Three Roots Valued Partner, Mark Taylor of Dominion Group

Dominion Group is a Knoxville-based real estate investment firm co-founded by Chairman Steve Hall and CEO Mark Taylor. The firm develops, acquires and operates generational real estate assets in Tennessee, South Carolina, North Carolina and Kentucky.

Hall and Taylor founded Dominion in 2007 and began buying older, neglected apartment communities and “bringing them back to life” through strategic rehabilitation projects and installing new management infrastructure. In the past 15 years, Dominion has grown dramatically and is approaching two billion in assets under management, development and ownership.

Since its founding, Dominion has kept its original business model of acquiring and rehabilitating existing structures. The firm also develops and builds new apartments, manages two senior living brands and operates management companies for its properties. Additionally, it has an affordable housing business that acquires, rehabilitates and develops projects in the affordable and low-income housing space.

“The desire to impact affordable housing communities and make them really fantastic places to live has been part of our DNA since the beginning,” said Taylor. “From a housing cost perspective, we’re in a season where the need and desire on the customers’ part for affordable housing options has really hit a fever pitch – it’s a real societal need.”

With these projects, Dominion will (1) preserve existing affordable housing and layer in additional social services, (2) develop new apartment complexes or (3) think about new ways to provide affordable housing in the markets they serve, such as setting aside units for lower-income individuals in their conventional multi-family projects.

“We think it’s a great way for us to help,” said Taylor. “If we can help further by bringing in additional services to do more things to help our resident base, then we feel like we’re running a good business and doing good things for the communities we operate in.”

Financing these projects requires more work and creativity than traditional housing financing. Dominion works with partners like Three Roots Capital to support these complicated projects from a capital-sourcing perspective.

“Three Roots has been a great source of flexible capital for us to be able to step into these projects where we may need some additional capital sourcing,” said Taylor. “For us to have flexible capital and great partners like Three Roots that we know we can count on to help us put the capital together to do these types of projects is critical.”

Three Roots has partnered with Dominion Group on three projects. Previously, Three Roots served as an additional credit partner and provided essential bridge financing for two low-income housing projects in South Carolina. Most recently, Dominion Group closed on a project in Knoxville to help provide middle-market housing to help preserve a healthy rent profile for individuals who don’t qualify for affordable housing but need housing that isn’t outside of their budget.

“With need for affordable housing in Knoxville and beyond, we are pleased to work with valued partners like Dominion Group to help solve this crisis,” said Grady Vanderhoofven, President and CEO. “We are committed to working on placemaking real estate projects like these that have a lasting, positive impact on the communities we serve.”

Taylor and Vanderhoofven first met around a decade ago through a mutual acquaintance and have enjoyed working together over the years.

“It’s been fun to have Grady as a partner and a friend. I love his entrepreneurial nature, creativity and excitement about participating in projects that we think are very meaningful,” said Taylor. “We’re looking forward to a long relationship with Three Roots. I imagine we’ll have a lot of fun projects to work on with them over the next few years.”

Collaboration and strategic investment in the face of economic uncertainty, by Grady Vanderhoofven, President & CEO

Earlier this year, the great Tom Ballard, editor of and Chief Alliance Officer of PYA, spoke with several angel and venture capital investors in the region, including me, about 2021 trends and our outlook moving into 2022.

At the time of that conversation, there was so much liquidity in the market that angel and venture capital were booming. I spoke about the unprecedented level of activity and wealth creation, allowing for the possibility of more capital flowing into regions, such as Tennessee, outside of traditional investing hotspots.

Unfortunately, I also predicted that a “correction” in the stock market, or an increase in the cost of capital, or in the instance of unforeseen events with severe economic consequences, there would be major disruptions in the market and the economy. My interview with Ballard ran in January 2022 and just a short time later, the war in Ukraine began, interest rates began to rise, the stock market tanked, and the price of everything from fuel to household goods became more expensive.

At a macroeconomic level, we’re dealing with economic uncertainty – everything from inflation to a looming recession. But at a microeconomic level, our community – while still experiencing some economic pain – isn’t feeling the full brunt of some of the problems facing larger metro areas and other states and regions of the country because of the massive influx of people and companies moving to our region.

With respect to jobs, we’re seeing major organizations relocating some or a significant portion of their operations to East Tennessee – as we’re seeing with Smith & Wesson and Elo Touch Solutions – because of our state’s attractiveness to business. The entrepreneurial ecosystem in east Tennessee is increasingly welcoming and attractive to start-ups and young companies, as multiple communities invest more capital and resources in creating and nurturing start-ups. Meanwhile, professionals from the East and West coasts are moving to the Knoxville area in droves to enjoy the relatively lower cost of living and high quality of life.

I believe this surge has provided a slight buffer from the worst of the current economic downturn. With more jobs available and more individuals and businesses participating in our local economy, we’re somewhat insulated from some of the worst issues of unemployment and inflation.

But this buffer doesn’t mean we’re immune to economic difficulties or that it is clear sailing ahead. Right now, we’re facing a dire need for housing of all kinds, including workforce housing and affordable housing. According to the Knoxville Area Association of Realtors, rent in the Knoxville metro area increased about 20% just last year. The median sale price for houses also increased 19.7%, making our area one of the fastest-growing markets in terms of price growth. As an added issue, housing availability is near a record low.

Three Roots Capital is aware of this issue and actively working with developers and other partners to help address this problem. We financed Foggy Bottom Flats Townhomes in the South Knoxville Waterfront District. We have partnered with Dominion Group on three projects – two in South Carolina and one in Knoxville – to bring more access to affordable and workforce housing.

Looking ahead, if we want to keep people and companies here, we need to have more collaboration between like-minded investors inside and outside of our community. I am heartened by the heightened focus on collaboration and information sharing we’re seeing lately and hope this trend continues.

As the founder of a Community Development Financial Institution (CDFI), I have observed in the past couple of years that more capital has been available for CDFIs from the federal government than ever before in the history of Three Roots Capital. These funds can be used to create and grow unique and potent pools of capital, like the Three Roots Capital Impact Fund, from which we make crucial equity investments and subordinated loans and other investments that we cannot make with funds we borrow from our valued bank partners. Ultimately, these funds enable us to add new tools and enhance some of the existing financing tools in our toolbox and allow us to support innovative, growing companies, such as our recent investments in Active Energy SystemsNellOne Therapeutics and SmartRIA.

Through the Three Roots Capital Impact Fund, we recently made a small equity investment in a company in Chattanooga and are in discussions with another Knoxville company to make an investment or loan. We recently have raised flexible capital from a new bank partner to support future deals like these, with a particular focus on affordable housing and minority-owned businesses. Three Roots Capital intends to do even more in the future as we grow our Impact Fund and our affiliated TennesSeed Fund.

My predictions about the current economic situation were unfortunately correct earlier this year. However, with increased collaboration between investors, developers, companies and other forward-thinking individuals, I think we can continue to grow and strengthen our region.

Working together is rarely easy – especially when facing economic uncertainty. Nevertheless, I believe collaboration is one of the most important parts of building on our current momentum to bring more capital to our region and our mission to help people and companies here to thrive.