Key Take Aways from January 2023 Meeting!
Richard Warren, Bradley Arant Boult Cummings: Richard was happy to share that he had a closing for $17 million where Streetlight Residentials from Texas purchased one acre of land. NES put up their substation since they did not need the land any longer since they moved the old substation into the Gulch. They will put up a 20 or 25-story apartment building right next door to the new Giarrantana 60-story building next to the Downtown YMCA.
Jim Murphy, Bradley Arant Boult Cummings: He does feel that projects are still moving forward. He has been working on the redevelopment of the old Madison Square Shopping Center and the Council approved the tax increment financing incentive for the project, which is a pretty big deal for Madison. They were very excited that they had Councilmember VanReece be aggressive in pushing the project, otherwise he does not think it would have happened. It passed with little debate.
Casey Estanislao, Hastings Architecture: They offer architecture, interior design, urban planning and sustainability consulting. She is happy to see all this development happening on the East Bank. It has been about two months since they announced 18-acre Station East project where the TravelCenters of America truck stop is currently. Hastings has also partnered with Metro Nashville and a few other design firms to hold a community meeting for Wharf Park work on the West Bank of the river. As a practice, Hastings is heavily invested in seeing the Riverfront developed. As for 2023, she said they had one significant residential multifamily project go on pause. It is not dead yet, but it is definitely on hold based on everything that has been happening with construction pricing and she has been bracing herself for a little more of these pauses coming in the next six months. She has not seen any slowing yet, which is a great thing.
Sam Sarbacker, Oman-Gibson Associates: He feels like there is a staring contest right now between the Federal Reserve and the stock market. The Feds are saying they will raise the rates and the stock market is saying, “we’ve heard that before.” He believes we will see who will “blink” in the next six-months. Over a third of the Federal FOMC members thinks that the rates will be over 5.25% this year. He said that he is seeing lots of growth in South Williamson County, with the news of the interchange being done. He is just seeing a lot growth in South Williamson County. And there is a lot of opportunity out there.
Bond Oman, Oman-Gibson Associates: They are a national medical developer and acquisition company. They have completed projects in 35 states and California was their most active state last year. Oman-Gibson develop ASC cancer labs, physician offices and most of their projects are with health systems and large physician groups, etc. They have had some large behavioral projects pull back because of interest rates and the economy. He is starting to see a slowdown. He did mention that he is seeing a lot of opportunities in the MoBs projects. He believes the next two years will be very rough and we probably will not get out of this until 2025. We are still having supply and staffing issues. He believes it will be an interesting next two years.
Steven Prather, Chas. Hawkins Company Inc: They manage over 10 million square feet of mostly industrial property and have about 25 brokers. He went on to say that they had their three best company years in history. Deals that dropped off are now getting massively big. He said that there is still a demand out there and he is extremely bullish on the industrial side. He continues to be shocked that buildings are being turned back into industrial warehouses. He currently has a 23,000 sq. ft. single story building that is being converted back to a warehouse.
Alan Thompson, Regan Smith: He is currently serving as their CMO and he functions more importantly as a Land Development Infrastructure Strategist. This can be a variety of things from the design of the project, to how it would be phased, to estimating costs and how it will be executed. Probably most importantly, how to get it zoned and approved and how to navigate that political process.
Stephen Brink, First Southern Mortgage Corp: Stephen said that they provide everything with respect to capital stats, including commercial projects. He says, yes, the interest rates are higher, but the lenders that they represent, which are banks, insurance companies, pension funds and commercial mortgage-backed securities, investors all have money available. He feels that there is not a lack of money, it is just what it costs. In today’s market, if one wants to finance an apartment property or industrial property, there are a lot of eager lenders. He said that everyone is interested in financing smaller community centers, strip centers along major thoroughfares or grocery anchored shopping centers. They are not quite as interested in doing big box, but there’s still funds available for that as well. Lenders are more conservative on building.
Mia Keller, The Pizzuti Companies: She mentioned that they built The Joseph Hotel and if you haven’t seen it yet, you definitely should. She feels that a lot of deals are being dropped because of the tough market that we are all in. She went on to say that it is really tough to get the sites titled. People do not want industrial developments in their backyard. She feels that ¾ of industrial products in the US is 20 years old, or older. The demand is very high in Nashville. They are focusing on suburban multi-family developments right now.
Jeff Hammers, Real Estate Ventures: He is starting to see very early signs of the inventory getting better. The pricing and other issues remain, but he is seeing things that he hasn’t seen in a while. Many of his clients have pushed things off until 2024. For instance, he is seeing restaurants finish building out current inventory, but not getting anything new. He said that their constructions costs have gone up 50% in Tennessee.
Michael Hunkler, Gresham Smith: He is seeing growth locally and regionally from hospitals. He is not seeing much from single family but in talking with his clients they are not panicking. He is not seeing any relief on the land construction costs and one of his biggest clients, Dollar General (for over 13 years) has said goodbye to GBT.
Renee Shipley, Cardinal Glass Industries: She shared several magazines with the group. The Glass Magazine (www.glassmagazine.com/) and the USGlass Metal and Glazing Magazine (www.usglassmag.com/). She also mentioned that she will be attending the National Glass Association conference (https://www.glass.org/bec-conference-2023) in a few weeks in Las Vegas. Her business is with national window accounts and they are focusing on improving customer supply. She feels that last year was challenging in a good way.
Kelly Cochran, State of Tennessee Real Asset Management (Stream): She works in leasing offices around the State. She says 90% of the offices are leased. She is still sending out RFPs so things are good for her. She is seeing a lot of leases that are awarded. Deals are falling apart because bids were pre-pandemic when the interest rates were low and now construction costs are too high. She said that there is a reduction in office space demand and more people are working from home. She also mentioned that she used to travel three to four days a week and now she still works all day but she only come into the office two days a month. Kelly also said that she expects the State will begin to sell more office space downtown, which will be good for the city.
Lee Hunter, CapStar Bank: He is seeing a lot of refinancing of loans. Historically, banks have done mainly construction financing but over his 30+ years in this industry, he is doing more refinancing because of the market that we are currently in. He has great borrowers, great clients and he is currently having more fun now than he had in the past because of the quality of the people he is dealing with, the liquidity and equity people have to put into deals. He also feels that this year will be slow. He said they have been really busy and because things are trading so quickly and for the first time, he will be looking at maturities. He feels that if something was originally financed in the 3% range, it will be refinanced in the 6% range and that may not cash flow anymore. He said that some of the big warehouse deals are too much for them but they focus on the $2-$20 million projects.
Derrick Morgan, KNGDM Group: He played nine seasons in the NFL in the old stadium, that used to be called LP Stadium. When he retired, he and his two co-founders launched KNGDM Group, which is a mission driven real estate development firm. They focus in areas that were cut off by the highway in East Nashville and North Nashville. They have done some work in Atlanta as well. They received several projects in 2021, which was a great timing. In looking at new projects, it is becoming harder and harder. Especially from a mission component. When you begin to talk about mixed income housing, how can you create amenities for the community. They are leaning a lot on tax credits, micro tax credit, low-income housing tax credit and raising philanthropic capital. Over the last 9-12 months they have been partnering with a lot of faith-based organizations and they are currently working with an HBCU seminary in Atlanta that has 10 acres to redevelop their whole campus. These are people who own their land outright and they do not have a lot of carrying costs, and are able to leverage their land as equity as part of the capital stack. That has been a pretty good strategy for KNGDM from a mission standpoint, there has been a lot of alignment with their mission and KNGDM’s mission as a company.
Rebecca Moore, Ware Malcomb: They have 28 offices across the US and Canada. It is an interior design and architecture firm, site planning. They kind of run the whole range. The Nashville office is focusing on just about anything except for single build residential property.
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