Signature: Really Feasible?

[Jeeper12]

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.

Pre-sales can work very well to demonstrate that there's demand for a condo but I wouldn't characterize them as "guaranteed profit", especially considering how nominal some the deposits are for some Nashville projects. $5,000 deposits, however binding the contract may be, don't obligate a buyer to close if the market (interest rates, economy,etc) moves against them during the predevelopment/construction period. Without a more significant deposit the developer (and lender) is really still at risk right up until the completion/closing of the unit. Larger deposits (20-30%) have served developers in (now) overheated markets like FL, NV, CA very well by forcing buyers (speculators/investors mostly) to show up for a closing or risk losing a deposit that is sufficent enough for the developer/lender to absorb a 5-10% correction in the market.

[city watcher]

Welcome to the planet tistic!!

[DruidCity]

Jeeper12, good point. A lot of the projects I see advertised on the coast have 20% deposit.

[jdavidf]

"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.

Yeah yeah - I know... of course, this might just be the straw that broke the smoking camel's back! Move to the 60th floor of a highrise and quit smoking! Better than a patch

[Rural King]

Really great informative post Jeeper12. I'm not sure if I have welcomed you yet or not, if not welcome the forum!

[hayesmw]

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?

In looking at both Tony's and Novare's web sites, it does not appear that Novare is involved. This does not appear to fit their mold.

[urbanbna]

after reading that, i got a strange sense of dejavu. all these questions have been discussed already and answered. this seems like a thread that just put all those questions in one space. to me this is a good thread for people to read who dont think the sig tower will be built, so they can realize that it is very "feasible" and it would not have been proposed if the need wasnt there.

[Jeeper12]

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

Are we really looking to Dubai or any other oil soaked country to justify demand for a project in Nashville ? There are currently all kinds of crazy over-the-top ($70 a barrel) projects being built throughout the middle east that wouldn't make sense in any American city let alone Nashville.

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.

First, as a minor point Alex Palmer has yet to pull off anything on his site (see Richard Lawson's Friday article). Perhaps he will but it's a little early to speak of it as historical precedent for anything. BNA made a fair point in noting that Viridian and Encore (not selling or under construction yet) are basically derivatives of Novare's vast portfolio of successful development. Other than the Cumberland, Tony has no experience that I'm aware of handling all aspects of a development from soup to nuts. That point will not (or has not) been lost on prospective lenders, partners and (perhaps) purchasers.

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.

I hope you're right about this but I think reasonable people can disagree on this point. I think it's more fair to say that there's currently a red hot investor market in Nashville (see my earlier post regarding modest deposits). Proof of a red hot "owner market" won't really be possible to judge until we see closings on a large scale.

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

Not sure this is all that relavent but there are certainly many residential buildings in major markets throughtout the world that stand as tall as their commercial peers.

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.

I wouldn't begin to offer a proforma critique of Tony's project but I do think it is fair to point out that most of the markets that have residential buildings as tall as ST command $/SF pricing in the range of $2-3,000/SF which I presume reflects, among other things, the extreme premiums associated with super high-rise construction.

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.

Ah yes, but watch the interest rates Daniel san. A continued climb in rates along with a continued escalation of Nashville prices could seriously impact the market.

[Dale]

Ah yes, but watch the interest rates Daniel san. A continued climb in rates along with a continued escalation of Nashville prices could seriously impact the market.

True, although we've been wringing our hands over the interest rate scare now for more than a year.

[Jeeper12]

True, although we've been wringing our hands over the interest rate scare now for more than a year.

I'm still figuring out the post technology....Most of my reply to Hankster ended up embedded above what appeared to be my short reply...sorry about that.

[Jeeper12]

Let me take a shot at these questions:

See my follow up to Hankster's post underlined below. Sorry about the re-post but I think my small brain has finally figured out how to respond:

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

Are we really looking to Dubai or any other oil soaked country to justify demand for a project in Nashville ? There are currently all kinds of crazy over-the-top ($70 a barrel) projects being built throughout the middle east that wouldn't make sense in any American city let alone Nashville.

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.

First, as a minor point Alex Palmer has yet to pull off anything on his site (see Richard Lawson's Friday article). Perhaps he will but it's a little early to speak of it as historical precedent for anything. BNA made a fair point in noting that Viridian and Encore (not selling or under construction yet) are basically derivatives of Novare's vast portfolio of successful development. Other than the Cumberland, Tony has no experience that I'm aware of handling all aspects of a development from soup to nuts. That point will not (or has not) been lost on prospective lenders, partners and (perhaps) purchasers.

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.

I hope you're right about this but I think reasonable people can disagree on this point. I think it's more fair to say that there's currently a red hot investor market in Nashville (see my earlier post regarding modest deposits). Proof of a red hot "owner market" won't really be possible to judge until we see closings on a large scale.

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

Not sure this is all that relavent but there are certainly many residential buildings in major markets throughtout the world that stand as tall as their commercial peers.

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.

I wouldn't begin to offer a proforma critique of Tony's project but I do think it is fair to point out that most of the markets that have residential buildings as tall as ST command $/SF pricing in the range of $2-3,000/SF which I presume reflects, among other things, the extreme premiums associated with super high-rise construction.

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.

Ah yes, but watch the interest rates Daniel san. A continued climb in rates along with a continued escalation of Nashville prices could seriously impact the market.

[Lexy]

Let it be known now that Novare is in no way involved with this project. Not one penny of this projects money will go toward a Novare contract. Simply because there will be no contract with them on this.

[smeagolsfree]

I had talked about this a long time ago when the Signature was changed into a condo only tower and noted to several people that Novares name was no where on the partnership and this was an exclusive Tony G. project. The man is a financing genius to pull this off too never to have done anything like on this scale before. Donald Trump would be proud.

[bnaflyer]

I had talked about this a long time ago when the Signature was changed into a condo only tower and noted to several people that Novares name was no where on the partnership and this was an exclusive Tony G. project. The man is a financing genius to pull this off too never to have done anything like on this scale before. Donald Trump would be proud.

He hasn't pulled anything off yet. Unless I've missed something, there is no firm financing committment for this project. I think people on this forum need to be a little more skeptical of pronouncements by developers. They are, after all, salesmen first and foremost. For example, everyone (including myself) was excited by the West End Summit anouncement, but apparently that deal is not at all "firm" and remains questionable. Developers like to create hype and buzz while leaving the details--such as where hundreds of millions of dollars will come from--for a later date. If Novare was involved, this project would be more likely to happen, since, unlike Tony, Novare has an extensive and successful development track record. (It doesn't surprise me that they aren't involved in Signature, because it doesn't fit their typical development profile.)

[sleepy]

The Sig Tower will get built if bankers and the developer think they can make money on it. If they don't think so, it won't.

That's my genius statement of the day.

[queensguy06]

You know, you could argue whether or not this building will actually be built in its current design, but to be honest the only way I will know 100% for sure is when the shovel is in the ground. having said that, a lot can change in 7 months - how many towers across the U.S. have been proposed in the past only to fizzle into a much scaled back design, or no design at all? Someone mentioned above, Tony is great at what he does, and that's sell a product. But the announcement a couple of Saturday's ago was nothing more than an elaborate proposal for a new tower. With the lack of funding, lack of sales, and even lack of experience Tony has right now, I am still on the skeptical side of this truly being a 1047' residential tower.

[it's just dave]

We all know that queenie, but it's fun to dream. Probably a better chance than PowerBall, so in the meantime, we'll still look to the sky and visualize what we hope will be.

If it doesn't get built, only a few of us will jump in the river, but to those of us who don't, we'll still be living in one of the south's great up and coming cities, and having lots of fun watching it grow...with or without Siggie.

Long live Siggie! I have some magic beans, think I'll go plant 'em just a little extra push.

[Dale]

I'm of the persuasion that tossing out cautionary phrases like, "We won't know for sure until the shovel hits the ground", does little to remove the sting of a cancelled project in any case.

So, why not wax optimistic ? It won't hurt any more in the end.

[Rural King]

"Siggie"......I like it! I like it a lot.

We can't claim Sig till its built. Is it viable? Sure. Is it a sure thing that simply because its viable it will happen? Nope.

Until it gets built or cancelled it will still be lots of fun to speculate about, so why not enjoy the speculation until a final determination of its future is finalized.

[Justiceham]

We all know that queenie, but it's fun to dream. Probably a better chance than PowerBall, so in the meantime, we'll still look to the sky and visualize what we hope will be.

If it doesn't get built, only a few of us will jump in the river, but to those of us who don't, we'll still be living in one of the south's great up and coming cities, and having lots of fun watching it grow...with or without Siggie.

Long live Siggie! I have some magic beans, think I'll go plant 'em just a little extra push.

I love that nickname "Siggie." lol

[Jeeper12]

You know, you could argue whether or not this building will actually be built in its current design, but to be honest the only way I will know 100% for sure is when the shovel is in the ground. having said that, a lot can change in 7 months - how many towers across the U.S. have been proposed in the past only to fizzle into a much scaled back design, or no design at all? Someone mentioned above, Tony is great at what he does, and that's sell a product. But the announcement a couple of Saturday's ago was nothing more than an elaborate proposal for a new tower. With the lack of funding, lack of sales, and even lack of experience Tony has right now, I am still on the skeptical side of this truly being a 1047' residential tower.

I ran across an article today about a rumored Trump project that seemed relevant to some of the discussion about ST. Given the vast experience of Trump and Wood Partners I wonder why they aren't going higher. Also, interesting to note that little 'ole Nashville (thanks to Tony G) is virtually tied with Atlanta for the record land price/sf of $197. With 3 million more people one would think that land prices in Atlanta would be much higher. Maybe it's time for Nashville to turn off the TIF faucet.

http://www.globest.com/news/537_537/atlanta/145508-1.html

[tomcampion]

Just posted in the Tennessean that Tony has withdrawn his request for TIF:

http://www.tennessean.com/apps/pbcs.dll/ar...510013/-1/RSS05

I guess this means no 'affordable housing' units in the Signature.

[Hankster]

Just posted in the Tennessean that Tony has withdrawn his request for TIF:

http://www.tennessean.com/apps/pbcs.dll/ar...510013/-1/RSS05

I guess this means no 'affordable housing' units in the Signature.

Very interesting news. This is something I've wondered about. Now that the tower has grown to supertall status, I figured that the "affordable housing" units would no longer be affordable to build, even with the TIF financing. I think this adds a concern to his ability to presell the number units required to get financing. My guess that entry level at Signature will be at least $300,000. I think Tony has decided to go after the more affluent buyer with this project as reflected by his reduction in condo units to only 400. This indicates that he's building the larger style units. I believe I remember reading than they would average in the neighborhood of 1,600 Sq Ft. each. Many of the new properties being sold in Midtown, etc are going for $300 per suqare foot, and these are not "Supertall" structures. The average unit in Signature Tower will easily hit $500,000. Remember, the Adelicia had absolutely no trouble at all selling units at an average price of over $600,000.

[barakat]

Did Tony get TIF money for Encore? Have units started pre-selling?

Just posted in the Tennessean that Tony has withdrawn his request for TIF:

http://www.tennessean.com/apps/pbcs.dll/ar...510013/-1/RSS05

I guess this means no 'affordable housing' units in the Signature.

[Skyscrapergeek]

This is most definitely interesting. At one time Tony said there would be no Signature Tower without TIF. I'm very glad to see he apparently doesn't need it. I hope this means that demand is higher than expected. The article asserts that it somehow gets Tony out from under the stamp of approval of MDHA. Is that accurate? Don't they still have to OK the design. I sure hope not. I love this being 100% private money. Go Tony!