NAI Nashville Market Report

In this edition of the NAI Nashville Market Report podcast, I spoke with Tom Chevins the Senior Vice President for Regus Group Americas about their unique product offering, and the new location that just opened in Cool Springs.

Please be sure to listen to the entire interview because Tom has an exclusive special offer to listeners of this podcast — FREE OFFICE SPACE!  Find out how to take advantage of this offer in the interview.  This product is great for emerging businesses, and is sure worth giving it a try.

If you’re reading this through email or an RSS reader, please be sure to stop by our web site to get more information on these issues and many others affecting our marketplace in Nashville, Tennessee.  Or subscribe to these podcasts in iTunes to stay up to date

Please feel free to send us your feedback about the podcast, or inquire further about the special offer by contacting us any time by calling (615) 850-2700, or emailing me directly at podcast@nainashville.com

In this edition of the NAI Nashville Market Report podcast, I spoke with Timothy Downey the President and CEO of the Southern Land Company about their new mixed-use development in the Cool Springs area called McEwen.

If you’re reading this through email or an RSS reader, please be sure to stop by our web site to get more information on these issues and many others affecting our marketplace in Nashville, Tennessee.

Please feel free to send us your feedback about the podcast, or inquire further about this development by contacting us any time by calling (615) 850-2700, or emailing me directly at podcast@nainashville.com

In this edition of the NAI Nashville Market Report podcast, I spoke with Jim Garrett the Senior VP of Network Operations and Tom Garland the VP of Client Development with NAI Global about how our industry has become a global marketplace and the impact it has on us locally.

If you’re reading this through email or an RSS reader, please be sure to stop by our web site to get more information on these issues and many others affecting our marketplace in Nashville, Tennessee.

Please feel free to send us your feedback about the podcast, or inquire further about this development by contacting us any time by calling (615) 850-2700, or emailing me directly at podcast@nainashville.com

Tony Giarratana
“Signature Tower”
(Giarratana Development)
November 10, 2007

TG: Is Signature Tower going to go? Yes. In fact, it is going to go. The excavation for this project takes five months and we’re looking to start that work this calendar year.

(Music Up)

MK: This is the NAI Nashville report for Saturday, November the 10th, 2007. I’m Marc Krejci, the Director of Market Research here at NAI. This is a podcast where we feature commercial real estate trends and happenings in the Nashville, Tennessee area and beyond.

You just heard my guest on today’s podcast, Tony Giarratana. Tony has completely changed the face of Nashville with his developments from the Encore condos to the Viridian, to the upcoming Signature Tower. In today’s podcast, we talk about his developments, his career path and what’s looking forward for him.

It’s a very exciting discussion. Hopefully, you’ll have time to sit through the entire interview. If you haven’t already, please go to our website and subscribe to this podcast on iTunes by clicking on the iTunes button. There, you can also listen to past episodes of this podcast where we’ve interviewed other professionals in the commercial real estate and development industries.

So, let’s jump into our interview with Tony Giarratana.

(Music Out)

TG: My name is Tony Giarratana and I attended school at the University of South Florida in Tampa. Having grown up in Clearwater, the University of South Florida was a short drive away. I got a degree in Finance there.

While I was in my senior year, I had a chilling thought that I’d be a banker and decided that I would take matters into my own hands, looked around and saw that the real estate guys were having a great time developing in Tampa, Clearwater and along the beachfront, the bay. I said, “That’s what I want to do.” So I got into the real estate business while I was still at the University of South Florida. I tried desperately to sell homes for nearly six months unsuccessfully and I had my break when I listed and sold an office building. From that point forward, office buildings were my business.

That took me to Denver, Colorado in 1981 with a firm then known as Urban Investment and Development Company – it was the fourth largest developer at the time and handled the leasing and marketing of a 2.8 million square foot office complex in the heart of Downtown Denver. It’s in Denver that I fell in love with the city.

Growing up in Clearwater, I was much more familiar with the beachfront than I was urban areas, but living six months initially at the Fairmont Hotel in Downtown Denver and then, later living in a high-rise condominium in Larimer Square, a few short walks from my office, I just fell in love with the Downtown area.

I continued with office leasing, which brought me to New Orleans, Louisiana, where I spent a year. Following that assignment, I was brought here to Nashville, Tennessee by Aladdin Resources, which was the developer/owner of an 850-acre mix-used business park called MetroCenter.

After a couple of years with them, I started my own company, Giarratana, Inc. and I’ve been without a real job ever since.

MK: So, after being in all those different places from Florida to Denver, circling in almost it seems like, why did you settle down here in Nashville?

TG: Well, it’s an interesting question. In the mid to late 80’s, I had received a fabulous offer to take over the leasing and marketing of Koll Company’s Southern California properties. I would have taken that assignment and moved to Southern California – Orange County, but two things happened.

Number one, my then girlfriend who was from Alabama, told me that she would not move with me to California and Nashville announced that it was going to build a new airport.

Growing up in Florida, I saw what the impact of a new airport had on the Tampa Bay area when I was growing up and I looked at Nashville, Tennessee as an area that had everything going for it – all the highway access, the river, tremendous quality of life, major corporate presence, particularly in the healthcare field. A very intelligent populous with 17 colleges and universities within the geographic area of Nashville. Now, with the introduction of an airport, which I felt would really stimulate the economy, I decided this would be a great place to set down roots and pursue my dream of having my own development company.

MK: When you fell in love with Denver – Downtown and the urban environment – and brought that love here in Nashville and saw the opportunity, what is it on our national market you see as the trends towards to this urban redevelopment, coming back to downtown areas and buildings? Moving people back into the city, sort of the ebb and flow of the marketplace going out into the suburbs and back in. What is it that’s driving them back in right now?

TG: I love listening to you. Just to talk about it is very exciting for me. There are so many dynamics at work. There’s no one thing.

First, Downtown Denver, Colorado was so exciting because it has so many spectacular buildings. While I was there during the early 80’s, there were three towers over 50 stories tall, built simultaneously. Now, the oil and gas market collapsed soon there after, so it was not a very happy time to be in the office business in Denver, Colorado, but it was just an exciting place to be. You cannot underestimate the power and excitement that a skyscraper holds for a community.

So, the dynamic of the tall building is very much at work here. You think of Chicago, you immediately think of John Hancock or Sears. You think of New York, many, many other buildings, but the first words out of your mouth would be Chrysler and Empire State Building. Then, you’d go to Rockefeller, Citicorp and all those other great buildings. So, having a city that has great architecture is very, very important.

Downtown Nashville…it’s at risk of losing this honor, but has had the highest concentration of office space in the entire region right here in this small eight block-by-eight block area called Downtown Nashville, Tennessee.

MK: You’re talking about density?

TG: Yes, density of office concentration. It has over 60% of the cultural venues in the Davidson County area, with Tennessee Performing Arts Center and the new Schermerhorn Symphony Hall, the First Visual Arts Center – all of the different opera and ballet. All the other cultural venues – the Ryman Auditorium and the live music that occurs at Sommet. This is very much a magnet for the arts and culture. The Tennessee Art League has offices right here on Broadway and Downtown Nashville.

It has the Riverfront, which historically has been ignored for 100+ years, but only last year, then Mayor Purcell decided to make a huge investment, a $40 million investment that would be funded over a five-year period of time. He seeded that investment with $8 million with the hopes that $8 million a year will be invested in this reclamation of the Riverfront verse what has occurred where the city has turned its back to the river and now, embraced the river. It’s very, very exciting. I personally am not active in that, but it doesn’t matter that I’m not involved directly in it. I can get very excited about it. I think what’s good for Downtown Nashville is good for me and what’s good for me is good for Downtown Nashville. So, all of those dynamics are at work.

Additionally and speaking specifically about Downtown Nashville, $1.325 billion of public and private investment has been made in Downtown Nashville just since the year 2000. That’s a phenomenal investment, but add to that $1.8 billion worth of investment that’s currently on the drawing boards. As you know, if I had my materials with me, I could show you all those projects and you’d immediately say, “Hey, I think the Convention Center’s going to cost a little bit more than the $455 million.”

Putting that aside, just assuming the $1.8 billion is correct. That’s $3.1 billion invested in a small land area that already had a lot going for it. That’s a phenomenal amount of investment and will have a phenomenal impact on the attractiveness of Downtown as a place to live, work, play and invest.

All this sets the stage now for residential development. We started back in 1993 with the notion of building residential in Downtown Nashville. The first thing we had to do was to amend the zoning code, which since 1963 had prohibited residential in the CC zone district and is the historic Downtown. We petitioned the Metro Council to change that zone code. They were quite frankly, surprised to learn that I was there asking them to do something that they didn’t even know had been a prohibition. They said, “Why can’t you build residential in Downtown Nashville?” Nobody had any perspective whatsoever on this, so it was an easy approval.

We built the Cumberland. It opened in 1998 with not a single resident. We were able to do no pre-leasing. It was very, very difficult to lease. By the time I got that building leased, I swore I’d never do another residential building in Downtown Nashville, but an interesting phenomenon happened as these initial leases, as I said no sooner had I leased it up, one-year leases were beginning to expire and these people were leaving the building. I’d go to them and say, “My goodness. Why are you leaving the building? Have I done something inappropriate? Do you not like the building? Do you not like the city?” Eighty plus percent of them told me that they loved the Downtown experience, loved the building, but they wanted to build equity in something that they could own, to take advantage of the historically low interest rates, the mortgage interest deduction. They wanted to own something and would tell me, “Tony, why don’t you build something that we can own?”

Frankly, not knowing what that would be I did the only natural thing, which is to ask, “What would you like me to build you?” What they designed was the Viridian, so we very boldly pursued the development of this 31-story $80 million high-rise residential condominium tower in Downtown Nashville with absolutely nothing to point to in Downtown Nashville to suggest this would be successful, except for the fact that our consumers said, “If you build this, we will buy it.”

It was just a natural – by all measures, it’s an out-of-the-park homerun. It’s a complete success from every possible measurement you can imagine. Economic of course, societal, the impact it’s had on stimulating the rebirth of residential in Downtown Nashville, the first urban grocery since 1967…that grocery would not work…it’s working beautifully at the base of Viridian.

The building has won the Urban Land Institute Award from the Atlanta Regional Council and most recently, the national award by Multi-Family Executives as Project of the Year in the United States – Multi-Family Project of the Year right here in Nashville, Tennessee.

So, we started introducing residential. We were very pioneering in the venture. Even our Encore project is very pioneering in that it’s the first high-rise residential in SoBro. But, all the dynamics were at work here. The final piece of the puzzle was the Boomer population. Only recently has Nashville media picked up on this.

There’s a young lady named Linda Bryant that is currently doing a story on this and she called me to ask me questions I said, “Linda, bless you. I’m so excited that Nashville finally gets it.”

By 2009, the Boomers will be the most important demographic anywhere in the United States in terms of urban housing. The Boomers, when they came on the scene in 1946, dominated the US economy. Now, as the Boomers turn 60 years old, the Boomers will again dominate the marketplace.

Downtown Nashville – all the residential, all of our product, everything that everybody else is building – all geared towards the same demographic. The young, as I affectionately refer to them – hip-and-cool, the twenty-something’s and thirty-something’s that want the product that we’re building. We’re going to build more product for it because we’ve not satisfied that demand.

But, we feel that the Boomers…we anticipated this back in 2003…will be looking for something different. They’re mature professionals, sophisticated empty-nesters. They’re not going to be satisfied with the same thing that the hip-and-cool were looking for. They want more and that “more” is what we’re building today.

MK: We haven’t even alluded to the name of it, yet, but we’re referring to the Signature Tower…

TG: Yes, sir.

MK: Before I get to the question on the Signature, Downtown Nashville, in comparison to other cities and other markets, is still grossly underserved in its residential square footage. You were responsible for more square footage in the residential marketplace Downtown than anybody else.

TG: Well, we’re very pleased to have a part in this. There’re many, many smart developers here in this town doing some wonderful projects. Our focus has been the urban core, the CC zone district, the historic Downtown of Nashville in all of the high-rise product we have done. In SoBro, we’re the only developer of new, high-rise product.

So, these are our two areas of concentration and we are very proud about the buildings that we’ve added in those two markets. We have essentially dominated that scene.

On the adaptive reuse front in Downtown Nashville, Aaron White of Core Development has done a magnificent job. He’s one of my favourite developers. I tour his projects and love what I see. He’s very, very creative. But, our focus has been new construction.

The statistics in Downtown Nashville don’t match-up with the headlines you read. Unfortunately, the sensational headlines that really talk about national phenomenon like Vegas and Florida where there’s been massive overbuilding and just meteoric rises in interest in housing prices. That simply didn’t happen in Nashville, Tennessee, so while certain areas that overbuilt and had just spectacular price increases experience a correction, most other markets in the country are doing very, very well. Prices are actually rising. You’re going to see some statistics on that released by the Board of Realtors as early as this week.

In Downtown Nashville, there are roughly 1,100 existing condominium homes – that’s it! That’s the entire market. Under construction, there’s another 1,000 units. Those will all be completed in the spring and summer of 2008. Once those are all completed, 2,100 units will be the entirety of the market. Everything on the drawing board represents about 1,500 units. If all of that could be completed by 2009, that would be 3,600 units.

Certainly, all of that won’t be completed by 2009. It simply can’t be done. But, all of the experts like Robert Charles Lesser, ERA, consultants, they all predict the need for housing in Downtown Nashville of 5,200 units.

Well, we can’t get there. We may be halfway there in 2009, but even if we could have 5,200, that would put us 50% or less than any of our peer cities, which includes Charlotte, Memphis, Indianapolis and St. Louis. We are grossly behind ½-⅓ of what our peer cities have.

It’s interesting to talk about a city like Denver where I spent time. I lived in one of the high-rises. I bought it cheap, I sold it cheap when I left. Right across the street from me was Writer Square. They couldn’t sell these units. Today, there is an absolute explosion of condominium residences in Downtown Denver. It’s unbelievable – all the Downtown residents.

I don’t have that number on the tip of my tongue, but I will tell you about the same timeframe in the early 80’s, there were two condominium towers in Downtown San Diego – two of them. Both of them were in receivership. Today, there are nearly 30,000 people living in Downtown San Diego and I think 29% of them are over 55 years old.

That number in Nashville hovers around 10% of the total number of people that live Downtown, so we’re definitely in out infancy. We are by no means, a mature market. We have a long way to go. It will be another decade before we are at a position where we’ll be stabilized.

MK: Let’s talk about that generation – the Baby Boomers and the product you’re building for the Signature Tower. It’s slated to be currently, I guess, the third tallest building in the US.

TG: The numbers that I’ve heard would make it the seventh tallest and the tallest building outside of Chicago and New York.

MK: The question everybody wants to know, of course, you’re asked every week is how far along you are in your pre-selling and when are you breaking ground.

TG: I am asked that question…you said every week…I think it’s…

MK: …everyday, twice a day.

TG: …breakfast, lunch, dinner and everything in between.

Let me tell you the path that we’re on in Signature Tower. We launched the project in 2003 and we set five goals for ourselves with the project.

Number one – the project, we wanted to get all of the drawings done, all of the construction documents for this building. Number two – we wanted to buy the land.
Number three – we wanted to get all of the entitlements for this project. This is a very complex skyscraper of a building. It’s the first building to be designed pursuant to the 2006 building code in the state of Tennessee. The code was just adopted two months ago.

I’m happy to report that we have in fact, bought the land, we have in fact, completed the drawings and we have in fact, received all the entitlements.

On the presale front, point number four – we wanted to presell half the units. Well, we got to a quarter of the units and then, the market slowed and that’s where we are right now. We need to sell another 100 condos. We’re doing them two and three units at a time. We’re working very, very aggressively to get that done as soon as possible. So, we’re about half way, maybe about 55% of our way through our presale goal.

The last issue was a guaranteed max price contract from our general contractor. We had selected a general contractor 15 months ago. For whatever reason, we weren’t able to get there. In August, we had to let that contractor go. No hard feelings. We wish them the best. They wish us the best. We just need to identify a new general contractor that can provide the quality product, the scope of the product that we have at the budget we’ve established for this project. That’s very fundamental, but very, very important.

So, three of the five goals that we set for ourselves have been achieved. We’re working aggressively on the remaining two.

The excavation for this project, the permits are already in hand. The excavation for this project takes five months. It’s approximately $5 million in five months and we’re looking to start that work this calendar year, so we’re very committed to the project.

If you’re too polite to ask me the question, is Signature Tower going to go, I’ll just go ahead and give you the answer to that. Yes in fact, it is going to go. We’ve got $22 million invested in this property. If it takes us a little longer to get the presales, so be it. We’re not going to be happy about it, but we’re committed to the project long-term. Signature Tower is not like anything else that we’ve ever done.

Typically in our development projects, we have well over $150 million worth of development going on right now. All the projects follow the same path: identify a financial partner; then launch-off on preliminary drawings; secure basic entitlements; and move on from there.

Signature Tower – we took a different path. It’s a skyscraper. It’s a very significant building. It’s a historic event in Downtown Nashville. We didn’t take the path of identifying a financial partner because it’s too grand for that. How are you going to show a picture to somebody and say, “Hey, would you like to be a part of a historic building in Downtown Nashville?” It’s just too outrageous by Nashville standards.

So, we made it and we have all the investment today, all the progress we’ve made, we’ve done without a third party financial partner. Only today, this physical day, we sent out a memorandum to a select group of possible investors, saying, “Listen, we’re now ready to accept some third-party capital with which to get the excavation of this project underway while we work to complete the presales, while we work to complete the guaranteed maximum price contract for this building.”

So, I’ve got an entire team here, dozens of professionals that are under contract – architects, engineers and others out in the field. We’re committed to making this project a magnificent addition to Downtown skyline.

MK: Now, this is purely speculation, but you just put a property up for sale in the North Gulch area. Are you planning to use the proceeds of that to help push this along a little further or is that completely separate altogether?

TG: What’s funny, in a recent newspaper article, they linked the sale of that to the fact that we’re working on a new tower in the SoBro area. They’re really unrelated, but the Gulch property, I originally started pursuing in 2001. I contracted for this Polar Cold Storage building that sits on approximately six acres, worked on a plan to convert that building to 80 loft-style residence. Completed the drawings, a local architectural firm did it. Took it to the development agency – they weren’t interested in creating a new development district. Took it to the historic preservationist – they didn’t think the building had any historic significance, so there were no tax credits available for that. Took it to the state, looking to see if there might be some interest in some tax credits for some housing for the state – there was no interest there. So, I let my contract go at the time.

During the time I was working on this, I contracted to buy the adjoining acreage from CSX. Well, one thing led to another – it took about two years for that closing to occur. When it was about ready to close on that portion of the land, it was almost nine acres there, I called the Polar Cold Storage people and I said, “Hey, would you like to sell that building. They said, “Yes.” So, I bought the entire nine acres, not really having a specific plan for development.

Since that time, my partners and I have gotten very active in the SoBro area with Encore, very active in preparation for the development of a second tower in SoBro. So, the decision was made not to pursue development of a new area for us in the Gulch, but rather to liquidate that asset, and yes, divert those funds into whatever we might want to divert them to, including SoBro and our urban developments.

So, Signature Tower has significant cash requirements, as I mentioned $5 million worth of excavation, that’s $1 million a month. So, Signature Tower is a very large-scale project, requires a lot of capital. Sure, I’ll use a portion of that capital in Signature Tower but other portions of it will go somewhere else. The property in the Gulch is much more valuable today because of the success of the Gulch, Capital G that Steve Turner, Bristol and Joe Barker have done there on the other side of Broadway. So, the announcement that Magic Johnson’s involved out there came on the same day we put our property up for sale – we’re pretty happy campers.

MK: Let’s talk more about what you just mentioned, about some of your interest in SoBro and you have a development there now called Encore. You just mentioned another tower you’re working on. What are your long-term visions for that area in SoBro besides this tower or whatever else you see happening down there.

TG: Well, it’s interesting. I think you’ll see a reoccurring theme. We like to do projects that 80-90% of the population thinks we’re a little bit crazy. When we introduced apartments at the corner of 6th and Church, I’ll tell you that 99% of Nashvillians didn’t think the project would ever be built or certainly, if it got built, it wouldn’t be successful. It got built, it was successful. The folks that we sold it to, at a profit, are enjoying record rents. It’s a wonderful success story.

At the conclusion of that transaction, they asked us to convert the top four floors to condominiums and we sold those top four floors as high as $458 per square foot, absolutely phenomenal. The Viridian was pioneering, likewise the Encore building, was viewed as a little bit ahead of it’s time.

I first brought my partners out there and said, “This is where we need to build our next tower.” They looked to the left and looked to the right and they said, “My goodness gracious! You can get by a golf cart here, you can get a new engine for your car. You can get your bumpers chromed but what you can’t do is live and you can’t shop. Why would you want to be here?” I said, “Oh, but there’s something coming called the Schermerhorn Symphony Hall.”

So, we bought that land before SoBro got cool and we bought it very, very attractively. We were able to get that project underway, no presales whatsoever. We broke ground in May, waited until after September when the Schermerhorn Symphony Hall introduced the world to SoBro, the area south of Broadway. We opened our Sales Center in late October and we’re almost 85% pre-sold on that unit. We won’t be completed to provide occupancy to the first resident until sometime in February or March of 2008.

MK: What about the other tower you mentioned briefly?

TG: The second tower would be largely residential – predominantly residential with at least 300 units.

MK: Is that just near it or behind it?

TG: It’s in close proximity to it. We have a site, a Phase II site, but the site that we’ve identified for our second tower is not the site that we already own. That’s going to surprise people that I think everybody certainly expects us to build our second tower in the site that we already control. But there’s another site that came available to us that was very exciting to us and we’re very enthused. I think that when we announce our plans for it, I think people will get very, very excited.

But the second tower will be largely residential. Like the first tower, it will have retail at the base. Encore has 20,000 square feet of retail. The second tower may actually have more retail at the base and this time we’d like to do something a little differently. If possible is work with the city. Rather than just build a parching garage that serves our building, like we do with every one of our buildings, work with the city so it could be shared not only with our homeowners and retailers but also with the Downtown dynamic of SoBro. Parking for the Symphony, the Country Music Hall of Fame, overflow parking for the Pinnacle building, parking for events at the Sommet Center, there’s lot of exciting things that a large scale-parking garage can help stimulate and facilitate.

I think that’s a more appropriate development model if we can pull it off. It’s going to take the cooperation of a number of different apartments but I think we can get it done.

MK: To close out, let’s go back to the Signature Tower.

TG: It’s my favourite thing to talk about.

MK: It’s your favourite. Everybody is talking about Signature Tower. Who do you consider your competition for that building? Is it here in this market or is it somewhere else? When people are looking to buy a unit there – maybe you see it that they’re Baby Boomers, maybe retiring just looking for a place to settle down. Are they looking between Atlanta/ Nashville or are they looking between Signature or some other project?

TG: Let me answer it this way. I make a practice of never saying anything negative about anybody else’s projects. I believe that a rising tide lifts all ships and I want everybody to be successful.

So, whenever I’m doing a comparison, I always talk about my own buildings. I talk about the Cumberland, the Viridian, the Encore, the Bennie Dillon, our Belle Meade projects, etc. I can tell you that none of those projects are in the same category as the Signature Tower. From ground up, Signature Tower is meant to be a statement for Nashville, Tennessee.

From the structure, from the glass and glazing, the ornamental crown at the top, the elevators at 1,200 feet per minute. The amenities of a fine boutique hotel, the services such as 24-hour a day room service, concierge service and maid service. Valet parking, an on-site restaurant, spa, two pools, essentially an urban resort on a 15,000 square foot activity deck in the back, this building is not like anything else in the market.

If I toured you through our existing product and then I took you over to the Sales Center for Signature Tower, you will immediately see the differences in the bathrooms. You’ll immediately see the difference in the kitchens. You’d see the quality of this building would just be absolutely and immediately evident to you.

Things like powder rooms and pantries that are just not part of the vocabulary of the hip and cool. They’re not important elements for that particular demographic. All of our buyers of this particular product demand powder rooms, demand pantries.

The cabinetry is custom cabinetry by Wood-Mode, which is voted year after year in all of the surveys last year, 20,000 architects, engineers and interior planners, voted Wood-Mode Cabinetry the finest custom cabinetry in America today. That’s standard within our building.

All the appliances are Sub Zero, Wolf, top of the line cooler fixtures. Wood flooring and top of the line floor coverings, tiles, granites, marbles. It’s just the finishes are all extraordinary. The bathrooms, almost all of them have both garden tubs and large showers, water closets with pocket doors. These are just things that you don’t see in these other projects and that’s the beginning.

The building is built squarely to accommodate the discerning buyer, the mature professional, the sophisticated empty nester. When the building is completed in 2010, those in Nashville that don’t get it when I sit here and talk about it, they will understand completely. Those lucky few that step up and pre-purchase the first 200 of these units will look like geniuses in 2010, I assure you.

ML: Well, Tony, we could go on and on talking about all these different developments. I appreciate you taking the time and I’ll spare my listeners going on any longer.

TG: Great. Thank you so much and please visit our website at www.signaturetowernashville.com for more information.

MK: Great. Thanks, Tony.

TG: Thank you.

(Music Up)

MK: I want to thank you all for turning in to another episode of the NAI Nashville Market Report. We want to hear from you, please be sure to stop by our website at www.nainashville.com. There you’ll find all of our contact info or you can e-mail me directly at podcast@nainashville.com.

If you have any ideas for future programs or guest interviews, please be sure to drop me a line to let me know and we’ll do our best to arrange that. We’re certainly open to suggestions.

I just want to thank all of you for giving us some excellent feedback on the daily e-mails that we sent out covering commercial real estate items, we’ll continue to offer that. You can also subscribe to those updates at our website as well.

So that does it for today, please be sure to tune in again in the future for another NAI Nashville Market Report podcast. Again, I’m your host, Mark Krejci, and we’ll see you again next time.

(Music Out)

©2007 NAI Nashville
300 Broadway, Nashville, TN 37201
(615) 850-2700, www.nainashville.com

For this episode of the NAI Nashville Market Report podcast, I sat down with Nashville’s premier developer Tony Giarratana, president of Giarratana Development. When residents of Nashville think of housing in the downtown area, the name Tony Giarratana is the first to come to mind. In fact, Giarratana and his partners are responsible for the majority of the housing in the Central Business District. Giarratana’s focus on the downtown market has been constant since he formed his development company in 1986.

In this interview we discuss Tony’s background and experience, what brought him to Nashville and his various developments including the much anticipated Signature Tower.

If you are reading this through email or an RSS reader, please be sure to stop by our web site at NAInashville.com to listen or download this episode and subscribe for free to future updates.

In this episode of the NAI Nashville Market Report, Richard Lawson of the Nashville City Paper joined us as we sat down with John L. Knott, the President and CEO of the Noisette company.  John was recently in town to speak at a local Urban Land Institute Event entitled “Regenerating Healthy Urban Communities for the 21st Century“.

Noisette is a 3,000-acre, sustainable urban redevelopment effort in North Charleston, South Carolina, which includes 350 acres that were once part of the Charleston Naval Complex, that are being transformed into a new mixed-use urban community called the Navy Yard at Noisette.

While here in Nashville, we have great resources like The Plan of Nashville and a very healthy development environment, its always good to step back and look at the sustainability of these communities we’re creating.  In this episode we adress this issue from a macro viewpoint and also look at how Nashville is doing from John’s viewpoint.

If you’re reading this through email or an RSS reader, please be sure to stop by our web site to get more information on these issues and many others affecting our marketplace in Nashville, Tennessee.

John Knott
“The Noisette Project”
(Noisette Company)
November 5, 2007

JK: Unfortunatly the way we’ve been planning our developments and planning our cities, it’s been more about the physical infrastructure or the physical buildings. It’s not organized around the concept of social health.

(Music Up)

MK: This is the NAI Nashville report for Monday, November 5th, 2007. I’m Marc Krejci, the Director of Market Research here at NAI. This is a podcast where we feature commercial real estate news and events happening in the Middle Tennessee area.

On today’s podcast, we have a very special guest. We have John Knott from the Noisette Company in South Carolina. The Noisette Project is one of the largest sustainable developments in our country. We have a special guest interviewer today, Richard Lawson from the Nashville City Paper who came on to interview John for us. John was in town for a local Urban Land Institute event and he took some time out from his day to speak with us about his project going on in South Carolina and how it may relate to some of the projects we have here in Nashville.

So, I hope you enjoy the podcast. Please be sure to stop by our website at anytime, at www.nainashville.com where you can see archives of past shows. You can also see daily news items relating to our commercial market place. So, please be sure to log on there and subscribe to updates using either e-mail, iTunes or the RSS feed.

So, without further ado, let’s get into the interview and I’ll come back afterwards.

(Music Out)

RL: We’re here with John Knott, co-founder and CEO of the Noisette Company, who has been spending the past 20 years of his life doing urban redevelopment, sustainable development In Charleston, South Carolina, a city that is quite often considered a model for urban redevelopment and historic preservation.

Welcome, John.

JK: Thank you.

RL: Let’s start with your latest project, the Naval Shipyard project down there. That’s got to be an interesting project considering it is formerly a nuclear shipyard.

JK: Yes. What we have, it’s about a 1,600-acre naval facility. We have 350 acres of that facility. The shipyard is controlled by a private user, then the Port Authority and federal enclave has the southern 800 acres of the facility. The 3,000 Noisette area is 2,600 acres of the existing city, which is the original founding city. This 3,000 acres is 90% of the founding city of the City of North Charleston when it was incorporated in 1972. So, it’s a pretty massive project.

RL: What all are they doing in there? What type of residential, what type of commercial, what type of retail, that kind of stuff?

JK: The 3,000-acre area has, within the 2,600-acre area, there are 13,000 who live there. There was an existing over about 5,400 housing units and about 4 million square feet of existing commercial and industrial facilities very much in an economic and social depressed area.

So, you had housing trading at $54 a square foot. Vacancies at 50%, commercial vacancies in the 70% range, commercial property trading at the $40,000-50,000 an acre range. So, the crime rates were extensive in the area and in the closed shipyards. We actually did a master plan for the 3,000-acre area as a sustainable rebuilding of that original core city.

On our navy yard property, we’re developing 6-10 million square feet of commercial and retail, 5,000-7,000 housing units in that range. So, it’s a very urban mixed-use, kind of old Boston scales, if you want to think in terms of an image. We’ve re-developed about a million square feet of foot warehouse and flex space, about another 2,050 square feet of office.

RL: For those who don’t really know what sustainable development means, give us kind of a brief definition of sustainable development.

JK: There are a lot of definitions out there. For us, it really means triple-bottom line. It means that we’re looking to serve the social, economic and environmental health of the entire community, not just our group long term. So, every decision we’re making is a long term decision, balanced in those three sectors, and across every economic level.

The Brundtland Commission definition was basically, conducting your affairs in such a way that what you consume today does not jeopardize the quality of life or the ability of future generations to live better than you live today.

RL: In that vein, you talk about the environmental side of it, obviously, being there with the naval shipyard and it being closed, what kind of environmental issues did you guys have to work through to get it ready for any kind of development?

JK: Well, actually, this is the first property that the military closed where they…we’re actually doing this to clean up in advance and had it insured. They used private contractors, so the shipyard was primarily cleaned up. The residential standards, through navy contracts, it was about a $70 million on the land. They did not clean up the buildings.

So, most of our work in clean up has to do with asbestos, lead and all types of other things that you find in buildings. If we happen to find other things in the land itself, then the navy is required, by law and by contract, to come back and clean it up, of course, and compensate us if we have to do the clean up. Of course, nobody gives you the person whoever signs the check and the treasury to do that so we actually have a $20 million insurance liability policy that’s an environmental policy that will actually bridge that funding gap, if we have to get into a more extensive clean up on the land.

RL: In terms of selling the houses, do you have to worry about convincing people, “No, you won’t glow after a while.” Anything like that?

JK: No. We have spent so much time focused on the ecosystem restoration around the area. We’ve built public parks already. We’ve got 10 ½ acres of Riverfront Park open. I think we’ve really integrated people into the place in such a way and finally made it accessible after 105 years. We just have thousands of people in there every week, in activities and different efforts.

So, people are getting used to being in this base and seeing that it’s a fairly healthy place, and it’s not a big problem with the environmental conditions.

RL: Have you started selling houses to residents or move anybody in?

JK: We have no residents living there except for places that we’re renting or leasing that are already existing in the officers housing area. Our first new residential development will break ground in the second quarter of ’08. We have 500 housing units under contract for land sales with other developers. Remember, these are all vertical, so we’re not selling lots, we’re selling parcels, we’re vertical development. It’s mixed-use are going on those properties.

We have about 700,000-800,000 square feet of commercial, institutional and retail development that has already been contracted. We have, as I said, about a million square feet to a million one that we’ve already leased on the base. We have 61 new businesses, 800 employees in the navy yard now. In the Noisette area, in the 3,000-acre area, there are 2,200 housing units under development now. Probably about 300-400 of those are now occupied. That’s in an area where nothing was being developed for 20 plus years.

RL: So this slowing housing sales nationally hasn’t seem to hit Charleston just yet.

JK: No, it’s hit Charleston in certain areas but it has not hit us. We’re in a very central location. We’re five minutes from the airport, we have the best access off 26 and 526. We have better access than the City of Charleston itself. We also have a very strong affordability factor. If you look at the peninsula, which is at the south of us, you’re looking at a mean of probably $700 a square foot. If you look at Mt. Pleasant, Old Village and those areas to the east of us, you’re looking at an average of probably 600,000 or 700,000. As you go further out it’s 500,000, Daniel Island it’s 600,000, Summerville it’s 300,000. We were starting at a mean of $54 a square foot, which is sensitive at 60,000 mean in 2001. Today, we’re probably at a mean of about 180,000.

So, the properties in that area are trading so substantially bellow even the mean of the overall market no matter where you go, with this financial crisis and everything else, everything is falling to us. So, we’re in the right position. We’re not in the upper end of the market.

RL: So, you guys are kind of the cradle?

JK: Yes, and we’re so well located. The fact that we have such stringent environmental standards for even our single-family residential, with the Noisette Quality Home Standard, every property that’s being developed, we’re doing in an exoteric reserve, every single house. We’ve got 108 builders, 100 lots already sold. We’ve got 20 up, another 20 under construction. Everything is pre-sold. We just don’t have enough supply.

RL: That’s good to have sort of that problem, I think, especially when there’s a market that’s not a good market. Tell us, what was the biggest hurdle in sort of working through all this and doing the master planning and getting them moving forward.

JK: I think that the biggest hurdle in the master planning was probably, initially, having the confidence of the community. Just remember, here we are as a developer, master planning 3,000 acres of a city that we don’t own and we’re not under contract to the city. We actually invested that money ourselves. So, the first question by anybody in the community is, “What are you doing here?”

RL: …and, “Why do you care?”

JK: “Why do you care?” “What are all these standards?” “I’ve never seen a developer like this,” and “Do you expect us to trust you?” My first answer to that question is, “Absolutely not. I don’t expect you to trust us. I expect you to listen to what we say. I expect you to see if we do what we say, that we do what we say or exceed what we say, then you can start to consider whether you’ll trust us.”

So, we’ve engaged over 4,000 people in these communities over 2 ½ years to build this master plan. So, it’s their plan, it’s not our plan. Once that conversion was made, went for our approvals, our next problem was, as the turnaround of the area, this area was not as upchuck an area as…

RL: Well, it was in the shadow of the naval shipyard, so it had to be very depressed when the shipyard just closed.

JK: It was, and it had declined over time, but it was also very blue collar. It had always been blue collar. It was on an area that was very kind of Wild West, rough-and-tumble kind of place versus the rest of the area of Charleston. Charleston is well known for its attitude so you kind of look down your nose. Then, when the decline happened a lot of other problems set in as well. Of course, the stuff that you see around any shipyard, with all that transiency in a shipyard, all the associated professions that find themselves around a shipyard, doesn’t add to the economic…it adds a certain economic health but not to the overall health of the city.

RL: So they had interesting entertainment options.

JK: Yes, they did. They had very interesting entertainment options. That’s a good way of putting it.

So, I think that once this thing started to turn around, which everybody thought was impossible, what started happening was business interest that didn’t really want to be in it, didn’t see any value, all of a sudden started to see value there. But that wasn’t being controlled by them, it was being controlled by us. We weren’t from there so that created its own problems. Then, the Redevelopment Authority was supposed to be transferring the land to the city, all of a sudden, delayed the transfer for three years, because they really didn’t seem to have much interest in transferring the land. That was the state authority that have been created that was one of the few bases in the country that have been closed to sit entirely in one city, and the city had no control over what was going on the base.

RL: Your lobbyist must have been really busy.

JK: I had no lobbyist.

RL: So, you must have been really busy.

JK: Yes.

RL: What could Nashville learn from some of the stuff you’ve done there? That’s a big project. I don’t think we have anything quite that large going on here. It’s more in pocket. I guess, probably, the biggest would be Rolling Mill Hill perhaps.

JK: Well, I think you have to think about this in a different way. I mean we’re effectively leveraging 350 acres of direct development to influence and assist the transformation over 3,000 urban-acre area that we don’t own. So, you certainly have projects like the Gulch and others that could leverage themselves beyond their property.

What we’ve done is several things. One is we’ve really taken the leadership to create a true community based planning process that isn’t a charrette that you come in for a week, puts some drawings up, then say, “What do you think?” and then come back. It’s a very iterate process. It engages people in a conversation about what they like, what they don’t like and what they think is missing in the neighbourhood, by neighbourhood, by neighbourhood, meeting by meeting, by meeting to reform. It’s basically, applying strategic planning, business strategic planning, that you would run in your corporation, to strategic planning for a city. So, it’s a very different master planning process.

Second component is whole community involvement process. We’ve been building a model for 35 years of how to engage communities in this conversation.

The third is, for the first time we were able to get to the system. We can’t fix our cities unless we start getting to the systems level. That means you’ve got to get to scale, because you can’t design sustainable infrastructure, you can’t fix your social problems and you can’t get that resolved unless you get to that large scale level.

So, we, in the first time in this country, have really moved to that level and created a model for that. So, I think that it’s totally transferable, even if the city were to conduct it, you could conduct an entire urban initiative within a city conducted it. We actually talked about that at the meeting we had at the Chamber today.

So, I think there are a lot of lessons but I also think the lesson here is that we believe that the social health of everybody in the community, from conception to death, is at the core of how you plan. Unfortunately, the way we’ve been planning our developments and planning our cities, it’s been more about the physical infrastructure or the physical buildings. It’s not organized around the concept of social health.

RL: Have you had a chance to look at the Plan of Nashville?

JK: I have not seen the Plan of Nashville, I’ve seen the book. I want to get the Plan of Nashville when I go to the Design Forum tonight. I’ve been hearing a lot about it. I’m actually blown away by what I’ve seen here physically. What I’ve see is really good thinking. You could see it physically in the forms here. You could see it in the kind of investment in buildings. You could see it in some of your public infrastructures. But what you can’t see is the social side of this thing. So, I asked the key question today at this meeting, where are you in this holistic thinking process about seeing how all these systems that are physical systems are connected to all the social systems that in an integrated way, serve the health for everybody in the region equally.

RL: I don’t know that the city or I don’t think that folks have really thought about it at that level. That would be a very interesting exercise to go with it.

JK: That’s what everybody in the room said, they hadn’t thought of it. One of the things that we talked about today with the research person at the Chamber was in our work around the country – if you go to chapter 2 or 3 in our master planning you’ll see these charts. But what we’re finding over the last 30 years in this country is that the average density per square mile has reduced by at least half. That means a number people per square mile has reduced.

What that means is you’re having to deploy infrastructure and social service systems. When I say social service systems, I’m not talking about welfare. Social service systems are things like police, schools, fire; all those are social service systems. Those systems are having to be deployed against a much wider area for less and less people per square mile. A lot of areas of this country, and I bet you Nashville isn’t all that different, if you look at it’s sprawl equation over the last 30 years, what you’re going to find is…let’s say in 20 or 30 years your population growth has been 50% or 100%, whatever it is. I almost assure you that your land use has more than doubled, if not 300% or 400%.

That’s a non-fundable equation. It has no economic sense to it. Yet, at the same time, all that we’re doing is running around and saying, “Let’s cut taxes.” So, if we were in business, what that’s saying is I can increase the cost to my product but I don’t have to charge my customer what the cost is. I then actually give them the product for below cost. I don’t have to be efficient about it.

RL: So, your idea and the ideas that you’ve developed, and this is an idea that’s been brought up here and everywhere really, is if you create dense nodes, if you can create that density, bring people back in that you can actually reduce the cost to your services?

JK: Yes, and you can afford to make really strategic, well thought through investments that actually make some sense long term.

RL: Now, how do you convince the population to do that? The population goes out, they want that property, they want that land. They want to have that front yard that backyard, they want the schools, they want all of that. How do you work through and convince them? That’s really what you have to do. The government would certainly like to do it but how do you convince…?

JK: I’m not so sure about that. Number one, you say the people, who are the people? What are the people now? What is everybody now?

RL: The people who are sprawling out.

JK: Do they know it’s costing to provide that service to them? We were talking today that we’re having problems with people getting downtown because you charge for parking. You charge so much a square foot for the support services on a tax base. While out in the suburban market where you have all this “free parking” and you have all these roads to deploy all these people, to get them all over the place, is anybody being charged for that? Well, no. Why is one being charged and one not? That’s a public decision.

RL: Sure. You could see the directness, you come downtown, you’ve got to pay to park. You move out to the suburbs, you get free parking. Getting from that point to understanding what the bigger cost is, is it probably a little too esoteric for folks to understand. That’s where government comes in and tries to explain that. But it’s a matter whether people actually care to hear it.

JK: I think it’s where the private sector comes in because the private sector has to start being honest about this conversation. We in the private sector have to start taking the leadership to solve this problem. Ineffectively, the private sector in this country, even the public sector, have been focused in the last 40 or 50 years, on short term economic decision making and so are we as individuals in our own consumerism. We don’t really think about the impact beyond us and we don’t think about what’s causing things to be long term.

I’ll give you just a simple example. If you do surveys, and this have been done a great deal, just do a survey of kids in school and survey of most of the people in your community, find out – inventory – what they want to save in their community. You will not find much in the buildings, you’ll find parks in different areas, you’ll find statues but you won’t find public utility buildings. Yet, if I look at a public utility building built before 1920 lots of people want to save them. They’re beautiful buildings. What did we build waterworks buildings, sewer works buildings and power facilities look beautiful then when we didn’t have as much money and we build them now and they look ugly as sin, we put them in the back room.

It’s all the short term decision making that’s going on and we’re doing it out of the context of what the impact of those decisions are. We don’t know the results. But I do think we’re seeing a tipping point that has arrived all over the country everywhere. If you simply look in imprisonment rates, if you look at failing public schools, if you look at closed libraries, if you look at teen obesity, if you look at teen suicide, if you look at child respiratory disease, you can’t look at a social metric in this country and not see a real big problem. Well, all of a sudden people are starting to connect all those pieces in their own lives. They’re looking around and saying, “What’s the solution? What’s going on?”

RK: In talking about all this, sort of linking these things together, when you were going through this project in the Charleston area, are these things that you guys talked in the community meetings, these are the things that you talked to people. You’ve said here is the cost of doing this, this and this. Here’s a comparative cost or an alternative cost if you were to move in and do some of these things.

JK: Right. It’s like affordable housing. When the 50% of the people in this country spend more on their car payment than they pay on the mortgage or rent of their home, why do they do that? Well, because they don’t have any choice. There’s no transportation system, everything is spread out, everything is separated so the only way you have to get around, then you just start looking at who can drive.

Do you realize if you take the people who can’t drive because they’re elderly, the people who are handicapped and the people under 16, you add all those numbers up, that’s more than 50% of our population. That means we have a system that’s designed for 50% of our population or more to be in prison unless somebody else unless somebody else is chauffeuring them around.

None of this is making any sense but no one is talking about those things. No one is bringing that information out. All the politicians know it, most of the business leaders know it and no one is willing to take the hit for telling the truth. I think all the public wants to know is the truth.

Then, if you look at your markets, the biggest markets for growth on housing today are 52 and older, and 21 to 32. The 32-52 market is not very big. Those two markets, you want their highest demand location is? Urban. Then, even if you look at the 32-52 market, I think it’s something like less than 12% is the traditional nuclear family. It’s a huge percent that are single parents. You tell me that’s great if you’ve got a mom and dad at home, and somebody can drive people around. What do you do when you’re a single parent, you get an 8 and 9 year old kids, your school is over here and 10 miles over here you’re working? What do you do?

RL: You hope the bus system works.

JK: Well, there is no bus system.

RK: They have the school bus system.

JK: Well, sure. What happens when they’re sick, the bus system isn’t running. Why are we building schools that aren’t in neighbourhoods where people could walk to them like we used to build them?

RL: Obviously, what you’re discussing, what you talk about and what you’re thinking about is it’s a very complex problem. You start talking about building schools in neighbourhoods that’s well up the school. If you’re building a school in a mostly black neighbourhood, you build a school in a mostly white neighbourhood, then you start talking segregation issues by virtue of that. Those are the social views that you start dealing at the complexity of all of that.

JK: It’s very complex and the problem is we haven’t had those kind of conversations. We also have all of us individually and all of our disciplines are sitting in silos and nothing is being connected. It isn’t just the social conversation it’s the economic conversation and the health care conversation, all these things are all sitting in these different silos. Yet, when you start looking at all of the pieces to the puzzle, you look at them together, you start seeing relationships that are causing the problems with each other. When you start to see those relationships you could very cost effectively start to solve those problems.

RK: It’s sort of going back down into a neighbourhood level when you look at gentrification of neighbourhoods. You always see there’s a certain cycle in these neighbourhoods. They come in and it’s the poor, the elderly and a lot of times black. They get pushed out through the process of gentrification, they can’t afford to live there because of property tax increases. Their home becomes more valuable so they sell, or they’re renting and the owner sells. In terms of doing sustainable development, how do you prevent that from happening because these people who get pushed out of the neighbourhood, they’ve got to go somewhere else. It doesn’t solve the problem…

JK: Why do they have to go someplace else?

RL: That’s typically how it’s worked. So, they pick someplace else to move to. It’s like pushing a rope around in a way.

JK: We keep moving the problem someplace else that it gets worse and worse…

RK: Exactly.

JK: …because it gets further and further out. So what you need to do is you need to focus on why is that problem occurring. The reason the problem is occurring is because the amount of density we’re getting in these areas is fairly low. We’re requiring sizes of buildings and houses that are too big for many of these people to afford. I don’t mean just the economics of buying it. A lot of these people who want this house don’t want anything as big as we’re requiring. Then its starts to attract, then we have no mixed use, we have no mixed income. We’ve taken all that out of the equation. That’s not the way our cities work up through 1950 or 1960. Our cities never worked that way.

If you trace the history of our cities in this country, you will see just example after example of the great areas that maintain their highest wealth today are areas that were mix use, were mixed income, were mixed sizes and multi-family next to single family. Everything interconnected with retail, services and everything else. It wasn’t high-end Rodeo Drive, it was just neighbourhoods that all worked together. We’ve somehow come up with this idea that we have to have a model that has no interconnected grid. That has only a certain size house that with a minimum size footprint on the first floor, a minimum size square footage because God forbid you should have different sizes next to each other because that would destroy the economics of the neighbourhood, which isn’t true. There’s no validity to that. In fact, just the opposite has been proven.

So, somehow we’ve evolved over the last 40 or 50 years and basically it was driven by this automobile machine that started in the…

RL: I was just going to ask, when the car came into greater use, that’s what allowed this to come about.

JK: How did the car come into greater use? Why isn’t the public transit system in place? Why are not all the streetcars in place that used to be here?

RK: Car companies had better lobbyists.

JK: Yes and how did those disappear?

RL: Better sales people.

JK: The National Bus Company was created…

RK: The tire companies wanted to sell tires, too. The streetcars don’t have tires.

JK: Right and the National Bus Company was created, funded by the federal government, which then purchased all the systems and shut them down. Then the National Highway System was build, which was actually for defense originally. It was supposed to be limited access highways, then all of a sudden we started putting all these access points on this limited access highway and now all of a sudden…

RL: …is opportunity for development. Hey, they’ve got to stop somewhere to eat.

JK: Right. Then we have drive until you qualify, so…oh, my goodness! It doesn’t work anymore because now instead of gas being $0.25 a gallon, now we’re up to $3 a gallon. That pretty aggressively starts to affect drive until you qualify when you start putting all that cost together.

RK: When you look at neighbourhoods and one of the ones you may see is German Town. There was the plant there, the bag factory. You had the boss’ house and you had the next boss’ house, the next boss’. So, everybody lived within a few blocks of each other so you had to really pretty much basically walk to work with each other.

So, you have that and now you have the car that comes in, you have the Microcar, and it just gets expanded. Now you have this big city here were the bosses all live and over here are where all the workers live. So, instead of walking to work with each other, they’re driving past each other to work. That’s the kind of thing that sounds like the true sustainable development, you’re trying to turn back the clock of time in certain respect.

JK: I really don’t look at it that way. I think we’re not trying to turn back the clock of time, I think we’re trying to understand what makes healthy places. What makes good economics for everybody involved, not just a few people. I think sustainability is becoming the answer to addressing our children’s health, it’s addressing the economics of cities. We’ve got a great opportunity in this country. It may look like a problem but it’s a real opportunity.

RL: …and it’s going to cost us more to fix it than anybody really wants to pay or acknowledge that they’re going to have to pay.

JK: We have a $1.6 trillion deficit just to repair what we have. We haven’t even counted the number to replace it all, which has to be replaced in the next 20 years. Water, sewer, roads and the power infrastructure is about ready to crash. So, we have a great opportunity. Either we’re going to let it all fall apart and we have nothing, which we’re not going to do, or we’re going to rebuild it. So, if we can rebuild it more sensibly, with longer term value built in as opposed to something that’s going to fall apart. It’s the great intersection of great opportunity. Out of that great crisis comes this new opportunity that if we do it sustainably we’ll have a much better world.

RK: Well, on that note, it sounds like it’s going to be a long, complex problem that’s going to involve everybody.

John, thank you very much for sitting down with me.

JK: Thank you.

(Music In and Up)

MK: I want to thank our guest for today’s program, John. We thank you for coming by to spend a couple of minutes with us, talking about your project. Again, thank you to Richard Lawson of the Nashville City Paper for conducting the interview.

So that does it for this edition of the NAI Nashville Market Report. Please be sure to listen in next time where we’ll be talking to uber developer in Nashville, Tony Giarratana, about his developments and some of the most recent updates on his projects. As always, please visit our website where you can find past episodes. You can also find transcriptions of all these interviews if you’d rather read them, just click on the “Transcript” link and you can read or use for your own purposes the transcripts of these interviews that we conducted.

Thank you again and we’ll see you next time on another NAI Nashville Market Report.

(Music Out)

©2007 NAI Nashville
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“Nashville CVB”
(Music City Center)
August 18, 2007

BS: I think we are embarking on phase two of the Convention Center 10 years from now. That’s how confident I am in its success.

(Music Up)

MK: This is the NAI Nashville Market Report for Saturday, August the 18th, 2007. I’m Marc Krejci, the Director of Market Research here at NAI. This is a podcast where we feature the latest news and happenings in the commercial real estate industry here in Nashville, Tennessee and beyond.

We have a great episode for you today. We have the President of the Nashville Convention and Visitors Bureau, as well as Bert Mathews who is also on the board of the Nashville Music City Center Coalition. Together we discuss many issues going on with the new Convention Center proposal, what it means for Nashville and what we can expect going forward, I think you’ll really enjoy it.

As always, if you’d like to hear past episodes of the Nashville Market report, please visit our website at nainashville.com, click on podcasts and there you’ll see ways to subscribe via e-mail, RSS or even iTunes.

So, without further ado, let’s jump right into our interview with Butch and Bert.

(Music Out)

MK: We do have a lot of people listening to us around the country, outside of our market who don’t know what’s going on here. Why is this important that we’re looking at a new Convention Center, where this began, what’s sort of the back story behind a new Convention Center?

BS: The conversation about a new Convention Center goes back almost 10 years, in terms of legitimate efforts and real research. We started recognizing the significant amount of lost business in the late ‘90s, we did some feasibility in ’99 and the story has only gotten more compelling. Probably the beauty is the business community at large recognize the value of the hospitality industry, I say, three years ago, at the request of the mayor to look into it, and when the business community jumped on board it took a life of its own and it hasn’t slowed down since.

MK: So, where is it at today in terms of the progress?

BS: We’re at a great place. Many people would say the Convention Center is a done deal, it is not quite a final or complete. It is one vote away from moving into RFPs and design phase. We had a resounding 30 to 2 vote in our city council two weeks ago, and we have two mayoral candidates in a run off and both of them have endorsed the project. So, we’re right at the cusp of making it happen but we can’t take the eye off the ball.

MK: Both of you are on the board of this thing called the Music City Center Coalition. Explain what the purpose behind that is.

BM: The Music City Center Coalition is really the business community explored the idea at the request of the mayor. A number of people came together to gather research in terms of what the market was, the financial feasibility and the cost, reported that to the mayor. The mayor said, let’s take a look and study it a little bit more and the Music City Center Coalition, which is today a variety of individuals and more than a thousand people who have signed up to be a part of it, is a group whose job it is to move the Convention Center forward.

BS: I will add to Bert’s great description that we have raised from the private sector about $350,000 to support the campaign and we have 32 organizational endorsement from as diverse as the Urban League and the Country Music Association. So, support is overwhelming and that’s what’s led the project to this final step.

MK: You can use this as a call-to-action out there, too. So, the NR industry, GNAR just stepped-up, which is Greater Nashville Association of Realtors, who else are you looking for? Who’s still dragging their feet, who do you want to step-up and join?

BS: I don’t think we can ever have too much support. We have a new Metro Council coming in September and we have a new mayor in the end of September. Both of those bodies need the confidence that the city supports it. So, any organizations, any businesses, anybody that has experience and understanding the value of these types of civic projects – come on, you’re welcome.

MK: Let’s shift gears there, back-up a bit because there is another Convention Center in the city of Nashville at the Opryland Resort area, they’ve just announced a major expansion on what they’re doing. How do they compete, if at all, with this center and how are you guys working together in this market place?

BS: They compliment each other. They have for the last 20 years. The research 10 years ago showed that there was room for both. The research four years ago showed there was room for both. We have supported their efforts, we’re please that they’re moving forward now as a result of that last vote that I’ve mentioned, to spend $400 million on an expansion and they’re supporting the downtown – the new Convention Center efforts and the new Convention Center is supporting them.

They’re really two distinctly different markets for the most part. There’s minimal overlap and Nashville’s in a great position, Bert may want to add to this, but I will point out, from our standpoint, the different cities Gaylord is in around the country, they are not in the same political geographic area as the main Convention Center, if it’s Dallas, Orlando, DC, they’re outside the marketing boundaries. We’re in the same marketing boundaries so we’re partners. What’s good for Gaylord is good for the city and vice versa.

So, we’re in the unique position to support both and make sure both are successful. The other markets, they compete with the primary with destination.

BM: The other thing that’s advantageous is that there are conventions that tend to go to resorts where you come, you stay and the amenity packages there, there are other ones that come to cities and explore a diverse urban experience. So, having both of those really makes Nashville much, much stronger. So, we are supportive as much as they have been for us.

BS: I was with 40 clients Tuesday, at lunch in DC, they love the news about both. Some are excited about coming downtown, some are excited that they will fit better out at Opryland.

MK: One of those news items was we are Music City USA, it was last week that was announced that NAMM was coming back – The Nashville Association of Music Merchants.

BS: They’ve been the poster child for this effort and they were here for 11 years in a row. They outgrew us several years before they left but they did everything they could to shoehorn themselves in, they finally decided they needed to experiment in some other cities. As you’ve mentioned, we’re very pleased that they’re coming back. They haven not done as well in other markets and they shouldn’t have, they belong here. They’re coming back before the new center is built, they’re going to grow with us and we’re ready.

MK: What about in terms of an anchor hotel, I know there’s a couple different possibilities there. What are we looking at for the hotel that would anchor on to this Convention Center?

BM: I think that one of the things that we’ve learned is that it’s extremely important for there to be an anchor hotel hat’s a part of it. There have been any number of people who have approached the MCC and approached the city to talk about that opportunity. I think as the project moves forward, the location of that, the flag for that, how it’s financed, all those pieces will fall into line but there is a tremendous amount of private sector interest in making that happen.

BS: I think it would be a relatively easy sell. The interest has been pouring in since we’ve released the report of the recommendations a year and a half ago. All the usual suspects that you would expect have more than inquired and have been doing their due diligence. So, we look forward to form an RFP and getting the best product for this.

MK: What about in terms of the construction of the actual center, have you guys picked a construction company for that or if not, what are you looking for?

BM: I’ll tell you, I think that what’s really going to be important and I think what will happen very soon is that whoever the next mayor is, there’s a process in our city of going through and designing these major projects, building these major projects and financing these major projects. We’ve gone through a lot of them preliminary due diligence, if you will. Is it feasible, is it financeable, all those steps, we’re ready now to execute on the plan and who the contractor is, what the specifics of what it looks like, those things are really, put that next mayor is really, hopefully going to be tasking folks to do.

BS: There have been a number of local and national partnerships being formed on the periphery, with the anticipation that they’ll get to bit. I think that that is pretty smart for national/international construction companies to partner with local, national architectural firms to partner with local and create the right kind of synergy so that’s there’s an understanding of what Nashville needs and also, an opportunity to bring in expertise on a national or international basis.

But, it’s wide open. So, if your listeners sharpen their pencils, make contact with some local companies, they’re welcome to join the firm.

MK: Let’s do a little vision casting for those folks then. Ten years down the road from today, the center is up and running, what is this place look like here in Nashville and how is the city working with it?

BS: That’s a great question. I think there’s an interesting, almost dichotomy. I hope, and I think, Lower Broad doesn’t look any different. The honky-tonks, the historic buildings, they’re in place they’re thriving. The authentic music, I think SoBro takes on and that’s the area south of Broadway for our listeners, takes on a totally new life and look, and becomes a very cool, very hip entertainment and urban residential area, clubs, restaurants, retail. From my perspective, I hope not a lot of change, there’ll be some but we have an opportunity to charter our own destiny and keep our authenticity in place. I think that that’s a big part of everybody’s vision.

BM: In addition to that, you’ll have a center that’s hopefully, acknowledged as one of the best in the world that has an active part in the neighbourhood that surrounds it. That is an attraction for thousands of visitors in and out of there that come to Nashville to be a part of that experience, and that the Convention Center becomes a real part of our fabric. People are down there to visit, to see the art, that are down there to visit the restaurant that’s in the Convention Center because it’s in one of the Liner buildings that are actually living two or three floors up and are a part of it.

There are so many things that we can do. Music venues inside of it that really make this center part of the community, as well as an incredible resource to support the Convention and Visitors Business that we have.

BS: I’ll add tow things. One is, I think it’ll be millions of new visitors, and maybe a lot of people don’t realize, will cross the 11 million annual visitor mark this year. So, there’s a significant amount of people that come here. Now, we look forward to growing that. The other piece that I’ll add, as I think we are embarking on phase two of the Convention Center 10 years from now, that’s how confident I am in it’s success and it’s demand. I probably have the most to lose if it doesn’t work so I am that positive about this city’s drawing power.

MK: So, bringing it back to present day, next actions today, what are we looking at? What are the next steps you guys are looking at moving forward from here on?

BM: There are a couple of things that have happened, (1) as Butch said, we have passed to the city council a variety of funding mechanisms and those taxes will start to be collected, hopefully as early as September 1st.

BS: September 1st, they actually got the word today. Forms have gone out, the Clerks Office has contacted the majority of the hotels already.

BM: So, with that we will have begun to raise money, the city will begin to collect taxes paid for by visitors that will fund this new center that will give us the money to finish the due diligence. The next steps are really the next mayor who will be elected on September 11th, stepping up and saying, “This is what we need to get started with. I task this organization, this entity and this person to deliver it,” and we’re on our way.

BS: I agree. We have the people, the past experience of large projects and the mechanisms to move it along. So, our job as a committee is to move it along and we think, very realistic, that we can…fast track is a relative term with this large a project, but as much as you can fast track something like this, I think we have that opportunity in front of us.

BM: I think Butch started out, when we were talking, by mentioning the need for the Downtown Convention Center in the compelling case – the compelling case is lost conventions. So, everyday that we’re not in the ground, everyday that we’re not closer to opening, is the day that the city is losing tax revenue that otherwise is going to have to be paid for by property tax or sales tax by local individuals.

MK: Butch, Bert, thank you. Any parting thoughts as we go out?

BS: I think if anybody is listening, the time to check out Nashville, if they haven’t already is right now, because this city is moving and moving in a great direction. It’s not just fast growth. It’s quality growth, its significant growth and it’s thoughtful growth.

(Music Up)

MK: Thank you.

BM: Thank you.

MK: Thank you for listening to another episode of the NAI Nashville Market Report, be sure to tune in again later where we’ll talk about more issues affecting our real estate and development marketplace here in Nashville.

If you’d like to receive daily news updates in your e-mail about commercial real estates and other development issues happening in our marketplace, just visit our website at nainashville.com, click on the news tab and you’ll see news items updated everyday relating only to the commercial real estate industry. Also, if you’re interested in reading up on our market reports, click on the Nashville Market and you can view the second quarter market reports covering the office, industrial and retail markets.

That will do it for today, thank you for taking the time to listen in. Be sure to join us again in the future for another NAI Nashville Market report.

(Music Out)

For this episode of the NAI Nashville Market Report podcast, I had the opportunity to sit down with Butch Spyridon, President of the Nashville Convention and Visitors Bureau, and Bert Mathews who (along with Butch) sit on the board of The Music City Center Coalition. From their web site, this group defines themselves as the following:

A growing number of business and civic organizations and individuals in Nashville are joining the citizens group actively leading the discussion about the need for a new downtown convention center. Called the Music City Center Coalition, the 501(c)(4) group is dedicated to seeing the Music City Center dream become a reality.

We discuss where the center is currently at in the process, and cover other related news items concerning this development.

Please feel free to send us your feedback about the podcast, or inquire further about this development by contacting us any time by calling (615) 850-2700, or emailing me directly at podcast@nainashville.com

July 18, 2007

HG: Now that Nashville is celebrating all of its great accomplishments, the convention centre, will be, really, an exclamation point for the next 30, 40 years.

(Music Up)

MK: This is the NAI Nashville Market Report for Wednesday, July the 18th, 2007. I’m Marc Krejci, the Director of Market Research here at NAI. This is a podcast where we cover the commercial real estate and development here in Nashville, Tennessee and beyond.

Just a couple of weeks from now, we’ll be having an election for a new mayor for the city of Nashville. In the next couple of podcasts, I did a series of interviews with the candidates to get their thoughts on various commercial real estates and other issues affecting the downtown Nashville.

If you’re listening to this through iTunes or an online streaming media player, please be sure to stop by our website at nainashville.com where you can listen to past interviews of other commercial real estate related items. You can also click on the news tab where you’ll see daily commercial real estate related stories happening here in our marketplace.

Without further ado, let’s get into our interviews. On today’s program, I interviewed Howard Gentry. So, let’s chime in and listen to what he had to say.

(Music out)

MK: Over the past several years, we’ve been ranked number one by numerous publications in a variety of categories, from corporate expansion, smartest place to live, for family relocations, etc. What will you do as a mayor to ensure that we keep this high mark?

HG: The reason for the high ranking is the fact that Nashville has been moving, progressing in a very exciting way and we are very fortunate to have such a diverse offering in our city, musically, artistically, educationally, developmentally and economically. What I’m going to do, since I have been involved over the last, at least, six years of my political career is to continue to recruit those business entities that are providing so many professional opportunities to our city to continue to support and promote those entities that are already here, such as our music industry and our healthcare industry. As a matter of fact, I will have an Office of Music and Entertainment in the Mayor’s Office to continue to promote the music. But, also to attract those entities that surround music, such as marketing, merchandising, technology and other areas. Also, the film industry, and as it relates to, our healthcare industry continue to promote their efforts so that the healthcare within this city can become a model, rather then suffering the same challenges that we suffer across the nation. So, long answer to a short question.

I’m going to continue to promote Nashville in the ways that we’ll have it not only appear, but in reality, be: the friendliest city, the favourite city to move your company, your families; a progressive city, a city that is… What’s that, the new one? We’ve been one of the coolest cities, but there’s another one that we’re on the verge of being and I’ll think of it as we go. But the fact is that what I hope to become is, also, one of the most technology advanced cities. We haven’t gotten to that point, yet, where we are in the top rung, but we are moving up the ladder.

MK: A potential boon for downtown economy is the proposed convention center. How is this a priority for you and how do you propose it be funded?

HG: It’s absolutely a priority. I was here when the last convention center was built. There was a lot of controversy around it, not necessarily because of it, but because of how it got started. It just took awhile to get moving, but the fact is that it did take us to another level as a city and it helped to boost the downtown economy.

Over time, that economy subsided. Now that we are on the move again and now that Nashville is celebrating all of its great accomplishments, the convention center will be, really, an exclamation point for the next 30, 40 years. That’s how important it is.

We have now determined that tourism is our second largest revenue producing entity. With the convention center downtown, it will increase our opportunity to attract outside visitors to our city. It will increase our opportunity to showoff Nashville as we draw the conventioneers to Nashville. It will also create a very, very strong economic market around that center as a facility. Also, it will help to vitalize and energize downtown because we are moving in a direction of encouraging people to move downtown, encouraging businesses to move downtown, both retail and otherwise. It just fits into the new, emerging Nashville in the downtown development. It is absolutely important. We will fund it as we did the prior convention center. The State of Tennessee has provided an opportunity to utilize the hotel/motel taxes and other resource streams that are paid-for by our visitors, such as the fee on transportation, taxi transportation and other costs that our visitors pay. I want to make sure that our convention center is not a burden to our local taxpayers, on our local tax base, but absolutely paid for by those people who visit our city, have a great experience and have a good time. We want to just weave it into the cost of their visit to Nashville, treat them so good that they’ll come back and do it again, over and over.

MK: After the Sounds ballpark development fell through on the riverfront, Mayor Purcell proposed that an amphitheater be built on that site. What are your thoughts about the highest and best use for that particular site?

HG: The fact is that even though it’s probably time for me to look in another direction, I’m not totally giving-up on the ballpark. I still believe that baseball was absolutely the best usage for that location. Be that as it may, when things don’t happen, there’s a reason and we might have to move-on from that wish and that dream. If so, I’m not certain that the initiative that the mayor brought forward is the best usage. I know that it is a nice usage and a usage that would…or an opportunity that, I think, the city could benefit from. It creates an environment for family. It creates an environment for tourists. Also, it creates an entertainment environment that we could utilize in a big way, being Nashville Music City.

But, I’d also like to see that opportunity to receive financial benefits in the greatest way, too. I think, what I would like to do is to just hold-off and see what other ideas come forward to determine if, in fact, not only will we have a great family, visitor and entertainment venue, but also maybe a venue that provides all of that plus a sustainable string of income or revenue. Some would argue that the amphitheater would be a string of income, sustainable over months, over time.

MK: One of the largest concerns from visitors, residents and even employees about being downtown is the transportation infrastructure and parking. What will you do, as Mayor, to improve this situation?

HG: Parking is really our biggest challenge right now. With downtown not taking-up the greatest landmass, the fact is that we all want to drive downtown. We all want to park. We all want to get to our cars and get out of downtown.

I served on a taskforce to review the parking. Downtown is really involving more of the state parking initiatives. The state is our biggest parking tenant downtown and they’re not getting any smaller. As the city grows and as we attract more residents downtown, more corporations and more businesses, parking is going to become even more of a challenge.

It was determined that there is a definite need for parking, but also, a need to coordinate the movement from existing parking to a particular housing or businesses that people are either working or living. There needs to be a plan and I would, as mayor, work to help develop a plan where we first, will move persons from the existing parking to their jobs or their homes in the downtown area, utilizing all other sources. We have the Titans parking lot. We also have the Gulch area that could provide a great resource for us, at it relates to parking. What needs to happen is, not just to build a lot or a parking facility, but also couple-in with that transportation to and from. We have the ability in our city to step-up our ground transportation. Our bus lines are right around 60%. We have opportunities for trolley in the downtown area, buses and bus lanes in the downtown area. I would work to have a comprehensive approach to parking and transit in the downtown area, even to the point, if need be, to look at developing a multilevel parking facility in the downtown area. You’d be surprised though with the number of spaces we have already, we can handle a lot more capacity than people know. It’s just that, it’s not organized. It needs to be planned and organized with a partnership between the parking initiative and the transit industry.

MK: With numerous sites currently under construction downtown and Nissan leaving the BellSouth Tower for their new headquarters in Cool Springs pretty soon, there’s a large amount of office square footage that is just going to become vacant. How will you keep downtown an attractive place for companies to do business?

HG: I really look at that as opportunities to bring more businesses to downtown. I’m really bothered by the fact that Nissan is leaving d