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Charles
Carlisle, CEO of Bristol Development Group, joined the Nashville
apartment and condo builder as its top executive about a year
ago, arriving just in time for the local and national economy
to stumble.
He
moved here from Birmingham, Ala., where he spent 12 years
with the Daniel Corp. in real estate development and finance.
Carlisle thinks it could be 2011 before the national economy
rebounds from a massive credit crunch that has left consumers
battered and afraid to spend on big-ticket purchases, and
he hopes Nashville's economy manages to bounce back more quickly
than the nation as a whole.
Bristol has sold 107 of 417 condominium units in its high-profile
Icon property in the Gulch, and it will soon launch two new
apartment buildings.
Carlisle recently discussed how Bristol is managing through
the downturn with Tennessean Business Editor Randy McClain
on "Lunch Money," a live webcast that airs several
days a week at noon on Tennessean.com.
What's your view on progress made in
the Gulch to date, and what's next for that area over the
next 12 months?
"When you move here, as I did about a year ago, you immediately
see that the Gulch is a very exciting, emerging urban neighborhood
with all the elements that you'd want — retail, restaurants,
residential, office, all those things. But that didn't just
happen by accident. Our partner in the Icon (condominiums),
Market Street Enterprises, which is run by Steve Turner, Joe
Barker and Jay Turner, had a vision about 10 years ago to
create an urban neighborhood near downtown on what was a forgotten
piece of real estate under the Broadway overpass."
"There
are a lot of people who have good ideas, but very few of them
actually put those into action by risking their own capital
and then spending years in careful planning to bring it about.
What you see today is a step in the progression of the Gulch
to becoming a very exciting neighborhood."
Bristol made its mark in apartments
to begin with. From a tenant's perspective, what do you see
happening now in terms of rents and apartment projects in
the city center?
"If you take the downtown-West End market, it's really
a wonderful opportunity for rental housing today, in part
because of the focus we've seen on building "for sale"
condominium projects over the last five years or so."
"But there's been a dearth of new rental construction.
In fact, since 1998, there's only been one rental community
built in that West End-downtown submarket — and that
was only 32 apartments and it was in the Gulch. There's an
unserved demand here for new apartments."
"Bristol has two projects in development, one already
under construction about a block and a half away from Baptist
Hospital on State Street between 17th and 18th avenues. It's
called 1700 Midtown; it's 170 units. And we'll start construction
on another project in January on Jefferson between Fifth and
Sixth avenues in Germantown. It's going to be 238 units and
it'll be called Vista Germantown."
What price ranges for rents would you
expect at 1700 Midtown and at your Germantown project?
"At 1700 Midtown average rents will be about $1,350 and
most of the residences will be one-bedroom. Germantown, by
contrast, is a little bit larger square footage, and the average
rents there will be about $1,450."
"In comparison to the urban submarket, downtown and West
End, when we look at the six or eight most competitive properties
there, the average rent among those is about $1,350 and occupancy
is 96 percent. So, it's a pretty healthy market."
"In fact, the rents and occupancy statistics in that
submarket are better by comparison than most areas of Atlanta,
which we tend to think of as a city that's a little ahead
of us when it comes to development. Meanwhile, rents here
have gone up about 3.5 percent over the last year, due in
large part to a lack of new apartments."
Are
those statistics among the reasons that Bristol feels the
time is right for new apartment construction?
"Rents
are edging higher and that helps to pay a developer's bills.
We
track job growth and supply and demand in the markets where
we operate, and we think Nashville's a very compelling story.
One of the interesting things about Nashville's downtown is
how underserved the entire downtown submarket is in terms
of residential."
"If
you look at peer cities — places like Charlotte, St.
Louis, Indianapolis — we have far fewer residences and
residents downtown than any of those cities."
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"We have about 4,800 people living in our downtown
submarket, and I think there's a long-term potential for
more downtown housing here."
"Currently the focus should be on apartments; someday
condominiums again, once the financing markets recover
and supply and demand come more into balance."
When do you plan to start marketing
your two new apartment buildings to prospective tenants
here?
"In late 2009 for 1700 Midtown, and probably early
2010 for the one in Germantown."
How have condo sales run the last
six months? Do you see prices dropping or fewer deals
closed?
"It's tracking the single-family home markets; it's
very slow; there are not many transactions in the resale
market. The pace of sales is certainly slower overall
than we would like. I think the thing that we take heart
in is that the market here is in relative balance. So,
while there are not a lot of transactions occurring, pricing
remains fairly stable. We have not reduced prices at Icon
at all."
In fact, we are writing contracts for people walking in
off the street today at higher than our original listing
prices. There are some other properties (Encore condominiums,
for instance) that have offered special discounts for
a month or two, and that wouldn't be unusual in these
times ... just as you see homebuilders offering special
incentives."
With the Encore offering as much
as $50,000 discounts on some units, does that undercut
the market? Does it damage Icon or other condo developments?
" It always affects the competitive environment.
The difference between Icon and Encore is ... Encore is
toward the end of their sales. They're relatively close
to selling out their 300-plus units. So, strategically
offering discounts now and for a limited period of time
to get some velocity in these relatively slow winter months
makes sense. Presumably, at some point, they'd go back
to normal pricing."
" On the other hand, Icon has 417 units and to date
we have closed 107 of those. Those are actual closed sales.
We have people who are walking in off the street, buying
units at full price that we either held in inventory or
have taken back in the process of working through our
contracts. We see no reason to offer discounts now or
in the foreseeable future because the market is reasonably
strong."
" We believe that we will have closed 120 units or
more in the Icon by the end of the year. And in this environment,
we're very satisfied with that, although not excited because
we at one time thought we had over 400 of these units
sold. It will probably take us until the end of 2010 (to
sell out)."
Do lower interest rates help spur
sales?
" Falling mortgage rates help. With every drop in
the interest rate it makes it that much more affordable
for someone to own a home or condominium."
" But I don't think sales will get back to anything
like normal until we see the banks begin to loosen the
purse strings and do more in the way of financing, not
just on home sales but also on construction lending as
well. We need more stability to convince people to get
out there and make big spending decisions again."
" The biggest impact in terms of condo sales has
been on investors buying units, those people who don't
intend to live in the units. The investor segment is usually
expected to put down a 20 percent down payment on a dwelling
or unit that they're going to own and rent. And that has
restricted the demand, which is probably OK. Because ultimately
what you want is people who are going to own and live
in the units or at least have them as a second home."
" None of us want to see a huge investor community
in these downtown condominiums."
Let's talk a bit more about the
Icon. When it comes to ground-level retail or restaurants,
what tenants have you signed for those commercial spots
and when will they open?
" We have three under construction right now that
will open between January and May 2009. The first one
is Cantina Laredo, which is a gourmet Mexican restaurant,
a concept that has a number of stores in Texas and in
Huntsville, Alabama. It has kind of an upscale feel that
should match up very well with the demographics of the
Gulch. It's about a 7,900-square-foot restaurant, and
it will have patio dining along the sidewalk of 12th Avenue.
It will open in April or May."
" In addition to that, Urban Flats is a flatbreads
and wine concept. That's about 5,000 square feet and I
believe they're set to open in January or February."
"And then there's a coffee shop, Casablanca Coffee,
coming in April, we believe."
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