Multifamily Investor Expo - Feb 15th
For passive investors, having a greater understanding of the MSA where a specific multifamily project is located can provide valuable insight for selecting the right deal. With this in mind, The Multifamily Investor Podcast will be releasing a series of episodes focusing on specific MSAs. First up is Nashville, which has seen incredible growth and interest in multifamily real estate.
Today’s guest who will break down Nashville for potential investors is Jessica Grover, Managing Partner for Cassica LLC. Jessica has been on both the LP and GP side of multifamily and is herself a Nashville resident. Listen in for her unique perspective on The Music City.
Watch On YouTube
- The investment thesis for multifamily projects in Nashville.
- What is driving Nashville’s growth, and how city leaders are supporting it with infrastructure and policy.
- Key locations in Nashville’s layout relevant to prospective investors, including transportation, entertainment, and employment centers.
- A breakdown of rent growth, housing inventory, and employment data for this MSA.
- What the most popular neighborhoods and suburbs are in the Nashville MSA.
- The future of multifamily investment and development in Nashville.
Featured On This Episode
- Report: Nashville’s multifamily sector leads the nation (Nashville Post)
- Suburbs Continue to be the ‘Shining Star’ for Nashville’s Multifamily Sector (RE Business Online)
Today’s Guest: Jessica Grover, Cassica LLC
About The Multifamily Investor Podcast
The Multifamily Investor Podcast covers trends and opportunities in the multifamily real estate universe. Host Scott Hawksworth discusses passive investment offerings in the space, including direct investments, DSTs, opportunity zones, REITs, and more.
Scott: Hello and welcome to “The Multifamily Investor Podcast.” I’m your host Scott Hawksworth. Today we’re going to be doing the first and what I plan on being a series of episodes where we look at specific MSAs and look at specific markets for multifamily. And talk about the ins and outs of those markets, why they’re compelling for investors, and what investors should really know about these markets before getting involved in a deal in one of these markets.
And joining me to offer her insight on our first market here, which is Nashville is Jessica Grover, who is the managing partner at Cassica, LLC and she’s also a Nashville resident. So she knows quite a bit about Nashville. Jessica, welcome to the show.
Jessica: Scott, thank you so much for having me here. I’m excited to do this. Excited to talk about this great town.
Scott: Yeah, exactly. I think this is going to be so great. And let’s kick it off at the high level because we’re talking about Nashville. A lot of people associate Nashville with the music scene. But there has been so much buzz and growth in Nashville over these last couple of years here and beyond.
And there’s a lot that goes on. I’ve got it right here. It’s become a destination for Fortune 500 companies, millennials, families, real estate developers. And again, this has led to population growth. What’s it been like to experience? What’s driving this growth for Nashville?
Jessica: Yeah. So it’s funny. So I originally moved here in 2006. So I’m a third-generation Californian. And so literally, my parents, their parents, their parents Like, you know, we were sooners I guess you will in California. And so I moved here in 2006 when Nissan North America moved their corporate headquarters here. And at the time, it was not the dynamic city that you see today, right?
Like it was growing but it wasn’t growing like we’re seeing today. And I think that what has happened over, you know, several years and we actually moved away in 2012, and came back in 2019. And what happened just between 2012 and 2019, was absolutely the most astonishing thing I’ve ever seen.
The skyline changed completely, the population had grown exponentially. It was crazy. It was like 30% population growth in like 10 years, right, it was unreal, it was unreal. And I think that what’s happened is that people are starting to…and you’re hearing this from everywhere, right? You’re seeing the exodus from California and New York and Chicago. And some of these…you know, if you will the West Coast is just kind of like moving inward, right?
And they’re fleeing some of these states that are tax unfriendly, you know, at this point, they’re getting super, super overcrowded. People may have political different, you know, views, like, there’s just so much that’s happening. And I think over the last few years, part of that stemmed a lot from COVID. And so we’re seeing this mass exodus of people leaving these states and going into the Arizonas and the Texas and Idaho and California and Florida, excuse me, not California, Tennessee, and Florida.
So it’s just been really truly amazing to see this like just complete change to what used to be kind of like a small town, right? When we first moved here in 2006, there were like maybe five restaurants that I would say I would want to go to.
Now, I can’t keep up with how many are here, right? It’s just amazing. Like, I have kids, so I don’t get to go out as much as I used to so the list has to like could be broken down piece by piece.
Scott: Right. Right. Well, okay, so that’s sort of the background there. And we’re going to dive into… I know we’ve got some numbers to look at, and we’ve got some areas to look at. But before we do all of that, before you get your screen share going and show us some great things, can you talk a bit about your background in multifamily? You’ve been an LP and you have also been on the GP side of things.
Just talk a bit about your journey into multifamily and maybe how that all intersects here.
Jessica: So a few years ago, I was in a position where I was looking at, you know, I’m in my 40s and my husband’s pushing 50 and we’re like, “Okay, what are we going to do with our money,” right? I was not liking that we were, you know, what, 13, 14 years into, like, what a 10-year cycle would be. I did not like where the market was going.
I just didn’t trust it. I didn’t trust what was going to happen. So I went on a search for what are we going to do with our money? I mean, that’s essentially where it all started, right? And I started kind of looking into all of the different asset classes. I mean, I looked at everything. I looked at all of the different commodities, I looked at oil, I looked at, you know, agriculture.
I looked at, you know, crypto didn’t understand that too much, like, I couldn’t get it so I was like I can’t put my money there. And so I kind of landed…after looking at everything and studying all of these different, you know, returns and tax and all of these pieces, I kind of landed on I’d rather have tangible assets, right?
And I grew up with a father who was in the gold and silver brokerage or excuse me, gold and silver business. And so tangible assets has been kind of like ingrained in my brain my whole life. So I landed on real estate. And when we started, we started with just buying single families. And then, you know, I had a moment where I was like, “No. You know what, I want 100 doors.” And then I don’t know how it happened but you know, the Grant Cardone effect.
I was like, “You know what, let’s just 10x that. You know what let’s just… I want to 1000 doors. I’d like 1000 doors. Well, if I…
Scott: Let’s start working at these economies of scale and all that.
Jessica: Yeah, let’s do that. And so it’s either you go for… And I had started looking at like the effort that goes into buying single families and finding them, and financing them, and things like that. I was like there’s no way. There’s no way I’m ever going to get to 1000 doors. So I came and found, you know, after a ton of research multifamily, and realized that that’s kind of the direction where we wanted to put our dollars. And we had, you know, a large group of friends that were like, “Oh, Jess…,” you know, all of which still have W-2s and they’re like, “What do we do with our money, Jess?
We know you well enough to know that if you’re onto something like you’re going to go figure this out,” right? And so, you know, fast forward a couple of years later, and we’re, you know, passively invested in about 1000 units and general partners on 105. And, you know, have no plans to slow that down. You know, market dependent, right like we’re seeing it’s been a little bit crazy…
Scott: Of course which we’re about to talk about and talk about market.
Jessica: Which we’re about to talk about. But yeah, so that’s kind of where it all began. It started extremely selfishly with me just trying to figure out how I could hedge the market, right? And I’ll tell you over the last, you know, definitely the last year and six, eight months, right, like, anybody who’s been looking at their, you know, sits down with their financial planner and sees what’s happened to some of their retirement accounts.
I’m really, really glad that I moved as much money as I did into real estate because…
Scott: I couldn’t agree more. I’ve looked at my stock portfolio the last few months I’ve been like, oh, okay, close that.
Jessica: I just don’t even look at it. And it was funny because in true…and you’re probably finding this with a lot of people that you speak with. If you sit down with your financial planner…like, in fact, my financial… I was like, “Okay, I’m going to take this money, right that I have sitting over here. I’m going to take this money, and I’m going to go put it into multifamily real estate.” And, of course, your financial planner is going to be…because they don’t necessarily understand it, right, like they don’t understand what you’re doing.
So he was like, “Really? I mean, are you sure you want to do that?” I’m like, “Yes, I’m absolutely positive I want to do that.” And what’s funny is we’ll have meetings with him now and I’m like, “See what you did to what I left you. Look what I did over here,” right? And so it makes…
Scott: And there you go.
Jessica: Yeah. But it makes that conversation a whole lot easier because… you know, I saw a lot of people and I was young at the time, right? Like I was in my late 20s, early 30s in, you know, 2008, 2009. But I was seeing people my age and older now, right, that lost, you know, half their retirement in a day, right? And I just didn’t want that to happen. I didn’t want that to happen.
And so also, you know, looking at the financial freedom side of things is…you know, passive income goes a real long way, right? And I love what I do like I’m a brand builder, so there’s that. But it is the ability to live the life that you want by design.
Scott: I mean, I think that is one of the great thesises of this show and why we do multifamily investor and why so many folks, you know, our listenership they are interested in passive multifamily investment. All right, Jess, so we want to dive into Nashville specifically. So I’ve got you screen sharing here.
Let’s start maybe high level can you walk us through Nashville’s layout? You know, where maybe some of the key transportation, entertainment, employment centers, maybe greater Tennessee. Just walk us through, you know, I guess the market?
Jessica: Okay, so the first thing…I’m going to start off just by kind of giving you a bit of a lay of the land. Like a lot of times, people think of Tennessee as just being Nashville, but it is a ginormous state, right? Like, we are surrounded by, like, seven states, it is very, very long, but very, very narrow, right? Narrow and long so it takes much, much longer to go from east to west than it does to go from north and south, right?
So it’s divided into sort of like these three main…what are called grand divisions, okay? There’s east, middle, and west, okay? East has areas that you’ve heard of, there’s a lot of stuff that’s for sale around there. People have been saying that Memphis, Memphis, right, is kind of a big growing market. Nashville sits here in like middle Tennessee. And then West is basically grounded by Knoxville, which is up here near North Carolina, right, in the mountains, right?
And then Chattanooga, which is down here and it actually splits between Georgia and Tennessee, okay? So that’s just to kind of give you guys an idea of what we’re talking about. We’re going to focus right in here, right, so Nashville being here in Davidson County. And then Sumner that borders into Kentucky down into Williamson, we’re going to focus in here. And I’ve got another slide to show you that.
I just want to give you guys an idea of where you are looking at.
Scott: Where we’re at in the state. And then you see two with that like how close Nashville or Tennessee itself is to all of these other states. You have Illinois, Kentucky, Missouri, Alabama, Georgia, South, and North Carolina. I mean, that is not far from a lot of different areas.
Jessica: And that’s actually a really good point. So one of the things is we’re seeing so much inflow, you know, a lot of people ask, like, why are companies coming here, right? Like, what is it that they’re doing here? Why are they here? And one of the main reasons for that, you know, aside from taxes, and everything else we could talk about is it is a very commutable city.
So they claim that you can get to…now let’s say that this is normally when we’re not having all of the travel issues that we’re having these days. But normally you’re about a two-hour flight from roughly 70% of the country. Because if you think about where this sits, right you can see this red down here, you can get to all major corridors in the U.S., with the exception of the west coast.
So if I go home to see my parents in California, it takes me, you know, a good five hours to get there. But if you’re hitting 70% of the U.S. population right in here, you can get there within two hours. So that’s a big deal for a lot of companies because they can deploy, you know, leadership teams, they can deploy sales teams very, very easily from this area.
So it’s a great observation.
Scott: A hundred percent. That’s a good thing to have that larger context. Okay, moving into Nashville now.
Jessica: So now we’re going to keep going down. So we’re going to start big and kind of come down microscopically, okay? So this is what I was talking about. This is sort of the area that we were talking about is here in this Davidson, Williamson, Dixon counties, Cheatham County, okay? So I just want to again give you lay of the land because we’re going to talk a little bit about some of these growth areas. And some of these growth areas don’t necessarily fall in Davidson County, right?
So Davidson county is Nashville proper. And then you’re surrounded by Cheatham, Robertson, Sumner, Wilson, Rutherford, and Williamson, okay? So Williamson is where you’re going to have a lot of the families living, right, like it has got the best school system, it is where all of the burbs are, it’s where I live now. I’m not as hip as I used to be when I moved here in 2006 and we lived in Sylvan Park, which was super hip and happening.
But now, you know, we’re kind of down here in the burbs. But you’re going to hear a lot about places like Murfreesboro. There have been a lot of really big sales that have been going on in Murfreesboro. And there’s Middle Tennessee State University that’s down there. You know, we’ll talk a little bit about universities and things in a second. But there’s a lot of growth that’s coming down into Rutherford County, as all of this urban sprawl starts pushing south, right, and north right, it starts pushing kind of all around us, okay?
So I wanted to take a minute to talk a little bit about neighborhoods, right? So we have, you know, Nashville multifamily has several different sub-markets, right? You can see in here that Sumner County, Wilson County, some of these counties that we were talking about Rutherford, Murfreesboro, all part of sort of this Nashville sub, okay?
So just to give you an idea, this is your Nashville center, right, this is downtown. So you’ve got a bunch of cities and areas that still fall into kind of that Davidson County realm, right, that would be like an immediate sub.
So a lot of the development that’s happening is happening down in here, you’ve got some redevelopment happening in Bordeaux, all this stuff is happening here, right? But now there’s a lot of people because of the development and the corporations that are moving downtown, you’re seeing a massive amount of development pushing out, right, as it often does. And so you’ve got a lot coming down here into Williamson County, right, this Brentwood, Franklin, Nolensville.
You’ve got a lot coming down into this Rutherford County into Murfreesboro. Smyrna is where there’s a big Nissan plant. And we’re seeing a lot going on in and around Sumner County, you know, because as these companies come here, it’s very, very easy to access downtown from all these different places.
So I just want to kind of give you an idea. You’ll see on this list that southeast Nashville has had in the last 12 months, sort of the biggest…between downtown and southeast has had the biggest sales, right, like in multifamily. Southeast is kind of this area, right? Crieve Hall, Antioch, there’s a lot of development that’s happening right down in here. In fact, there’s a big…it’s called Century Firms it’s coming in down here and that is going to have a tundra outlet, it’s going to have a bunch of multifamily.
It’s just going to be a really, really big development. So as things are pushing out there’s still space here to do a lot of that work.
Scott: Is there a reason that, you know, Southeast specifically is just so high maybe compared to some of these other areas? Is it just because there’s more happening there or it’s just closer…
Jessica: No, because the thing is all along this river corridor, and you can barely see it here, right, this is the Cumberland River. There’s a bunch of office development and things that are happening. We’ll talk a little bit about projects. So a lot of these areas, this Inglewood area, this Bordeaux area, a lot of this stuff has been built up over the last eight years.
So like around this Westmead area, like, we used to live right about there which was Sylvan Park. The other side of the tracks, if you will, from Sylvan Park is an area that’s now called The Nations that didn’t even exist in 2012, right? And so like a lot of this has just been built out. But as people are not necessarily… I mean, here’s what we’re looking in Nashville, right? Like, you can literally move here, or have been here for college, right?
We’ve got like 19 universities in Tennessee. There’s four major universities in and around the Nashville area, okay? So you can come here for school, and you can stay here and then grow with the town, right? Like you can live in the urban center where it’s hip and cool and happening, and then you decide to get married and you want a little bit more space.
Scott: Spread your wings
Jessica: Right, spread your wings. Then you need to deal about school, you kind of move into, you know, more of the suburban areas. So people are coming and staying, right, for long periods of time. So yeah, that kind of gives you an idea. You know, we’ve had rough… I think the 12-month number was roughly like $5 billion in multifamily sales over the last 12 months.
Like, it’s kind of ridiculous how much is being bought and sold in and around. There’s a lot of redevelopment. I think there’s like 25,000 units that are coming up under construction that will be delivered in the next 18 months. Like it is crazy how much growth and development are happening in and around this downtown area, as well as kind of the surrounding. Which is really truly amazing if you think about a town that, you know, used to be thought of as a secondary market.
And just to be honest with you, I don’t know if anybody can say that anymore, right?
Scott: When I look at these numbers, that’s a really tough sell to say.
Jessica: Right, right? I mean, I kind of wish I could, you know, you wish sometimes that hindsight is 2020. And I kind of wish that we would have been in the position that we are now, you know, back in 2008 when things were being built downtown because it was the boom coming off of, you know, 4, 5, 6, 7 and things were coming on market. I mean, they couldn’t give away, you know, loft space in downtown at that time, like, the incentives on them were insane.
Now those same things that they were basically handing out for $150,000 are going for, you know, $500,000, $600,000 for like, you know, one, two-bedroom loft. It’s crazy. It’s crazy.
Scott: Wow. It’s incredible.
Jessica: So anyways, so that’s kind of the neighborhoods just to give you an idea of that. You know, we don’t really need to talk too much about population growth it’s been crazy. I know that in and around Nashville I mean, I think, you know, the numbers are pretty insane. I want to say that it was like 30% in the last 10 years and it will continue to grow. So, you know, a lot going on there. And then, you know, what are the economic drivers? So a lot of times people will say, well, okay, so Nashville is just music, right, like that’s all it is.
Scott: Right, yeah. Oh, yeah, country music, of course.
Jessica: Country music. Country music is what it’s all about. Well, you know, even just looking at music and entertainment that is actually not…it’s not just country. I mean, there’s every musical genre represented in and around this town. And it’s known very much as well there’s, you know, the 40 highway that is called, you know, Music City Highway.
It goes from Memphis which is also very big for blues and everything, you know, that comes out of Memphis into Nashville. So while music and entertainment is a huge deal interestingly, the largest comes from manufacturing and the healthcare world, right? Like, there are major healthcare employers that are here and that has historically been one of the biggest drivers in and around this area.
So you can see how many jobs on the slide are sort of attributed to that, right?
Scott: Right, what, 167,916 direct jobs. 67 billion annual economic impact for health care management, right?
Jessica: Forty-one thousand jobs for music and entertainment, roughly $15.6 billion economic impact. You’ve got 86,000 jobs for manufacturing. I mean, we’ve got big manufacturers they’re everywhere, right? You’ve got a ton coming on to Jackson, you’ve got, you know, Nissan plants and copper plants, and, you know, food plants.
I believe Kellogg is down in and around Jackson, Tennessee. So there are just some really, really big manufacturing jobs that are here, you know, making almost $70 billion
Scott: You have tourism and hospitality. And I’m literally going to a conference, the IPA conference in September, which is in Nashville. And so that right there you see there’s people that come and they want to enjoy the music, they want to enjoy…you know, they go to the conferences what have you, right?
Jessica: Yeah. And because of that, there has been a lot of building and there’s a brand new convention center that’s just absolutely epically beautiful. And one of the biggest issues in and around Nashville at the time was there really not very many hotels. Like the hospitality build and the hospitality market here has been insane just trying to bring on enough rooms to facilitate how many travelers we have coming here, right?
I mean, between…you know, we always call it…those of us that live here, kind of call it [inaudible] town because you’ll go downtown, and it’s sort of bachelorette party and bachelor party central. And so we call it like the woohoo girls on different…you know, there’s like mobile transportation, entertainment, right and all these different things. So there’s that piece but during the week, it is almost entirely business travelers, right?
People are here for conferences, people are here for meetings, people are here for whatever. But it’s a great place to do that because you have this fantastic mix between, you know, like your business setup with your conference center, but then also music and entertainment and restaurants as well.
Scott: Right. And just looking at this, I mean, it’s jobs, it’s jobs, it’s jobs, and where there are jobs people move, and where people move they need housing.
Jessica: That’s exactly right. That’s exactly right.
Scott: And that’s where multifamily comes in.
Jessica: And, you know, it’s interesting because our growth has gotten so big at this point. You know, when people are asking like, why multifamily? Why has multifamily exploded so much in and around Nashville, Davidson, Murfreesboro, etc. And part of the reason is because we got such a massive inflow of people, so many companies and corporations that are coming here, that, of course, the market as you’re seeing is going to go up for your single-family homes.
And then suddenly, single family becomes a little bit less affordable, right? And so multifamily becomes a great alternative to that. And that has driven a large amount of interest, of course, into multifamily. And then also driven rent growth pretty insanely, as well. And, you know, we’ve got a little bit of a slide about that.
So yeah, so just, you know, a little bit more about the market. I mean, this is…anybody can come and find this on, you know, the Chamber of Commerce. But you can see that some of the biggest employers, Vanderbilt health, HCA…
Scott: General Health.
Jessica: General Health, St. Thomas Health. Like, there’s a lot of health, but then there’s also a lot of like Nissan North America being a really big contributor. And then hospitality, right, Dollar General is here, we’ve just got a lot…
Scott: And don’t forget about Amazon. There they are, 4,000.
Jessica: Well let’s not talk about Amazon, and we’ll not forget about Oracle building, you know, a $1.3 billion campus on the river. You know, it’s becoming kind of a tech and, you know, corporate hub as well, it really is, it’s just amazing. So, you know, we’ll talk about rents in a second we’ll come back to that. Let’s go back to this.
So like all this leads to…you know, I didn’t necessarily put up a whole bunch of charts and graphs, with how much has been sent or spent. Or, you know, I didn’t want to bore you guys with too many charts and graphs, especially for the people who are listening in their car. I’m also a podcast listener in my car. But I wanted to just kind of talk through how much we’ve seen in the last even five years from a rent growth perspective, right?
Like, we are seeing massive, massive numbers. I think in the last 12 you know, year over year at this point in Nashville, it’s roughly 13.5% rent growth. And then if you get into some of the surrounding areas like Williamson County, Franklin, and Williamson County saw like 22% growth over a 12-month period, like it’s been insane.
And so I think that according to costar these days, I think we’re going to finish out this year at about 9.4%. But that was after like a year before you’re paying 13% it’s an insane…it had seen roughly 16%, 2021 to end of 2021.
So it’s crazily growing. And it’s going to be interesting to see because there are so much construction that’s happening downtown right now, right? We’ve got so many units that are coming on so there’s going to be sort of this heavy supply. So it’s going to be interesting to watch and see kind of what goes on in and around downtown. And if where we start seeing a lot of that growth is into some of the surrounding areas such as Wilson County and Maury County, where a lot of the plants are being built, right?
Like, these are big manufacturing plants and so housing kind of like grows up in and around there.
Scott: Right. And then just looking at this, you know, chart you have here I mean, you got 2017, and you look at 2022 and that’s that hockey stick right there.
Jessica: Right, it is absolutely the hockey stick. And so that’s been really, really fantastic. But it’s also been extremely attractive to, you know, a lot of people that are looking at this area as a place to buy and to invest in, right?
Scott: Right. And I’m curious if you could I guess just whether anecdotally or what you’ve seen. In terms of a lot of this multifamily development are these all, you know, ground up, or is there lots of value add that’s also happening where folks are, you know, acquiring things and updating them may be adding to that, you know. What’s the sense or is it all the above?
Jessica: Yeah, I don’t know, if I could give you an exact…I mean, don’t quote me on what the exact, you know, mix would be between those two.
Scott: Sure, of course.
Jessica: But, yeah no. I mean, the good news is Nashville is relatively old, right? Like, you will drive around and there are, you know, Civil War battlefields all over the place, right? So it’s been developed for quite some time for, you know, a few hundred years or a couple hundred years. And so there is still a bunch of things that are on the market that are available from a value add perspective.
I have seen interesting in the single-family space, a little bit more of people sort of purchasing the land for the land, tearing down whatever is on it, and building up onto it, right, because in certain times, it’s easier. But in and around…it’s part of the reason why I pulled this back up. In and around this kind of southeast corridor. And for that matter, things in and around, you know, sort of surrounding Nashville, there are still places that need or that have the ability to do sort of that value add.
There’s a lot coming on but there’s still a lot that was here to begin with, right?
Scott: Right. So there’s opportunities in kind of both areas because I know some folks, you know, they may be chasing…they like ground-up development for the potential of greater returns, but then there’s more risk there as well. So that’s interesting.
Jessica: Well and it’s longer term, right like, you have to remember…
Scott: Right, well that’s the other point.
Jessica: …that development is really amazing to invest kind of up front, but you’ve got to build it. Well, first, you got to like, you know, get all of the, you know, planning and everything done, right, then you’ve got to build it, then you got to lease it up. And then typically, it’ll end up being sold, right? And so it’s a little bit longer of an investment strategy, right, because you got to build it and, you know, once you build it, they will come.
But, it’s just a little bit longer than say your value adds which, you know, it’s already built, it’s already there, it’s just a matter of going in and kind of re-doing everything that’s in there and, you know, putting your CAPEX on everything.
Scott: Right, of course. So, okay, I’m curious to know about the transportation aspect maybe diving into the metro area. You know, how that all functions here and especially for folks listening or watching on YouTube, to kind of understand, okay, we’ve sort of identified where a lot of these areas are, but how does that connect with the highways, the public transit, the airport, and all that good stuff?
Jessica: No, it’s a great question. And, you know, for that, for those of you that are watching versus listening, why don’t I pull up a little Google Maps and kind of bring this over for us to look at? Let me know if you’re seeing our good friends at Google.
Scott: There we are.
Jessica: There we are. Okay. So one of the things that’s extremely unique about Nashville is you’ve got three major interstates that feed in and through and around, okay? So you have I-24 that’s your…I mean, they call it east to west. Although it kind of makes me crazy because I look at it as kind of a north, it’s like a north and south, right, like I was…
Scott: Sure, for sure.
Jessica: I was like, yeah, I was like…then you’ve got I-40, which is a major trucking corridor, right? Like that’s what takes you across. And then you’ve got I-65 that kind of goes north and south, okay?
Scott: Is 840 there kind of a pseudo outer belt?
Jessica: Yes. So it’s an outer belt, right so you’ve got kind of a loop. It brings you down into connecting a lot of these new developments that are kind of coming in and around. This is all Williamson County and so it’s starting to connect some of this upper…because this is the airport up in around here, right? So it’s connecting some of these, you know, east to west corridors versus going right through downtown.
Because this literally goes right through downtown.
Scott: Got you.
Jessica: Right, so you can kind of go around. And also it connects some of the other areas as well like you can get down into Murfreesboro if you’re needing to get around. So we have, you know, that we have…you know, one of the things that is also a big driver here is the fact that we are…Nashville airport…the claim is that you can basically get to roughly 70% of the U.S., right, like major markets in two hours or less by plane, right?
Now, as you and I were talking about before that may not be today. So if anybody’s just flown lately has seen, you know, what’s kind of been going on in that realm. But typically, you can get to roughly 70% of the major metros in two hours, okay? Now, if we were to look at Nashville from a transportation perspective, that is one area…
I mean, we do have like a commuter train that comes out into some of these areas out west. I couldn’t tell you a ton about it because it’s not…from what I’ve seen it’s just not really used. A lot of times a lot of the people that live inside the city, it’s a very walkable city, like a very walkable city, or a very short cab ride or Uber ride into other parts, right?
Like you might not walk from downtown proper in East Nashville, but that’s like a…you know, it’s like a 5-minute ride 10-minute ride depending on traffic, right? We do not have any…okay there’s, of course, a bus system. To my knowledge unless it was built without me knowing there’s no subway system or anything of that nature, which is kind of a bummer.
I kind of wish that that would have been put in, you know, years ago. But again, because this downtown center is so incredibly walkable, I think it was just kind of like an afterthought. But it’s really easy to get in and around. So if you’re working downtown, right, you can hit, you know, three major highways to get home. And then…or excuse me three major interstates to get home and/or some of these long corridors that can take you north or south as well, right?
41, 31 East. I live down here in Williamson County, I can take 41 A straight down from downtown. I can literally stay on the same road to go from my house straight into downtown. which is cool.
Scott: Right. And Have you seen…you know, as this population has grown, you know, have the roads grown with it? Are they, you know, adding new on-ramps, widening highways doing all of the types of things that you tend to see in cities when you have this kind of influx of car traffic and all of that?
Jessica: Yeah, so I think where we were lucky is I think that there was a lot of infrastructure in Nashville that was really well-done sort of at the beginning, at least in the, you know, outside of city downtown, right? It always cracked me up when we moved here in 2006 because I was driving to our office…you know, I lived in and around downtown, right?
I lived right here in Sylvan Park, right, super hip, Sylvan Park. And I was driving down to where Nissan North America’s headquarters were, which was down here in Franklin, right, in Cool Springs. And I remember getting on the 65 and going why is this thing like eight lanes across? There is nobody on this freeway like I don’t understand.
I mean, to me, it seemed like it was huge. But it was like they absolutely anticipated the growth that was going to happen. And so that has made…you know, people may have differing opinions on this, like, depending on where you live. But I would say, you know, having come from California, having lived in, you know, several different places in the country there is traffic here, but it’s not traffic like you have thought of traffic, right?
Like you might see in Atlanta or Southern California or…
Scott: Or Chicago.
Jessica: Or Chicago or anything like that. I mean, you’re not sitting on the road. We always say when we’re looking at properties down here in Williamson County, you can basically commute into downtown. So you can live in the burbs, right, like down here, down here, down here. So you can live down here in the burbs, okay, and drive in to downtown in roughly 25 minutes. Which is nothing.
Scott: I mean, that’s incredible. That’s incredible. And that’s getting downtown whether it’s for work, for entertainment, for, you know, whatever, just going sightseeing, right?
Jessica: That’s exactly right. So like, I’ll go up into Nashville to have lunch with somebody, and it takes me…I mean, and I live out here. I live in this Nolensville area, which is kind of a newer development area. It was historically very, very rural but there’s a lot of building that’s going on here now. Which I love because I see cows on my commute, or to pick up my children from school, which is very cool.
You know, coming from California and zero lot lines and everything that we’ve seen there like, it’s just nice that there’s still a lot of green space. But yeah, so that is really nice. I will say that I’ve seen a lot of road work that’s being done out west, right? Like in between Nashville and Memphis there’s a ton of highway expansions and things that are happening over there.
And then we’re also seeing a little bit of development down here. So they are able to handle it for the most part. I think if there’s anywhere that I’ve seen do a great job of it it’s here. Don’t quote me on that any of the infrastructure people might have a completely different opinion. And maybe I’m a bit spoiled, having seen how bad it can be right? Like, live in Atlanta for a year, it’s a nightmare, right?
It’s a nightmare. It’s a nightmare. I mean, they have a million, you know, highways and byways that go in and around, but you’ll sit on the road for three and a half hours. So I feel like from that perspective, it’s really well done.
Scott: So there’s obviously so much growth going on, there’s so much multifamily development happening, could you speak a bit to your experience and understanding of the regulatory environment in Nashville and around Tennessee, when it comes to, you know, multifamily? When it comes to, you know, housing.
Is it landlord friendly? Do you get a sense for these developments that many of them are going very smoothly, you know, from what you see, you know, there’s always these stories of there’s a battle or something like that. What’s your sense there?
Jessica: I can’t speak too much to, you know, any of the challenges or anything that happens from a development perspective, that’s not really the side… We’re kind of like on the value add side. But I will say that it can’t… You know, I would surmise that it can’t be that difficult to do because there is, you know, we literally have a crane count here.
Scott: Right, all the cranes in there.
Jessica: All the cranes that are here. Like there’s so much being built that clearly, it is very friendly for development, it’s also extremely friendly for, you know, corporations to come in. But when it comes specifically to sort of regulatory requirements as a landlord-friendly state, I would say it’s a very landlord-friendly state, right? You know, eviction rules and things are roughly for…like non-payment lease violations are 14 days, right, 30 days for illegal activities, you’ve got no limits on rent increases, right?
Like, in fact, my understanding is that there’s law, there’s state law that prohibits jurisdictions from actually passing too many rent control ordinances. So you know, there’s a lot of restrictions so it is very, very landlord-friendly from that perspective. And then, of course, you’ve got visual clutter and things like that. And there’s zoning laws.
It’s not like places like say Houston, right, where you can have a house, and then you can have a car repair garage, and then you can have like a school, and then you have like four more, right? There is definite zoning sort of planning that goes on. But from what I’m seeing, it’s been extremely landlord friendly.
Scott: Right. Right. And it seems that there’s maybe an embrace of this growth from the regulatory side as well?
Jessica: Well, yeah. I mean, the bottom line is there are people moving here, and so we need to put them in…they need to live somewhere, right? So we need to build them houses, or we need to build them apartments to live in. And so I think as the state continues to give as many incentives and things that it does for corporations to move here, the infrastructure around that has to grow, right, like the housing has to grow.
I think that that’s why it’s been such an attractive market for so long because there’s scarcity, right? Like, there was not enough housing, you know, in and around here to handle all of the growth that we’ve had. And so that’s why there are so many developments that are going up right now, right, right now.
Scott: In terms of all of this as well do you have a sense of what cap rates have done kind of in the Nashville area and surrounding areas, I mean, we have so much compression across so many different markets. Now, some folks are thinking, well, maybe there might be some expansion depending on the market.
What’s Nashville been doing there?
Jessica: So they’ve been kind of steadily decreasing in the sense that, you know, if you would have looked at like 2012 I mean, I think we’re at like a six-and-a-half cap, right? Like, now I think the…let me give you the exact number. I think our market cap rate is 4.5, right, just overall. So it’s definitely been compressing a little bit as there’s been just a lot of valuation that’s happening here, right, like, the property values have kind of gone insane.
And so, you know, we’ve seen sort of this reduction or this, you know, compression happening just in and around this area.
Scott: Sure, sure. So competition for deals, but many opportunities to be had, right?
Jessica: Right. But it’s interesting. So one of the…you know, I know you and I were talking before a little bit about, you know, is the secret kind of already out in Nashville? And I would say yeah, it is. You know, one of our biggest challenges at this point is so much institutional investment coming in, right?
Like when you’ve got your, you know, top two or three biggest, you know, acquisitions happening by BlackRock, right, like happening by these big institutional investments it’s kind of…I think that that’s what’s pushing some of these cap rates and some of these asking prices and things that we’re seeing.
Scott: It just puts the spotlight on there in an even bigger way.
Jessica: It absolutely does. It absolutely does. And then it also values things in a place where it’s not always the easiest to be, you know, like a syndicator in this market, right? Because sometimes you cannot make the numbers work for what, you know, an institution will come in and pay for it, because they’re really just looking at as, you know, playing the appreciation game and parking money and whatever versus what we as syndicators have a responsibility to do which is to make sure that any property that we’re investing in, we’re making our investors money, right?
And so that’s been a bit of a challenge. It doesn’t mean that I have lost hope. It doesn’t mean that I have stopped looking. You know, we’re underwriting my partner and I are underwriting constantly, right? But we’re looking at sort of different areas now, instead of downtown proper, just partially because of all the construction and everything that’s going on, and looking at some of these expansion areas as well.
Scott: Right. So you’re looking, okay, you know, downtown’s happening, there’s lots of development that’s going on there. But that’s why, you know, we were talking earlier about, you know, all the different areas that are outside of Nashville, but still so connected to Nashville, and the job markets and all of the things happening there.
Jessica: That’s right. And again because we’re so commutable, there are so many different places that you can go and still get in and commute international. And, you know, I always talk a lot about Williamson County because I’m down in here, there’s a ton of, you know, employers that are down here as well.
Nissan North America, Mitsubishi, HEA down here, there’s plants going in and around down here in Sumner. So there’s a lot that’s happening down here and there’s still land and still places to sort of acquire in and around there. So we’re looking more at, you know, sort of these tertiary areas, only because…you know, just as this market is so incredibly hot, right?
And also, like, all the development is…where the majority of the development is happening is in and around downtown. And so there’s going to be, you know, kind of a flood of inventory that happens. So just kind of looking outside areas where there’s still going to be that urban sprawl is, you know, something that’s looking very interesting to us.
Scott: From your perspective, do you maybe have concerns or it sounds like you’re kind of hedging against potential being overbuilt in the downtown area? Is that kind of when you look at it?
Jessica: I don’t know if it’s going to be overbuilt because I think that there’s a really high demand and I think multiple people have a different definition of that. Obviously, all developers that are coming in and building do not think that it’s going to be a problem. I don’t necessarily think it’s going to be a problem because I don’t foresee the inflow of companies, manufacturing facilities, and things slowing down, per se.
I think that this is just a very…it’s a great place to live. From a state perspective, it’s a fantastic…you know, it’s fantastically like company friendly, like corporation friendly. And so I don’t necessarily see the inflow slowing down. But it’s more for if you’re a value add type of investor, all of that’s going to kind of be like flooding, makes it a whole different game, right?
You’re just investing in something different. So you’re investing in, you know, $4 billion worth of new development, which is a little bit different than, you know, some of these other, you know, older properties and things that need to be brought around, right?
Scott: When you’re talking from the value add side, you know, what types of properties do you tend to see? Like what existing, you know, value add opportunities are there in Nashville or are we talking just, you know, 10 units or there larger, you know, what’s their own average? Because I think every area in the country, you know, here in Chicago, we have a very specific type of, oh, yeah, these are old Chicago buildings, these are old Chicago multifamily buildings, this is how it is.
What’s the state of that in Nashville?
Jessica: So it’s interesting. So we have…I’m going to move it down so I can see you a little bit more. We have a lot of…there’s the 50 to 100s and then there’s the 150 and above, okay? Like, I would say, there are some really, really big properties that have come on.
Like, for example, there was a…I think it was like 400 units that were sold in Murfreesboro recently, right? So there are some bigger new development properties. A lot of the value ads that we’re seeing, I have seen as, you know, 150 doors or less, or 100 or less. The ones that we were looking at most recently in and around Southeast Nashville was like 88 units, right, 80 units.
So I guess it depends on where you go. You can find if you’re looking for the smaller properties, which is actually something that I’ve been looking at a lot more lately, right? You can find, you know, 22 door, 25 door, 30 door buildings in some of these tertiary areas from downtown.
But the majority of what’s being built are big, big, big properties, right, like, hundreds of doors.
Scott: Right. And again, that’s where…you know, as I was saying earlier, the economies of scale really kind of coming to play.
Jessica: That’s right. So like, if I look at some of the most, like, significant sales that have happened in around 330 units, 360 units, 436 units, 328 units, 333 units, right? So there’s a lot of big ones that are selling, but of course, those are going to be the most significant because they’re going for, you know, $128 million, right, that type of thing. But you can still find some of the smaller properties as well.
A lot of these are ones that have come on, whether in the last 3 years or the last 10 years or so, right? So we’ll still find some of the properties that we’ve looked at and, you know, put ROIs in the most recent months were built in the late ’70s, early ’80s, right? So solid B properties B or C properties, right, in B areas, or B plus areas that are sort of up and coming, right?
Scott: That makes sense to me.
Jessica: Does that answer your question?
Scott: Yeah, that does. That does. I’m curious, you know, we’ve talked about a lot of different things. Are there any maybe upcoming whether they be citywide projects, you know, announcements from a company of, you know, moving operations or adding jobs. Anything big that’s on the horizon for Nashville that could impact the multifamily market?
Jessica: So what everybody is sort of talking about what you hear on the news every day…and if anybody who’s interested, they can actually look up Crane Count, like Crane Count Nashville, like, there’s literally a website that talks about all these big projects that are happening.
Scott: We will include a link to that.
Jessica: Yeah, if you’re really curious about what’s going on here. I mean, for a while, it was kind of a joke like there was on the morning news like let’s count how many cranes there are, right? Like, how many cranes are in downtown? But what really everybody’s sort of talking about right now is a couple of things specifically to Nashville is the east bank is…Oracle is building a $1.3 billion megaplex on sort of the east bank along the river.
So that is a real big conversation that’s happening right now. The other thing is this Nashville Yards, which is building and it’s got Oracle and some MGM and Pinnacle that are kind of moving in there. And then the other big thing that people are talking about is the Facebook data center in Gallatin, right? So you’re seeing a lot of tech coming in, it’s a real centrally located place. So yeah, that’s kind of what I’ve heard most about recently.
Scott: So clearly, a lot more on the horizon for Nashville and we’re talking about all this growth. I don’t see anything that suggests that’s just going to subside.
Jessica: Same. It’s the same. So when you said to me, “Hey, how do you feel about all these new units coming on board?” I don’t foresee the inflow slowing down. I mean, it’s possible, right, we’re all going into whatever is going to happen with the market. But this is just becoming such an attractive place for companies that realize that they can access some of the best education, right, we’ve got Vanderbilt University, TSU, we’ve got UT.
We’ve got like, all of these incredible universities so they can attract some of this young talent. But also, it’s where any of their older executives or families, it’s a great place for families to live as well, right? So if you’re looking for a place to move your company that’s also tax-friendly from a corporation, from a worker perspective, your cost of living is much lower than you’ve seen in…I mean, gosh, you’re in Chicago, right like…
Scott: Oh my gosh, yeah.
Jessica: …it’s one of the worst right? And so there’s a lot of people just coming down because it’s…especially now that we live in this, you know, this virtual world, right? So much of the world is virtual that people can live where they want to live. And I don’t foresee that slowing down here in Nashville.
Scott: What would you say to a potential investor who’s looking at a deal in Nashville, and they’re trying to evaluate, okay, is this deal attractive to me? You know, what’s good about this? What might you say they should consider about Nashville or keep in mind that maybe we haven’t already covered?
Jessica: So I think…you know, look, because I’m an investor, too, right? Like I’m looking at deals [inaudible] to Sunday. And so I would say, you know, keep in mind, all of what is coming on the market in the next couple of years. Understand that, you know, the growth that we’ve seen, I don’t know if it can sustain forever at that…
Scott: At that level necessarily.
Jessica: At that level, at that level, right? And so just be cognizant of that. But I would also say that, you know, the last few years, if you’ve been selling properties in and around here, and not just here, but everywhere, right, like you’ve been making out like a gangbuster, right, the market was really an incredible place. And so just take a minute to really…I would say do not doubt your underwriting if you become a strong underwriter, like be conservative with it and stick to that.
Because we are seeing that…you know, there’s a lot of things that are sort of priced well outside of what a syndication would be great for, right? Institutional Investors may love it and that’s awesome because they’re parking, but, like, just pay attention to your underwriting, right?
I think that we’re going to be getting to a point where sellers and buyers in this market are a little bit closer, right? Because right now sellers are like, okay, it’s top dollar for everything like no matter what, like I’m going to charge…
Scott: No. I’ve been getting this. Look at those cap rates, yeah.
Jessica: Yeah, I can charge $500,000 a door here, right? And I think that what the market is doing right now is it’s sort of like leveling itself a bit. And so buyers, especially syndicators that are down here and need to see where that, you know, value-added things come from, like, I think we’re going to start seeing a little bit more, you know, leveling.
I know that we’re seeing it already in various markets in the single-family space, right? Like, I don’t know if you watch some of these things, but, like, price reduction is happening left and right now, right? And so…
Scott: I was reading about that just this week we’re starting to see that certainly in single-family things just going a little bit.
Jessica: I mean, it’s just slight, right, we’re not seeing a 2008 or anything again, right? Like, Detroit just being, you know, practically abandoned. I don’t foresee that. But I think that what we’re seeing a little bit more of now is that if you were selling in the last couple of years, you did awesome, right? And I think that people are…that expectation might still be very high.
And we’re just going to kind of see the buyers and the sellers come a little bit closer to each other. I don’t foresee this area necessarily losing value, you know, over the next 5, 10 years, I don’t know. And watch we’ll look at this in five years from now and you’ll be like, “Jessica, you’re such an idiot.”
I don’t have the crystal ball, right? But, you know, just looking at it, I don’t know if that growth can sustain, you know, forever, as we’ve seen so far, right?
Scott: Right. But that doesn’t change the fundamentals that we’ve been talking about on this whole episode for Nashville. And I think it’s just something though… a really good point Jess, to keep in mind, that investors should keep in mind is don’t assume that it’s all going to keep growing this way. But, you know, be choosy and look at the deal and consider those aspects, you know, consider the assumptions, have those conversations that you need to have.
But I mean there’s just so many great signals still for Nashville out there.
Jessica: There is. And look when…you know, my partner is our main underwriter. And when we underwrite we underwrite very conservatively, right? Like I would rather, you know, under promise and over-deliver to my investors, right? Like, here, this looks great, like, you’re going to want to do this anyway, but I’d rather be pleasantly surprised if it goes higher.
But I want to make sure that whatever we acquire is going to give them a really great return. Because I think of all my investors very similar to myself, right? Like, I want to put my money in a place that’s going to, you know, grow and is going to provide me with great returns, okay?
And so I would just look at…you know, don’t assume that your rent growth is going to be 17%. Just don’t assume that over the next five to seven years that that will be exactly what it is. Be realistic with it and I think that, you know, hopefully, everybody does well with that, right?
Scott: Yeah, I think that’s fantastic advice and a good place to sort of wrap things up. You know, whether we’re talking about Nashville, or you’re looking at a different market, a different deal, all things to keep in mind. Jessica, I want to thank you so much for joining me on the show today, walking us through an exciting market, which has so many developments going on and a lot of interest for multifamily investors.
So hopefully, this has been a great primer, you know, for that. And if folks want to find out more about what you’re working on, and your guys’ projects, where should they connect with you, where should they go?
Jessica: Yeah, by all means, Cassica, LLC, I think you’re going to probably put the link up.
Scott: I will drop a link in there.
Jessica: Drop a link in there, I’ll give you all the…you know, feel free just to give me a call. I love having conversations with people , especially from, you know, other markets. And, you know, let’s just talk it through like, what are you looking at? What are the kinds of things that interest you? And would love to just have a conversation. So Jessica Grover, nice to see everybody. Thank you so much.
Or here, everybody hear me. And at Cassica, LLC. Yep.
Scott: Fantastic. Thanks again.
Jessica: Thanks, Scott.