Four Seasons Hotel and Residences, 40 stories, 542', $400 million

[MidTenn1]

This should help.

[SumnerCountian]

Thanks for the warm welcome. I have long been lurking, enjoying the info on the different projects around Nashville. I understand that there are always backroom issues that have to be addressed when a project like this one is proposed. Ultimately, I guess it comes down to profitability for the developer.

[wmaddbb2018]

3 hours ago, nashvylle said:

One is 5-star hotel. The other is resi. 

I believe the hotel sits in between the 2 residential towers, one condos and one apartments.  I to am worried that this may not get done.  Even if it is scaled back somewhat, I still hope it gets done.

[Nashtitans]

If this project gets going, it may be bigger than the convention center development.

[bmkTN]

IIRC the last NBJ article on this said that the current landowner understood that the property wouldn't be officially purchased until the legal dispute with the parking lot owner was resolved and he was totally fine on waiting until then to finalize the purchase with them.  The question is: where is the dispute at in the court system at this point?

[titanhog]

Wish we knew the whole story on the sliver of land.  I'm not totally sure who's the "bad guy" in this deal.  Is it someone in the Pinnacle that poisoned the water?  Did the land owner figure he could hold 2nd Ave Partners hostage and get more money?  Or did 2nd Ave Partners try to low-ball the landowner, knowing they would be his only option since they would build whether he sold or not...leaving him no options?

[SumnerCountian]

What would be the value of a .14 acer lot that is jammed between the Siegenthaler bridge and a 40 story building? I don't personally know, but I imagine it would be less than whatever they were offered. I just hope it gets done as I think the development would really change the face of the skyline for the better.

[smeagolsfree]

I know some of the story but I can't say much on a public forum, but it comes down to miscommunication, IMO.

[titanhog]

3 minutes ago, smeagolsfree said:

I know some of the story but I can't say much on a public forum, but it comes down to miscommunication, IMO.

The main question is whether or not there's still a good chance the development will happen.

[smeagolsfree]

The fact that The Congress Group has not closed on the property is telling. Many times that happens just before the end of the year for tax purposes I think.

They may have deep pockets, but I am sure they want to get financing lined up before the purchase goes through. Interest rates are going up and this does not bode well for some of thes large scale projects.

[Neigeville2]

Also the downtown luxury housing market is in a bit of a glut right now, although by the time this is built that may have passed.  They may just not be in much of a hurry given where the market is.

[ruraljuror]

54 minutes ago, Neigeville2 said:

Also the downtown luxury housing market is in a bit of a glut right now, although by the time this is built that may have passed.  They may just not be in much of a hurry given where the market is.

What do you mean by glut? - that there's lots of available inventory just sitting on the market and it's a good buyer's market for downtown luxury housing right now? I thought prices were pretty inflated everywhere around here, or is this a niche exception?  Or do you just mean that there doesn't appear to be much pressing demand for luxury housing downtown right now based on some other indicator? 

[samsonh]

1 hour ago, ruraljuror said:

What do you mean by glut? - that there's lots of available inventory just sitting on the market and it's a good buyer's market for downtown luxury housing right now? I thought prices were pretty inflated everywhere around here, or is this a niche exception?  Or do you just mean that there doesn't appear to be much pressing demand for luxury housing downtown right now based on some other indicator? 

The new high rises are offering as much as 3 months free rent. There is definitely a glut. You won't be seeing rising effective rents for the next couple years at least.

[ruraljuror]

2 minutes ago, samsonh said:

The new high rises are offering as much as 3 months free rent. There is definitely a glut. You won't be seeing rising effective rents for the next couple years at least.

Oh, right.  I was thinking condos not apartments. 

[SoundScan]

My building (near Centennial Park) has raised my rent every year for the last three--until this year, when they offered reduced rent and one month free if I renewed my lease again. There is definitely an oversupply of "luxury" apartments at the moment.

[smeagolsfree]

I am thinking it will take a minimum of two years to fill everything recently completed , not to mention the others getting ready to come on line. There is a shortage of condos, and I will not be surprised if some of these projects convert some if not all units to condos at some point. The problem is that the condos need to be under 400k, as we have too many that are in the 400k to 1 million plus. There is a market for some of the projects to get that price, and two come to mind. SoBro and 505 will be able to get that price, however both are apartments at this point.

I spoke to the folks at the Element and there are no plans to convert to condos and they are in the Nashville market for the long haul.

We also have to high-rise apartment projects getting ready to start, the old CC site and the Endeavor project on Broadway. They will not come on line for another two to three years out. So this begs to question when Buckingham and the 2nd Ave. project will be built.

[Canuck87]

I was downtown this morning with some time on my hands, so I decided to stop by the courthouse and pull the case file for Second Avenue Partners v. Belle Meade Investments, which is pending in Davidson County Chancery Court. 

For those interested, the filings are public record and can be requested at the clerk’s office. The case number is 16-0775-I. Since I’m pretty sure most of you would prefer to avoid reading through pages and pages of pleadings, motions, and other filings, I thought I’d give you a somewhat brief summary:

The facts are fairly straightforward. Second Avenue Partners (the "Buyer") is the plaintiff, and Belle Meade Investments (the "Seller") is the defendant. The original purchase agreement executed between the parties provided that closing would take place in February 2016. The agreement also gave the Buyer an option to delay closing by providing an additional earnest money deposit that would be applied to the final purchase price. After being delayed twice, closing was set to take place on June 28.

On the morning of June 28, a representative of the Buyer contacted the Seller to ask about delaying the closing once more until sometime in August. This additional delay would allow the Buyer to comply with some unspecified requirements of the lender. The Buyer alleges that the Seller agreed to this extension, but there was nothing in the record evincing this claim.

On July 1, the Seller notified the Buyer by email of its intention to cancel the sale. This communication, however, did not comply with the notice provisions of the purchase agreement, which provided that all communications must be transmitted via mail. On July 7, the Seller sent a letter to the Buyer notifying the Buyer that it was cancelling the transaction. 

On July 19, the Buyer filed suit against the Seller in Chancery Court. The Buyer alleges that the Seller failed to deposit the closing documents with the escrow agent pursuant to the terms of the agreement, and that after the closing date, the Seller attempted to wrongfully repudiate the contract. The Seller has filed a counterclaim alleging that termination of the contract was valid and that it is entitled to the $106,000 earnest money deposit that is currently being held in escrow.

The parties have raised several arguments, but the crux of the dispute relates to the interaction between two provisions of the purchase agreement. The first important provision is the so-called "time is of the essence" clause. For many types of contracts (e.g., construction, real estate sales, loans, etc.) courts will often view minor deviations from a contract's schedule as being too insignificant to warrant damages or termination of the contract. Thus, where timing is crucial to a deal, lawyers may include a "time is of the essence" provision, making timeliness with respect to the parties' obligations essential. The agreement between the parties here contained such a provision. The Seller believes that the Buyer's request to extend the closing shows that it was unable or unwilling to consummate the transaction by the closing date of June 28. Accordingly, the Buyer did not comply with the agreement's schedule and was in breach of the contract. The Seller was thus entitled to terminate the agreement.

The second key provision of the purchase agreement relates to notice and cure. Typically in a large transaction like this one, a party will not be entitled to immediately terminate the transaction upon breach by the other party. The agreement at hand required that, before terminating the contract, the party seeking termination must provide notice to the other party. This notice must specifically describe the nature of the breach and provide the other party with an additional 10 days to cure the breach. Only upon the completion of the 10-day cure period could the transaction be cancelled. The Buyer's argument is that, even if it failed to meet its obligations by the closing date, it had the right to reasonably rely on the 10-day cure period provided in the agreement. Since the Seller did not provide the Buyer with time to cure, which was a condition precedent to termination, the termination was not effective.

There seems to be very little Tennessee case law cited by the parties that is directly on point, so it is hard to say who has superior legal arguments. I won't bore you with my personal prognosis regarding the case, but I will point out a couple things that I thought were notable.

First, the Buyer is not seeking money as damages. As a general rule, the default remedy for breach of a sales contract is monetary damages. Take for example a sales contract for the purchase of a commodity good. If the seller breaches, the buyer will have to mitigate its losses by buying substitute goods from another seller. If the buyer is required to pay more to "cover," then it will be able to recover the difference from the seller, but courts will not generally require the seller to perform the contract. That being said, there are circumstances where a party can sue for "specific performance." This equitable remedy is often available in land transactions, based upon the theory that land is unique and no other legal remedy will put the non-breaching party in the same position as if the contract been performed. Here, the only relief sought by the Buyer is that the Court declare that the contract remains in effect, set a closing date for the transaction, and compel the Seller to convey the property according to the original contract terms. The Buyer avers that it stands ready and willing to close the transaction and that it has the full amount of the purchase price secured. As of now, there is no indication that the Buyer is not fully intent on purchasing the property.

Second, throughout its filings, the Buyer repeatedly stresses the significance of this project-- the scale and value of the development, the 5 star hotel, the additional parking for the benefit SoBro and Ascend, increased property taxes, the impact on the skyline, etc. Though theoretically, these sorts of external considerations should have no bearing on a court's legal analysis, it would be naive to ignore the role they play. Judges are only human and are not ignorant of these sorts of factors.

Finally, judges rarely look favorably upon parties who try to play "gotcha" in cases like this one. It appears from the deal timeline that initially both the Buyer and Seller were perfectly intent on having the sale completed and were willing to cooperate with one another to facilitate its completion. Now, however, the Seller is seeking to receive the $106,000 deposit and cancel the transaction so it presumably can try to receive more money for the property down the road. In other words, the Buyer is only trying to receive the benefit of its original bargain, whereas the Seller is looking to receive a windfall. I don't want to insinuate that the Seller is acting in bad faith, only that the "equities of the case" seem to tilt in the Buyer's favor.

As for the case timeline and how it might progress, there has been no movement on the docket since October. The parties' motions to dismiss have been filed and denied. This is typically followed by a discovery period, where documents are exchanged and witnesses are deposed. Depending on the nature of the case, this process could last for a couple months or several years. Towards the end of discovery, parties will routinely move for summary judgment, and this would likely necessitate another hearing. Depending on how congested the Court's docket is, a ruling could take a few weeks or several months. I will say that there does not seem to be any material facts in dispute, so a trial in this case seems unlikely. I would not be surprised if the case is disposed of on summary judgment. Plus, it's important to keep in mind that 90%+ of cases like this end up settling. This is especially true when it appears that a case is unlikely to be resolved quickly in court. The longer the case takes, the greater the legal fees, and the greater incentive there is to resolve the dispute through settlement.

I will check in with the progress of the case periodically and report here if anything happens, assuming y'all are interested.

 

 

Edited January 3, 2017 by Canuck87

[samsonh]

5 minutes ago, Canuck87 said:

I was downtown this morning with some time on my hands, so I decided to stop by the courthouse and pull the case file for Second Avenue Partners v. Belle Meade Investments, which is pending in Davidson County Chancery Court. 

For those interested, the filings are public record and can be requested at the clerk’s office. The case number is 16-0775-I. Since I’m pretty sure most of you would prefer to avoid reading through pages and pages of pleadings, motions, and other filings, I thought I’d give you a somewhat brief summary:

The facts are fairly straightforward. Second Avenue Partners (the "Buyer") is the plaintiff, and Belle Meade Investments (the "Seller") is the defendant. The original purchase agreement executed between the parties provided that closing would take place in February 2016. The agreement also gave the Buyer an option to delay closing by providing an additional earnest money deposit that would be applied to the final purchase price. After being delayed twice, closing was set to take place on June 28.

On the morning of June 28, a representative of the Buyer contacted the Seller to ask about delaying the closing once more until sometime in August. This additional delay would allow the Buyer to comply with some unspecified requirements of the lender. The Buyer alleges that the Seller agreed to this extension, but there was nothing in the record evincing this claim.

On July 1, the Seller notified the Buyer by email of its intention to cancel the sale. This communication, however, did not comply with the notice provisions of the purchase agreement, which provided that all communications must be transmitted via mail. On July 7, the Seller sent a letter to the Buyer notifying the Buyer that it was cancelling the transaction. 

On July 19, the Buyer filed suit against the Seller in Chancery Court. The Buyer alleges that the Seller failed to deposit the closing documents with the escrow agent pursuant to the terms of the agreement, and that after the closing date, the Seller attempted to wrongfully repudiate the contract. The Seller has filed a counterclaim alleging that termination of the contract was valid and that it is entitled to the $106,000 earnest money deposit that is currently being held in escrow.

The parties have raised several arguments, but the crux of the dispute relates to the interaction between two provisions of the purchase agreement. The first important provision is the so-called "time is of the essence" clause. For many types of contracts (e.g., construction, real estate sales, loans, etc.) courts will often view minor deviations from a contract's schedule as being too insignificant to warrant damages or termination of the contract. Thus, where timing is crucial to a deal, lawyers may include a "time is of the essence" provision, making timeliness with respect to the parties' obligations essential. The agreement between the parties here contained such a provision. The Seller believes that the Buyer's request to extend the closing shows that it was unable or unwilling to consummate the transaction by the closing date of June 28. Accordingly, the Buyer did not comply with the agreement's schedule and was in breach of the contract. The Seller was thus entitled to terminate the agreement.

The second key provision of the purchase agreement relates to notice and cure. Typically in a large transaction like this one, a party will not be entitled to immediately terminate the transaction upon breach by the other party. The agreement at hand required that, before terminating the contract, the party seeking termination must provide notice to the other party. This notice must specifically describe the nature of the breach and provide the other party with an additional 10 days to cure the breach. Only upon the completion of the 10-day cure period could the transaction be cancelled. The Buyer's argument is that, even if it failed to meet its obligations by the closing date, it had the right to reasonably rely on the 10-day cure period provided in the agreement. Since the Seller did not provide the Buyer with time to cure, which was a condition precedent to termination, the termination was not effective.

There seems to be very little Tennessee case law cited by the parties that is directly on point, so it is hard to say who has superior legal arguments. I won't bore you with my personal prognosis regarding the case, but I will point out a couple things that I thought were notable.

First, the Buyer is not seeking money as damages. As a general rule, the default remedy for breach of a sales contract is monetary damages. Take for example a sales contract for the purchase of a commodity good. If the seller breaches, the buyer will have to mitigate its losses by buying substitute goods from another seller. If the buyer is required to pay more to "cover," then it will be able to recover the difference from the seller, but courts will not generally require the seller to perform the contract. That being said, there are circumstances where a party can sue for "specific performance." This equitable remedy is often available in land transactions, based upon the theory that land is unique and no other legal remedy will put the non-breaching party in the same position as if the contract been performed. Here, the only relief sought by the Buyer is that the Court declare that the contract remains in effect, set a closing date for the transaction, and compel the Seller to convey the property according to its terms. The Buyer avers that it stands ready and willing to close the transaction and that it has the full amount of the purchase price secured. As of now, there is no indication that the Buyer is not fully intent on purchasing the property.

Second, throughout its filings, the Buyer repeatedly stresses the significance of this project-- the scale and value of the development, the 5 star hotel, the additional parking for the benefit SoBro and Ascend, increased property taxes, the impact on the skyline, etc. Though theoretically, these sorts of external considerations should have no bearing on a court's legal analysis, it would be naive to ignore the role they play. Judges are only human and are not ignorant of these sorts of factors.

Finally, judges rarely look favorably upon parties who try to play "gotcha" in cases like this one. It appears from the deal timeline that initially both the Buyer and Seller were perfectly intent on having the sale completed and were willing to work with on another to facilitate its completion. Now, however, the Seller is seeking to receive the $106,000 deposit and cancel the transaction so it presumably try to receive more money for the property down the road. I don't want to insinuate that the Seller is acting in bad faith, only that the "equities of the case" seem to tilt in the Buyer's favor.

As for the case timeline and how it might progress, there has been no movement on the docket since October. The parties' motions to dismiss have been filed and denied. This is typically followed by a discovery period, where documents are exchanged and witnesses are deposed. Depending on the nature of the case, this process could last for a couple months or several years. Towards the end of discovery, parties will routinely move for summary judgment, and this would likely necessitate another hearing. Depending on how congested the Court's docket is, a ruling could take a few weeks or several months. I will say that there does not seem to be any material facts in dispute, so a trial in this case seems unlikely. I would not be surprised if the case is disposed of on summary judgment. Plus, it's important to keep in mind that 90%+ of cases like this end up settling. This is especially true when it appears that a case is unlikely to be resolved quickly in court. The longer the case takes, the greater the legal fees, and the greater incentive there is to resolve the dispute through settlement.

I will check in with the progress of the case periodically and report here if anything happens, assuming y'all are interested.

 

 

This might be the most researched and detailed post ever on the Nashville forum. Thank you!

[titanhog]

I wish 2AP would just start building without the land.  Then...I bet the sellers beg them to buy, knowing they're not going to be able to sell to anyone else.

I still wonder if the guys in the Pinnacle had anything to do with this fiasco.

[SumnerCountian]

Can they start while the case is winding its way through the labyrinth of justice that is the Davidson Co. court system?

[titanhog]

1 hour ago, SumnerCountian said:

Can they start while the case is winding its way through the labyrinth of justice that is the Davidson Co. court system?

They already have approval from the city on a design that does not incorporate that sliver of land...so if they purchased the other land, got all of their financing in order and permits...I don't see why not.  However...I imagine the developer and the city would rather they build with that sliver of land because it serves everyone to have that original design built.

[SumnerCountian]

Build that building an let the owner of the .14 acre lot kick rocks. This is an impressive set of buildings which will help hide the monstrosity of the Hayes/Hines building.

[Lexy]

On 1/11/2017 at 8:02 PM, SumnerCountian said:

Build that building an let the owner of the .14 acre lot kick rocks. This is an impressive set of buildings which will help hide the monstrosity of the Hayes/Hines building.

Agreed!!

[claya91]

4 hours ago, Lexy said:

Agreed!!

That's what the like button's for.

[Lexy]

16 hours ago, claya91 said:

That's what the like button's for.

Was that really necessary?  I don't have a lot of time to type out a long winded response on a phone.