November 12, 2015
Convention Center Developers Have Equity, Delay Start Date
Nashville Business Journal
The developers pursuing a $400 million overhaul of downtown Nashville's most pivotal and prominent site say they have secured all the investor funding they need to finance their skyline-altering project.
That said, the developers also expect to postpone construction by as much as six months.
In an exclusive interview, the developers disclosed that milestone and the delayed start date for a project that would revitalize the site of the city's original convention center, which was made obsolete when the Music City Center opened in SoBro two years ago. The 6.2-acre site is the city's highest-profile address, at the intersection of Broadway and Fifth Avenue North — at one end of downtown's honky-tonk tourist district and across the street from Bridgestone Arena and the Ryman Auditorium, the iconic "mother church" of the country music that underpins Nashville's "Music City" brand.
The project is loaded with potential. The newest design, which we first reportedearlier this week, shows a 32-story office tower that would rank as the city's seventh-largest office building and rent at prices that will rival the city's most expensive space; an apartment tower almost that tall, containing 350 units; and well more than 200,000 square feet of retail, restaurant and entertainment space, including a possible grocery store and a home for the long-proposed National Museum of African American Music. In one swoop, downtown's total supply of retail space would leap 50 percent.
It's a signature and legacy-defining project for Pat Emery, president of Spectrum | Emery Inc., known as the driving force who turned Cool Springs into Middle Tennessee's preferred destination for corporate headquarters. The city has tried for more than five years to do something with the convention center site, and next month marks the two-year anniversary of when the city entrusted Emery with the task. Last year, Emery added San Diego-based OliverMcMillan, known mainly as a high-end retail specialist, as a co-developer.
There are not yet any tenants signed to lease the retail or office space in the project, which developers have named Fifth + Broadway. Retail leasing efforts have been ongoing. Emery and Paul Buss, president of OliverMcMillan, said they're now starting, in earnest, the effort to lease office space. Brokers Dick Fleming and Buck Haltiwanger, of the firm Avison Young, are leading those efforts.
Emery and Buss discussed the new changes to the project in a Nov. 11 interview, after they privately met with Mayor Megan Barry and city officials to debrief them on the project's status.
"When you see it, you know it's Nashville," Emery said.
The developers declined to disclose the identity of the investor group providing equity for the project, though they did say it is not JP Morgan — which has been a longtime backer of both companies. In fact, officials with JP Morgan played matchmaker for this project, recommending to Emery last year that he connect with the team at OliverMcMillan.
The developers have said they intend to fund half of the project with investor equity, meaning they would need to raise roughly $200 million in funding. That show of support would buoy their efforts to secure a bank loan that would finance the balance of the work.
"This group is totally capable of funding this, plus a whole bunch more of this size if they really wanted to," Buss said. "They have totally vetted this project, and they are committed to it. That gives us all the necessary equity."
Still, the developers said they will not purchase the convention center site from the city by the original Dec. 31 deadline in their contract — at which point demolition would have started.
Emery and Buss said they expect to take two extensions of that contract, which would mean the land sale would close by June 30, 2016. The developers will owe Metro a total of $500,000 for those two extensions, money that will go toward the $11.25 million they have agreed to pay the city for the land.
Per the terms of the contract, only $5 million of that $11.25 million is due at closing. The balance can be paid in installments over 25 years.
If demolition does not begin until mid-2016, the development may not open until 2019, gauging by the most recent timeline the developers gave for the project. Skanska USA will oversee construction.
"Speed to market is important, but this is not a speed-to-market thing. This is a legacy project for Nashville and the state of Tennessee," said Eric Buchanan, senior managing director at OliverMcMillan.
Buchanan noted that roughly 50 people are working on the design and architecture of the project, spread over three architectural firms: Nashville-based Gresham Smith & Partners; Gensler, of San Francisco; and Pappageorge Haymes Partners, of Chicago. Developers said they needed time to assemble that team and they also pointed to a factor we've reported on before: the fact that the Renaissance Hotel had a valid lease for some of the convention space that Emery and OliverMcMillan will redevelop.
Although an agreement with the hotel was announced in March, Buss said it took additional time to "get the hotel deal documented." The hotel is owned by a real estate investment trust in Dallas; the developers will spend at least $7 million building new meeting space that the hotel — the city's original convention hotel — can use.
"If we move too fast, we will stumble and we won't get it right," Buss added. "We do very complex projects, and our team considers this at the top of that list. We literally have a week-by-week layout of all the meetings necessary to get all the decisions made.
"The important message is that we are not sitting and waiting. We have major teams working full-time, and hard," Buss said.
The developers have made several notable changes to the project's design, which they say is not yet finalized.
The apartment and office buildings are taller because they now sit atop parking garages, a switch from earlier plans to build underground parking. The office building's garage will be available for public use on nights and weekends, as will a 780-space underground garage that the Nashville Convention Center Authority is paying roughly $32 million to create.
Also, Emery has moved some 70,000 square feet of "creative space" into the office tower, which shrunk the height of the retail-and-restaurant building at the corner of Fifth Avenue North and Broadway. Such creative space is targeted to music companies, tech companies and architects, among others, Emery said.
"We think it's a great headquarters and corporate-relocation play. We think it's a great tech location, when you look at all the amenities that will boost recruiting. And we think the health care market will follow the lead of Parallon and Sarah Cannon," Emery said — referring to two subsidiaries of HCA Holdings Inc. that are relocating to an office building under construction in the North Gulch.
The office tower will front Commerce Street (about as far away from the honky-tonk scene as you can get on that site).
The parking garage for the apartment tower will be concealed by units that will wrap around the garage. It's one of two essential features Buss sees in the project. The other is a "public market," an open food hall with communal tables, inspired by Chelsea Market in New York City and the Ferry Building in San Francisco, Buss said.
"We will make it the place for the noon lunch crowd for locals. It won't just be about tourists," Buss said. "That, and the housing, are really critical.
"The Gulch has been a success; it's been a great project. But this housing right smack in the core, in the middle of everything," Buss added. "Having those units wrapping the garage will make the street feel active and safe at all hours."
Link to the original article here.