Developer tweaks plans for ‘Scott’s Collection’ project

Coined Scott’s Collection One, this five-story, 80-unit building at 3000 and 3008 W. Clay St. will be one of several apartment buildings developed by Henrico-based Capital Square. (510 Architects)

A local real estate investment firm is scaling back part of its ambitious plan in Scott’s Addition as it looks to buy in with another developer on a separate project nearby.

Capital Square, based in Innsbrook and run by founder/CEO Louis Rogers, no longer is planning to develop an 11-story, $52 million apartment tower at 2911 W. Moore St.

The company’s contract for the site, which had been announced as the largest of three parts of its planned Scott’s Collection project, fell through in recent weeks, Rogers said.

Instead, the firm last month paid $1.8 million for a half-acre at 3001, 3007 and 3009 W. Leigh St., where it plans to develop an $18 million, five-story, 72-unit apartment building.

That will join the other two original planned pieces of the Scott’s Collection: an $18 million, five-story apartment building with 80 apartments and onsite parking at 3000 and 3008 W. Clay St.; and a five-story, 60-unit apartment building at 2900 and 2904 W. Clay St.

Louis Rogers, CEO of Capital Square

“We had to make some changes,” Rogers said. “But we remain committed to our other investments in Scott’s Addition.”

Capital Square now has acquired all the land it needs to move forward. In addition to the Leigh Street properties, it shelled out nearly $2 million in November for the half-acre parcel 3000 and 3008 W. Clay St. site. It bought the half-acre site at 2900 and 2904 W. Clay St. in July for $1.6 million.

The Clay Street developments are set to launch construction during the spring, Rogers said, while the Leigh Street piece is set to break ground during the summer.

Capital Square has retained Richmond-based 510 Architects to design the buildings. Rogers said the firm still is interviewing general contractors.

Scott’s Collection marks Capital Square’s initial push into development after years of acquiring existing apartment, office and retail properties using pooled funds from 1031 exchanges.

An assemblage of now vacant buildings, that was once slated to be a food hall, has been purchased by Capital Square for $1.6 million as part of its Scott’s Collection development. (J. Elias O’Neal)

Its new development direction will be funded with a mix of private equity and Opportunity Zone funding. Opportunity Zones allow investors tax advantages on the proceeds from the sale of just about anything, as opposed to 1031 exchanges, which apply only to avoiding capital gains taxes on the sale of real estate.

Capital Square created three separate opportunity zone funds for the three developments, raising a total of $13.4 million for the Scott’s Collections One and Two. Last month, the firm launched a $7.5 million opportunity zone fund raise for the Scott’s Collection Three.

And it’s not done yet in Scott’s Addition.

Another project

Rogers said the firm is partnering with Charleston, South Carolina-based Greystar Real Estate Partners in securing equity for its $87 million, six-story apartment development set to rise on the former Relay Foods warehouse site at 1601 Roseneath Road.

Plans call for the existing building, which sits on about 2.4 acres and is bounded by Roseneath Road, Mactavish Avenue, and West Moore and Norfolk streets, to be razed and replaced with a five-story, 353-unit apartment building, Rogers said. The ground floor would include a parking deck with about 350 spaces and some street-level retail space.

The firm is set to launch a $32.4 million equity raise for the project, Rogers said.

Both Capital Square and Greystar are set to close on the property sometime in the summer.

Capital Square also has development ambitions outside of Richmond.

Rogers said the firm is partnering with Philadelphia-based Method Co. in the $47 million redevelopment of a long-time furniture store along Charleston, South Carolina’s famed King Street into a 50-room location for extended-stay apartment hotel brand Roost.

Capital Square launched an opportunity fund for the Charleston project last month, where it hopes to raise $7.7 million in private equity for the redevelopment.

The firm also is looking to complete other apartment developments similar to its Scott’s Collection project in Savannah, Georgia and Raleigh, North Carolina, Rogers said.

Rogers said Capital Square is bullish on second-tier cities such as Richmond and Raleigh because of their healthy job growth and affordability. He added apartment demand in the region remains strong, prompting the firm to scope out fresh markets for new growth.

“Large companies are seeking out cities like Richmond that have a high amount of very smart, college-educated adults and young people, and remain affordable,” Rogers said. “As long as that type of interest remains for employers … we’re going to be building more apartments for them.”

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Charles Frankenhoff
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Charles Frankenhoff

I’m surprised this deal didn’t make sense, considering how cheap Opportunity Zone funding must be.

Bruce Milam
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Bruce Milam

once a building exceeds a specific height the construction materials change from wood to steel and concrete. And the expense jumps significantly. developers have found that this added expense can be met with higher rents on the riverfront where views lure a more discerning lessee. Currently there are nearly 1000 units underway that will be 10 or more stories on the Richmond Riverfront , all in OZs., although not all are using that funding method. Scotts Addition has tremendous appeal, but the addition of more stories may not bear higher rents there.