Staying on track: scion of a North Carolina family with a century of real-estate history, Clay Grubb positions his company to profit from the young and restless.

• Author: Mildenberg, David
• Position: Cover story

This month marks the kickoff of Charlotte's $37 million streetcar, aimed at revitalizing one of the few areas of the center city yet to sprout new apartments. The price tag for the 1.5-mile route from Novant Health Presbyterian Medical Center to Time Warner Cable Arena enraged a lot of people, even if the federal government is picking up two-thirds of the tab. But the happiest guy at the July 14 opening ceremony is likely to be a wiry, perpetually good-natured fellow who co-owns a chunk of land around the streetcar's east terminus. Clay Grubb started investing in the Elizabeth Avenue development in 2003 after partnering with Novant and has since promoted plans for a $90 million cancer and heart outpatient center, office buildings, a Whole Foods Market and more than 800 apartments and condos. After $40 million spent on land and buildings, relatively little has happened, a casualty of a recession and health care industry changes that slowed the hospital's plans. The Whole Foods deal fell through. A costly experience, yet it will turn out fine, Grubb says, as Charlotte becomes more densely populated by a generation that prefers mass transit, walking and biking versus driving a car and paying $10 or $20 a day for a downtown parking spot.

Grubb is a survivor whose ability to dodge the worst impact of the 2007-09 recession is a lesson amid the current, soaring values for real estate in North Carolina's biggest cities and resort areas. Scores of the state's commercial developers defaulted on their loans during the recession, especially those who expanded between 2004 and 2007, fueled by Countrywide Financial Corp., IndyMac Bancorp and other freewheeling lenders. Almost half of North Carolina banks lost money in 2009 after U.S. commercial real-estate values tumbled 47% within 19 months. Grubb saw trouble ahead and made no acquisitions between 2005 and 2008, while paring his company's holdings from 40 properties to five, including two that had no debt. He was so negative about real estate that he pressed his six-member board of advisers to use company money to make an investment bet, called shorting, that homebuilder stocks would decline. The board said no, but such caution is the main reason Grubb Properties Inc. survived the quickest real-estate collapse in 75 years, he says.

"We couldn't make sense of the opportunities during [2005-08] because if you were building at that time, you were doing so at highly inflated prices and hoping the market was going to come to you. But the writing was on the wall, and it was obvious to us that every homebuilder in America was going to go bankrupt." Grubb was especially wary of Charlotte-based Wachovia Corp., fearing it was spinning out of control.

"We had a senior team meeting in December 2007 to discuss what would happen to our company if Wachovia didn't make it. At the time, they were the largest land lender in Florida, and we knew all the homebuilders were going under and all of those loans were going to go bad," he says. "Our view was they'd lose all the shareholder value and Charlotte would get hammered by losing the headquarters. But we didn't realize that the financial sector would also collapse and everybody in Eastover and Myers Park would have their 401 (k)s wiped out at the same time," referring to two wealthy Charlotte neighborhoods.

Grubb says he made mistakes, particularly with the Morrison mixed-use project in Charlotte's SouthPark neighborhood, which opened in 2006 and did not lease as quickly as expected. Under pressure from bankers in 2010, Grubb says he sold his company's interest in the site...