Local Investors Bought Discounted Nashville Office Building

Two local investors are the buyers who picked up a downtown Nashville office building this week at a steep discount.

Byran Fort and Taylor Preston bought the 20-story Philips Plaza building for about $39 per square foot, a dramatic 85 percent drop from the $255 per square foot Wheelock Street Capital paid for the property in 2019, the Nashville Business Journal reported.

The transaction was one of the most significant discounts in recent memory for downtown Nashville real estate. Philips Plaza, built more than 40 years ago, features 435,000 square feet of office space and tenants such as health-tech company Philips, coworking provider Industrious and law firm Sherwood Boutique Litigation.

Although the building resides in a prime downtown location, its occupancy rate has fallen to just 50 percent, significantly reducing the property value and resulting in a hefty loss for Wheelock, led by managing partners Jonathan Paul and Rick Kleeman.

Fort, an office leasing and investment sales broker at CBRE, and Preston, principal at local investment and development firm the Natchez Group, plan to maintain Philips Plaza as an office building. Their purchase comes at a time when downtown properties face increasing competition from submarkets like Germantown and Midtown, which have become popular with tenants seeking modern amenities.

The buyers are no strangers to Nashville’s development scene. They have made several acquisitions in recent years, including properties in the Pie Town area. Recent acquisitions include the $21 million purchase of the City Winery site and a partnership with Miami-based retailer Walt Grace Vintage, which plans to open in Nashville next year.

The Philips Plaza deal underscores the difficulties facing Nashville’s downtown office market, where the vacancy rate was 22.7 percent in the second quarter.

When Wheelock acquired the building in 2019 for $111 million, downtown Nashville’s office market was more robust. However, pandemic setbacks, rising interest rates and shifting tenant preferences have since caused a decline in demand for downtown office space.

Although office landlords continue to face challenges in filling vacant spaces, the market is beginning to rebound, fueled largely by growth in the tech sector. In the same year Wheelock purchased Phillips Plaza, the city of Nashville approved a $17.5 million deal for an Amazon hub expected to generate 5,000 jobs. Additionally, Oracle’s $1.2 billion investment in an East Bank campus reinforces Nashville’s emergence as a tech powerhouse.

— Andrew Terrell