question for Downtown experts

[John P]

I think everybody agrees that the biggest thing missing in downtown are residents. Gimmicks wont sustain. Venues need people to come to be successfull and always having to attract customers from somewhere else is a burden. More residents is the answer. Wiht that being said has anybody heard anything at all about new housing in downtown? Any conversations into apartments? Any new apartments? Any chance part of the Laura street trio is financed? Anything about downtown housing at all?

[simms3]

Wish I had.  Lots of buzz and actual things happening with regards to downtown residents in Atlanta, Charlotte, Nashville, Austin, and other southern/peer cities.  Jacksonville is really falling behind

[lowlyplanner]

John P,

That's a great question. 

If you look at DVI's State of Downtown Report, downtown rental apartments have an 88% occupancy rate (the same as the City overall).  I think that's pretty good, and should justify building some new units.

In my opinion, though, the focus on adaptive reuse of old office buildings is not helping us get more people downtown.  Buildings like 11E and the Carling are awesome, but they were astronomically expensive to rehab, and the City had to pick up most of the tab.  They just don't pay for themselves on their own.

I think the City ought to be encouraging developers to build new mid-rise (3-5 story) buildings on parking lots.  The buildings themselves could be very similar to a standard apartment complex, but they would go right up to the street, and have much reduced parking.  It would be the easiest and cheapest way to get more bodies downtown, and help drive the rest - bars, restaurants, shops, activities, etc.

[thelakelander]

I don't think residents are the largest thing missing downtown.  We have thousands.  They just live about a mile outside of the center of the central business district in all directions.  The biggest thing missing is reliable transit connectivity that will faciliate growth that recreates the urban center that has been lost over time (the type of building products lowlyplanner just mentioned).  As for residential projects happening in the CBD at this time, there's really no news here.  To this date, nothing has changed to encourage or stimulate growth of any kind in the downtown core.

[urbaknight]

John P and Thelakelander, I agree with both of you. We need more residents first and foremost. A relibale transit system is key for moving them around. This may sound corny, but this is exactally what I think about as I lay awake at night. There's no reason that buildings like the Ambassitor Hotel for example, should'nt be refitted for apartments (NOT condos for sale) Apartments, young people live in cities for the excitment, environment and convience of walkability. Most people move out when they get older. They get tired of the noise and they just want to settle down in a freestanding home away from the city with a back yard and a dog. The point is that most people do not want to live in a city all their lives. Some may, but there's not enough to justify condos for ownership.

And JTA needs to make it "okay to be a pedestrian" by enhancing public transit Downtown. These apartments do not need decated parking if the buses ran often and actually went to places where people want and need to go. Such as the post office, supermarket and entertainment hotspots such as east bay st, the Landing and the sports complex. 

If we can achieve both of these ambitions at the same time, the city would be a much better place to live, work and play.

[simms3]

lowlyplanner,

To get financing for rentals, one has to give a certain return and there has to be a certain feasibility.  Construction loans are pretty expensive and hard to come by nowadays, especially in a city as small and "unspecial" as Jacksonville.  Atlanta barely qualifies as a place where lenders will throw money at projects, but it is only because the pent up demand for multifamily is incredibly high right now (not very high in Jacksonville) and lease up would take 6 months or less AND rents would start at at least $1.70/SF, which is 2-3x as high as what's possible in Jacksonville.

A top floor 3-bedroom apartment at the Strand is leasing for $1900/mo, which is barely above a $1.00/SF/mo.  Other projects are equally as cheap or cheaper.  It is no wonder Vestcor has had problems servicing their debt on their rehab projects downtown.  In order to get people to live downtown where land is most expensive and construction is most expensive, rents have to be artifially low.  Landlords have struggled to hit occupancy rates above 80%, and it takes more time, effort, and money for them to do so.  No building there is fully stabilized...even if occupancies are high.  That is because rents and concessions are low/high respectively.

That's why nobody is building downtown.  Sadly, it's a circle.  Jacksonville is not a wealthy town to begin with, so there aren't a lot of people who can afford to pay $2/SF/mo to live in an urban environment, and those who can don't want to be the only ones there (they want to be among thousands of people like them...and they most likely work on the Southside).

Ashley St apartments and Metropolitan lofts are affordable, but they represent really the only possible affordable housing developments there.  Everything else must be a very expensive rehab/retrofit (and more expensive than necessary because we let everything decay so badly), or it must be new construction, which is not cheap.

Downtown living all across America is understandably more expensive.  There has to be a reason for people to live downtown first and foremost, and there has to be a large enough population that can actually afford to live downtown.

And because there are so few examples of downtown living, underwriting projects is most likely daunting.  Who can predict what lease-up will be like?  What are the kinds of concessions that will be necessary?  Who has pockets deep enough to finance a new downtown project that would even look at Jacksonville, and will lenders and equity partners make the debt/equity more expensive because of the market and ultra-high risk?

Etc etc etc

[thelakelander]

Urbanknight, projects like the Ambassador don't take off because they are expensive to retrofit.  From a development perspective, unless you're doing it for the love of downtown, there's better ways to invest money sitting in your pockets.  Publicly, by investing in things that make people want to spend time and money in your neighborhoods, you create a market where the numbers for projects like the Trio and Ambassador begin to make sense.  It's time to Jacksonville to invest in itself.

[lowlyplanner]

simms3 - I agree about the construction costs and financing.  That why I think the emphasis on highrises and historic rehabs is mis-placed, and why I think mid-rise apartments are the only option that will work. 

11E cost $190,000 per unit to rehab.  The Carling cost $273,000 per unit.

Meanwhile, in 2007 (the last year I could get numbers from the City building permits), the average apartment built in Duval County had a construction cost of just under $50,000 per unit.  That leaves out "soft costs" like architecture and financing, and the cost of the land itself, but you can see the scale of the problem.

Here's what I would recommend:


A lot of people in Riverside hate the Villas of St. Johns because they're not great architecture and they were very cheaply built.  But they do meet the street and they put a lot of people in a fairly small area.  They're not built any differently from a standard suburban apartment complex.

[hillary supporter]

I don't think residents are the largest thing missing downtown.  We have thousands.  They just live about a mile outside of the center of the central business district in all directions.  The biggest thing missing is reliable transit connectivity that will facilitate growth that recreates the urban center that has been lost over time (the type of building products lowlyplanner just mentioned).  As for residential projects happening in the CBD at this time, there's really no news here.  To this date, nothing has changed to encourage or stimulate growth of any kind in the downtown core.

says it all..... I tried 3 years to become a resident DT living at the metroplot an lofts and looking to buy a building. The prices were high but to rehab was out of the question. Found the perfect place in riverside across from above building. For less than half to move DT.

[simms3]

The Villas of St. Johns nearly collapsed on themselves and had to be nearly rebuilt, which ended up being quite expensive (and unforeseen).

There are other issues unique to the Villas that make underwriting it and operating it a different animal than something downtown.

Lastly, it IS too ugly to build something like that downtown and incorporates no potential for deep space commercial tenants on the ground floor.  Downtown requires ground floor retail, which is actually quite expensive because there are no cash flows from that kind of buildout possible right now.  Ironically, here in Atlanta there is a 443 unit condo building with a good ~60,000 SF of ground floor retail.  The 10% of units able to be rented are full with a longgggg waiting list, but the condos are only 50% sold.  The rented units and the quite high rental income from the leased spaces on the ground floor are what are basically carrying that building.  That is not possible in Jax where not only is it difficult to rent or sell residential downtown, it is impossible to rent out commercial space to restaurants, bars, and shops.

A flat construction loan is impossible in Jax.  A construction to semi-perm is also impossible.  A permanent loan is the only option, but who is going to issue it.  Again, that is the question.

The most aggressive pension funds and other institutional investors are solving for unlevered internal rates of return dipping below 7% on acquisitions and even new development.  Aggressive lenders are putting out interest only loans at below market rates and 7 year terms on many of these same acquisitions and developments.  This CHEAP debt and equity is not coming to Jacksonville...ever.

Instead, investors are going to want extremely high returns and because there is no "market-rate" debt for such projects in Jacksonville, it will have to be established at best case with cautious, conservative underwriting.  I.E. expensive debt.  Riverside is a much more proven market than Downtown, and even then there are really only a few projects in Riverside.  Sembler got rid of its Riverside Market development as soon as it could (the Publix/shops), so it obviously was not working for them (not that they like to hold long-term, but I can only imagine what it took to build such a low density retail development on that site).  Sembler is also a company that likes to use bond-financing and it takes risks.  If they exited Riverside that quickly, that says to me that only smaller guys taking larger risks are what is left...and that's one of our most established intown markets!  Downtown is our least established market.  Investing in downtown right now is like playing Russian Roulette with 6 bullets.

[lowlyplanner]

I'm not recommending that buildings be built to fall down. 

But I do wonder if we've made the perfect the enemy of the good downtown.  Downtown will need ground floor retail in every building eventually, but how long will it take before any of those spaces are in demand?  The City just "rented" one of the retail spaces in the Library garage to the Green Building Council for free as long as the GBC builds it out and pays the electric bill.  And no one else is asking for the same deal.

Sembler initially came into the Riverside Hospital site with a plan for just a Publix and an Eckerds.  During negotiations, RAP asked them to increase the square footage and cut the parking.  At the time it was not a proven market at all - the Villas of St. Johns got a City subsidy!  to build waterfront apartments!

Demand for apartments downtown is the ONLY positive indicator that I'm aware of.  I think the City and people that care about downtown need to figure out how to capitalize on that. 

[hillary supporter]

Lastly, it IS too ugly to build something like that downtown and incorporates no potential for deep space commercial tenants on the ground floor.  Downtown requires ground floor retail, which is actually quite expensive because there are no cash flows from that kind of buildout possible right now.  Ironically, here in Atlanta there is a 443 unit condo building with a good ~60,000 SF of ground floor retail.  The 10% of units able to be rented are full with a longgggg waiting list, but the condos are only 50% sold.  The rented units and the quite high rental income from the leased spaces on the ground floor are what are basically carrying that building.  That is not possible in Jax where not only is it difficult to rent or sell residential downtown, it is impossible to rent out commercial space to restaurants, bars, and shops.

A flat construction loan is impossible in Jax.  A construction to semi-perm is also impossible.  A permanent loan is the only option, but who is going to issue it.  Again, that is the question.

The most aggressive pension funds and other institutional investors are solving for unlevered internal rates of return dipping below 7% on acquisitions and even new development.  Aggressive lenders are putting out interest only loans at below market rates and 7 year terms on many of these same acquisitions and developments.  This CHEAP debt and equity is not coming to Jacksonville...ever.

Instead, investors are going to want extremely high returns and because there is no "market-rate" debt for such projects in Jacksonville, it will have to be established at best case with cautious, conservative underwriting.  I.E. expensive debt.  Riverside is a much more proven market than Downtown, and even then there are really only a few projects in Riverside.  Sembler got rid of its Riverside Market development as soon as it could (the Publix/shops), so it obviously was not working for them (not that they like to hold long-term, but I can only imagine what it took to build such a low density retail development on that site).  Sembler is also a company that likes to use bond-financing and it takes risks.  If they exited Riverside that quickly, that says to me that only smaller guys taking larger risks are what is left...and that's one of our most established intown markets!  Downtown is our least established market.  Investing in downtown right now is like playing Russian Roulette with 6 bullets.

I tried to go against this grain, but to no avail. Without these big investments, it just aint gonna happen. And, apparently,
Downtown will be the last place. And now there is no place in todays world.

[JHAT76]

I sometimes think focusing on housing/entertainment is putting the cart before the horse.  Jobs are what is needed downtown.  When I think of what most people want to live by (when thinking of downtown living)  their job is the first thing that comes to mind.  They live downtown to avoid the drive from the suburbs.  Next comes groceries/restaurants.  The big focus needs to be to lure more business downtown.  Examples being the (somewhat controversial) Everbank relocation or giving incentives to lure attorneys offices to relocated or put a branch office downtown near the courthouse.  This would fill in the vacant office space, possibly add more fill to the LaVilla area near courthouse and create demand for parking in garages.  Eventually someone will think "hey these people need to eat and maybe go to happy hour, maybe I need to open lunch diner or bar."  The more that grows the more people fill in the San Marco, Riverside/Avondale areas to avoid that drive from the burbs.  The reason they fill in is now with their jobs are downtown and with more traffic they will get tired of that Clay County/Southside drive.  Once the San Marcos and Riverside/Avondale's of the world get a little pricey there can then be a demand for downtown living and all the grocery, restaurant, entertainment that comes with it.

Of course having transportation that goes hand in hand with this growth is essential as does smart planning of housing and not encouraging sprawl with outer beltways and moratoriums on fees for developers.  Look at the more happening cities, look at Buckhead in Atlanta.  Sure they have great condos and restaurants, but there are also jobs right there for people to want to live by.  Why have a condo downtown if my job is on the Southside in some 60's style office park.

Maybe no one agrees with this but at least we can agree FBC is partly to blame.   

[urbaknight]

West Adams st would be a perfect residential corridor. When I get off the bus at Adams and Broad st. I walk down Adams st and come to what looks like a bank and law office on the first floor. There are five or six floors above that. Banks and law offices are generally quiet businesses. So this building would be perfect for apartments to occupy those floors above.

Then I walk further down the street, between Hogan and Julia st's is a seven story building. There's an ad on the  the side of the building, it says 218 west Adams st lofts, there's a number to call if interested. But I called it and the number wasn't even activated! I guess they gave up on that one too. But they should be rental units anyway, no one wants to pay a million dollars and not even own land.

Go up Broad st and you'll see even more opportunities for apartments. That old furniture store that was features on an earlier article, the two floors are exactally what I remember up north, the building even has a fire escape. And just up the street there are a few more buildings just like this one, and plenty of lots that can be infilled.

Does anyone know anything about these buildings I just described?

[ronchamblin]

Residential….. Office/Commercial…. Retail/Entertainment.

Although it is possible to entice residential and retail, it would be difficult now.  So I agree with JHAT767 about achieving the most success by first enticing Office/Commercial jobs into the core.

Office/Commercial can come into the core whether or not Residential and Retail already exist.  If one is to be second on the viability scale, then I suggest that residential would be it.  Some of the core Office/Commercial workers may move into the core as a convenience.

As the core population increases by way of Office/Commercial workers and Residents, “then” it will be possible for more retail and entertainment to survive and prosper in the core.

In other words, Office/Commercial, in order to survive and stabilize, doesn’t need Retail/Entertainment, nor does it need Residential; whereas Retail/Entertainment and Residents needs one or both of the other two in order to survive and prosper.