Key Take Aways from June 2023 Meeting!
Richard Warren (Bradley Arant): Richard is still seeing announcements of new projects. He said that Albion just closed on a project and are going to build two residential towers that will total about 800 units.
Van East (Bradley): Van is a partner at Bradley Arant. He is local counsel for a lender for one of the residential towers in Nashville Yards. He is excited to see this project move forward because it was on hold for a while. From the development side, he has a client that acts as a land bank for home developers and they are still doing deals. He is also looking at a fast-food restaurant lease which he feels is nice to see someone interested in redeveloping an area. He is also noticing corporate mergers and acquisitions are pretty active.
Steven Culp (W. E. O’Neill): Steven is seeing new multi-family projects. He is not seeing as many projects dying early, like they were eight months ago. Things have calmed down. People are more cautious. He was seeing properties flip 3-4 times before finalizing the deal. He also said that there is still a good amount of working coming. Private projects have slowed down, but there are plenty of public projects, such as school projects, out there for contractors.
Lee Hunter (CapStar): Lee mentioned that the Feds did not raise rates, which is a first in a long time. He was talking with someone and they were discussing how this is different from ’08 and ’09, but from a bankers’ standpoint, it is feeling the same because of the “not so fun” conversations that are beginning to happen with customers. He is also starting to see deals that were under contract where people are trying to get extensions and put as little non-refundable earnest money down as possible or they are just letting the deals die. He also mentioned that getting an office building project financed is so difficult right now.
Kelly Cochran (STREAM): Kelly is in office leasing and she leases for the State of Tennessee. The state is a good tenant to have but she is noticing that some places do not want the State’s tenants. It depends on which agency is looking to lease space. For instance, no one in Brentwood wants a probation office. She mentioned that there is a lot of highway money coming. She feels that if people can afford to get through this short-term difficulty over the next two years, she feels it will get better. She said that the State owns half of downtown but their lease portfolio is across all 95 counties. They are vacating some of the space in the office towers because more people are working remote. She also mentioned that over the next few weeks, there will be a website that is launched that will list every state-owned property that is for sale and one will have the ability to make an inquiry.
Vic Alexander (Kraft CPAs): Vic mentioned that he is an executor on a distribution company that had to refinance and the refinancing went so long that he was concerned if it was going to close. He was happy that it ended up closing but wasn’t certain what would have happened had they not closed. He also mentioned that Chartwell Residential is developing 850 residential apartment units in what used to be the Watkins College of Art. He said that they are really moving on this project. Based on what he is hearing from his clients about the delays and supply chain issues, he is really surprised that Chartwell is moving like a well-oiled machine.
Bond Oman (Oman-Gibson): Bond feels like this market is the haves and the have nots. The people that are doing well have Canadian money, etc., it is long-term money. The middle guys that have raised money through friends and families are taking a hit. Oman-Gibson are merchant developers. They are currently busy and have some things that they are looking at. They acquired some land in Robertson County in 2021, had some of the largest home builders chasing them and they put them under contract. In late 2022, they all cancelled their contracts because of the market but now, over the last four weeks, each one has called and they are back under contract. They homes will not be finished until 2025, so they are looking long-term. He also said that people do not realize how big the residential market is here in town.
John Agee (Terracon): John said that he is seeing his quarter two slow down. They are about at 75% of where they were this time last year. His revenues are still climbing up. He is seeing projects in Madison/Rivergate, Donelson, Antioch Wedgewood-Houston areas. Clarkesville, Dixon and Portland are continuing to get industrial type projects. Overall, they are still optimistic as a company. He mentioned that Costcos are getting their projects completed from beginning to end in six months. He finished with Nashville is doing well in Terracon’s prospective.
Stephen Brink (First Southern Mortgage): Steve said he is still busy. They are having a good year so far as they have closed about $250-$300m to date. Currently, he is working on a lot of projects. He is trying to do refinances on new construction loans where the banks have put the breaks on construction lending. On a permanent loan basis, there is plenty of money out there to finance warehouses, industrial, retail, multi-family, and self-storage, but not so much for office. He feels Hospitality is one step better than office. Most of the permanent loans that they are doing having stabilized.
Deneen Owen (International Workplace Group): Deneen works with International Workplace Group, also known previously as Regus Spaces. She does hybrid models for office space. IWG is a global company and are opening offices once a month. They are opening a new location on Deaderick Street, Mt. Juliet and in the downtown area. They are growing and doing a lot of partnerships. They are reaching out to business owners and having them invest capital and then splitting profits. They are currently up to 75% occupancy rate. Their lease terms go from month-to-month to three years with new offices. When they get to the renewals, their costs are going up as well. She leases anything from 68 sq. ft up to 1,500 sq. ft. suites with multiple offices inside that space. Great example for IWG is when K&L Gates moved out of one of their spaces, they were able to re-lease all of their space.
Raddie Zlatkov (Matthews Real Estate Investment Services): Raddie is CFO and Strategy Officer. They are a national broker, 600 people across the county with 20 offices. They are headquartered in the Broadwest in Nashville. They are a private, debt-free, and all their equity is in-house. They just hired about 400 people, half of that being interns. They just opened four new offices in New York City and they are active in corporate mergers and acquisitions. They are doing what they are doing because they know what is coming. He feels that what is happening right now is extremely painful in terms of their industry on the transactional space. They have to build so that they can just print money in two years. He views commercial real estate as the leading indicator and he anticipates that as the broader economy starts to hurt, we will begin to come out it. He says that car washes and self-storage are huge right now.
Alan Thompson (Ragan Smith): Ragan Smith is a consulting firm that does land planning, landscape architecture, environmental engineering, civil engineering, and survey. In the Nashville market, they are still seeing really good projects come in and they are staying very busy. He feels that the number one market is single family. Industrial was hit hard before lending became an issue and he has seen industrial taper off. Not because of demand, but of lending. He said that Davidson County is running out of land and easy deals are rare. He feels that from an affordable housing standpoint, it is a “drive until you qualify” which will eventually come back and bite us. So, in essence people are driving away from Nashville until they can qualify to afford a home and a loan. What we will begin to see is a lot of our service-oriented people moving so far out and they will need to now take the interstate to get to work and that is in turn clogging our interstate. Infrastructure / sewer will need to be upgraded. Our infrastructure cannot keep up with the growth. New companies are still coming to town and Nashville has become a key target.
Robert Burns (SVN Robert H. Burns Co.): Bobby Burns primarily does office leasing, tenant rep and investment sales. He said the activities are not picking up as much. Tenant rep deals are taking a very long time to get done and most brokers are just wanting information. He was in a meeting where someone mentioned that a friend relocated to Nashville to work and Apple called and told him that he needed to come back to work or he will lose his job. Bobby said that was a new dynamic that he had not heard of. He is receiving a lot of phone calls where people are wanting value add properties. He mentioned that the office market is frustrating, the submarkets have a big block of space holding fast and spec space is doing great.
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