If there's a visual metaphor for a reset, this is it.
In a spare and hidden upstairs breakroom, David Lang sits at Fifth & Main's "conference table" — actually a simple, round, pressboard piece of furniture. Lang, an ACG Equities principal and managing director of the company's Atlanta office, drives from the Georgia capital to his company's newest investment at least once a week. ACG, which has its primary offices in Chicago, bought the troubled East Nashville condo complex at auction earlier this month for $11.2 million. Unit sales are expected to resume next month.
Lang is ready and says the complex is, too. But he readily acknowledges what Nashville real estate watchers have whispered about for three years: The project was snakebit.
"But snakebit applied to anybody who opened around that time," he said.
It wasn't a fault of the project's construction — which he readily and frequently praises — and he's optimistic about the submarket. But recessions don't care about high-quality work and private lenders weren't convinced that the east side is the next-big-thing. Not with the housing market falling apart.
No matter. ACG, which specializes in total equity multifamily buys, saw some value. But first, they had to get realistic about the prices.
When Fifth & Main units were first offered in 2007 — and 110 went under contract fairly briskly — they were priced at about $275 per square foot, some $100 per square foot less than similar projects in the glitzier Gulch. Prices have dipped since then, of course. At the Gulch, things are down in the high $200s and, before it emerged from receivership, the court-appointed steward at Fifth & Main was offering units at 25 percent off. But focused on covering their $47 million building cost, the project's backers still hadn't really adjusted their prices.
With a new owner has come a new philosophy and will come a total price reset when units head back to the market in the coming weeks. Lang didn't disclose the new price-per-square-foot number, but expectations are in the $140-$150 range, giving ACG $60-$70 back per square foot. Those numbers don't include the equity firm's commitment to maintain 23 units as affordable housing, which will be priced based on the federal guidelines.
There's also the matter of the first-floor commercial space. The only occupant of the 27,000 square feet of retail and office commercial space is restaurant Allium. Lang has engaged Colliers International, the former NAI Nashville, to handle filling the ground floor.
"We think we got the right group," he said, but patience, as always is a virtue. Lang says much of the difficulty from attracting commercial users was low loan availability.
"We have the ability to put in tenant improvements, so we should be able to provide those funds," he said.
There's a perception, fair or not, that Fifth & Main, coming in as it did when higher-profile (and many said, better located) projects on the west side also came online. And fair or not, East Nashville does have a reputation as a destination for a younger crowd, more apt to rent than own. Plus, the trendy bars and restaurants of Five Points are several blocks from the decidely more modest cell phone stores and gas stations of Main Street.
But Lang says Fifth & Main can overcome that. For one thing, its views of downtown aren't likely to be impeded by an interloping high rise tower, as famously the Icon blocks Terrazzo. Even the complex's location near interstate isn't a downer for Lang.
"We're not hidden," he said, drolly. "People drive by all the time."
And with the reset, maybe those young, hip renters will become young, hip buyers.
"At $330 a square foot, there's a barrier to entry and maybe you have to be in your thirties. With the values being reset, I think some younger people will take a look," he said. "They may, they may not."
Lang gives the impression that ACG is at Fifth & Main for the long haul. With a total cash buy that's not beholden to every blip or wave in the market, it's a change from the hair-pulling and uneasy market-watching that has hounded the project until now.