Khan, Jaguars expect Lot J development to begin early 2020

[jaxlongtimer]

Typical Curry heavy handedness with lead by notorious button pusher and bully, Brian Hughes, and support by an aid that is way in over his head and has a history of increasing mistrust.  The parallels to JEA just can't be ignored.  No transparency, backroom dealing, overbearing pressure, playing favorites, twisting arms, misplaying the cards and, mostly, screwing the taxpayers who elected him to "win" at all costs.

Khan is a smart man,  I hope he realizes, now, that Curry is not a reliable partner.  He should change how he manages his relationship with our community.  While he is a hard nosed businessman, I know he also has heart.  He needs to show more of the latter and not totally rely on his minions (Curry, Hardin, Lamping) to always speak for him.  Everyone likes to meet the "wizard" behind the curtain once in a while and it would serve Khan well to be a bit more out front in our community.  He doesn't need to "move" here, but with a few hours of his income, he could buy a downtown condo and "hit the town" once every few months to show his humanity.

It's never too late to turn the ship around unless you wait until it sinks.  Despite Curry's Twitter pronouncements, Khan controls his own fate and he needs to be front and center at this point.  He would be far better off following Carlucci's advice and plan than anything Curry tells him to do.  Not smart tying your fortunes to a mayor with his less-than-stellar popularity ratings (City Council members should also take note of this!).   If Lot J is really good for Jacksonville then Khan should be proud to put all his cards on the table to convince us.  Anything less will continue to feed suspicion.

[CityLife]

https://assets.documentcloud.org/documents/20418593/dia-staff-report_lot-j-comprehensive-development-proposal.pdf

I've skimmed the DIA staff report a bit and they've done a really thorough and high quality analysis in a short time frame, even though they were missing many relevant pieces of info from the developer (that they normally would have requested early in the process). It's obvious that they should have been reviewing this from the start.

Then there's this interesting tidbit in the report:

"Until very recently, we had been advised by legal counsel that property used by the City for other City purposes but within the boundaries of Downtown, did not meet that definition and was not subject to our disposition procedures and review. For several years, the Mayor’s office moved forward with negotiations on Lot J, also with that understanding. We have now been advised that several case law interpretations now lead to the conclusion that City-owned and utilized property comes under DIA jurisdiction when it is made available for redevelopment. It is for this reason that 2020-648 contains numerous waivers of Chapter 55 and Chapter 500. Nevertheless, we will provide our estimate of the fair value of land to be donated in lieu of the appraisal required by Ordinance."

A few other interesting pieces in the staff report:

-The minimum office space has been reduced from 40k to 35k square feet, the minimum number of multi-family units has been lowered from 400 units to 350 units, the hotel has been reduced from 150-250 rooms to 120 rooms, surface parking has been reduced from 700 to 600 spaces (likely to reflect decreased demand from a less intense development).

-The development is not going to be required to pay any mobility fees. Those fees being waived, along with the city foregoing future property taxes by keeping the LIVE! land under city ownership are silent incentives not being included in the total incentive package. My hunch is they would have tried to keep the entire development under city ownership for this purpose, but there are plans to ultimately sell off the apartment and hotel uses to separate operators (common move in a large master planned project). The DIA has a nice solution to this "DIA staff would recommend that the office portion of the Live!, other than the office space used for management of the Project, be structured as a separate taxable condominium interest. The City’s contribution to the construction cost offsets any feasibility gap for the speculative office space. While the City’s contribution will still allow lower than market rents to be charged, the tax revenue generated will narrow the competitive advantage and return some revenue to the City for their investment." This was one of my biggest gripes with the incentive package earlier in the thread. Well done DIA.

-The DIA also believes the construction estimates for the LIVE! Component are on the high end and that Khan/Cordish will be using incentive money for tenant buildouts, “Based on the $100 million budget for this facility, we assume tenant improvements are included and have concern that this will adversely impact the market for other retail space.”

-The DIA does not think the developer needs the breadbox loan to develop a viable project based on its financial analysis,  “Recommendation: Our analysis of financial feasibility and construction costs, based on the information provided, does not reveal a need for this additional incentive as currently structured. Nevertheless, we understand that this may be non-negotiable from the Developer’s perspective, and actual construction and operating numbers might justify this incentive.”

-The report calls out the fact that no mention has been made of the financial impacts associated with the project being in the Opportunity Zone (something I harped on earlier in the thread). “No mention is made of value attributed to the fact that the Property is located in Downtown’s only Qualified Opportunity Zone. Elsewhere in the City, this designation has been factored into financial feasibility as the sheltered capital gains provide capital at a lower cost for the development.”

-I didn't have time to fully go through all of it, but the DIA has a substantial list of protections it recommends adding to the Development Agreement. It would have been absolutely insane for the City to move forward with the Development Agreement without a review by the DIA.

The people of Jacksonville should feel much better about the direction of the project after a professional review by the DIA. Hopefully the DIA board and City Council stand behind them.

[thelakelander]

Would the Jags still want to do this project if it were approved with the recommendations made by the DIA? From Curry's Twitter fingers, it appears that he's under the opinion that it's approve the deal his administration came up with or no Lot J or Jags in the future.

[Ken_FSU]

Would the Jags still want to do this project if it were approved with the recommendations made by the DIA? From Curry's Twitter fingers, it appears that he's under the opinion that it's approve the deal his administration came up with or no Lot J or Jags in the future.

Prediction on how the next few days will go, based purely on how things have played out in the last two days and this latest document from the DIA:

The Jags buckle to some (but not all) of the DIA's recommendations, allowing all parties to save face (The DIA, the Jags, City Council, and the mayor).

Upfront public subsidies decrease by, I don't know, $15 to $30 million dollars.

Everyone celebrates having struck a hard deal.

Meanwhile, if you look closely at the document from the DIA, you'll see that sometime here in the last few days, the entire project scope seems to have quietly decreased by around 15%.

Residential -> 400 units to 350 (-13%)
Hotel -> 150 rooms to 120 (-20%)
Office Space -> 40,000 sf to 35,000 (-13%)
Parking -> 700 spots to 600 (-14%)

So we kind of end in the same spot that we started in terms of the city fronting half of the project, only at a slightly smaller number for a slightly less impressive project. The city blows off fireworks to celebrate having stood up for itself and wrestled back tens of millions of dollars, but the reality is, the project scope just shrank and the RF* is virtually identical.

*Relative fleecing

-The DIA also believes the construction estimates for the LIVE! Component are on the high end and that Khan/Cordish will be using incentive money for tenant buildouts, “Based on the $100 million budget for this facility, we assume tenant improvements are included and have concern that this will adversely impact the market for other retail space.”

What the DIA got wrong here, and what everyone seems to be confused by (perhaps intentionally by the developer) is that the Live! Component isn't a "facility" by letter of the development agreement.

When we talk about splitting the $100 million cost to build the Live! Component, most people logically conclude that we're talking about the Live! arena pictured in the top right of the project map.



When we talk about the Live! Arena and the Live! Component, however, the terms are used interchangeably even though we're actually talking about two totally different things.

What we're actually splitting the $100 millon tab with Cordish to build is the entire Live! Component, which is legalese for the above referenced Live! Arena, plus what seems to be all office space and street-level retail throughout the entire development.

Here's the language in the development agreement.

It's subtle, but also pretty clear.



Further, based on the above (I don't have Exhibit I to be sure), it sounds like the city may technically own and play landlord for most of the retail space in the development, even at the residential buildings and hotel.

The DIA mentioned the office space not being a separate taxable interest, but based on my reading of the document, I wouldn't be surprised if none of the retail spaces are taxable either.

[Steve]

Personally I think the DIA Board approves it as-is, with no changes. I can't see any of Curry's appointees bucking him.

The report from DIA is good, but it has some soft statements in there to give the DIA board an "out" for approving it anyway.

[Papa33]

Would there be any reason to begin environmental remediation of Lot J without a guarantee that something is going to be built?

[marcuscnelson]

…the hope of selling it to any other interested master developer?

I imagine there’d be someone interested in the site if it was marketed. That’s why I’ve been suggesting starting that now and giving everyone time to get their houses in order before a vote on the entire package. That way even if people decide to throw in the towel there’s at least some kind of out.

[CityLife]

Personally I think the DIA Board approves it as-is, with no changes. I can't see any of Curry's appointees bucking him.

The report from DIA is good, but it has some soft statements in there to give the DIA board an "out" for approving it anyway.

The DIA board is only issuing a recommendation to City Council. Even if the DIA board completely ignores the DIA staff recommendations, the City Council can ignore the board's recommendations and back some or all of staff's recommendations.

The beauty of the DIA getting a look at the project, is that Council now has a professional level review of the proposal and development agreement by the DIA staff to evaluate and factor into their decision making process. I'm sure the DIA staff (and City Council) wishes they had more time to do a more in depth analysis, but Council should be able to make a more informed decision than they would have if it hadn't gone to the DIA.

[thelakelander]

Would there be any reason to begin environmental remediation of Lot J without a guarantee that something is going to be built?

While expensive, if the city desires to see development on Lot J and the Shipyards, etc., we'll need to bite the bullet and spend the money to clean them. That part won't change regardless of who ultimately develops these properties.

[vicupstate]

Would there be any reason to begin environmental remediation of Lot J without a guarantee that something is going to be built?

While expensive, if the city desires to see development on Lot J and the Shipyards, etc., we'll need to bite the bullet and spend the money to clean them. That part won't change regardless of who ultimately develops these properties.

I agree. Also, if the entire city owned properties are cleaned, then the Live! element would probably move back to the Shipyards property (or at least closer to it) which it where it was originally IIRC.  That would be a good thing IMO. 

Just philosophically, I have a much easier time justifying cleaning up contaminated property and if still necessary, selling it cheap or at no cost than writing a $233 million check to a multi-billionaire with no means at all to recover very much of that money back.  If the project still isn't profitable with no clean up cost and free land, then it probably wouldn't survive anyway.   

[Papa33]

Would there be any reason to begin environmental remediation of Lot J without a guarantee that something is going to be built?

While expensive, if the city desires to see development on Lot J and the Shipyards, etc., we'll need to bite the bullet and spend the money to clean them. That part won't change regardless of who ultimately develops these properties.

Perhaps the city could agree to begin remediation immediately while terms are (re)negotiated (assuming Iguana/Cordish are willing.  If it will take, by some estimates, 3 years to clean up the site, then theoretically, no development time would be lost?

[marcuscnelson]

^ That's what I've been saying. Sign a deal now for remediation and the surface lot work. Get the actual final plans and negotiations for Lot J, the Shipyards, and stadium renovations done, and then hold a final vote (preferably a referendum) to build + lease extensions.

[marcuscnelson]

Very good thread from Nate Monroe and Matt Flowers about something that's been mentioned here before, the near certainty that Curry expected the JEA sale to be a slush fund for the Jaguars, the jail, and a convention center, among whatever projects his buddies wanted.

[Steve]

What was that old adage about not spending money before you have it?

[Papa33]

^ That's what I've been saying. Sign a deal now for remediation and the surface lot work. Get the actual final plans and negotiations for Lot J, the Shipyards, and stadium renovations done, and then hold a final vote (preferably a referendum) to build + lease extensions.

My apologies marcusnelson.

Maybe Curry realizes (once again) that he's promised something that the City cannot deliver and now needs someone other than himself and his administration when things go south (i.e. Carlucci, Hazouri, DIA)