Jacksonville, FL - It’s a major step forward for a long-planned project on Jacksonville’s Southbank, but there’s still a steep climb to see ground break.
Jacksonville’s Downtown Investment Authority has approved a public takeover of the purchase of land on which the multi-use development “The District” is slated to be built. The group behind the 30-acre, $433 million development, Elements of Jacksonville LLC, won the right to develop the JEA land back in 2015 for around $18.6 million. Since that time, the deal has not actually moved forward. The new proposal partners the City, DIA, and Elements in the purchase and initial development, with a significant upfront investment from the public sector.
“It has not been easy,” says DIA CEO Aundra Wallace, about the year-long negotiation to hammer out this plan.
This deal is still subject to approval by the JEA Board, Mayor’s Administration, and Jacksonville City Council. The goal is to clear those hurdles by the end of March, although a change made by the DIA Board Wednesday is expected to face objection by JEA, which could push things back.
The proposal has JEA assign the Purchase and Sale Agreement over the property from Elements to the City instead, and allocates development rights to the DIA. The property closing date is projected as mid-July.
The DIA would make a one-time cash payment to JEA of $1,859,000 at the time of the closing. The DIA would provide JEA with a cash flow note- essentially a promissory note- for $17.59 million. The DIA would pay only interest for the first decade, and then principal from the eleventh year on. Initially, the proposal envisioned this money coming from the Southbank Tax Increment District- a special line of funding with money generated from and going to Downtown’s Southbank. Despite assurances from Wallace that they had enough money in that pot, the DIA was concerned about how exposed that left them in terms of having money to finance other Southbank projects. Ultimately, they adopted a motion to pay back only 25% of the JEA obligation through the TID, with the other 75% coming from project revenue.
“Let the loan be based on the success of the project, and we’re all in this together,” says Board Member Oliver Barakat, who proposed the change.
Wallace said through the meeting that, in his negotiations, it seemed JEA would not be open to that option, because it leaves them more exposed. His staff added that JEA doesn’t have an economic development arm, and they’re looking to simply offload the property.
“This is the one way that we could get people most uncomfortable to agree,” Wallace says.
His concern is to the degree that he asked the Board what he should do if JEA does not adopt their change. Barakat said they would not immediately “cave”, and Wallace would have to bring the deal back to them to take another look.
That second look would come on January 17th, with the JEA vote currently scheduled for the 16th.
The DIA is also issuing a cash flow note to the City of Jacksonville, because City dollars would cover $26.41 million in public infrastructure for the project. This payment will be made through project revenue, with all of the revenue being deposited in to the Southbank TID, and 25% of that then being transferred to the City. Once the JEA principal payment kicks in, 25% of that City share of the project revenue will go toward that JEA note.
The term for payment on each of those cash flow notes is through December 31, 2040.
Elements will fund the first nearly $18.7 million in public infrastructure and anything beyond the City’s commitment, with the total public infrastructure expected to cost $45.1 million. There would be benchmarks along the way where Elements would have to show they have the equity and financial backing needed for the development, and are keeping up with the pace of development.
Once the City and the DIA formally take over, they are responsible for the debt, even if the project goes under. DIA Staff says they have checks built in along the way so that they can easily track if progress seems to be going off the rails. Wallace also plans to ask the Board to hire a special owner’s rep who has specialized knowledge and can serve as their point for this complicated project. The developers consented to that, but the Board was cautious about putting in too many constraints.
“The fastest way to kill a deal is to put barriers in front of it,” says Board Member Dane Grey.
A host of other concerns were raised by the DIA ahead of their vote. Some were concerned that the DIA is essentially paying for a deal that JEA and Elements negotiated. Others wanted to make sure the early investment dollars from Elements would be used toward lasting improvements in the land, instead of administrative, legal, and similar costs. Still others wanted commitments that there would be work for Small and Emerging Businesses. Ultimately, the Board gave Wallace direction that he should work to achieve certain benchmarks in these areas, although they did not set any of the benchmarks in stone because of concerns from Wallace and the developers about what would be attainable.
While tax dollars would go in to the purchase of the land, the plan is to see Elements take the parcels over time, and therefore get the long-vacant property back on City tax rolls. The developers have also agreed to pay a special assessment, to further boost anticipated revenue to the City.
The District envisions a “healthy living” cross-generational concept, with the goal to bring people of all ages together in a community that supports active living. The plan includes residential, retail, office, and restaurant space, as well as a signature hotel- an AC Hotel by Marriott. It would also extend the Southbank Riverwalk not only to meet the existing span but to create a continuous loop over land as well. The development also calls for marina space, a grocery store, a drug store, and plenty of park space- including a park along the River.
Peter Rummell and Michael Munz- two prominent Jacksonville businessmen behind Elements- told the Board there are already many negotiations underway and some nearing final stages for occupying the development. They said they’ve cleared all the needed regulatory hurdles to this point, and this land deal is the only thing standing in the way of moving forward.
Despite their reservations, many DIA Board Members said they supported the concept and the overall drive to revitalize the Southbank and put the vacant land to use.
“I personally think it’s time to get busy,” says Board Member Ron Moody.
“I’m willing to swallow hard and give you a chance from our perspective to do this, and God be with you,” says DIA Vice Chairman Jack Meeks.
In the end, while there were two votes against the change in the financing of the JEA payment, the resolution itself passed by a unanimous vote. If the project is fully built out, the DIA’s conservative estimates project at least a $98 million impact over 25 years.