$105M downtown Franklin project now fully financed, thanks partly to Memphis hotel king
After more than four years of planning, developers have finished lining up all the funding for a $105 million mixed-use project that will overhaul a whole city block in historic downtown Franklin, TN.
The team driving the Harpeth Square project, led by Franklin resident J. Roderick Heller III, announced Wednesday that it has secured commitments for all the equity investment and bank loans necessary for the development. Site work should begin next week, with construction fully underway by early January, Heller said.
The Harpeth Square project will include a 119-room luxury Hilton Curio hotel, 150 high-end apartments, about 15,000 square feet of retail and restaurants, and a nearly 600-space parking garage partly available for the public. The four-story development will dramatically alter the northern entrance into downtown, at a scale unmatched by anything that’s happened downtown in a number of years. With its upscale hotel and apartments, Harpeth Square will inject features that are absent from the seat of tony Williamson County, the county with the seventh-highest median income in the nation. Franklin, TN also is home to the Cool Springs commercial hub that remains the premier corporate headquarters address, and Williamson is the fastest-growing county in Middle Tennessee, posting job growth that led the nation in five of the previous seven quarters.
In an interview, Heller revealed that Walker & Dunlop (NYSE: WD), Franklin Synergy Bank (NYSE: FSB) and CapStar Bank (Nasdaq: CSTR) are loaning money for the project. Investors include Green Hills developer John Rochford and one of his investors, Ed Cooper — as well as the Kemmons Wilson family from Memphis, whose patriarch founded Holiday Inn.
The project is set to open in phases over the course of 2019. The hotel and parking garage are scheduled to open in April of that year, along with the first of the available apartments. Retail space will open in the summer, with the final apartments able to be occupied in November, Heller said. Nashville’s R.C. Mathews Contractor is in charge of the work.
“This is one of the best locations in the country,” Heller said.
Heller said his group raised $20 million of equity for the project. More than 70 percent of that has been received; Heller said he’ll call the remaining $5.5 million as needed as the project goes along.
“I’d stress our non-Wall Street [investor] base,” he added. “About one-third of our investment dollars come from Franklin. Another one-third come from Nashville. The remainder is mainly long-term friends and business colleagues of mine. That gave us the flexibility and long-term orientation that we needed. Our long-term financing has enabled us to focus on quality.”
Per Heller, here’s a breakdown of the project’s two main highlights:
- Curio is a fairly new brand for Hilton (NYSE: HLT), consisting of independently owned high-end hotels that affiliate with Hilton.
- Heller’s group struck a joint-venture agreement with Kemmons Wilson Cos. The family-owned company committed to provide 60 percent of the equity for the hotel, through its family members and their connections. Heller’s group will provide the other 40 percent.
- Franklin Synergy Bank will provide a construction loan.
- Atlanta’s Valor Hospitality will manage the hotel and its restaurant.
- In size, quality and amenities, the units are targeted primarily to Baby Boomers and generally more affluent people who choose to rent. These are unlike so many of the apartments springing up in downtown Nashville. The building will be concrete, not wood. The average unit is 1,064 square feet. More than half of the apartments will have two bedrooms or more — whereas most Nashville apartment complexes are dominated with studios and one-bedroom units.
- Renters will have access to hotel amenities including room service, maid service and valet parking.
- Walker & Dunlop is providing the loan.
- Heller said he may try to convert the apartments into for-sale condos, but not anytime soon. “Apartment financing, given the fact that we’re not backed by Wall Street, was easier for us to obtain,” Heller said. “Also, it’s the economics of it: Why give the appreciation in value over the first six to eight years to condo owners? It should belong to the investors who made this possible.”
CapStar Bank is financing the parking garage, Heller said. His group will solely own the garage, the apartments and the commercial space in the project.
Heller’s group, Harpeth Associates LLC, also owns two existing buildings on the city block bounded by First and Second avenues north, and Main and Bridge streets. Those buildings are fully leased and will remain untouched for now, though it is possible to expand or redevelop one or both buildings in the future, Heller said.
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