A private investment firm is cutting its losses and heading for the exit ramp after selling off two of its downtown Nashville, Tennessee, properties for just a fraction of their earlier acquisition price tags.
Within a less than weeklong span, Connecticut-based Wheelock Street Capital finalized deals to offload its Philips Plaza and a two-building office portfolio across a pair of transactions that represented a combined loss of about $120 million, according to property records. While office landlords are eager for valuations to bounce back from pandemic-era lows, the Nashville dispositions underscore the deeply rooted challenges many will face in landing prices that come close to resembling their own initial investments.
The duo of Wheelock deals, closed in the final days of 2024, could hint at what's to come in the year ahead as buyers look to take advantage of deeply discounted listings and property owners are eager to get them off their books.
The firm sold the 20-story tower at 414 Union St. to Nashville's Evelyn Capital Group for $17 million, just a fraction of the $111 million, or $255 per square foot, Wheelock paid for the roughly 444,800-square-foot building in 2019. The Philips Plaza tower at the time was about 95% leased, according to CoStar data, a figure that has since fallen to the property's current occupancy rate of about 55%.
Wheelock also sold the two buildings at 300 and 404 James Robertson Parkway to an undisclosed buyer as part of a $15 million portfolio deal just shy of 230,000 square feet.
The firm paid $33.52 million in late 2019 to acquire the NorthCap Center building through a joint venture with Commonwealth Commercial Partners, according to CoStar data. Several years later it scooped up the neighboring Court Square building — which remains fully leased — for $8.25 million with plans to overhaul the two buildings into upgraded office and residential space.
However, against a backdrop of rising interest rates and a worsening office market landscape, those plans were never realized.
Neither Wheelock nor Commonwealth immediately responded to CoStar News' requests for comment.
Nashville turmoil
The combination of depressed demand, stagnant leasing and the ongoing impacts of flexible work has helped push the national office vacancy rate to a record high of nearly 14%, according to CoStar data. Tenants collectively handed back upward of 65 million square feet last year, boosting the total to more than 210 million square feet of move-outs since the start of 2020.
Those pandemic-induced factors have been exacerbated for many landlords across the country, and some — especially if they're facing maturing loan deadlines or mounting financial distress — have been eager to offload their troubled properties, even if it means closing a deal at a deep discount to their initial investments.
Downtown Nashville, in particular, has taken a hard hit in recent years as its office vacancy rate has more than doubled since 2020, according to CoStar data.
An active construction pipeline, coupled with tempered demand and a spike in sublet listings, has pushed the area's availability rate to nearly 24%, according to the data, and high-profile moveouts among companies such as AT&T are expected to further complicate downtown's recovery.
That turmoil has translated into a challenged pricing environment for Nashville landlords looking to sell off their properties. Only $200 million worth of deals have closed over the past year, according to the data, about 26% less than downtown's annual average throughout the past decade.