Business Journal Profiles Navy Yard at Noisette Project

Happy Monday!

Attached is the article “Perception Problem” From Charleston Regional Business Journal Aug.30- Sept. 12. 2010 Print Edition.  Enjoy!

Perception Problem?

Pic – The 40-person company PeopleMatter hopes to continue expanding at the Navy Yard at Noisette.

Some question the progress of a high-profile redevelopment effort for 340 acres at the former Navy base in North Charleston, particularly in light of an ongoing railroad debate.  This report takes a look at what has and has not happened in recent years at the Navy Yard at Noisette.

Pic – Vapor Apparel is one of about 80 businesses, nonprofit groups and government entities at the Navy Yard at Noisette.  The company has leased space at 10 Storehouse Row since 2006.

Investments continue at Navy Yard Project

Rail debate leads to questions, answers about pace of progress

By Ashley Fletcher Frampton and Daniel Brock

Leaders of the Noisette Co. say their Navy Yard at Noisette redevelopment project has a public perception problem.  Nearly a decade after the company announced plans to transform 340 acres of the abandoned Navy base into a new mixed-use community, some see little in the way of new investment and activity.

At least one state official sees no reason why massive, two-mile long trains shouldn’t run through the site on a daily basis while accessing a new port terminal nearby.

“I’m not really sure what the impact would be on the community.” S.C. Public Railways President Jeff McWhorter said in an interview with the Business Journal earlier this year.  “It’s vacant land; nothing’s really going on with it now.”

Counting jobs and businesses

For years, drawings promoting the Navy Yard at Noisette have depicted stories-tall office and residential buildings that rise above a lush landscaping, a lake and bustling, tree-lined sidewalks.  No such structures are in place today and dilapidated pavement often stands in for sidewalks at the property.

The Noisette Co. was preparing to develop infrastructure for some of those features when financial markets melted down in 2008, said President and CEO John Knott.  The crisis halted lending for development projects just two years after the Navy turned over the property at the base for redevelopment in 2006, he said.

Still, more than 80 businesses, government agencies and nonprofit groups are now operating within the Navy Yard at Noisette project boundaries, according to the Noisette Co.  Those entities are home to between 2,100 and 2,300 daytime employees.  Some of the groups have purchased and completed multimillion-dollar renovations to decades-old, deteriorating Navy buildings.

Firms as diverse as engineers, microbrewers, medical researchers, recycling services and TV crews for the series Army Wives operate at the Navy Yard.

The development site includes more than 800,000 square feet that The Noisette Co. leases and says is about 97% occupied.  It contains about 200,000 square feet of space that third parties own and either use or lease and about 450,000 square feet where government entities are based.

The largest on-site government operation is Space and Naval Warfare Systems Center Atlantic, a defense agency that occupies six buildings on the former base and employs more than 2,000 government workers and contractors, SPAWAR said.

Other activity includes an apartment complex under construction, a school, a pair of restaurants set to open soon and the Riverfront Park that the city of North Charleston and the Noisette Co. partnered to build along the Cooper River five years ago.

Pic- Renderings of the Navy Yard at Noisette show new construction, bustling sidewalks and a lake.  Developers say the economy has slowed those plans, though renovation projects have advanced.

“The Navy Yard was always conceived as the urban heart of the Noisette area.” Knott said, referring to the broader 3,000 acres of North Charleston targeted for redevelopment after the Navy base closed.  “And what you see is this urban heart coming to life, with all the components that make a city.”

Knott said that when the financial crisis halted infrastructure development, the company turned its focus to a portion of the former base with historic buildings and infrastructure already in place.

It might appear that more activity was going on if new construction were occurring, Knott said.  But, “I would say that restoring a historic building and keeping that fabric in place is even more valuable than building a new building.”

Knott added that “800,000 square feet is still 800,000 square feet, whether it’s an existing building or a new building.”

Coleman-Snow Consultants is among the companies that have bought and restored a former Navy structure.  The engineering firm just completed the renovation of a 16,000-square-foot building that once functioned as sick quarters for Navy officers.

The building now serves as office space for about 30, a combination of Coleman-Snow Consultants’ employees and those of its parent company, United Infrastructure Group.

According to Billy Coleman, president of Coleman-Snow Consultants, interest in the Navy Yard continues to grow.  He bases that on the calls he has received from groups around the base that want to rent additional space in his building.

Unfortunately, that space is occupied, he said.

“There’s quite a bit of interest, and there’s quite a bit going on as far as I can tell with what is coming,” Coleman said.  “I think we got in on what is the bottom floor.”

Redevelopment and the rail debate

The viability of the Navy Yard at Noisette redevelopment project has come into question during the latest flare-up over how to best move cargo via rail from the $600 million S.C. State Ports Authority terminal under construction on the former base.

The terminal won’t be directly served by rail, but it’s likely that an intermodal yard – to which containers are brought in from the port by truck and hauled away by train – will be built nearby.

One plan, backed by the city of North Charleston, rail carrier CSX Transportation and developer Shipyard Creek Associates, would turn an existing small CSX rail yard and property owned by Shipyard Creek near the base’s south end into a modern intermodal facility and warehouse operation.

The plan calls for competing carrier Norfolk Southern to build its own yard elsewhere.  Norfolk Southern officials say that plan is unfair and that the port would be more competitive if served by a single facility that offers equal access to both rail lines.

Among those aligned with Norfolk Southern is S.C. Public Railways’ McWhorter.  He and company officials have backed a proposal that would place a rail yard on former Navy base land now deeded to the Clemson restoration Institute’s $98 million wind turbine drivetrain testing facility.

CSX trains would access the intermodal facility from the south end of the base, and Norfolk southern trains would use existing tracks on the base’s north end.

McWhorter’s agency, a division of the S.C. Department of Commerce, would operate the yard, and both rail lines would have equal access under that plan.

The north-end tracks that Norfolk Southern would utilize under the plan run through the heart of the Navy Yard at Noisette.  That section of track is used today, but traffic is light and trains are only a few cars long.

Because of the harm that Summey says miles-long intermodal trains would pose to redevelopment efforts, the mayor signed an agreement with the SPA in 2002 under which the authority agreed to utilize rail access only from the base’s south end.

McWhorter said he understood Summey’s objection to large trains in the redevelopment path – initially.

“I understand why he did not want that rail there with the Noisette project and where they were heading with that,” McWhorter said in the July interview.  “Quite frankly, I’m not sure what resulted from that.  What is it that’s been constructed in there?”

McWhorter’s comment ruffled the Noisette Co. officials and several of the businesses that have invested in the area.  After repeated attempts to obtain comment, neither McWhorter nor the Department of Commerce would respond directly to questions for this story.

Some current business owners say they worry that large trains running daily through the Navy Yard at Noisette – in some cases steps away from their offices – would hinder their operations, block key intersections for workers and clients and generally hurt the investments they’ve made.

Jackson Burnett, president of Vapor Apparel, which operates out of 22,000 square feet in the 10 Storehouse Row building on the former Navy base, said train trucks run right past his back door, which serves trucks carrying blank shirts and other apparel that the company sells and customizes.

Trains use the tracks only occasionally now, said Burnett, whose company has been in the building since 2006 and has grown to 25 employees.

“If there were larger trains and more train traffic, it would pose a very large problem because it would cut off our warehouse and our loading and unloading dock to the main street, ” he said.

Kenny Oubre, senior director of strategic solutions at PeopleMatter, a talent management software company at 7 Storehouse Row, said he has similar concerns.

“We don’t have a play in rail or shipping; we’re a technology company.” Oubre said.  “That (rail) was not the vision for part of the Navy base.”

Oubre said the 40-person company plans to double in size over the next year and would likely consider additional space within the former Navy base as it grows.

“But if there are multiple trains rolling through the back of our building every single day, we have to really take that into consideration,” he said.

Multiple landowners

A foreclosure lawsuit filed against the Noisette Co. last year likely has not helped the perception that the project remains a military wasteland with stalled redevelopment plans.

Lender Capmark Financial Inc. filed a foreclosure lawsuit in June 2009 seeking the sale of 240 acres of the project that served as collateral for a $23.8 million loan.  The Noisette Co. defaulted on the two-year bridge loan, which was due in 2008, at a time when Knott has said permanent development financing had become unavailable.

The loan was used for a $9.6 million payment to the city of North Charleston for the property and for the planning and design of infrastructure improvements – including those that Knott said were put on hold.

So far, the company has not lost ownership of its land.  But the legal proceedings continue to advance, and the sale of the 240 acres that serves as collateral is looming.

The company hopes to attract new investments and avoid a foreclosure sale.  Even if that doesn’t happen, the Noisette Co. would still own about 100 acres, and Knott has said that development will continue there as planned.

Summey has said that if the land is sold in foreclosure, new owners would have to abide by the property’s zoning, which was set up for the Navy Yard at Noisette project.

No matter what, land and buildings within the development area that have already been sold would continue operating outside of the foreclosure proceedings.

Those include the Lowcountry Innovation Center, a 40,000-square-foot building that houses about a dozen companies, most of them knowledge-based operations. Developer Alan St. Clair purchased the building, previously military hospital administration offices, renovated it as flexible co-work space and opened it to tenants in 2009.

Landmark Assets Services Inc., a Winston-Salem, N.C., company, purchased a 1.6 acre parcel at the Navy Yard for development of a 60-unit apartment project called West Yard Lofts.

Construction is under way, and the apartments should be ready for move-in by January.  the units are meant to be affordable for individuals and families earning between $21,000 and $42,000 annually.

Another Navy Yard landowner, Live Oak consultants, an engineering, planning and project management firm, bought one of several historic officers’ quarters from the Noisette Co. and renovated it as it headquarters.

The firm invested $250,000 in the renovation, according to Bryan Wood, president and managing principal.  Wood said he sees the renovation as an investment of at least 20 years that will pay off when he retires.

Wood called the Navy Yard “a great area” and said he disagreed with the idea that nothing has been done there.

“It’s definitely slowed down with the economy, ” he said.  “There’s a lot of work to do, but there’s activity.”

END

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