Developer Adam Rosenberg’s company AGB Real Estate started in Nashville. The company’s first development was built here in 2021 when the business was founded.
“AGB Real Estate’s mission is to develop sustainably focused, affordable, and attainable housing in cities across the Southeast and Mid-Atlantic,” Rosenberg said. “AGB Real Estate stands for ‘Always Getting Better,’ and for me that really spoke to what we at AGB Real Estate endeavor to do. We weren’t necessarily looking to immediately get into affordable housing. We looked at a model to convert motels to apartments and then layered the expertise of one of my business partners on top of it. He has been involved in affordable housing in Washington, D.C., for over a decade.”
AGB’s second development was in Tulsa and their third development is in Nashville as well with several hundred more doors in the pipeline in different locations. Rosenberg sat down with The Contributor to talk about development and housing in Nashville.
Your first project in Nashville was Hermitage Studios where you converted a former Rodeway Inn. You purchased that project at $55,000 per unit. With renovation cost, what was the per-unit cost for this project from start to finish?
That was a very involved redevelopment project. Our biggest challenge in our developments are the additional items that we have to bring into a motel. If you think of a motel room, it typically doesn’t have a kitchen. Bringing in a new kitchen means new electrical and new plumbing. Additionally, Codes requirements changed over the last couple of years. So, we have to put sprinkler systems throughout the buildings and bring them up to apartment-style codes, which is obviously understandable.
A lot of the cost goes towards installing those items — electrical, new plumbing, and fire safety, which, by the way, includes not only a new sprinkler system but also additional hydrants or dedicated fire lines. So, depending on what has to be put into the units, the additional cost can vary from $30,000-$40,000 per unit per project or go as high as $60,000-$70,000 per unit. It all depends on what is already in place.
With that, it’s still significantly below the per unit cost of new construction, correct?
Yes. I think if you do motel conversions like we do, you are looking at a replacement value in the area of over $200,000 per unit. If you build new townhomes, you’re in the range of $300,000-$400,000 per unit.
At a public meeting of the Homelessness Planning Council in January, you announced the opening of Wallace Studios, which will come online in 2024 and provide 131 units of permanent supportive housing (PSH). Can you walk us through the financing of a PSH project of this scale?
Our original business model is workforce housing, which is what Hermitage Studios is. These are very attainably priced studios, something a barista, an Uber driver, a warehouse worker or people working at the BNA airport could afford. Our renters are people who struggle to find clean, new places to live in the Nashville core. Within about 10 months, we successfully converted a motel into the 108-unit Hermitage studios, which is very quick.
At the same time, I reached out to my district councilmember, Erin Evans, to learn more about Mayor Cooper’s $50-million housing initiative. That’s when I learned about affordable housing and the real need Nashville is experiencing. I had no idea until that conversation. And that’s when I reached out to my business partner Ryan (Samuel) who has about 200 Section 8 supportive housing units in Washington, D.C.
The lightbulb moment went off when we [saw] that we could quickly convert these motels and offer a real viable solution to challenges of homelessness here in Nashville. My business partner got equally excited, and we found this property on Wallace Road through brokers. For Wallace Studios, we assembled the same team locally that we used to convert the Hermitage Studios. We closed on that property in August, and we hope to welcome our first tenants in April.
In terms of the financing, we went out to the market to try to get this financed in April 2023. That was around the time that the banking sector was going through significant challenges because of Silicon Valley Bank. Credit lines were really drying up. We talked to over 70 banks. Everyone said no. Even the ones we had worked with before, who knew us, were closed for business. So, we had to think outside the box and one of my business partners has a connection to a bank that he’s done a lot of work with in Washington, D.C. They know him and trust him, and because of that they were nice enough to come down to Tennessee for the first time and provide us with the line of credit for Wallace Studios.
Did you use any government funding like Barnes Trust funds?
No. Not at the moment. The Barnes Fund here in Nashville requires that a nonprofit make the request. Understanding the grants and incentives that are available is something that we’re focused on in 2024. But we move very, very quickly. Part of the challenge and the pros and cons that we have to consider is that sometimes grants take a long time to get done.
What we’re really focused on, not only for our future tenants but also for our investors, is making sure that we do the best job that we can in the quickest amount of time possible. Looking at Wallace Studios, from when we bought it Aug. 1 to when we opened in April, it will have taken just about eight months to do a 131 unit gut-renovation conversion project.
You are working closely with the Office of Homeless Services. What does that partnership look like?
We have been very impressed with their team. We are extremely interested in understanding the needs and the challenges that Nashville experiences.
They have been nice enough to answer our questions and emails. They have been collaborating with us on creating a detailed lease-up plan, making sure we’re speaking to as many service providers as possible about what we’re going to be bringing to market so that the providers can tell their constituencies about Wallace Studios and then hopefully about many, many more developments.
Is there a specific service provider you work with to ensure the support services are on site?
No. We are looking for a multi-faceted collaborative involvement from multiple support service providers.
Per your Website, “AGB Real Estate is setting new benchmarks for what it means to be a socially responsible, efficient, and be a successful real estate developer.” What does it mean personally to you to be socially responsible, efficient, and still successful in your business?
I look back at the arc of my professional career. I cut my teeth in real estate development doing an apartment to boutique hotel conversion in Panama City, Panama. It was very flashy. I learned a lot. I was involved in every aspect of the development from interior design to development to branding and marketing to procurement of the furniture, fixtures, and equipment.
What I am doing now is not as “sexy” or flashy. But the ability to have a measurable effect on so many people’s lives is what gets me and my business partners up every morning. As developers and as business professionals you face challenges and headwinds all the time. And for us right now it’s about seizing an opportunity to make a difference in as many lives as possible.
Is there anything else you’d like to highlight?
The city has been fantastic. One of the things I was talking with another developer about is creating need-based incentives for developers like us that really speak to what we’re doing and can help us do more of these developments. I know real estate tax abatements are something that’s been discussed and really has not been well received. But if it’s done on a stepped-up basis, it may work better. For example, if you build units for people at 30 percent AMI (Area Median Income), you get 75 percent tax abatement. If you build for 50 percent AMI, you get 50 percent tax abatement. If you build for zero percent AMI, you get 100 percent tax abatement. That really would make a difference, and I don’t think it would affect the city’s coffers very much. I’m really looking to work with the city leadership to see what is possible. Looking through a new lens in a way that really focuses on creating incentives at that deep, deep affordability level.
The other thing I want to mention, and we already talked to the city about it, is support services for items that developers like me might not think about when we’re doing our projects’ proformas. That could be providing some dollars for security onsite, which is important not only for the development itself but also to reduce the NIMBYism that may pop-up Neighbors have valid concerns about the developments that may be coming to their neighborhoods. We want to be an honest partner and be really an example of what is possible for changing the stigma about what an affordable project development looks like.