JEA Board selects West Adams Street for new HQ

Jacksonville, FL — JEA will soon be preparing to set up a new shop in Downtown Jacksonville.

The Board has voted to authorize final negotiations with Ryan Companies for the construction of a new headquarters building on West Adams Street by the County Courthouse, which JEA would lease for 15 years. This proposal scored highest among three “short-list” bids that were under consideration, when factoring in both the critical analysis from JEA staff and their real estate consultant CBRE and the scoring by the JEA Board of Directors.

“The Downtown core is important to the health of Jacksonville’s Downtown, but it’s also important to the health of the entire MSA [metropolitan statistical area]. All of your customers want a health Downtown. JEA decides ‘Well, being in the civic core is optional’, is it optional for City Hall too? The Downtown needs to be healthy. This is where this building belongs, and I think our site provides the best opportunity to reinforce the commitment to the civic core to Downtown,” says Ryan Companies Regional President Doug Dieck.

THE PROCESS

The decision to move to a new headquarters has been years in the making, as JEA determined their existing space was not only too large for their needs, but also needs substantial repairs.

“Perhaps more than other Board members, I’m down here a lot, and I ride the elevator. And certainly, all the other employees of JEA who work in this building think the timing’s a big issue. Not that the building is inherently unsafe, but it is certainly degrading. I think we had two major flood events in the last 30 days, where entire floors weren’t able to work. You heard the alarms going off earlier today, I take it that that isn’t an unusual occurrence. So, I want to point out that there is a cost to staying in this building,” says Board Chair Alan Howard.

In fact, JEA says they’ve spent more than $8 million in the last ten years on maintaining the building. An estimated 760 employees will occupy the new HQ, which is proposed to be much smaller than the current 19-floor tower.

Late last year, the 'Invitation to Negotiate' was put out, and early this year, JEA's team announced the three "short-list" bids that were being considered- Kings Avenue Station on the Southbank, Lot J near TIAA Bank Field, and West Adams Street near the County Courthouse.

The Board then decided to make the official vote in April, in order to accommodate the public release of some of the bid information ahead of the decision. Overview proposals were released in February, looking at the concept for each of the designs.

GALLERY: Kings Avenue Station JEA headquarters proposal

GALLERY: Lot J JEA headquarters proposal

GALLERY: West Adams Street JEA headquarters proposal

JEA continued negotiations with those proposers, and ultimately received “Best and Final Offers” last month.

Now, the Board has made its choice on a proposal, West Adams Street by Ryan Companies. The Board has authorized negotiations on a full 15-year lease to begin, and the final lease will come back to them for approval. Ryan Companies must secure control of the site from the City of Jacksonville and reach a final lease deal to present to the Board within 90 days.

SCORING

A proposal for a new HQ at West Adams Street scored best in the subtotal, which accounted for the critical evaluation done by JEA’s team. Of 660 available points, West Adams Street received 507, Lot J got 499, and Kings Avenue Station got 471. Board Chair Alan Howard noted that all of the scores were incredibly close, to which CBRE said all three proposals were good work.

An additional 100 points were awarded from JEA’s Board of Directors, with equal weight given to JEA’s core values- customer, financial, community impact, and environmental. Each Board member ranked the proposals, and those were averaged out and divided by four, to represent the four present and voting Board members. That total was then added to the subtotal to deliver the final count.

Ryan Companies came out on top, with a total of 585.75 of 760 available points.

ANALYSIS

In recent weeks, JEA’s team scored the three proposals in several key areas, and West Adams Street sat highest among those areas, before the Board scores were even factored in.

Lot J came in with the lowest bill for anticipated annual rent and operating costs for JEA, at around $8.8 million. West Adams Street was the middle of the pack, at $9.3 million, and Kings Avenue Station was a bit higher at $9.31 million. Over the course of the full 15-year term of the lease, JEA’s team considered the difference in the costs between the plans to be relatively insignificant and not of any substantial risk.

Included in that cost is a parking garage and 850 dedicated spaces, with some differences. Lot J would require monthly rent per space each month, whereas the other two would not. It also required construction of a parking garage, which the development team intimated would be a cost the City would have to cover. West Adams Street includes the construction of the garage as part of the lease, which means capital cost, but then includes the facility as an asset at the end of the lease. It is also the only proposal that dedicates the garage to JEA, as opposed to sharing it with other development. Kings Avenue Station was the only proposal that already has a garage ready to go.

West Adams Street ranked highest for both their development schedule and how their design accommodates JEA's culture and engages the workforce. Included in that is the walkability of the site to restaurants and public transportation, which some JEA customers use to get to the HQ if they have anything to address. Kings Avenue Station scored highly for site control- since they currently have full control of the property- and financial viability. Lot J scored highest in economic development, as it was planned to be an anchor for the redevelopment of that Lot, which could continue to grow out to the greater Sports Complex, including the Jacksonville Shipyards. This proposal also included a separate single-story customer center, and it was regarded well for building programming.

There are outstanding lease and construction addendum issues for all of the plans, which JEA considers to be risks, because they are unresolved and could result in costs or liabilities. The Lot J proposal has the most of these outstanding issues, and West Adams had the fewest. Other considerations beyond the lease, like land control, financing, and any remediation are considered “dependencies” by JEA’s team. Lot J had the most dependencies, with Kings Avenue Station and West Adams Street tied at fewest. The dependencies specifically for West Adams Street include that they don’t currently own the property, don’t have a parking garage already built, and haven’t yet dealt with some elements of planning for the project. The team believes they can overcome all of that.

One of the factors that was considered is the responsiveness of the developers during negotiations, and JEA’s team noted that Ryan Companies went “above and beyond” through that process.

“The biggest thing you guys need to select is the best team member, the best athlete out there. There are certainly risks in those dependencies, and that’s a concern, but you’re picking a teammate, and you need to make sure that you can play on the field with that teammate and solve problems, big problems- we’re going to have obstacles- and keep the ball moving down the field,” says Stewart Green with CBRE.

While it does not appear to have been substantially weighted in the scoring, West Adams is also least vulnerable to a major hurricane event. JEA’s protocols already call for relocation to a separate, hardened emergency operations center if there is a storm stronger than Category 2 expected, but West Adams would leave the corporate headquarters less susceptible to flooding than the other two sites. JEA decided not to build the corporate HQ to higher storm standards because of the cost.

WEST ADAMS STREET

This plot is actually something that was previously considered by JEA as part of a land swap agreement with the City. Those discussions were ultimately suspended in 2017.

The proposal from The Ryan Companies includes a focus on collaborative work spaces, energy efficiency, and related areas in a nine-floor tower.

The design includes a full service kitchen and cafeteria, with access to outdoor seating. The project includes a parking garage that would be dedicated to JEA, including nested customer parking.

“We have put our heart in to this,” Dieck says.

Ryan Companies believes this location would serve JEA and Downtown overall, by keeping hundreds of employees in the core. JEA customers who currently rely on public transportation to get to the HQ would be able to use those same options, with this location only a few blocks from the existing site.

“This is what we do. There are many different areas of the real estate development business, this is what we do, this is what we do best. We know corporate build-to-suit,” Dieck says.

Occupancy is estimated within 25 months, in this proposal.

NEXT STEPS

JEA’s Board has authorized the final lease negotiations, so now the remaining issues must be addressed, in order to get a final deal on paper. In that same 90-day time frame to deliver the lease, Ryan Companies must also secure the land itself from the City of Jacksonville.

To fund their cost obligations for the new HQ, JEA has been exploring some big real estate sales, including selling their existing headquarters and leasing it back until their new facility is ready. They believe this "Real Estate Optimization Initiative" would allow them to take on this project without raising your rates.

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BREAKING NEWS: JEA's Board has chosen a location for their new HQ. A proposal from Ryan Companies for West Adams...

Posted by Stephanie Brown, News 104.5 WOKV on Tuesday, April 2, 2019

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