Investment Management

Megan Epstein, founder of CA South has lived and worked in Nashville since 2014, and since that time has gained a deep understanding of the trends, growth drivers, and geography that drives decision making in real estate in Nashville. CA South’s proprietary equity and debt relationships allow for creative deal structuring and financing, which opens a whole universe of transactions not otherwise available to other local developers who are forced to use traditional financing channels. 

While an extraordinary amount of investor attention is now newly placed upon Nashville, it wasn’t so long ago that local developers’ only source of capital was from local investors. Today, extremely sophisticated investors from around the globe are deploying capital into Nashville in creative and progressive ways. For the first time ever, several billion dollar projects are being constructed simultaneously. However, with all of the out-of-town development companies setting up shop in Nashville, there is a scarcity of sophisticated local developers who really understand the market and where the development trends are heading. Anyone can pay top-dollar for a piece of land across the street from the Sounds Stadium or a developable parcel two blocks from Broadway, but what about assembling purchase contracts on a series of parcels near a proposed Soccer stadium prior to the announcement? CA South’s local knowledge and deep connections allow it to stay one step ahead of the pack and drive yield by “buying smart”.

Any of transactions sourced and developed by CA South are not brokered or listed opportunities. This provides for less competition securing developable parcels, resulting in better overall returns. By having a solid reputation of performing on purchase and sale agreements and performing due diligence and closing quickly, several local commercial brokers often provide a “first look” at their transactions prior to widely marketing them. CA South is thus able to cherry pick excellent opportunities and get valuable land under contract because of their ability to close quickly and perform.

As sophisticated investors who have been through several economic cycles, we are committed to maximizing returns while responsibly mitigating downside risks such as;

1) Macro Economic Risk – It is prudent to assume we are “late” in the current economic cycle, which means that we must be extremely selective about the product types in which we invest, as well as the target market that our development projects will serve.  Nashville’s economy with its favorable taxation, affordable cost of living, pro-growth and pro-employer government, is benefiting from the net migration away from states with less competitive taxation and higher cost of living. Nashville’s affordability, access to world-class entertainment and attractions, and big city amenities make it unlikely to stop growing over the long-term, despite macro-economic challenges. Nashville is one of the “safest bets” due to job growth, household growth, income growth and other important demographic trends, especially when compared to the cost of cities like New York, San Francisco, Los Angeles, Chicago, and others (from which many new local residents are coming from).

2) Rising Interest Rate Risk – As the cost of capital continues to increase, it is wise to shy away from projects whose yields are disproportionately driven by exit-cap rates. Both residential and commercial condominium yields are less sensitive to fluctuations in cap rates than traditional stabilized rental assets. While interest rates and the availability of capital certainly impact condo prices and valuations, residential and commercial condos are so dramatically under-supplied in Nashville that the depth of the market and strength of overall demand serves to mitigate this risk.

3) Softening of the Luxury Markets – Residential real estate priced above $1m in Nashville is considered high-end, and the number of homes on the market and the number of days on the market have both recently increased, pointing to a softening in the “high-end”.  This is not the case for residential units priced below $1m. Over 90% of residential condominiums funded by the Réaliste Fund will be between $400k and $700k which is considered the “sweet spot” of affordability and value where demand is robust and the number of days on the market is shorter.