Pollack Partners to Buy and Convert Velocity Condos to Apartments

Velocity in the Gulch NashvilleThe Nashville Business Journal is reporting that today, multi-family developer and operator Pollack Partners from Atlanta, will buy the remaining 220 unsold condos in the Velocity in the Gulch for $24.5 million. While it has not been announced publically, Pollack Partners will be converting the condos into apartments, potentially leaving the current 43 Velocity condo owners out in the cold.

The Velocity will become the second major Nashville condo project to be converted to apartments, Rolling Mill Hill was bought and converted by Chartwell Hospitality earlier this year. The Velocity will also become the fourth major Nashville condo project to be purchased at a distressed price. In late 2010, California based Alvarez & Marsal Capital purchased the 65 unit Belle Meade Court project and just last month ACG Equities from Chicago bought the 5th & Main project, both have remained condo.

According to Pollack Partners’ website, the company has bought more than 35,000 residential units valued at more than $3.2 billion over the past three decades. What does not remain clear is how the transition from a condo project to an apartment project will be executed.

How Velocity’s Sale Will Affect the Nashville Condo Market

In its purest and simplest form, taking 220 condos out of unsold developer inventory represents a huge reduction in overall condo inventory. In fact, this reduction cuts that inventory segment in half. Between the Icon in the Gulch, Terrazzo, Rhythm at Music row and Encore there are now 226 unsold developer condos, down from of 446. Adding together current condo resales and unsold developer inventory, Nashville now has under 450 urban condos on the market for properties built after 2005 (includes 17 urban condo projects).

Again, this underscores the importance of working with a buyer’s agent who knows and understands the dynamics of downtown Nashville real estate. I am one of the very few agents who can keep you from making a very costly mistake. Call or email me to start learning more about how to make the best buying decisions: 615-945-7123 or Grant@GrantHammond.com

  • http://StephanieCrawford.net/ AgentSteph77

    Great info. I don’t see how they can effectively convert without buying out the existing units too. Any idea when they will start leasing?

  • Rabbit

    People have already stopped in to inquire about leasing. For example, the tiny 419 sq. ft. floorplan begins at $950 + $30 water + utilities. 535 square feet $1100 + $30 water + utilities. The apartments include a parking space in the garage. I would like to hear everyone’s thoughts on Velocity in the Gulch. It has gotten some bad press and a big concern is the railroad noise. Do you think the remaining 226 condos (now apartments) will rent quickly? Should possible renters try to negotiate those high prices? Would you rent there?

  • Annie harris

    ANNIE IS GOOD IDEAL WOOD LIKE TO KNOW MORE

  • http://www.granthammond.com/ Grant Hammond

    Rabbit – I realize that $2/sf for rent seems high when you consider that the Velocity is built on the CSX railway, but that rental rate is very close to what the urban Nashville rental rates have been over the past 2 years. I do believe that $2.26/sf is a tad aggressive, but I’ll bet you that Pollack has the condos priced to allow for incentives. If I were going to lease in the Velocity, my offer would be for a 14 month lease at full price with the first 2 months free.

    I also believe that these 220 condos will fill up within 18 months, if not sooner. If you use the 1700 Midtown Apartments (also built by the Bristol Group) as a guide, one may come to the conclusion that the Velocity condos will be fully leased within 12 months at a stabilized rent of $1.90/sf.

    To address the fear of noise, don’t forget that the Bristol Group built these as condos. They used tripled paned Pella windows and double sound insulated the back of the building. If you stand in one of those condos while the train is going by, you don’t hear a single squeal, whistle or anything. The only sound you do get is a very low and weak rumbling that is hardly noticeable. I would lease there, especially since the retail space is about to announce a few very good tenants that will be excellent places to frequent.

  • http://www.granthammond.com/ Grant Hammond

    Leasing is really beginning now. I know, it was faster than I thought.

  • http://StephanieCrawford.net/ AgentSteph77

    Wow, that is fast. I agree that $2 per foot is a reasonable rate. Between this, the RMH conversion, and possible developments coming to Elliston and Melrose, I’d think the inventory would take a little longer to absorb, but rentals really aren’t my thing.

    Please keep us informed on the status of the sold units in Velocity. I would think that they would need to be bought out too in order to get the best zoning and tax advantages for the new owners.

  • http://www.granthammond.com/ Grant Hammond

    Exactly. They could lower their tax burden by 25 basis points by rezoning to apartments, but I don’t see getting 43 people to agree to be bought out at the same time as plausible. My guess is that they would have to challenge the constitutionality of the TIF agreements as well unless they plan on paying those off at net present value. Again, unlikely.

    I’ll certainly let you know if any of the owners receive any offers from Pollack Partners.

  • http://StephanieCrawford.net/ AgentSteph77

    I didn’t even think about TIF. That is an interesting twist. There must have been some sort of arrangement with the city to write off the existing guidelines on the TIF units they purchased. Or perhaps some of the units will have income guidelines for the next 5-7 years?

  • Falcon2

    Grant, do you know how many units Pollack will have to lease as income restricted? I don’t think more than 8-9 units were sold as affordables so if the normal 20% of units was originally required by MDHA to be income restricted I think that would equate to at least 40 of his 220 being leased that way. I wouldn’t think that the $950 quoted could meet the affordability test unless it included 2 incomes, a stretch in a 419 sf unit.

  • Rabbit

    Thank you Grant. I appreciate your insight.

  • http://www.granthammond.com/ Grant Hammond

    Falcon – Pollack now owns 41 condos that are under the MDHA guidelines. I also do not believe that these $2.26/ft rents will meet with current MDHA guidelines, but it remains to be seen how Pollack plans on dealing with this issue. I hear rumblings that the constitutionality of the restrictions may be challenged in a court of law. Yes, that seems expensive and I’d hate to be the first guy to set the precedent, but that is an option I am hearing.

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  • Rvsweatt

    I own a condo/apartment in The Velocity and I would take a buy out from Pollack Partners. I think it would be the only fair thing for them to do.

  • http://www.granthammond.com/ Grant Hammond

    That brings up a few interesting questions: would you take a buy out for less than what you paid? Also, from an owner’s perspective, do you think all 43 current condo owners could all agree to be bought out simultaneously?

  • Rvsweatt

    I have talked to a couple of other owners and they feel like I do. I am not sure if all 43 current owners would agree. I feel if they do not buy the condos from us we will never be able to sale. Some will also rent there condo out if conditions are not up to standard. I personally would sale at a minor lost at the present time.

  • Rvsweatt

    I have talked to a couple of other owners and they feel like I do. I am not sure if all 43 current owners would agree. I feel if they do not buy the condos from us we will never be able to sale. Some will also rent there condo out if conditions are not up to standard. I personally would sale at a minor lost at the present time.

  • http://www.granthammond.com/ Grant Hammond

    From what I have learned today, it sounds as if Pollack Partners will not be offering to buy out the current owners at this time. It sounded as though there just wasn’t enough capital to be able to do so; although, they would like to sooner rather than later. This leads me to speculate that Pollack will have to rewrite the current HOA rules and regs.

  • Rabbit

    I also heard that Pollack is more interested in leasing the 220 units they just bought than re-purchasing the units from the current owners. Pollack *says* it expects to lease all their units within 6 months.

  • http://www.granthammond.com/ Grant Hammond

    There are several reasons why Pollack would want to buy all of the condos (the ability to use agency financing to take out higher cost debt, the ability to change the tax structure from condo to multifamily, etc), but I do understand the urgency in leasing. I do think that a 6 month lease up is aggressive, I would expect a full stabilization of 220 units to take 12 months. Again, this is based upon the 1700 Midtown project as a gauge.

    Has anyone with Pollack Partners talked about or referred to re-writing the HOA rules and regs?

  • Rabbit

    I don’t know. That’s a good question and one that I’m wondering myself

  • Rabbit

    Any idea on the number of units Velocity has leased out so far?

  • Rabbit

    Any idea on the number of units Velocity has leased out so far?

  • http://www.granthammond.com/ Grant Hammond

    Rabbit – I am hearing that they have leased just north of 50 units since the beginning.

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    Trackbacks

    1. […] in recent memory. Granted, the 220 condos in the Velocity were purchased by an Atlanta firm and converted to apartments, but that is still inventory absorption. If you prefer to subtract the 220 Velocity condos from the […]

    2. […] projects in the Gulch to sell more condos this year than any other area of downtown. Despite the Velocity converting to apartments, the Terrazzo and Icon have outsold everyone […]

    3. […] real estate market is going to be in September 2012. You are currently renting an apartment in the Velocity for $1,475/mo and are considering purchasing a $400,000 condo somewhere near downtown Nashville. […]