February 12, 2016
Nashville Business Journal
by Adam Sichko

One of the biggest office buildings in Williamson County is for sale. It’s an emphatic reminder of how lovely it is to be a property owner in the region’s real estate market, and also the historically low supply of office space available to rent.

Bids are due this month for Cool Springs Commons, at 7100 Commerce Way in Brentwood. The building boasts more than 300,000 square feet, weighing in as the second-largest office building in the county not owned by and dedicated to one company ( per this research for our Book of Lists).

The sale is sure to grab the interest of investors: all but 0.01 percent of its space is leased. Community Health Systems Inc. (NYSE: CYH), which owns more hospitals than any other publicly traded company in the nation, occupies more than 60 percent of the building in a lease that lasts for five more years. The building could become just the latest Middle Tennessee draw for newcomer, out-of-state investors looking to dive into this market — particularly Williamson County, which is the fastest-growing county in the state and one of the 20 wealthiest in the nation.
This is just the latest office deal to surface over the past few months. The current owner of Dover Centre, an office complex ranking among the 10 biggest in the county, is in the final stages of selecting a buyer to negotiate with. The Cool Springs Life Sciences Center, which is just 60 percent full, sold for $22 million. Insurance giant Northwestern Mutual paid $45 million for two Brentwood buildings in December, and two athletic facilities are being pitched to developers as candidates to convert into office space.

Cool Springs is established as the region’s premiere hub for corporate and regional headquarters. Cool Springs Commons presents a twist, providing mid-tier Class B space that is primarily geared toward back-office functions (commonly including roles such as human resources, IT and accounting).
EIther kind of space is rarely available these days. Less than 3 percent of Brentwood’s office supply is up for grabs, according to stats from real estate brokerage firm Cushman & Wakefield. That already minuscule rate shrinks even more when considering the neighboring Cool Springs commercial hub, dropping to less than 1 percent.

Cool Springs Commons generates annual net operating income of $4.5 million, according to an offering memorandum obtained by the NBJ. Average rent is $2 to $4 per square foot below present-day market rates, which means the prospective new owner has room to generate even more money, according to Chris Sadler. He is president of Allegiancy, an asset management firm in Richmond, Va., which is offering the building for sale.

“Allegiancy is bullish on Nashville and has other assets in the market,” Sadler said in a statement to the NBJ. “Cool Springs Commons was purchased in 2006 based on a 10-year hold, and has met its investment objectives.” The purchase price at that time was roughly $40 million, according to public records.

Allegiancy has retained Cushman & Wakefield to broker the sale. Bids are due Feb. 26.