Signature: Really Feasible?

[bnaflyer]

I don't want to rain on anyone's parade--I'm as excited about the possibility of Signature as anyone (and love the design!)

However....

1. Wouldn't this be the tallest residential structure in the United States? Does it seem odd that a city the size of Nashville could support a residential building taller than those in NY, LA, SFO, etc?

2. While Tony G. has done some decent sized projects, he has never done anything nearly on the scale of this proposal. This is a multiple of several times over his previous experience. This project would be larger than the Arena and the Titans stadium combined, both of which were massive public projects. Is he capable of getting financing for this project?

3. Is there really enough residential demand to support this tower in addition to the many many other residential projects currently in the works in Nashville?

4. Can anyone think of a town in which the tallest structure is residential rather than commercial? Does that seem strange?

5. Has anyone looked closely at the economics of the building? Can you sell enough condos at a price sufficient to justify the massive cost of this building?

6. If there is a devaluation in the real estate market soon, will this kill any chance of the project?

Again, I'm not just asking this to be contrarian or skeptical. I'm geniuinely concerned that we are getting too excited about something that will never be built. Remember, where the Cumberland (a nondescript, dreary building if there ever was one) now stands Tony G. had originally planned a much grander building. As beautiful as this design is, and as exciting as the concept is, he is going to need HUGE financing, and he is going to be asking for it even though he has no experience with a project of this scale. The partnerships with Novarre (sp?) are of a completely different magniftude--Novarre does one thing well and repeatedly, but it's not building this kind of massive skyscraper.

Thoughts?

[DruidCity]

Well, "pre-sales" are the beauty of modern residential projects.

If enough people buy, it's a guaranteed profit for the developer. If there's not

enough interest, he's out only the cost of the architectural drawings, site/engineering study, and advertising - in other words a drop in the bucket.

Nashville has piles of $$$, but remember also that a project like this is regional in scope. Investors from Atlanta and Texas and God-knows-where magically appear out of the woodwork for upscale, distinctive projects like this.

I know that for a pre-sale condo in Gulf Shores, AL last year, buyers came from as far away as Guam. If a project is nice enough, buyers will appear.

Does it seem odd that a city the size of Nashville could support a residential building taller than those in NY, LA, SFO, etc?

Yes, it does, but I think there's a certain level that cities get to at which they become "satisfied," whereas the up-and-coming medium-sized cities are more "hungry" to make a name for themselves.

[city watcher]

If I had money to burn, I would buy a condo out of state

[SoundScan]

In pure height, yes, Signature Tower will be one of the tallest residential buildings in the U.S.--although it has now become a multi-purpose structure with the added hotel. However, if you take just the residential portion at 55 stories and 400 units, you'll find that there a many residential buildings of comparable size all over the country, while cities like New York and Chicago are simply littered with such buildings. The main difference between Signature and many of the other residential buildings with comparable unit and floor counts is:

1. The height of each floor is much taller in Signature (the 6 top floors of penthouse units have 24+ ft. ceilings), and

2. Signature has a large crown and spire that add a significant amount of height to the building.

I don't think Signature is a 100% guarantee to be built, but I certainly think it's a feasible project for the Nashville market.

-Sean

[Hankster]

Let me take a shot at these questions:

1. Wouldn't this be the tallest residential structure in the United States? Does it seem odd that a city the size of Nashville could support a residential building taller than those in NY, LA, SFO, etc?

Yes, it's odd that other cities in the US haven't constructed one yet. However, the city of Dubai currently has a population no larger than Nashville, and has about a dozen projects of this magnitude under construction right now. IMO, the problem is that there are not enough developers in the US like Tony G. or like the Dubai developers with the vision and "balls" to pull this off

2. While Tony G. has done some decent sized projects, he has never done anything nearly on the scale of this proposal. This is a multiple of several times over his previous experience. This project would be larger than the Arena and the Titans stadium combined, both of which were massive public projects. Is he capable of getting financing for this project?

Sig has a 100 to 200 unit hotel, and 400 residential units. It is smaller (yes, smaller) than the project Alex Palmer has just pulled off. The Viridian has over 300 units, and the Encore has 300 units. For comparison sake, the Icon has 424 units, more than Sig Tower. Tony is on a roll, the Nashville real estate market is smoking hot, and everyone knows it. The Hotel component will provide valuable financing for this project. I have little doubt that he will be successful in getting the hotel component, and obtaining financing.

3. Is there really enough residential demand to support this tower in addition to the many many other residential projects currently in the works in Nashville?

The 424 unit Icon project sold out its 217 condo units in less than two days. This project will be even more attractive to many prospective buyers. He had over 700 reservations for his 400 units. The market right now in Nashville is red hot. Enough said.

4. Can anyone think of a town in which the tallest structure is residential rather than commercial? Does that seem strange?

Miami - Their tallest which is under construction is the all residential Met 3 (75 Stories, 866 Ft) plus they have a proposal for two 106 Story, 1200 Ft tall residential towers. Vancouver - Their tallest is Living Shangri-La under construction, 61 stories and all residential

5. Has anyone looked closely at the economics of the building? Can you sell enough condos at a price sufficient to justify the massive cost of this building?

Tony's latest estimates are $275 Million in construction costs. He has a $12 Million TIF grant. He plans to sell all his penthouses for up to $5 Million each. He should get approximately $75 Million for the Hotel portion. My guess is he will have to average about $500,000 per condo to make money.

6. If there is a devaluation in the real estate market soon, will this kill any chance of the project?

That could, but there is absolutely no sign of a slowdown in sight. Nashville currently has a huge pent up demand for downtown housing that is estimated to be equivalent to several thousand units.

[city watcher]

I don't think Signature is a 100% guarantee to be built, but I certainly think it's a feasible project for the Nashville market.

-Sean

IMO I think the project is a go. According to the Tennessean, construction is supposed to begain in January of 07.

[nashscan]

Let me take a shot at these questions:

1. Wouldn't this be the tallest residential structure in the United States? Does it seem odd that a city the size of Nashville could support a residential building taller than those in NY, LA, SFO, etc?

Yes, it's odd that other cities in the US haven't constructed one yet. However, the city of Dubai currently has a population no larger than Nashville, and has about a dozen projects of this magnitude under construction right now. IMO, the problem is that there are not enough developers in the US like Tony G. or like the Dubai developers with the vision and "balls" to pull this off

2. While Tony G. has done some decent sized projects, he has never done anything nearly on the scale of this proposal. This is a multiple of several times over his previous experience. This project would be larger than the Arena and the Titans stadium combined, both of which were massive public projects. Is he capable of getting financing for this project?

Sig has a 100 to 200 unit hotel, and 400 residential units. It is smaller (yes, smaller) than the project Alex Palmer has just pulled off. The Viridian has over 300 units, and the Encore has 300 units. For comparison sake, the Icon has 424 units, more than Sig Tower. Tony is on a roll, the Nashville real estate market is smoking hot, and everyone knows it. The Hotel component will provide valuable financing for this project. I have little doubt that he will be successful in getting the hotel component, and obtaining financing.

3. Is there really enough residential demand to support this tower in addition to the many many other residential projects currently in the works in Nashville?

The 424 unit Icon project sold out its 217 condo units in less than two days. This project will be even more attractive to many prospective buyers. He had over 700 reservations for his 400 units. The market right now in Nashville is red hot. Enough said.

4. Can anyone think of a town in which the tallest structure is residential rather than commercial? Does that seem strange?

Miami - Their tallest which is under construction is the all residential Met 3 (75 Stories, 866 Ft) plus they have a proposal for two 106 Story, 1200 Ft tall residential towers. Vancouver - Their tallest is Living Shangri-La under construction, 61 stories and all residential

5. Has anyone looked closely at the economics of the building? Can you sell enough condos at a price sufficient to justify the massive cost of this building?

Tony's latest estimates are $275 Million in construction costs. He has a $12 Million TIF grant. He plans to sell all his penthouses for up to $5 Million each. He should get approximately $75 Million for the Hotel portion. My guess is he will have to average about $500,000 per condo to make money.

6. If there is a devaluation in the real estate market soon, will this kill any chance of the project?

That could, but there is absolutely no sign of a slowdown in sight. Nashville currently has a huge pent up demand for downtown housing that is estimated to be equivalent to several thousand units.

Yup. MMMHM.

[nashvillwill]

Personally, I hope other cities won't let this record stand for long. YES, I am pro-Nashville and a Nashville native, yet I hope we have the same effect as the L&C. Just as we are trying to do now (top another city) I hope the Sig inspires other cities to top us. No longer on a regional level but on a national and world-wide level, other cities our size might look and say "We can do that". Don't get me wrong, I like being on top, I just don't expect to be there for long. I want to be an inspiration of world growth. I hope to set a standard that we will try to live up to in the future. Dont' forget that Trump is currently building his 95 floor building in Chi-town. We ARE "the children of the future", but we have a long way to go. Mass transit, a more centralized city, more diversity, and a step up on the national level is what will define us as a city. I want the future of Nashville to dominate the economics, cultural, and visual aspects of a modern city, but I am simply hoping that the SIG will let us ALL know the potential of our quaint little city.

[chris holman]

Personally, I hope other cities won't let this record stand for long. YES, I am pro-Nashville and a Nashville native, yet I hope we have the same effect as the L&C. Just as we are trying to do now (top another city) I hope the Sig inspires other cities to top us. No longer on a regional level but on a national and world-wide level, other cities our size might look and say "We can do that". Don't get me wrong, I like being on top, I just don't expect to be there for long. I want to be an inspiration of world growth. I hope to set a standard that we will try to live up to in the future. Dont' forget that Trump is currently building his 95 floor building in Chi-town. We ARE "the children of the future", but we have a long way to go. Mass transit, a more centralized city, more diversity, and a step up on the national level is what will define us as a city. I want the future of Nashville to dominate the economics, cultural, and visual aspects of a modern city, but I am simply hoping that the SIG will let us ALL know the potential of our quaint little city.

I personally hope we can hold on to the record as long as we can. But, I know a city will top its height with a newer taller tower.

[Skyscrapergeek]

Yeah, it would be cool to have the tallest tower but I will be thrilled to have a 1000+ footer. After years of only 30 something floors being built it will be great to break on through in a very big way. I'm just excited to see what our potential is without even comparing it to another city.

[tistic]

Flyer--I'll take a shot at it, too...

1. Wouldn't this be the tallest residential structure in the United States? Does it seem odd that a city the size of Nashville could support a residential building taller than those in NY, LA, SFO, etc?

With over a million people in the MSA, we're really just talking about 400 home buyers. There's more money per home tied up in one medium-sized neighborhood in Brentwood than is required to sell out the Signature Tower. It may be out of the ordinary, but that kind of an oddity isn't unprecedented. For example, LA has no pro football team, but Nashville does. Houston is much larger, but there's way more revenue here in television production than in Houston.

2. While Tony G. has done some decent sized projects, he has never done anything nearly on the scale of this proposal. This is a multiple of several times over his previous experience. This project would be larger than the Arena and the Titans stadium combined, both of which were massive public projects. Is he capable of getting financing for this project?

When you add TIFF financing and the money that will come from the participation of a top hotel, you don't even need to double the gross revenues of the Viridian ($90) to get to a project on the scale of Signature Tower. Tony got the Cumberland done when the DT residential market didn't even exist. And he sold out the Viridian and it isn't even finished yet. Tony Giarratana probably has all the track record any bank will need to see. My sense of it is that when you get over $50M, if the track record is there then the main thing decision-makers care about is integrity. I've only met Tony a few times briefly, but he strikes me as someone you can be confident in.

3. Is there really enough residential demand to support this tower in addition to the many many other residential projects currently in the works in Nashville?

I'm with Hankster on this one. I think the developers are definitely competing for a limited number of buyers, but the conventional wisdom from Nashville real estate market observers is that Signature and the other projects are on the front end of a growing demand curve. I'd be more concerned if this type of development had already been under way for 5 years or more.

4. Can anyone think of a town in which the tallest structure is residential rather than commercial? Does that seem strange?

Great examples from Hankster. The tallest structure in my residential neighborhood is a cell tower, which is merely an observable measure of the market working.

5. Has anyone looked closely at the economics of the building? Can you sell enough condos at a price sufficient to justify the massive cost of this building?

Tony strikes me as an excellent businessman, but as much as his own knowledge, skills and abilities, IMO it will be the market forces he is able to tap into that will make Signature a success. We all saw how his original mixed use project didn't take off. My impression is that is b/c he had to rely on a relatively rare third party prospect to decide for a tenancy decision; this market did not have enough such tenants, so what does a bright guy do? Rather than letting the project die, Tony made a brilliant decision about his business model. Instead of relying on less numerous prospective clients (commercial tenants) who had to consider their own unique factors (well beyond Tony's influence), Tony decided to pivot towards types of clients that are plentiful (home buyers) and who make their decision based on their personal tastes & preferences(something Tony and his architects and designers can influence). Tony may get 5 "no"s for every "yes", but the brilliant thing is he's got vastly more potential 2500sf clients than 200,000sf clients.

6. If there is a devaluation in the real estate market soon, will this kill any chance of the project?

It looks like the whole thing is scalable. When the time is at hand to pour concrete, the proposal stage will be over and the market will either be clearly supporting the project or not. If the tenants aren't there, he can probably dial back the size of the columns and make it a shorter building. But this is something he and his team and his bank will carefully scrutinize just before the point of no return. So my impression is there's no question the project moves forward, there is only a question of whether it moves forward as proposed. And based on how much buzz there is about living downtown, I think we are at the beginning of a growth curve that will outlast the construction of this building. I bet it's a full steam ahead, but with the caveat that Tony will have to prove his numbers one last time before groundbreaking. (That's what I'd do if I were a banker, and it's what I'd do if I were Tony.)

Thanks for the great questions, Flyer. If I didn't know any better (the fact is, I don't) I'd say you're either a commercial real estate banker or that your initials are Alex Palmer

[Rural King]

^ Welcome to the forum tistic! Your first post was a great one. I hope we get to see many more from you!

[chris holman]

Yeah, it would be cool to have the tallest tower but I will be thrilled to have a 1000+ footer. After years of only 30 something floors being built it will be great to break on through in a very big way. I'm just excited to see what our potential is without even comparing it to another city.

Yes, to have a 1000+ foot tower in Nashville by itself will be truly amazing.

And once Sig Tower is built, can you imagine that when your in certain parts of the city, depending on where you are or how far away you are from downtown, and when you look in the direction of downtown all you will see is one TALL building looming above , until you drive closer into the city and then you will see the rest of the skyline.

[tistic]

^ Welcome to the forum tistic! Your first post was a great one. I hope we get to see many more from you!

Thanks RK...Long time lurker, first time poster. Thanks for taking my call... Wait, I'm getting my new media outlets confrused.

[chris holman]

Thanks RK...Long time lurker, first time poster. Thanks for taking my call... Wait, I'm getting my new media outlets confrused.

Welcome to the forum tistic.

[Skyscrapergeek]

tistic, your style seems somewhat completely and entirely familiar...do I know you?

[monsoon]

The problem with really tall residential towers and why you don't see more of them in really large cities is that for day to day living they are a b**ch to live in. Once you are above 25 floors access starts to become an issue due to limitations on elevator technology and developers wanting to reduce costs in that area. Things such as going downstairs to walk the dog or to get something to eat become cumbersome when you have to wait and deal with access. Another problem is that on the higher floors, say above 50, you can't really provide big open balconies (though it has been done) due to saftey issues with air pressure and high winds. I believe the current worlds tallest, the John Hancock building in Chicago has windows that just crack open. It makes people claustrophobic.

Now you do get high residential being built in high profile places such as Miami and Dubai that are being bought mainly by investors and property speculators. Fla is especially vulerable to this as a lot of investment money is flowing in from Europe into S. Fla from people looking to take advantage of the Euro/$ exchange rate. There are signs this market is starting to dry up. (Las Vegas is a place where the condo market is all of a sudden suffering) But beyond these few places you will find that in most large cities, unless there is a hugh shortage of land most people live in buildings that are less than 25 stories. It makes for better living.

With the rise of interest rates and high constuction costs all being caused by the rise in oil, it will be interesting to see if this project survives in its present proposal. The key will be the numbers of people with the required financial resources willing to sign up for these units. The banks are going to want a certain percentage before they will be willing to finance it.

[jice]

The problem with really tall residential towers and why you don't see more of them in really large cities is that for day to day living they are a b**ch to live in.

I tend to think that those that are going to be buying up the more expensive, upper floors (and possibly the majority of the building for that matter)... are going to be people who have tons of money to burn... and are only really buying them as another place to stay once in a while... not really for day to day living. I could be wrong. But, there are plenty of stars and other rich folks who come and go often in this city.

[monsoon]

That was the point I was trying to get across on why you see these type places going up in Dubai and Miami, when otherwise, there really isn't any reason for high residential towers to exist in these cities.

[jice]

That was the point I was trying to get across on why you see these type places going up in Dubai and Miami, when otherwise, there really isn't any reason for high residential towers to exist in these cities.

I think you're right. IMO, if Nashville didnt have this type of interest in the residential market... Sig T would not be a reality. There would still be condo demand to fulfill... but nothing on the scale of Sig T. We are lucky, in that sense, I suppose.

[DruidCity]

The banks are going to want a certain percentage before they will be willing to finance it.

Although it varies some by project and location, I know that 75% is pretty standard in one market.

[jdavidf]

The problem with really tall residential towers and why you don't see more of them in really large cities is that for day to day living they are a b**ch to live in. Once you are above 25 floors access starts to become an issue due to limitations on elevator technology and developers wanting to reduce costs in that area. Things such as going downstairs to walk the dog or to get something to eat become cumbersome when you have to wait and deal with access. Another problem is that on the higher floors, say above 50, you can't really provide big open balconies (though it has been done) due to saftey issues with air pressure and high winds. I believe the current worlds tallest, the John Hancock building in Chicago has windows that just crack open. It makes people claustrophobic.

This is something that's been flying around in my head, too... I'm really excited about ST going up and we've even talked about the possibility of sellling our place and moving there.. but then there's the really abrupt change to our lifestyle - like you said, just walking the dog would be an ordeal. And a tiny balcony who-knows-how-many-stories in the air may not give enough access to fresh air. And, while we're smokers, we don't smoke in the house - so there's another thing..

A move to the Sig isn't something I'd want to just jump into without a lot of thought.. but still, I'm as thrilled as I can be that it's going to be built. I think it's a great thing - even if we're not on top for very long.

David

[bnaflyer]

I think you're right. IMO, if Nashville didnt have this type of interest in the residential market... Sig T would not be a reality. There would still be condo demand to fulfill... but nothing on the scale of Sig T. We are lucky, in that sense, I suppose.

The problem is that Nashville is not Las Vegas, Miami or Dubai. It's a great city (where I've lived for much of my life, by choice), but it can't support 65 story condos based on out of town owners. And markets built on such investor-owned properties are probably about to collapse, which will make finding financing in other markets for that kind of project very difficult. For Signature to be a success, there has to be an existing demand of people living in or around Nashville to buy a home in a 65 story tower. I'm not sure the market is there.

I also think we may be overstating Tony G's ability to put this deal together. Make no mistake about it, the Viridian is a Novare project. If you go to Atlanta there are a number of Novare buildings just like Virdian. They basically came to Nashville and joined forces with Tony (whom I assume controlled the land?), but the financial backing and the design came from Atlanta. Tony's only signficant high rise project has been the Cumberland, which is closer in scale to my house than to Signature Tower. I am skeptical that he has the ability to pull this off. (But I might be wrong--every developer who moves to the big leagues has a first big project, after all)

One question I should have added to my list also relates to certain construction economies. I don't pretend to be an expert on the subject (and no, I'm not a real estate developer!), but in high rise construction there are certain diminishing economies as you build higher. In other words, at a certain point, it becomes more expensive per square foot. This is one of the reasons that you don't see residential buildings of this size. Also, as someone else mentioned, the hassles of living on the 60th floor are considerable. I have worked in tall buildings for almost 20 years and even in the office environment it can be a problem.

But thanks for all the comments--I hope I'm wrong in my skepticism...and someone needs to play devil's advocate!

[Dale]

I suspect there's a lot of math tied up in it. If the math works, Sig's going up.

[Skyscrapergeek]

And a tiny balcony who-knows-how-many-stories in the air may not give enough access to fresh air. And, while we're smokers, we don't smoke in the house - so there's another thing..

A move to the Sig isn't something I'd want to just jump into without a lot of thought..

"Not enough fresh air" "we're smokers" "the Sig" Sorry David, I'm not making fun, those phrases just jumped out at me and seemed funny strung together. Hmmm, this gives me an idea for photoshop.

Good points though.