The Chatter Class: Winner take all?

Monday, January 14, 2008 at 1:20am

More than a few people think developer Tony Giarratana has his back against the wall trying to build the 70-story Signature Tower downtown.

To put it succinctly, they think he's going to fail.

But Giarratana doesn’t appear to be paying much attention to the naysayers. Instead, he's still trying to figure out how to make it happen.

The earnest developer has been toying with the idea of reconfiguring what would be the tallest building in the Southeast to take advantage of what appears to be a stronger market for hotel rooms.

On Friday, Giarratana sent a letter to the about 100 pre-construction buyers of condominiums to tell them he is exploring adding up to 132 hotel rooms to the plans for the Hotel Palomar. That would increase the number of hotel rooms from 198 to as many as 330 rooms.

The change also would mean cutting floors 15 through 20 out of the residential mix, reducing the number of condos from 400 to 340.

Why consider it?

In the letter to buyers, Giarratana wrote, "A reduction in the number of condominiums would be viewed positively by our lenders given current market conditions and would only enhance the exclusivity of the remaining Signature Tower condominiums."

Around the country, large condo projects have lost favor over the past few months in the credit crunch following the collapse in the subprime mortgage industry. Last August, Giarratana’s investment bank advisor Chicago-based Jones Lang LaSalle took a break from seeking financing for the $250-million project.

The thought was to wait until the lending markets improve. When that does happen, condo projects, however, still may have a fairly difficult time landing money. Though Nashville isn't considered terribly overbuilt with condos, national lenders still will be stinging some from the condo oversupply on the coasts.

But when the credit markets improve nationally, projects with hotels — or hotels in general — could be looked at more favorably than a condo project because the hotel industry has been on the upswing with rates and revenue. And, that is particularly true in Nashville.

Nationally, according to recent figures from Smith Travel Research, average occupancy was flat through last November but average room rates climbed 5.9 percent from $97.96 to $103.70. Revenue per available room — the money made off a room in addition to the rate — climbed the same percentage.

Nashville’s occupancy was flat through November like the national average. And, like the national figure, room rates and revenue per available increased. But for Nashville, the increases exceeded the national average, 8.1 percent and 7.2 percent, respectively.

Smith Travel Research’s figures show Nashville’s downtown outperforming the city as a whole. Occupancy was down 1.9 percent, dropping from 75.8 to 74.6, yet, room rates climbed 10.8 percent from $111.59 to $123.68 and revenue per available room jumped 9 percent.

Without the addition of new hotel rooms, Butch Spyridon, president of the Nashville Convention & Visitors Bureau, has said occupancy doesn’t have much more room to grow downtown and rates can go only so high.

The several hundred hotel rooms that have been built recently appear to be filling fairly easily. Mark Lineberry, senior vice president with Wesley Hotel Group, cautiously said that future bookings for the company’s Hotel Indigo on West End Avenue could push the hotel past the break-even point this year.

Flat occupancy combined with continually rising rates and revenue tends to make for a good building environment. Also, throw in that Mayor Karl Dean is committed to constructing a new downtown convention center, which could be open with five years if all goes well.

Is Giarratana onto something with adding hotel rooms and reducing condos to make it more attractive to lenders?

His thinking on this will get some tongues wagging as to whether he is or isn't.

Contact Lawson at rlawson@nashvillecitypaper.com

Filed under: City Business
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By: frodo on 12/31/69 at 7:00

Richard Lawson's story leads with the idea that "More than a few people think developer Tony Giarratana...(will) fail." It then goes on to explain how he might succeed, providing no names of the "more than a few people." Where's the beef, Mr. Lawson? Don't lead with a sensational headline and then not deliver on the premise.

By: frank brown on 12/31/69 at 7:00

It is not going to happen. It never was going to happen. Not in it's original format and for sure not in a quasi hotel format..Too tall,Too many homeless,and a little too soon. It is a lot easier to sell the working class than the wealthy. The wealthy always and always want value. Conceptual value is not enough. Great idea though.

By: RIchardLawson on 12/31/69 at 7:00

Frodo, if people who think he's going to fail would go on the record, I would include them. They all prefer to chatter behind the scenes. Additionally, I don't know that I'd have room to name everyone if they would go on the record.

By: JeffF on 12/31/69 at 7:00

I will go on the record, I think Tony G's Signature plans are doomed to failure. We are headed for a downtown condo bust just like in every other "redeveloping" downtown. The market is too heavily based on the whims of 20 and 30 somethings who only have to make a trivial downpayment in order to be couted as buyers. These Flippers try to get rich quick and eventually get poor even quicker, dragging entire markets down with them.

By: nashbeck on 12/31/69 at 7:00

Frank Brown, until you show me your real estate license and degree in finance, I think I'll view your comments as solely opinions and nothing valid. This is smart thinking by Tony.

By: Grant4Nashville on 12/31/69 at 7:00

This project will go, downtown will develop, period. Read the downtown partnership reports for the past 5 years and then make some educated comments instead of becoming another negative voice in an uneducated crowd.

By: BillFelk on 12/31/69 at 7:00

I heard the Abu Dhabi Investment Authority is going to help throw Tony a bone. If not the China National Bank is growing tired of buying US Treasury bonds so they might be interested.

By: MJB on 12/31/69 at 7:00

Lawson, could you have been a bit more specific about the nay-sayers w/out violating their off-the-record status? "People in the local building trades...".I hope that Giarratana doesn't get the funding. Nashville needs no more towers. I miss the days when the State Capitol was the tallest point. Look at the photo again & note how this pretentious tower dwarfs the beautiful Ryman.Nashville needs more modest, affordable housing, especially in East N., as was done on Bransford Avenue.If Giarratana builds 340 modest, affordable houses to replace the Preston Taylor homes & the Edgehill homes, &c., AND if he's going to supply sufficient underground parking for his tower, then he can build his tower.

By: WickedTribe on 12/31/69 at 7:00

I can't wait till this gets built.

By: Time for Truth on 12/31/69 at 7:00

MJB, I think the plan is to incorporate underground and above ground parking into the structure. As for the project you envision, that is the province of HopeVI if I'm not mistaken. I somewhat agree with Frank Brown that the Sig is too tall. They can switch condos to hotel floors, and then we have a terrorist attack and that market goes downhill fast (also a good argument against MCC). The project would be more viable at, say, 55 or 60 stories and that would also eliminate concerns that have been raised by the Feds about the effect on air traffic. There is a really cool website showing computer-generated views from the tower. I don't have the link in front of me but if I find it I'll put it up.I like the look of the building and the location is appropriate. I think it would be an asset to the city if buildable.

By: Time for Truth on 12/31/69 at 7:00

www.signaturetowernashville.com . Click on 'virtual tour'. Escapist fun, and well done, especially if you like the techno-Muzak background.

By: bcruiser on 12/31/69 at 7:00

Nashville isn't NYC and doesn't need any more skyscrapers. Nashville is unique for a southern kind of charm and hospitality, let it keep this way of life. The traffic is probably the biggest mess in the city, why not try to solve some of it first before putting more people and cars downtown. Money would be better spent on a rail system to get some of the traffic off the roads.

By: RIchardLawson on 12/31/69 at 7:00

MJB... The nay-sayers run the gamut. The list includes developers, architects, real estate investors and people who aren't in real estate at all. As for the State Capitol, somewhere along the line that got messed up. In D.C., nothing can be built that is taller than the dome on the U.S. Capitol. The only structure taller is the National Cathedral. I think this is correct but the height limitation got put in place here going north but was too late for limiting downtown.

By: MJB on 12/31/69 at 7:00

Thanks, TfT, for the link, and what is Hope VI, and what stops Metro from insisting that any builder build some affordable housing, too? I'd love to see these "developers" marring the landscape of south-central Nashville w/ McManors putting some of that investment into homes that Nashvillians need & can afford.Cruiser, I couldn't agree more.Lawson, thanks for your reply. It's a good article, but beginning, say, "More than a few architects, developers, & investors think that Tony Giarratana has his back against the wall..." would add specificity to the piece while detracting nothing. A quibble, possibly, but still a point.It was my understanding that the rule about the Capitol was in four directions & was waived once enough cash from Life & Casualty was waved around. We thus created a downtown that, as in other cities, is a shrine to Mammon rather than a shrine to the People.Let's pass a law that makes the library the tallest building, and it can occupy the new tower. Seventy stories filled w/ books & learning. Doesn't that sound beautiful?

By: gdiafante on 12/31/69 at 7:00

My god you people whine about everything. If you don't like tall buildings, move to Lavergne.

By: producer2 on 12/31/69 at 7:00

gdiafante,Agreed, and now I see some want to dictate what builders can or can't build. "You must do this commrade or we will shoot you" I thought we lived in a democratic society with and economic engine based on capitalism. Am I stil in the US?

By: HokeyPokey on 12/31/69 at 7:00

It's not allowed to dictate opinions to dvlprs, so can it.If Tony wants his erection, Tony can have his erection.

By: RIchardLawson on 12/31/69 at 7:00

MJB: Fair enough on your first graf. As for the height of the buildings downtown, I had asked about that one time years ago but I don't recall L&C being the issue. I had it in a story years ago while I was at The Tennessean. I need to get my library card so I can look it up online through there. It's better than searching through Tnsn archives online and having to pay.

By: b_ on 12/31/69 at 7:00

It is a silly project.

By: TITAN1 on 12/31/69 at 7:00

I'm all for it! It would be an honor to have a 70 story skyscraper and to be the tallest in the southeast. I don't think he would build it, if he could not fill it.

By: mccullochd on 12/31/69 at 7:00

I'm still waiting for the Cumberland Yacht Harbor to break ground. I've been seeing signs for this place for over 2 years, but no activity.

By: MJB on 12/31/69 at 7:00

Titan, I got some swampland to sell you if you think that builders already know how to fill the buildings they build. Skyscrapers remain half-full for years.Lawson, I'm working solely from memory here, and you know more about Nashville's history than I do. I'll check the library, too. (I realize that my plaint about the Capitol sounds terribly nostalgic.)As to those who think that property makes right, grow up. You live in a COMMUNITY. Any building affects all of us. You have heard of zoning regulations, yes? It's perfectly within our rights to require certain public goods to be done as a builder pursues his private gold. That Nashville doesn't make more such demands is one reason that it is not a better city.

By: Time for Truth on 12/31/69 at 7:00

producer, the FAA has raised questions about the height of Sig. Otherwise I was just looking at options. However a Planning Commission is within it's rights to regulate the height of buildings. Proactive planning and zoning are necessary to avoid the many mistakes of the past.MJB, Hope VI is a Federal program that among other things razes old-style 'barracks' subsidized housing, replacing it with more 'neighborhood-like' buildings or scattered-site housing. Ownership is also encouraged. At Charlotte and 15th you can see a good example.