Future of Rolling Mill Hill condos could be known soon

Nashville development group and four national investors remain in the running to buy three condominium buildings atop Rolling Mill Hill that now are being marketed as an apartment community.

The five bidders, chosen from a group of 21 that submitted bids by an April 2 deadline, are now being asked to adjust their offers by Monday in terms of price or how quickly they intend to move ahead on the project. Bank of America, which owns the property, wants $10 million for the 72 units up for sale.

Nathan Swenson, a broker at Cushman & Wakefield in Atlanta, which was hired to market the buildings, declined to reveal identities of the bidders. But he did confirm that one is from Nashville while the others are national institutional or private equity investors.

The condos were a key part of the master plan for redeveloping the old Nashville General Hospital site off Hermitage Avenue near downtown. But the three buildings were taken over by the senior lender in a foreclosure after the condominium market here tanked and the Wisconsin-based developer defaulted on its $21.4 million

Senior lender Bank of America paid $7.28 million to buy the condos back and hired real estate company Cushman & Wakefield to market them for a new use, probably as upscale apartments.

"There's so many condos already in downtown Nashville … that we didn't feel like that was the right opportunity for the immediate term," Swenson said. "So, we marketed it as an apartment or rental opportunity."

A partnership of Nashville-based The Mathews Co. and Corner Partnership previously had offered $5 million to $6 million, or 40 percent below the owner's asking price, said Mark Bloom, a partner in Corner. "It's ridiculous what they're trying to get for their property," he said.

Bloom said it would be difficult for any buyer at the sought-after price to generate enough rental income and a rate of return on the investment that makes sense.

Swenson estimates that the apartments could rent for $1,400 for units that average 1,136 square feet. That's about $1.25 a square foot — a price similar to rental rates in the upscale Vanderbilt-West End Avenue area.

Kirby Davis, president of Nashville-based First Management Services and past president of the Greater Nashville Apartment Association, believes developers could get those targeted rental rates from tenants.

"They're brand-new units and have condo finishes," Davis said.

Others, however, said that it could take some time for the former condo units to get leased as apartments, in part because the Rolling Mill Hill area is largely untested as a residential market.

Bloom points to how difficult it has been for Corner Partnership to lease for $1.25 a square foot a 2,500-square-foot condo unit it bought at auction in The West End luxury condos. He said the units at Rolling Mill Hill sit in a less-attractive location and have fewer amenities.

But Davis expects the fact that the three buildings are near the Gulch and downtown to boost interest. "They're only a stone's throw from the Gulch, which is one of the hottest residential areas in terms of high-rise living," he said.