Nashville, Tennessee. Project Type: Residential/Mixed Use. Volume 38 Number 16. July September Case Number: C PROJECT TYPE

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1 Click images to view full size Viridian Nashville, Tennessee Project Type: Residential/Mixed Use Volume 38 Number 16 July September 2008 Case Number: C PROJECT TYPE When Viridian a 31-story, 305-unit condominium tower was completed in October 2006, it provided some of the first residential ownership opportunities in downtown Nashville, Tennessee. Located on Church Street in the heart of the central business district, Viridian contains both affordable and market-rate units as well as the city s first downtown grocery store in 40 years. Comprising 222,514 square feet (20,672 sq m) of parking and retail space, the base of the tower nearly covers the entire 0.55-acre (0.22-ha) site and was built within inches of the property lines and existing structures on both sides. The project clearly met a market need there were fewer than a dozen condominium units in downtown Nashville when sales began and was fully sold out nine months before it was completed. LOCATION Central City SITE SIZE 0.55 acre/0.22 hectare LAND USES Condominiums, Multifamily For-Sale Housing, Grocery Store, High-Rise Tower KEYWORDS/SPECIAL FEATURES High-Rise Building Urban Infill Mixed Housing

2 Mixed Use Public/Private Partnership WEB SITE PROJECT ADDRESS 415 Church Street Nashville, Tennessee DEVELOPERS Giarratana Development, LLC Nashville, Tennessee Novare Group Atlanta, Georgia ARCHITECT AND INTERIOR DESIGNER Smallwood, Reynolds, Stewart, Stewart & Associates, Inc. Atlanta, Georgia STRUCTURAL ENGINEER Walter P. Moore & Associates Atlanta, Georgia GENERAL CONTRACTOR R.J. Griffin and Company Atlanta, Georgia PUBLIC PARTNER (Tax Increment Financing) Metropolitan Development and Housing Agency (MDHA) Nashville, Tennessee

3 GENERAL DESCRIPTION The result of a collaboration between locally based Giarratana Development, LLC, and Atlanta-based Novare Group, Viridian is a 31-story concrete and blue-green glass condominium tower that stands in the heart of Nashville s central business district (CBD). Originally priced between $130,000 and $400,000 with penthouses selling for more than $1 million the 305 condominiums feature floor-to-ceiling windows, ten-foot (3-m) ceilings, and one- and two-bedroom floor plans that average approximately 875 square feet (81 sq m). The building s first floor contains a grocery store, another smaller retail space, a lobby, a concierge desk (staffed 24 hours a day), and a mailroom. Part of the ground floor and the eight floors above it contain 430 parking spaces; the lowest residential units are located on the tenth floor, and most offer views of the downtown skyline and/or the Cumberland River. The 31st floor features a club room, an exercise facility, and an outdoor rooftop pool. The project, which embodies smart growth principles, has helped generate demand that has led to the development of several additional high-rise residential projects in and around downtown Nashville. THE SITE As mentioned above, Viridian is located in the heart of Nashville s CBD, within blocks of major employment centers, including the Fifth Third Tower, SunTrust Plaza, the U.S. Bank Tower, and the landmark AT&T Building (known also as the Batman Building ). It stands within walking distance of many of the city s entertainment, cultural, and sports venues, including Ryman Auditorium, the Schermerhorn Symphony Center, LP Field (where the National Football League s Tennessee Titans play), and the Sommet Center (home to the National Hockey League s Nashville Predators). The small (100-by-235-foot/31-by-72-meter) urban infill site lies on the south side of Church Street, between Fourth and Fifth avenues, with an alley and a parking deck behind it. The site was formerly a parking lot that had been operated by several different companies as a valet parking facility, and was sold to Giarratana Development for the development of Viridian in December The tower is situated between the landmark 31-story Life & Casualty (L&C) Tower an icon on the Nashville skyline that was once the tallest edifice in the South and the historic Cohen Building, a three-story structure built in Giarratana also purchased the Cohen Building, which leaned about a foot (0.3 m) into the Viridian site. Although the owner of the Cohen Building originally wanted to sell it for a price based on the value of the land, Giarratana agreed to preserve and restore the landmark in exchange for a lower purchase price. Giarratana ultimately sold the Cohen Building, then leased it back to use as a construction office and sales center for Viridian. The fourth building on the Church Street block the Egyptian Revival style Downtown Presbyterian Church, a historic structure dating to 1849 is next door to the Cohen Building and less than 50 feet (15 m) from Viridian. This distance became relevant when the grocery operator needed to obtain a permit to sell alcohol. PLANNING Viridian s genesis can be traced to both a 1993 zoning change and the development of the Cumberland, an apartment tower that broke ground in 1996 but only after 68 banks declined to finance it. From 1963 until 1993, residential uses were prohibited within the commercial core zone district (the historic CBD). Although Nashville s population grew by 60,000 people between 1990 and 2000, virtually no one lived downtown until Giarratana Development built the 24-story, 289-unit Cumberland, which opened in March At the time, it was believed that there was no market for housing in downtown Nashville. It took a while to attract residents to downtown; lease-up at the Cumberland took 18 months and, after that process, Tony Giarratana (whose background is in office leasing and development) had no interest in developing another residential project.

4 Several years later, however, as the Cumberland s tenants began to turn over, Giarratana decided to conduct exit interviews with each departing resident. After hundreds of interviews, he determined that the primary reason people were leaving was to purchase their own homes and that many of these prospective homebuyers would have chosen to remain downtown if ownership opportunities had been available there. When Giarratana asked departing tenants what features they wanted in a new residence, they indicated a preference for larger (floor-toceiling rather than punched) windows, higher (ten-foot [3.04-m] rather than eight-foot [2.4-m]) ceilings, higherend kitchens and bathrooms, a more elaborate fitness center and club room, a swimming pool, and a place to shop for groceries. Just as important, they told him what they didn t value larger units, enclosed kitchens, powder rooms, or pantries. The concept for Viridian grew out of those interviews. Realizing that what former residents were describing was similar to Metropolis a condominium tower built above a garage and retail podium in midtown Atlanta that was completed in 2002 Giarratana approached architect Robert Riddell of Atlanta-based Smallwood, Reynolds, Stewart, Stewart & Associates which had designed Metropolis to discuss his ideas for the Nashville project. In October 2003, Tom Raney of R.J. Griffin, the general contractor for Metropolis, introduced Giarratana to Novare CEO Jim Borders so that Giarratana could request a peer review of his proposed project. Borders who had long wanted to develop a project outside of Atlanta was impressed with the plans and pro forma, and asked to become a partner and codeveloper. A change to the building code also helped make Viridian feasible. The Cumberland was built under the Southern Building Code, which limited the percentage of open window space a building could contain and required greater setbacks. In 2005, the Tennessee General Assembly passed a law that enabled state and local governments to use the International Building Code, which required lesser setbacks and allowed up to 75 percent of a building s exterior to be glass. DESIGN AND MARKETING Shoehorning Viridian into such a tight site was a major design challenge. The first nine floors, which contain parking and retail space, have no windows on the east and west sides. Above the ninth floor, the building steps back 15 feet (4.6 m) on the east and west sides, allowing windows and balconies to be included on all four sides. All of the residential floors are notched at the corners, with a step-out at the building s front facade, allowing designers to fit two units into each front corner, for a total of six possible corner units per floor. A corridor runs down the center of the building, and the remaining units open off this corridor, facing either east or west. The original design thus called for a total of 16 units per floor. Viridian initially was targeted to young professionals: 20- and 30-something, highly educated, highly compensated professionals and first-time homebuyers, both singles and childless couples. Eighty percent of the condominiums were to be one-bedroom units, and only 20 percent were to have two bedrooms. But something interesting happened during the marketing process: empty nesters showed up. Although the building s units were the ideal size for the target market, the empty nesters were looking for larger spaces: even the planned 1,190-square-foot (110.6-sq-m) two-bedroom dwellings were too small for them. The marketing team initially saw these visitors as an anomaly; clearly, they believed, empty nesters were not going to be buying condos in downtown Nashville. However, after a month or so, when about 20 percent of the sales center s visitors turned out to be empty nester couples, the development team decided to rethink its target market and the project design. They took the middle two units on the front of each floor off the market, and worked to design a larger, 1,500-square-foot (139-sq-m), two-bedroom unit out of space that had been designed for two 750-square-foot (70-sq-m) units. After much struggle on the part of the architects, engineers, and salespeople, they still were unable to figure out how to make it work as planned, with the front balconies set into the building (which was designed to be built out to the sidewalk). One member of the sales team eventually suggested pushing the balconies out over the sidewalk, which would create enough additional interior space to accommodate a larger living/dining/kitchen area. Giarratana obtained a permanent encroachment permit from the city to allow the balconies on the front of Viridian to extend over the sidewalk, which enabled designers to fit two bedrooms (a master suite and a guest room) and a

5 large living/dining/kitchen area into the reconfigured unit with windows on three sides and a V-shaped balcony that extends over the front of the building. This unit was so popular with empty nesters that it sold out in approximately two months. All of the condominiums at Viridian feature ten-foot-high (3-m-high) ceilings, exposed concrete columns and ceilings, granite countertops, stainless steel appliances, cherry or maple cabinets, bathrooms with ceramic tile floors, and at least one angled balcony. Units on the tenth floor, which sit directly atop the parking base, have large terraces separated by privacy walls. Each unit is prewired for surround sound and satellite television and has access to high-speed Internet service. Six penthouse units on the 30th floor include two two-bedroom units with two bathrooms and four three-bedroom condos with 3.5 bathrooms, two of which contain circular staircases leading to an upper level. Four east-facing units on each floor face a narrow (roughly 95-foot/29-meter) section of the L&C tower. These units, which have the poorest views (yet still offer views of the river from their balconies and/or living rooms), were designated as affordable and sold out quite quickly. Other than the views and their slightly smaller size, the affordable units, which are located on floors ten through 29, are no different from the other condos; they have the same design features and finish level as all of Viridian s other units. The inclusion of affordable units has made it possible for lower- and middle-income workers including musicians, police officers, teachers, and municipal employees to become homeowners in the city where they work. Purchasers of the affordable units had to meet income restrictions; they could earn no more than 80 percent of the area median income (AMI) for a two-person household. The Metropolitan Development and Housing Agency (MDHA) reviewed financial statements for all prospective buyers and each of the contracts for the affordable units. Those who purchased affordable units may rent them only to tenants who meet the same income restrictions as purchasers. They are also restricted as to how they can resell their units within the first five years: if they sell to someone who does not meet the income restrictions, they must pay a penalty that starts at $50,000 in the first year and drops to $10,000 in the fifth year. After five years, they are free to sell to anyone without penalty. The grocery store design also presented challenges, since an urban model is much smaller than a typical suburban supermarket and has to meet the needs of downtown residents. The development team visited and studied smaller grocers in other cities to determine which features and products to offer at Viridian. The design of the H.G. Hill Urban Market blends an old-fashioned look with modern features. The market has 30- foot-high (9-m-high) ceilings with large columns and metal fixtures. A rolling ladder along one wall allows stockers and shoppers to reach products on high shelves. (The idea for the ladder came from the Modica Market at Seaside, Florida.) The market, which can be entered both from the street and from Viridian s public lobby, offers a wide array of freshly prepared foods that are designed to appeal to busy professionals. Accommodating beverage sales also created a design challenge. H.G. Hills (which operates more than a dozen suburban supermarkets in Nashville) insisted that it needed to be able to sell beer in order to operate a financially successful grocery on the site, yet a city zoning code prohibits the sale of beer within 100 feet (30.5 m) of a church. Modifying the planned locations of the store s entrances and placing the beer display in the corner of the market farthest from the entrances put the store within inches of compliance. The grocer received permission to sell beer just one hour before the supermarket s grand opening in February FINANCING As the first condominium project in downtown Nashville, Viridian initially was seen as financially risky. After nine months of negotiations, however, the MDHA agreed to provide $6 million in tax increment financing (TIF) through First Bank and Pinnacle Bank in exchange for the developers setting aside 20 percent of the units (61 onebedroom condominiums) as affordable.

6 Viridian was developed as a 50/50 partnership between Giarratana Development and the Novare Group; the latter provided $3.5 million in equity. Both developers deferred their development fees and pledged the TIF to make up the remainder of the project equity. The project used $53 million in debt financing: primary debt financing came from Wachovia, which provided approximately 40 percent of the total ($20 million); and three additional banks (Regions Bank, Compass Bank, and LaSalle Bank) each lent approximately $11 million. Under the terms of the loan, the development team needed to presell approximately two-thirds of the condominiums (about 200 units) before construction commenced. Presales began in March 2004, and by October that number had been reached, allowing ground breaking to take place in November DEVELOPMENT AND CONSTRUCTION PROCESS Giarratana and Novare s original agreement called for two project managers one to be assigned by each company who would work cooperatively, but they eventually agreed to rely on a single manager Frank Reese of Novare who reported to both companies on a regular basis. The project s primary construction challenge involved fitting Viridian into such a constrained site without damaging the adjacent structures. The base of the building is roughly six inches (15 cm) from its neighbors on each side. Contractors and subcontractors found the site frighteningly small and have described Viridian as one of the most difficult buildings they ve ever worked on. There was little space to store materials and supplies on site, so they had to be brought in as needed and moved from one area to another as construction proceeded. Access also was an issue, since the site was essentially boxed in on all sides. Contractors were not able to access the site from Church Street a major city street so the only access was from the 15-foot (4.6-m) alley behind the site. Deliveries had to be carefully timed, since they were limited to certain hours. Because the parking levels are only inches from structures on either side, a luffing crane with a 446-foot-long (136-m-long) boom that can be raised and lowered one of only four such tower cranes in the United States, and the first to be used in Nashville had to be brought in to ferry materials essentially straight up, over the L&C Tower, and down, without disturbing the existing structure. The subsurface was primarily rock, but blasting could not be used during the excavation for fear of damaging the historic Cohen Building. Instead, workers had to chip and drill away at the subsurface. A monitoring system was installed in the Cohen Building to minimize the chances of its suffering structural damage during the construction process. The system included both vibration and inclination monitors and was tied into developers and contractors computers and cellular phones. All members of the construction team worked closely together along with municipal officials and neighbors to meet the 23-month construction schedule. As Viridian was being constructed, the city was in the process of completing an $8 million upgrade of the streetscape along Church Street, and municipal workers were able to revise their plans for the street and sidewalk in the field in order to improve the entrance to the grocery store by adjusting the grade to avoid the need for steps and a railing. The city s improvements included transforming Church Street from a one-way to a two-way street. An agreement between the development team and the Downtown Presbyterian Church allowed construction crews to use the church s small parking area for the erection of the tower crane and buck hoist (which moved materials and personnel up and down) in exchange for certain concessions, including temporary parking space on a lot that Giarratana owned nearby and an agreement to resurface the church s parking lot after construction was completed. The developers also agreed to provide a permanent canvas on the side of the building at the base of Viridian facing the church, behind the diminutive Cohen Building on which the house of worship could install a mural. Viridian is the first residential tower in Nashville to use the Metro Nashville District Energy System (DES), which circulates chilled water to more than 40 buildings in and around downtown Nashville from a plant in the nearby

7 South-of-Broadway (SoBro) district. Because the agreement with Metro Nashville DES was negotiated after the building had been designed but before construction had begun it was relatively expensive to retrofit the design. Metro Nashville DES contributed $250,000 toward the approximately $400,000 cost of accommodating the system in the building design. Using district cooling eliminated the need for an on-site cooling system and reduces the building s energy consumption and operating costs. It is competitively priced; residents pay about 10 percent less than they would with a standard on-site cooling system. MANAGEMENT The developers deal with H.G. Hill Urban Market gave the grocer 5,140 square feet (477 sq m) rent free for five years, as well as several thousand dollars to build out that space. Although giving away such valuable retail space was a risky decision, the grocery proved critically important to Viridian s success. The project was announced on January 15, 2004, and the local newspaper initially reported the story as First Downtown Grocery to Be Built since 1967; Condos to Be Built on Top. As Giarratana s exit interviews with departing Cumberland apartment residents had indicated, the grocery store was essential to attracting prospective homebuyers to a downtown residential project. The second, smaller retail space has not been built out and remains vacant as of September 2008, although several prospective tenants (including an ice cream parlor, a coffee shop, a hairdresser, and a masseuse) have expressed interest. A concierge staffs a desk in a secured lobby, which residents enter by using their keycards. The lobby also features three plasma televisions and a seating area; residents pick up their mail from a mailroom adjacent to the lobby. All elevators, as well as the elevator lobby on each floor, contain flat-screen monitors that provide community updates and information including a message welcoming residents by name when they swipe their keycard in the elevator to access their floor or the rooftop terrace. EXPERIENCE GAINED Imitation is the sincerest form of flattery. Giarratana not only copied the concept of Metropolis, which he saw as the perfect fit as well as the highest and best use for the Viridian site, but he also hired its architect and general contractor, and entered into a partnership with its developer, Novare. Their partnership has been so successful that Giarratana and Novare have gone on to collaborate on nine additional projects. If it works once, do it again. Giarratana and Novare s second urban residential tower Encore, a 333-unit condominium project located just a few blocks from Viridian in the aforementioned SoBro neighborhood is essentially the same product with subtle differences, including 22,000 square feet (2,044 sq m) of retail space wrapped around its base, additional residences, and a seventh-floor terrace-level pool, club room, and gathering areas. That 20-story project, which was completed ahead of schedule in early 2008, also has been a success. What works in one city may not work in another. The original design for Viridian contained one type of unit that was very popular in Atlanta, yet proved not to be a good fit for the Nashville market. The model featured a single bedroom set in the middle of the unit, with cutouts to offer views through the living area. Dubbed the Austin Powers model, it proved to be too edgy for the Nashville crowd, particularly among parents who were guaranteeing loans for young adult prospective purchasers, and thus was a complete nonstarter in Nashville. Although Viridian had been planned with four of these units per floor, before construction began the developers decided to include only one. Their next residential tower, Encore, eliminated this model entirely. It s all about the view. At the Cumberland apartment building, Giarratana offered models with both traditional (closed) and contemporary (open) kitchen layouts. By the time construction cranes had reached the fifth floor, the marketing staff realized that nobody was interested in the units with closed kitchens. Views from every room and

8 through one room to another make smaller units feel larger, and high-rise residents want unobstructed views from everywhere in their units, including the kitchens. Expect speculation. More than a dozen Viridian condos were resold within three months of the project s completion in October 2006, indicating intense investor interest. Many of these investors made significant profits, with increases in 2006 alone ranging from 9 percent to more than 49 percent. Downtown infill projects can be profitable. Although a project like Viridian clearly would have been much less expensive to build on a suburban or an exurban greenfield site, Viridian is a financial success. The developers were able to achieve their pro forma targets despite three constraints: one, they were required to presell two-thirds of the units before beginning construction; two, their contracts specified that purchase prices of executed contracts could not be adjusted for rises in project costs; and three, the contracts were written during a period of nearly unprecedented increases in construction pricing. PROJECT DATA LAND USE INFORMATION Site area (acres/hectares): 0.55/0.22 Percentage complete: 100 Gross density (units per acre/hectare): 555/1,386 Number of off-street parking spaces: 442 LAND USE PLAN Use Acres/Hectares Percentage of Site Buildings 0.55/ Landscaping/open space (rooftop pool deck) 0.18/0.07 Total 0.55/ RESIDENTIAL INFORMATION Unit Type Number Area (Square Feet/Square Meters) Percentage Sold Sales Price One bedroom (affordable) / $130,700 $140,700 One bedroom (market rate) / $200,000 $265,000 Two bedroom (market rate) ,470/ $270,000 $450,000 Penthouse 6 1,237 2,672/ $500,000 $1,050,000 RETAIL INFORMATION Tenant Classification Number of Stores Total Gross Leasable Area (Square Feet/Square Meters) Grocery 1 5,140/478 Other 1 435/40 Total 2 5,575/518 DEVELOPMENT COST INFORMATION Site Acquisition Cost: $4,575,000 Site Improvement Costs: $645,133 Paving/curbs/sidewalks and landscaping/irrigation: $323,461 Demolition: $208,455 Relocation: $33,609

9 Environmental: $29,608 Public improvements: $50,000 Construction Costs: $49,323,000 (Includes site improvement costs) Retail: $700,000 Residential: $48,623,000 Soft Costs: $11,602,000 Architecture and engineering: $2,055,650 Project management: $3,270,000 Marketing: $949,350 Legal/accounting: $275,000 Taxes/insurance: $555,000 Construction interest and fees: $4,022,500 Other: $474,500 Total Development Cost: $65,500,000 Total Development Cost at Completion: $67,100,000 DEVELOPMENT SCHEDULE Planning started: December 2002 Site purchased: December 2003 Sales/leasing started: March 2004 Construction started: October 2004 Project completed: October 2006 DRIVING DIRECTIONS From Nashville International Airport: Take I-40 West (toward Nashville) for 7.6 miles (12.2 km). Take exit 209. Turn right onto Church Street and go 0.7 mile (1.1 km). Viridian is located on the right at 415 Church Street. Driving time: 15 minutes in nonpeak traffic. Julie D. Stern, report author Jason Scully, editor, Development Case Studies David James Rose, copy editor Joanne Nanez, online production manager Ted Thoerig, editorial associate This Development Case Study is intended to serve as a resource for subscribers in improving the quality of future projects. Data contained herein were made available by the project s development team and constitute a report on, not an endorsement of, the project by ULI the Urban Land Institute. Copyright 2008 by ULI the Urban Land Institute 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington, D.C

10 Developed jointly by Giarratana Development, LLC, and Novare Group, the 305-unit Viridian is the first condominium project to be built in downtown Nashville, Tennessee.

11 The $67.1 million infill project, which nearly covers the entire 0.55-acre (0.22-ha) site, was constructed within inches of adjoining property lines and without disturbing two neighboring historic structures.

12 The ground floor of the Viridian includes the 5,140-square-foot (478-sq-m) H.G. Hill Urban Market the first grocery store in downtown Nashville in over 40 years.

13 Viridian s 305 condominiums which feature floor-to-ceiling windows and ten-foot-high (3-m-high) ceilings in one- and two-bedroom layouts were fully sold out nine months before completion. Featuring a rooftop pool and panoramic views of the downtown skyline, the 31-story luxury tower has helped generate residential demand in downtown Nashville, leading to additional high-rise development there.