the community stand apart.
How does site selection fit into that objective?
Site selection is finding a great area where a resident wants to be located. A well-located site has connectivity to interstates/transportation, employment hubs, and grocery and entertainment centers.
Even in a suburban location that is reliant primarily on car trips, it is important to find sites with a level of walkability. Most residents would prefer to walk to dinner, versus drive. For example, Waterleaf at Neely Ferry (Simpsonville, SC) is a suburban location, yet walkable to an adjacent grocery store, restaurant, and elementary school. It was a key design detail to build shared sidewalks to connect to the surrounding land uses.
How do you determine the need for the size of the multi-family complex, i.e., the right number of units – say 200 or 500?
The “magic number” for garden-style communities is 240 units. With that said “right sizing” is more important than building a standard unit count. In some markets, such as Nashville, the market has a great need for new rental product, which led us to build 364 units. In turn, we are building a 143-unit townhome community in Murrells Inlet, SC. We are not looking to shoehorn a certain unit count or unit mix into a market; we are flexible to build what appeals most to the local market.
Although Graycliff is a market-rate developer, is the company involved in affordable housing?
Graycliff is a major proponent of affordable housing. Affordable housing creates numerous positive impacts, including greater residential stability, traffic reduction by decreasing commuting times, and employment reliability being co-located near key employers.
Graycliff currently operates, and has several pipeline developments, of market-rate rental communities that incorporate up to +/- 20 percent of the total unit count designated as workforce units. The “workforce” units have the exact size and finish level as a market rate unit but offer a reduced market rent for qualified residents based on availability and HUD’s AMI (Area Median Income) calculation. These units are well-received especially by essential workers, including schoolteachers, nurses, and life safety personnel. We take a lot of pride in building high quality market rate and workforce housing communities that benefit the public in so many ways.
From the time you identify a property, what is the typical timeline from meeting with local officials until the construction project is complete and tenants begin to move in?
As Paul Aiesi (Partner at Graycliff) likes to say, it is earning a “college degree” with every new construction development. From the time we sign a contract to purchase the raw land, to the community achieving stabilized occupancy, it is easily four years (the college degree timeframe). The entitlement/re-zoning process can easily take a year-and-a-half. Depending on the total project size, it is between 12 to 15 months for the first units to be delivered. The lease-up process can take another 12 to 15 months.
What do you try to do that’s unique and different?
One major goal is to “place make” by tailoring each community to its location and surroundings. We do not simply copy and paste the same project over and over. At Waterleaf at Battery Creek (Beaufort, SC) for example, we constructed a +500-foot length amenity crabbing dock (nearly 1.5 football fields) into Battery Creek that gave residents the ability to fish or relax by the water. It was a very challenging amenity to build with governmental approvals and the physical constraints, but we were committing to giving residents access to the water. It didn’t seem right to be so close, yet so far away. I cannot think of any other multi-family community that has an amenity dock!
Give us some examples of Graycliff developments in the Carolinas.
Graycliff has developed multiple luxury apartment communities across the Carolinas in recent years. Graycliff’s recent and current coastal developments include Encore at Heritage in Raleigh, NC; Waterleaf at Murrells Inlet near Myrtle Beach, SC; and Waterleaf at Leland in Wilmington, NC. Other Graycliff developments include three in the Upstate region of South Carolina – Cotton Mill Apartments, Waterleaf at Neely Ferry, and Waterleaf at Keys Crossings. Recent acquisitions include Reserve at Asheville in western North Carolina, and The Ironwood Apartments in North Augusta, SC.
With three existing communities, and two more in planning, all with coastal locations, what draws Graycliff Capital to the coastal part of the world?
Graycliff continues to identify opportunities for new communities within the coastal Carolina markets, which are experiencing a significant in-migration population boom. The migration to the coast is driven by its moderate climate, diverse economy, and abundant lifestyle amenities – attracting both millennials and baby boomers alike to relocate.
How do you partner with local communities?
Graycliff employees provide input on which charities the company will assist each year. It is a collaborative process and creates a connection with the charities. The preference is to help local, grassroots organizations versus large corporate ones. We have a corporate responsibility to help non-profits not just in Greenville, but in each of the cities where we have a multi-family community. This is something we’re very passionate about.
What keeps you up at night in the real estate development business lately?
The top two items of concern are the rapidly rising interest rates and the increasing cost of construction. On the hard cost construction side, we’re seeing a 1.0% to 4.0% increase per month depending on the trade or material. It’s an unknown just how high interest rates will climb, but it’s happening rapidly. These concerns coupled together will only make new development that much more challenging, which may result in fewer construction starts. We already have a shortfall in the supply to meet the housing demand, and less new construction starts will only make the issue of affordability more complex.
About Seth Peterson
Seth Peterson earned his Bachelor of Business Administration (BBA) – specializing in Real Estate Development – from the University of South Carolina in 2007, followed by a Master of Real Estate Development (MRED) degree from Clemson University in 2014. Peterson enjoys giving back by mentoring young professionals and students in the Clemson MRED program. He was recently named to Clemson’s Advancement Board for Real Estate Development (ABRED).
His professional credentials include a South Carolina Broker’s license and select memberships that offer Continuing Education, including the Urban Land Institute (ULI) and the National Multi-Housing Council (NMHC).
Peterson was among the elite group of Upstate South Carolina professionals to be honored in GSA Business Report’s 2021 “Forty Under 40” recognition program. GSA Business Report’s Forty Under 40 Awards recognize success and community involvement of 40 professionals under age 40 who are making their mark on the Upstate from a mix of industry, professional and community sectors.