Tucked away off U.S. Interstate 26, between the Summerville and Jedburg exits, stands a monument to both speed and size.
Nearly completed in less than a year, the sprawling building has a perimeter of roughly one mile and about 1.1 million square feet of storage space beneath the 40-foot roof. The first half of the mammoth structure was opened about three months ago, when tenant TBC Corp. moved in and began off-loading tens of thousands of tires that will be delivered to its retail stores and other customers. The import giant will be getting the keys to the back end of its new warehouse any day now.
The completion of the distribution center marks the first major local real estate project to spring from the soil under an up-and-coming division of a longtime Lowcountry employer: MeadWestvaco Corp. At the same time, the super-size warehouse is a symbol of the Fortune 500 company’s resurrected real estate ambitions.
After taking a break from the development business — it bowed out about a decade ago before Westvaco Corp. merged with Mead Corp. — the land-rich packaging giant jumped back into the fray about four years ago, just ahead of the 2008 sale of its landmark North Charleston mill. Instead of paper, a large chunk of the company’s remaining local operations is looking to manufacture large-scale residential and mixed-use projects such as East Edisto.
In relatively short order, it has become a major player again in the real estate industry in Charleston, though not quite the way it originally envisioned.
Just as the newly formed MVW Community Development and Land Management Group was gearing up, the recession dug in its heels, and the market slowed to a crawl. The slowdown was evident through the first nine months of last year, when revenue at the Summerville-based real estate subsidiary fell 29 percent to $107 million while profits skidded 53 percent to $37 million. Year-end results are set to be released this week.
Ken Seeger, a veteran developer who is president of the land management division, said that in some ways the long downturn that greeted the upstart venture has had a silver lining. Investors, for instance, are more realistic and more patient than they would have been five or 10 years ago.
“Timing expectations are such that shareholders are willing to give you more time to plan,” Seeger said.
Deep corporate pockets help, too.
“I think for us it’s been an advantage because we’re so strong financially that we can do things in these times in terms of investment opportunities … that very few other companies in the real estate business can do,” Seeger said.
The unexpected opportunity in this case has been in the industrial and commercial real estate sector, with TBC and biotechnology firm ArborGen Inc.’s proposed headquarters being among the group’s first big coups. It’s hoping to win more deals as the economy recovers and as more expansion-minded businesses open their wallets.
Fueled mostly with revenue from rural timberland sales, MVW Community Development and Land Management Group is actively juggling eight South Carolina “commerce parks,” including five in the Charleston region. The others are in Colleton, Georgetown and Hampton counties. Combined, the sites total about 10,000 acres.
That wasn’t entirely by design.
Seeger said the company at first was working to get its large local residential communities off the ground, but at the same time was aware of the fact that their long-term success would depend on job creation. But as the recession dragged on, employment was moved to the front burner, he said.
“We really felt that by using our land that had economic development potential and investing in it to help stimulate economic development was in the best interest of the region, in the best interest of our residential communities, and it was good business,” he said. “So somewhat surprisingly, while we did not initially focus on the commercial and industrial side, we began to take it very seriously, and since then have been involved in numerous efforts.”
For example, it is seeking to have all of its industrial properties certified as “shovel ready” by the state Commerce Department and by McCallum Sweeney Consulting, an influential Upstate-based firm that helps big businesses pick expansion sites. Also, crews are preparing the remainder of the land in TBC’s business park, which is a joint venture with the Rockefeller Group, to accommodate another 1.6 million square feet of space.
Other developers are placing large, long-term bets on that once-sleepy stretch of I-26 as well, including Texas-based heavy hitters Hillwood Investment Properties and Trammel Crow Co. In all, more than 14 million square feet of new industrial space has been proposed for several large tracts along the corridor, partly based on projected growth at the Port of Charleston.
Jim Hill, vice president of MeadWestvaco’s land group, described the flurry of development activity being proposed around Jedburg Road as a “competitive situation,” but added that “there are some advantages to be located close together.”
“It’s become a cluster, a submarket that people are starting to recognize,” Hill said. “Sometimes if you a have a large group of opportunities like that in one area, it actually brings additional business for yourself, kind of like the way the car dealers and other retail-type merchants sometimes look at it.”
At the core
MVW Community Development and Land Management Group was the product of a sea change within the papermaking business.
For much of the past century, MeadWestvaco and its rivals amassed millions of acres of timberland to feed their mills. But in the past decade, they began selling surplus tracts at a rapid pace as their need to own trees diminished. At the same time, Wall Street was urging the industry to unload their valuable real estate and put the money to better use.
Seeger and his group are responsible for managing all of the parent company’s North America land holdings, though most of its hands-on real estate projects are in the Charleston region. Unlike the labor-intensive paper mill, which under Westvaco and MeadWestvaco employed thousands of area residents for more than 70 years, the development subsidiary has a modest payroll of about 100.
But the subsidiary, with virtually no debt and thousands of valuable acres at its disposal, is hardly an afterthought in the executive suite at the parent company’s Richmond, Va., headquarters. It’s now considered one of several “core” businesses at MeadWestvaco, which now breaks out the results of the real estate unit in its financial statements.
“The great thing is that we have 100 percent support of senior management,” Seeger said.
For MeadWestvaco, this is its second go-around as a real estate developer in the Charleston region. In a past life, it was instrumental in the creation of Crowfield Plantation in Goose Creek and the Ashborough subdivision in Summerville before taking an extended break from the business.
With CEO John Luke handling the announcement, the company marked its return in 2007 with East Edisto, a nearly 79,000-acre swath that runs from Summerville to Ravenel. Plans call for it to be built out over decades into a mix of homes, businesses, schools and conservation areas. In 2008, the company plunked down $25 million to repurchase the 5,000-acre Parks of Berkeley tract near Summerville for another huge master-planned community.
“John Luke feels a strong sense of kinship for the Lowcountry and really wants to make sure that whatever we do here is done right,” Seeger said.
Seeger added that the outlook for the Charleston region remains bright over the long run. The biggest short-term hurdle is the stubbornly sluggish business conditions, even for a developer with deep pockets and patient investors, but it’s “a good time to plan” and prepare for the eventual rebound.
“It probably set back some of our financial projections a couple of years although we’ve still been able to do some really good business like the TBC deal in the depths of the recession,” Seeger said.