A pair of mixed-income adaptive reuse projects are showing the way forward for housing conversions in the city.
By Christopher Williams
Nashville may be known for the Grand Ole Opry, for its iconic honky-tonks and for being the stomping grounds of a young Taylor Swift. But lately, it’s also attracting national attention for its growing shortage of affordable housing, high vacancy rates and soaring housing prices that are sparking alarming levels of homelessness and pricing out many residents.
Now, a Massachusetts-based community development financial institution and a local developer are working together to show that adaptive reuse of dilapidated or forgotten buildings — factories, warehouses, schools, hotels and more — could be the key to tackling Music City’s affordable housing shortage.
This year has seen two motel-to-housing projects open in North Nashville, a developing community of Black and lower-middle class residents near downtown, marking the completion of Nashville’s first mixed-income pilot projects.
The first is The Wilder, a former Super 8 motel that’s now a refurbished three-story building with 97 studios that restricts 40% of its units for tenants earning at or below 75% of the area median income. Across the street sits its sister structure, the Perch at the Wilder. Once a King’s Inn Motel, it’s now a gleaming 55-unit workforce housing with 20% of its units set aside for tenants at or below 50% of AMI.
“Equitable housing isn’t an issue for tomorrow’s Nashville; it’s an issue right now,” says Clay Adkisson, a partner of Wilder Development, the developer of the projects. “The speed of adaptive reuse — as compared to traditional ground-up construction — is the only way we can compete against market forces, development timelines, and interest rates to keep affordable products coming online at a time when they are most urgently needed.”
The Wilder-Perch conversions might be relatively small in size, but Adkisson, CDFI advocates and local government and community supporters see these buildings doing as expected: revitalizing the community, creating jobs and enhancing safety as much as providing a roof over peoples’ heads.
These two mixed-income projects have won commitments from all the major stakeholders: BlueHub Capital, the CDFI that provided initial construction loans for both buildings; developer Wilder Development; and city officials. They could serve as a template for other adaptive reuse projects in Nashville and beyond.
Meet the lender
Several economic and societal trends are creating momentum for adaptive reuse. Online shopping is creating ghost strip malls and work-from-home has emptied office buildings from Seattle to Washington, D.C. Rehabbing old structures is cheaper than building new ones; artificial intelligence is speeding the development process; and more cities, including Nashville, are easing zoning restrictions and extending tax credits to curb their housing crises.
After overcoming zoning constraints, the search for funding is the biggest obstacle to adaptive reuse initiatives. That’s where CDFIs such as BlueHub come in. CDFIs aim to bridge the financial gap between developer equity and traditional banks, which typically shy away from these projects due to size, regulations and risks.
BlueHub, based in Roxbury, Massachusetts, has invested more than $3 billion in projects nationwide and has built, preserved or enhanced more than 33,900 units of affordable housing since the mid-80s. Like many other CDFIs, Bluehub sees providing safe affordable housing in mostly poor, urban and rural communities of color as a “cornerstone of its mission” to bridge the widening racial wealth gap.
BlueHub finances these projects through its BlueHub Loan Fund, which has averaged 33 loan closings annually. Led by Karen Kelleher, who was named president last summer, the fund has invested close to $10 million in both Nashville projects, working with a local CDFI, The Housing Fund. BlueHub invested $6.7 million in the Perch and underwrote the Wilder to the tune of $3.3 million.
Kelleher says BlueHub has a robust pipeline of pending adaptive reuse projects, including providing $9.9 million to convert a mall into a school for low-income students in Memphis. “We're particularly focused on developments that have the ability to prevent people of color from being displaced from their communities (and) that are creating home ownership,” she says.
In developers Adkisson and his Wilder Development partner Austen Helfrich, Kelleher says she found partners deeply committed to unlocking the potential societal transformative power of adaptive reuse, who can see beyond the destroyed walls and rotting foundation of a dilapidated structure to the almost magical final products of uplifted lives of individual residents and restored economy of whole communities.
“They’re thinking big about how this conversion creates opportunity and economic development in the community where they’re investing because they care about that,” Kelleher says.
Meet the developers
The developers agree that finding financial partners who understood their vision was among the biggest hurdles in converting the motels.
“A local Nashville lender is much more comfortable lending to a high-end ground-up development,” Adkisson said on BlueHub’s site. “When we told lenders that we wanted to turn a motel into apartments, the door would shut.”
BlueHub’s scale and experience underwriting and providing other services on other reuse projects in other cities proved crucial, according to the developers. “BlueHub really supercharges the sort of hyper-local development that we are interested in,” Adkisson added on the site. “They see what a project can mean for a neighborhood.”
The two Southerners formed a partnership more than two years ago to begin the projects, fusing complementary skill sets and backgrounds in affordable housing development. Adkisson is the Nashville native and the designer, with an architecture degree from the University of Tennessee; Helfrich hails from Atlanta and, with his economics degree from the University of Pennsylvania, focuses mainly on the sourcing and business aspects of the projects.
The developers first looked for projects in downtown Nashville, but the cost proved too prohibitive. So they settled on two empty motels a mile and a half away. The pros: The 50-plus year-old buildings were close to downtown, came with many toilets and space for future amenities such as laundry rooms and gyms, and were close to major transit arteries.
The cons: The aging iron plumbing and electrical systems had to be fully upgraded to code, a new venting system had to be installed and the community is somewhat of a food desert. In The Wilder, the largest unit is only 300 square feet, so they had to be “really thoughtful with our design to provide the most livability,” Adkisson says.
But their competitive skill, they say, is being adept at adaptive reuse or retrofitting buildings across asset classes. It took two years from closing on the purchase of the property to wrapping up construction of The Wilder, which began leasing in April. The Perch opened to tenants in September. Sign-up is brisk, they say.
In the end, the duo created what they term a “community within a community.” The sister buildings, mostly comprising studio apartments, are geared mostly toward tenants and lower-income workers displaced by high rents. Amenities include a Peloton studio, fitness center, dog spa swimming pool and on-site parking.
Rents at the Wilder are priced up to 30% lower than comparable apartments; A studio there starts below $1,000 a month, according to Homes.com. “You can’t stand downtown, throw a rock and not hit a $2,000 a month studio right now,” Helfrich says.
The developers are busy. They note that three years ago the Affordable Housing Task Force established that the city needed 53,000 new affordable housing units by 2030, and developers like themselves are hustling to keep up. Wilder Development is currently building 51 affordable, small, family row houses right across from the Wilder-Perch buildings.
“We have no choice but to stay busy,” Adkisson says, “because we love Nashville and because we want it to be an equitable place for all to call home.”
Crafting the patchwork of tax incentives and funding programs that make mixed-income projects like the Wilder possible falls to Hannah Davis. For the past five years, she has led Nashville’s housing and policy initiatives as senior manager of policy and innovation at the Housing Division of Metro Planning.
Davis designed a program that provided tax cuts to builders like Helfrich and Adkisson if they allowed the city to buy a portion of their projects for affordable units.
“I have the best job in the world,” says Davis, who moved to Nashville from Colorado a decade ago. “We have the opportunity to pass laws that can change people's lives. We have a long way to go to be doing everything we can, but I think projects like Clay’s shows that it's having an impact in the place where it can.”
This story is part of our series, CDFI Futures, which explores the community development finance industry through the lenses of equity, public policy and inclusive community development. The series is developed in partnership with Next City.