Mike Stewart Examines Local Issues for Out-of-State Real Estate Investors to Consider before Doing a Deal in Nashville

February 8, 2019
National Real Estate Investor

In an article for National Real Estate Investor, Bass, Berry & Sims attorney Mike Stewart examined key issues that out-of-state commercial real estate developers, investors and sponsors need to be aware of prior to coming to Nashville. Given Amazon’s recent announcement of selecting Nashville for its Operations Center of Excellence, and the relocation of AllianceBernstein’s New York City headquarters to Nashville, interest from out-of-state investors in Nashville and Middle Tennessee continues to climb.

While there are many things to consider when considering a project in a new market, Mike outlines the following five key issues for those considering making a move to Nashville:

  1. Tennessee Franchise and Excise Tax – The state’s franchise and excise tax often surprises unaware out-of-state investors given Tennessee’s tax friendly reputation. The tax is imposed on all entities doing business in the state that provide their owners with limited liability protection.
  2. Incentives – In Nashville, payment in lieu taxes (PILOT) must be approved by the city’s governing body, and tax increment financing (TIFs) must be approved by either the Metropolitan Development and Housing Agency or the city’s Industrial Development Board. Investors should also be sure to consider projects in the city’s different opportunity zones.
  3. Construction and Development Issues – In Tennessee, a potential lien attaches at “visible commencement of operations,” which is the first actual work of developing the land or the first delivery of materials to the project site. Additionally, developers must ensure that their contractors, subcontractors, architects etc. are licensed in Tennessee.
  4. Zoning – Much of downtown Nashville is zoned in Downtown Code, which permits broad spectrum uses and does not include a parking requirement. However, the code divides the downtown area into a number of subdistricts, each having their own distinct design and building regulations.
  5. Lending – Given their familiarity with project sites and the local market in general, as well as their sophisticated lending practices, local banks are more agile and responsive when presented with an appropriate lending opportunity to finance a project.

The full article, “Considering a Deal in Nashville? Five Issues to Keep in Mind,” was published on February 8, 2019, by National Real Estate Investor and is available online.