Dean Stratouly, Co-Founder, President & CEO, Congress Group
Co-Founder, President and CEO of the Congress Group Dean Stratouly sat down with Invest: to offer insight into the state of Nashville’s real estate market, as well as how the real estate development and investment firm has continued to influence and expand the Nashville skyline. “Real estate is a simple business: if a city is growing, people need places to live, shop, and work. The key is finding sustainable growth markets,” he said.
How would you describe the real estate market in Nashville, and how is this affecting Congress Group’s operations?
We are an urban infill developer. We focus on multifamily, office, and hospitality. The first step in real estate development is identifying cities that are experiencing growth. Real estate is a simple business: if a city’s population is growing, it needs places to live, shop, and work. The key is finding cities with sustainable growth. Many submarkets experience temporary spikes and then decline. A good example of this boom/bust phenomenon was the housing demand created by the fracking boom. Thousands of housing units were built and then abandoned a decade later. Identifying sustainable growth is the real challenge. I arrived in Nashville eight years ago because one of my investors was touting it as the next Austin. I had skipped Austin, and he was critical of me for not entering that market. One of my personal rules for development is that I must be able to travel to a city easily on a commercial flight; otherwise, we won’t pursue a project there. Austin didn’t fit that criteria, Nashville did. The core element in our investment thesis is to focus on growth and to ensure that the growth is sustainable.
What makes Nashville an ideal market to do business in the real estate industry?
When I first arrived in Nashville, I had the typical perception of what the city was: country music, cowboy boots, and honky-tonks. I came here before Amazon and before Oracle had moved in, but I saw that HCA was thriving, the population was growing at 100 people per day, the music industry (not just country) was exploding, and the business travel, convention and tourism numbers were off the charts. I had been on the Board of the Boston Convention Center and was very aware of the event bookings in Nashville. Boston was consistently losing meetings to Nashville. Nashville’s Convention Center is as impressive as any facility in the country. Nashville was, and is, competing directly with top-tier convention markets for business. With the 800-room Omni Hotel connected to the convention center, it was clear Nashville had the infrastructure to support most major conventions. Higher education institutions generate intellectual talent that attracts businesses, and while Nashville doesn’t have as many universities as some other cities, it still produces great numbers of qualified talent to draw companies in.
What factors influenced Congress Group’s decision to expand into the Nashville market?
The growth potential in the hospitality and residential market. Nashville had plenty of convention-style hotels but lacked a true five-star hotel option. The Omni is a great convention hotel but doesn’t fit the luxury category. We had been involved in a joint venture with Omni in Boston, so we understood their economics, which gave us confidence in the strength of this market. We recognized that all the necessary elements for a successful five-star hotel were present. The city was embracing high-density urban development and we believed that there was a strong foundation for providing a true luxury hotel.
How would you describe the nature of the city’s collaborative efforts to support economic development?
We were very excited about the opportunity to develop in Nashville. Eight years ago, the city’s planning and economic development leaders, along with the chamber, downtown business association, and the state, had a unified vision for what Nashville could become. There was a strong commitment at all levels — city hall, state officials, and business leaders — to work cohesively and ‘attack’ the corporate market to attract new businesses.
How do upcoming developments expand upon the success of the Four Seasons project, and what impact do you expect the new projects to have on the city’s skyline?
We believe that Nashville’s underlying growth is continuing at a rate which is sustainable and is creating additional demand for hospitality, residential and office. Its geographic location, airport, highway network, pro-growth city and state policies, representative advantages, tax code, good higher education institutions, and a pool of young talented employees make it one of the best markets in the country.
Park Place is our next major development. We are replicating the Four Seasons model with a five-star hotel and two residential components: condos and luxury apartments. We have been closely involved with this site since we started the Four Seasons project. Walkability was a key factor in selecting the location. The site sits almost 100 feet higher in ground elevation, which enhances views — an important element in a residential project that increases project values. Having been in residence at the site for four years during The Four Seasons construction, we recognized its strong connectivity to the city. Our market decision was to continue catering to Nashville’s luxury demographic, similar to the Four Seasons. The architecture reflects this vision, and we will soon announce the brand, which will be in the same league as Four Seasons. This type of development will continue to change Nashville’s skyline.
What is your outlook for Nashville’s real estate industry, as well as the top priorities for the Congress Group over the next two to three years?
Our focus remains on the five-star hospitality and residential market. Nashville’s office market is strong, but office still faces challenges. The world is still defining what the office of the future looks like; whether it will be class-A office tower downtown or a low-rise suburban campus. Office demand remains uncertain. However, the residential market is strong, driven by industrial and commercial expansion. Companies like HCA and Amazon continue to grow here, with Oracle recently announcing its new corporate headquarters. All segments of the real estate market will have increased demand. We need more of these large corporations to relocate here, and the convention center must keep attracting major events. The state and city must continue to work cooperatively to ensure that Nashville and Tennessee remain among the Top 5 destinations for business relocations and expansions in the United States.
The Tennessee Valley Authority (TVA) provides reliable and affordable electrical power, which is crucial for long-term growth. Energy availability, cost, and infrastructure are becoming increasingly important, particularly as Tennessee emerges as a hub for manufacturing and data centers. Cities with a strong economic base can leverage these advantages. Maintaining a balance between social programs and corporate growth is also key. A focus must also be made by the city and the state to the improvement and expansion of the educational system. Schools are a big factor to sustaining growth. As long as people keep moving to Nashville, the economy will continue to thrive.
