Understanding the East Bank deal financing
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A rendering of the East Bank development. Photo: Courtesy of Metro Planning
Hotels. Residential buildings. Restaurants and bars. Nashville's vision for the East Bank figures to make it one of the most valuable neighborhoods for real estate in the city.
Why it matters: Mayor Freddie O'Connell's team, led by chief development officer Bob Mendes, negotiated an agreement with development firm The Fallon Company that would see the city get a share of those rising land values.
How it works: Under the agreement, Metro would receive annual rent based on the appraised value of the properties Fallon oversees.
- Metro would get 4.5% of the appraised value for commercial buildings each year. The city's share would be 4% for residential buildings. For example, a $14 million residential building would bring Metro $560,000 in annual rent.
- The rent will escalate by 2.5% annually under the proposed deal.
- If Fallon sells a building in the future, which is likely, Metro will receive 1% of the gross sales price of a commercial property and 0.75% of the gross sales price of a residential building.
Determining how to pay for surrounding roads, sidewalks and extending the nearby pedestrian bridge was a major point of the negotiation.
- Of the $147 million in infrastructure costs over the life of the project, Metro is on the hook for $6.85 million, according to the deal.
- The remaining $140 million will be paid by Fallon and by the Tennessee Performing Arts Center, which plans to build a new facility on city-owned land near the new stadium.
State of play: Metro Council will begin considering the development agreement at its meeting Thursday night. It's likely the development plan will pass the first of three readings and then be deferred until April.
- Unlike the Titans stadium deal, which was a slugfest in the council, there seems to be momentum for the development deal to pass with wide margins.
Between the lines: A key factor in council support is Mendes' role as lead negotiator. During eight years as a council member, Mendes, an attorney, was a vocal critic of the stadium and other economic development deals.
What he's saying: Metro Councilmember Sean Parker, who also opposed the stadium deal and who serves as the chair of the council's East Bank committee, tells Axios Mendes has avoided the "pitfalls" of earlier city development deals.
- "I'm still reading through the agreement, but there are no red flags yet that are jumping off the page."
- Parker says council members appreciate that Mendes sought their feedback before the negotiation was finished. Earlier this year, Mendes updated Parker's committee on negotiations before they were concluded.
- "It's just a different approach. It's a more collaborative approach. I think it's a result of his experience on council and dissatisfaction with some of the ways these things have happened in the past and trying to make it better," Parker says.
🎭 Council is also scheduled to consider another key aspect of the East Bank plan: a memorandum of understanding to build a new TPAC center.
- The city will provide the land and discounted rent in exchange for TPAC covering infrastructure costs and fundraising for the construction of its center.
- The state has already committed $200 million and is expected to contribute more to the $600 million fundraising effort.