Charleston’s surging real estate values helped sweep Carnival out to sea | Business

A rising tide lifts all boats, goes the old economic aphorism.

It also can cast them offshore.

Carnival Cruise Line found itself caught in such a sea change last week, when the State Ports Authority announced it won’t renew its contract with the company when it expires in late 2024. 

“We have a very good relationship with Carnival. We have a lot of respect for them and have worked collaboratively with them to their benefit and our benefit,” SPA chief executive officer Jim Newsome said Wednesday. “But this decision became clearer and clearer over time, and ultimately it’s the best business decision for the port.” 

It wasn’t long ago that the operator of the locally based, 3,001-passenger Carnival Sunshine was aiming to secure a 20-year agreement to remain anchored at Union Pier Terminal in downtown Charleston, just steps away from the City Market and the rest of the Historic District’s charms.

“My understanding is they love this market, they’re very successful in this market and the Sunshine has been a big hit for them,” Newsome said in early 2020.

Ink was never put to paper for the long-term deal.

All the while, real estate values in downtown Charleston continued to climb to irresistible levels, which Newsome said “probably changed the calculus” of the Union Pier equation.

“We’ve always looked at it as a bottom-line trade-off between maritime business and non-maritime business, and that trade-off really shifted … in the last couple of years,” he said.

Fits and starts

SCPA (copy)

Jim Newsome is retiring next month as CEO of the State Ports Authority. File/Provided

The SPA took ownership of Union Pier from the city after lawmakers created the agency 80 years ago. The industrial property has been handling passengers and all variety of oceangoing cargo — from cotton to bananas to lumber — since at least the 1830s, according to local news archives.

It was known as Union Wharf back in the day and was one of several steamship destinations that once lined the east side of the peninsula, from Tradd to Columbus streets.

Charleston ports agency starts process to sell key waterfront site

The city bought the string of maritime properties in 1921 for about $1.5 million.

Union Wharf, with its wooden sheds and creaky docks, wasn’t much to look at a century ago. It was in “a dilapidated condition unfit for commercial use,” the chairman of the municipal Port Utilities Commission said in a 1930 report to elected officials.

By that time, the bones of the modern-day Union Pier were already in place. The city invested more than $300,000 in the mid-1920s on a new pile-supported, rail-served port terminal at the foot of Market Street. It measured 630 feet by 415 feet and was outfitted with two warehouses.

“Ten years ago, Charleston had no modern waterfront facilities such as the new Union Pier … for handling foreign commerce,” according to a 1926 news article.

One of the first redevelopment proposals for the site surfaced in the early 1980s, when revitalization-minded Mayor Joe Riley floated plans for a mixed-use “Festival Marketplace” that was to be built on part of the 63-acre port terminal. The idea was abandoned about two years later.

In the mid-1990s, the SPA began exploring options for its increasingly obsolescent but valuable piece of waterfront real estate, which was never equipped to deal with the port’s bread-and-butter business of containerized cargo. That effort ended up on the shelf.

Shortly after Newsome became CEO in 2009, the SPA and the city announced an update of the previous Union Pier overhaul plan. One idea was to relocate the cruise operations from the 1970s-era passenger terminal to the north end of the property. The decision infuriated nearby residents, preservationists and conservationists who want pleasure ships banished from the Historic District. The legal dispute that followed left the future of Union Pier in limbo for more than a decade.

The opposition groups didn’t take a victory lap last week when they learned that Carnival’s days are numbered, saying in a joint statement that they’re awaiting more details. 

Pier pressures

Carnival cruise ship to leave Charleston in late '24 for Union Pier redo

The SPA began to distance itself from Union Pier, at least in a physical and geographical sense, when it decided to move its offices from a neighboring property on Concord Street to Mount Pleasant. In 2017, it sold its downtown headquarters to Lowe, a real estate investment firm that’s in the throes of building a 255-room luxury hotel on the site.

The ports authority took the relationship a step further in 2019. It hired Lowe to come up with a new reuse plan for the 25 acres of developable land at the Union Pier, which includes securing all zoning approvals. Newsome noted that the consulting deal lured back former Charleston planning chief Jacob Lindsey, who joined the Los Angeles-based company about 13 months after leaving the city for a new job in Colorado. 

“They’re running point on the planning, and that planning really entails … taking the steps needed to get this property to … where there’s a master plan that can be approved and … developers can buy the property and do what’s in their best interest on that property,” Newsome said.

Lowe already has stated that it intends to be among the bidders for Union Pier when the SPA starts seeking offers.

The new math, swayed by the surging real estate tide downtown, didn’t pencil out for Carnival, which began operating about year-round five-day cruises to the Bahamas from Charleston more than a decade ago. Parking requirements for a home-ported ship that generates a small slice of the SPA’s revenue pie was one issue, Newsome said.

The Miami-based line’s ships will still be able to tie up at Union Pier after 2024 because the existing passenger terminal will remain in the SPA’s hands to accommodate short-term “port-of-call” visits.

“We will work with the ports authority to explore future opportunities in Charleston,” a Carnival spokesman said last week.

Newsome's decade as SC ports CEO has revived Charleston's maritime industry

The port’s decision to exit the year-round cruise ship business marks one of the last major strategic moves for Newsome, who’s retiring June 30 after nearly 13 years at the helm. He said the long-elusive sale and redevelopment of Union Pier will put valuable government-owned property back on the tax rolls and give the public more access to the city’s waterfront.

Some of the proceeds will likely help pay down the $1.5 billion in debt the SPA has taken on to build a new container terminal in North Charleston and make other big-ticket investments to remain within the top 10 U.S. ports.

Newsome declined to speculate about how much Union Pier will fetch once it hits the market, though he quipped, “I have an idea.”

“I believe it’s safe to say that it’s a transformational amount of money. … We’re a capital-intensive business, so getting a proper return from what is likely the most valuable property on the East Coast of the United States is a really a good thing for our core business, which is growing our container business, our cargo business and really bringing economic benefit to the state of South Carolina and the region,” he said.

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