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VOL. 36 | NO. 20 | Friday, May 18, 2012

Medical Mart backers shake off rumors

By Joe Morris

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A rendering of the exterior of the proposed Nasville Medical Trade Center. Below, a rendering of the temporary exhibition space that would be available within the facility.

After months of silence, backers of the proposed Nashville Medical Trade Center have disclosed new leases and insist that their project is still on track and moving ever closer to reality.

The project made for some splashy headlines when was announced last year. The plan is for 1.5 million square feet of permanent showrooms, temporary exhibition space, education and training facilities, as well as leased space for health care-related companies to showcase their offerings.

It made sense on many levels. It would:

Use the existing convention center space, and add new floors above it for tenants.

Capitalize on Nashville’s prominent and growing place in the health care industry.

There was plenty of early interest and a flurry of early leases signed.

Over time, however, momentum slowed, leading some to question whether it would ever be built or would instead join a long list of downtown concepts that never made it off the drawing board.

Fast forward to May 2012, when Market Center Management Co., the Dallas-based developer leading the project, announced six new companies were taking space in the NMTC, and that it had retained Brentwood accounting firm Lattimore Black Morgan & Cain to start looking at financing strategies.

NMTC tenants to date

  • The 5,000-square-foot development center component of the project will be anchored by mdi Consultants Inc., a New York-based firm offering business-development services for domestic and international health care companies.
  • The Healthcare Information and Management Systems Society, or HIMSS, will be taking another anchor-tenant slot.
  • Informatics Corporation of America (ICA) will showcase interoperability technology that enables health information exchange.
  • The SSI Group (SSI) will promote claims management technology.
  • Humanscale will offer ergonomic work tools that support healthcare-specific technology.
  • ergoCentric will present its specialized line of medical grade seating, healtHcentric.
  • V Alexander will demonstrate its supply-chain management services, including transportation, customs, compliance, documentation, and security.
  • Remind America, a HIPAA-compliant physician reminder service, will showcase its customizable practice services.

– Joe Morris

Taken by itself, that news hasn’t completely shut down the rumor mill. But it has definitely lowered the volume.

“We have been making steady progress for some time, but we acknowledge that the project has had a longer runway than many folks expected,” says Cole Daugherty, vice president of communications and business development for MCMC, who hints at further development behind the scenes.

“We have companies eager to promote that they are joining the trade center and others who, for competitive reasons, are publicity shy. As companies have had longer to consider the trade center, we are reaping the benefits of more and more of them joining the project. They recognize that only in Nashville can they participate in a global center for innovation and commerce that will help their business become more efficient and more dynamic.”

That reluctance to announce tenants, firm figures and start dates is probably less a matter of being coy and more a response to ever-fluctuating marketing conditions, says Tom Frye, managing director of CBRE Nashville.

“It all depends on what it takes to get financed, and the banks dictate a lot of that,” Frye says. “When the market is hot and heavy in your area, things are booming and everything is great, there may be no lending required at all for a conventional office building to go up. You can just spec it and get the financing because your market is red hot and lenders are willing to take the risk.”

The medical trade center is a more unique proposition, he adds.

“It’s a specialty project because there’s space to be leased and space that will have other uses but still has to be maintained,” he said. “These projects really do have a pace of their own. There are a lot of different paths they have to go down to get approvals, and so no one outside them and their lenders really know what’s going on.”

Conversely, Frye adds, a slow economy makes the startup hill that much steeper.

“Banks get nervous; you can get to 70 percent, even 75 percent or higher for that leasing requirement,” he says. “Lenders at that point want to know that the debt service on the loan is covered before they come through with money. Everything really does hinge on the economic cycle.”

Right now, the trade center’s numbers break down like this: The entire project, which would renovate the existing convention center and build out eight new floors above it, will need $180 million, says Bill Winsor, chief executive officer of MCMC. The leasing “magic number” – what it will likely take to make borrowing that amount possible in today’s commercial real estate climate -- is 65 percent.

The project now has 45 percent of the 800,000 square feet it has set aside for leasing spoken for, Winsor says, adding the current figure is close enough to start looking for financing, hence the move in that direction.

Other than that, however, don’t look for a press releases every time MCMC inks a deal.

“We are not going to provide updated numbers each time we sign leases, but instead focus on taking advantage of the project momentum to secure additional partners and formulate a financing strategy,” Daugherty explains.

“As the economy warms up, we are receiving more inquires and making more progress with a range of companies in the U.S. and abroad. Health care innovators recognize the value of the trade center in terms of customer delivery, collaboration, and business efficiency. These values are more important than ever as companies consider how to maximize their business opportunities.”

The developer says he also learned from the expectations set by its earlier projections.

“When we initially announced the project, we were perhaps a bit aggressive in stating a timetable that complemented the opening of the new Music City Center,” Daugherty says. “With the recent announcement of new leases we have entered a new phase of the project where conversations about financing and construction will take place in earnest.”

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