Sterling Bullish on Nashville

NASHVILLE-Add Sterling American Property Inc. to the list of companies making inroads here. Starting with its buy of SunTrust Bank Building in June right up to its latest acquisition the CNA Building, the New York-based firm clearly likes what it sees in the city.

“It has good fundamentals, modern industries and solid economics. And its education base is one of the top in the nation,” explains Jeff Smith, Sterling American Property vice president of acquisitions. In addition, he notes that the city is investing in its infrastructure and the government has been preparing a better vision of Nashville over the past few years.

One strong draw is the entertainment opportunities found around the city. “It’s an entertainment capital, from country to Christian rock to folk music,” Smith says. “Entertainment is a catalyst behind this city. It’s really the replacement for the Motor City.”

But he points out that the city also offers more than music; a AAA baseball team is moving into a new ballpark Downtown on the river. In addition, it is home to about six universities. “It’s like the Boston of the Southeast,” Smith adds.

One notable company joining Sterling on the list high on the market is Nissan, which announced in November that would be relocating its 1,300-employee suburban Los Angels headquarters to a new facility in the Nashville submarket of Franklin. With company relocations, traditionally 25% of the work force moves with the headquarters, according to Smith. “However with Nissan I believe 50% [of the employees] have decided to move from Southern California,” he adds.

Adding to the city’s appeal is the convergence of several interstates, Smith notes.

“Nissan is moving its headquarters to Nashville. A lot of publications rank Nashville as a top market. This is really putting Nashville on the map,” explains Robert Bergman, senior vice president of asset manager. “It’s an interesting submarket.”With an office vacancy rate of approximately 11% and a slew of companies looking for space, Sterling remains bullish on the market, he adds. “A lot of corporate relocations and expansions are feeding into other companies moving here,” Bergman says. However, as bullish as the company is on Nashville, he does acknowledge the firm still needs to keep an eye on the national economy.

Sterling’s activity in Nashville increased by one recently with the acquisition of the CNA Building for $18.25 million. The 235,000-sf building is in the Airport submarket of Davidson County. It was developed in 1984-85 by CNA Insurance for its own operations. The property at 100 CNA Dr., which is visible from Interstate 40 East, first traded two years ago to Valley Forge Life Insurance Co., which decided to sell the building after a major outsourcing.

Now, Sterling comes armed with a strategy for lease up. The property is physically 25% occupied, but one tenant is moving out leaving the office building 15% leased, Smith explains. To date, an art institute has signed for 60,000 sf, or approximately 25% of the site, and plans to move in this fall. In addition, there have been other bites. “Others are lining up for large spaces that would bring significant occupancy immediately,” he adds.

“That building has been owner-occupied for so long that it was never really marketed,” Bergman explains. And that marketing is in the hands of a solid team, he adds, led by Rob Lowe and Whit McCrary of Colliers Turley Martin Tucker. The team will also manage the property.

“Waking it up and bringing it to the community will help [fill the property] but it’s the first step,” Bergman says. “More important is the demand. We have to roll up our sleeves on leasing and tenants will land.”

In addition to the CNA Building, which will be rebranded as Commerce Center East, Sterling has also acquired the 250,000-sf SunTrust Bank Building, with a local investment group led by Lowe, and the 327-unit Brentridge Apartments in Antioch, with Dallas-based partners. “We’ve had positive experiences, prior to this latest acquisition and after,” Bergman adds.