Retail-less Parador Parking Garage Up For DDRB Appoval

[thelakelander]

Furthermore, if they simply incorporate the first 20' deep parking stall on the first floor to the rear of the retail space

That would be great but the developer doesn't want any retail within the garage structure itself.  Also, the Jax Daily Record has an article up about this project with some good quotes.  After all the discussion about this being a high profile downtown lot that's key to the overall area's future, I still don't think the Haskell project manager gets it.

Flagg suggested changing the design to include environmentally conscious elements such as plant material on its exterior walls, a “green roof” and LED lighting.

“We need to be as innovative as we can be if we’re going to put a parking garage in a prime location,” he said.

Following the board’s comments, Haskell Director of Project Development John Norris said putting so many conditions on what the client has to provide could make the project untenable.

“There is a break-even point. You can only do so much to a building before it becomes financially unfeasible. How much can you ask of one particular project? It is a parking garage. Putting a green wall on a building does not make more people want to park in it,” he said.

http://www.jaxdailyrecord.com/showstory.php?Story_id=537451

[simms3]

Has anyone suggested that if parking rates downtown are so low that they can't even justify a slightly prettied above grade structure without free money to the tune of at least a third of the replacement cost from the city, then perhaps there isn't really market demand for parking to justify this project in the first place?

The fact remains that the proposed garage is still as cheap as a garage can possibly go.  It's going to be prefab tilt-up construction the way Haskell does all of its garages, the design elements are bare minimal, there is no retail built in and if it is, it's so minimal it does not detract from the overall parking schematic, and this isn't a large garage, the city is putting up $3.5MM it has in its coffers from some unknown source and in addition the city is going to subsidize a large portion of the parking each year (i.e. the income of the property) so that Toney Sleiman can continue to do jack shit with the Landing.

Overall, while the economics are not as grand as the Courthouse, this is by far a worse blunder.  People proud to be involved with this project should kindly walk themselves out of the city and try to find another that may accomodate them (doubtful they would be able to).

Trying to stimulate creative adaptive re-use of historic building fabric to remove blight and increase tax rolls and surrounding property values, potentially bringing residents and hotel rooms with resulting bed tax is one thing (and also creating a better vibe that may be more attractive to companies seeking to be near the action and their young workforce).  But stimulating an ugly eyesore of a massive parking garage on the city's Postcard Lot to help out a trio of inexperienced real estate investors (I believe one is even a doctor, but don't quote me, since WHEN do we help out doctors making poor financial decisions??) and a local disgruntled strip mall landlord who probably won't actually put more than a dime into the Landing even with the parking.  People should be getting fired over this, seriously.

[Lunican]

Has anyone suggested that if parking rates downtown are so low that they can't even justify a slightly prettied above grade structure without free money to the tune of at least a third of the replacement cost from the city, then perhaps there isn't really market demand for parking to justify this project in the first place?

Of course there is no market for those parking spots. They can't even fill the empty lot this thing is proposed for.

[thelakelander]

^Now that is interesting.  The surface lot right there now doesn't fill up.  I guess they figure that structured parking is more attractive than a surface lot if the city is going to subsidize its construction.

[dougskiles]

The issue with the parking spaces is directly related to the owner's ability to lease out the building.  Without dedicated parking, they can't find tenants.  The dirt lot (which will need to be made code compliant soon or shut down) doesn't provide this kind of dedicated parking.

The real question is, why was the Suntrust building developed with no dedicated parking?  Sometime ago, there must have been a deal in place for them to get parking offsite.

[Non-RedNeck Westsider]

Property Type:  Office 
Total Space Available:  214,189 SF 
Secondary Type:  - 
Max Contig Space:  44,007 SF 
Class:  A 
Annual Rent:  - 
Building Size:  383,239 SF 
% Leased:  62.4% 
Year Built/Renov:  1989 / 2004 
Typical Floor Size:  17,000 SF 
Stories:  23  Elevators:  9 with 1ft 
Parking:  Ratio of 2.00/1,000 SF 
Parcel No:  074465-0000, 074465-0001 
Amenities:  Bus Line, Concierge, Corner Lot 

I'm guessing somewhere they're counting 384 parking spots? 

Also, doesn't the % Leased # look a tad inflated?

[fieldafm]

Furthermore, if they simply incorporate the first 20' deep parking stall on the first floor to the rear of the retail space


That would be great but the developer doesn't want any retail within the garage structure itself.  Also, the Jax Daily Record has an article up about this project with some good quotes.  After all the discussion about this being a high profile downtown lot that's key to the overall area's future, I still don't think the Haskell project manager gets it.

If the developer added another floor, you would have enough space on the first floor to build out proper retail bays right now.  You wouldn't have to worry about having the building set back from the street to allow for future infill.  Problem solved.

However, at the very first meeting it was repeated that 'building retail now would add more than $300k to the cost due to the inclusion of fire suppression systems'  (wow less than 5% of the cost of construction, half of which is covered by taxpayers) and 'adding another floor with retail on the bottom would add unfeasible costs to the project'. 

Keep in mind, this taxpayer subsidy represents about 35% of the acquisition cost of both properties, one parcel includes 152,000 square feet of available Class A office space in a market that could well include two potential large company moves downtown (that will be subsidized as well).  That's about as sweet a deal as it comes.

The comment that 'You can only do so much to a building before it becomes financially unfeasible. How much can you ask of one particular project? It is a parking garage.'  is about as telling as you can get. 

Subsidizing the destruction of downtown's economic fabric is not much of a vision and is not asking too much of a building. 

I genuinely hope the developer backfills those spaces quickly.  I agree that dedicated parking certainly makes this building more attractive for future leasing opportunities.  I can't fault someone for that.  If it was my building, I'd want a parking garage too(just not at the taxpayers expense).  I'd also offer transit subsidies for potential tenants for the Skyway/King Street garage, but that's another story.

However, I cannot under any circumstance stand for a taxpayer subsidized dead space in the middle of downtown by allowing this zoning exception.  What is the public benefit in that?  Zoning exceptions are supposed to result in a better product, not creating three larger problems by not addressing a longstanding elephant in the room (Landing parking).

Last I checked, you don't get four strikes in baseball.

Sometime ago, there must have been a deal in place for them to get parking offsite.

There was.  The former owner (Cameron Kuhn) acquired SunTrust(bldg) and the adjoining parking lot and was going to build a large tower on site with a dedicated parking garage beneath the new building that would serve both towers and have dedicated spaces for the Landing.  He went belly up, and as such the money reserved for that garage (which was in place b/c it provided dedicated parking to the Landing) languished and reappeared when Sleiman tried to purchase the surface lot adjacent to the Enterprise Center.  Of course, we all know that deal fell through.

[fieldafm]

Property Type:  Office 
Total Space Available:  214,189 SF 
Secondary Type:  - 
Max Contig Space:  44,007 SF 
Class:  A 
Annual Rent:  - 
Building Size:  383,239 SF 
% Leased:  62.4% 
Year Built/Renov:  1989 / 2004 
Typical Floor Size:  17,000 SF 
Stories:  23  Elevators:  9 with 1ft 
Parking:  Ratio of 2.00/1,000 SF 
Parcel No:  074465-0000, 074465-0001 
Amenities:  Bus Line, Concierge, Corner Lot 

I'm guessing somewhere they're counting 384 parking spots? 

Also, doesn't the % Leased # look a tad inflated?

It's a tower of office condos.  There are people who own a portion of those office condos already in the building.  When Parador bought it, they only purchased a little over 200k square feet (if I'm not mistaken).

[Non-RedNeck Westsider]

the 65% number stuck in my head from your response ealier in the thread...

And the applicant was correct, 65 percent occupancy was not arbitrary.  Given that once Class A office space reaches 50pct occupancy, the building becomes much more attractive to sell.  Given the low acquisition costs of the building 4 years ago, my guess is Parador sells it before that 65pct number is reached, thereby dissolving themselves of the responsibility of building the retail which they have made clear is not their kind of business.  All the while they get taxpayer assistance to make that kind of transaction possible.  That's a sweet deal, glad we the taxpayers can subsidize building permanent dead zones on PRIME downtown real estate.

I posted those figures, because based on the leased % now...   It seems as though the retail portion is already really close to a go as is.  I'm assuming leased % = occupancy %.

and if that's a concern (a real concern, not a WLA concern) then we should be pushing even harder for them to put in a viable setback, because it's not a wait and see event.  The occupancy could easily hit 65% (5,500 sqft) prior to construction.

[simms3]

I would be interested in learning more about office condos.  I'm picturing medical office near a hospital or on a suburban arterial, or small strip specialty centers filled with mom and pop businesses, but I'm drawing a total blank as to what kinds of businesses would wish to own semi-complicated real estate that is beholden to an association in a class B office tower in a CBD with a bad business environment?

Also, assuming the building is 62.4% sold and the condo association was created at least 4 years ago when Kuhn re-organized the multitenant building into condos, isn't there a law that will force the landlord to hand over control of the building to the association at some point by now?

And so assuming Parador Partners, LLC has the adjacent land under a different entity, no matter if the building has dedicated spaces with the garage, etc, aren't there new and increased hurdles to go through to put new condo owners in the building?  Any new buildout or improvement is going to require association consent and must fit association guidelines.

Why is the city risking $3.5MM on this when there is probably little chance of finding a large buyer such as PSS and dealing with the association just increases time and cost to do a deal?  Why would PSS wish to own its own real estate such as in the form of an office condo?

Screw dedicated parking and simple design/aesthetics, with $3.5MM on the stake can the city publicly answer any and all questions regarding the viability of such an investment, the reasoning for such an investment, provide a proforma and deep dive analysis, etc etc?  I remember reading about Parador Partners, LLC when doing some research, it seems at least one is a doctor with no or limited real estate/finance experience.  Do these people have a model?  Do they act as guarantors on a recourse loan?  Who's the lender?  I doubt there's debt because they would have foreclosed already if I had to guess the covenants to perform and no traditional lender would place a term loan on this project.

Ok, questions done, now can someone answer and provide detailed background on the development partnership and its past experience?  Can someone answer my questions on office condos?  Can someone tell me the $3.5MM is actually going to solve something, even if it's just some folks' bad investment?

[fieldafm]

You're making a lot of assumptions.

First, the building is Class A.

Yes, there was previously a mortgage on this property (it is not at all difficult to finance such a project).  Parador bought the building from the bank who had a default judgement against Kuhn.

No one has said that future tenants will be buying office condos... you can still lease out significant space in the building. 

There is a world of financial and commercial transactions out there that work differently than what your experience may be. 

You keep calling this a bad investment.  Frankly, with how low the acquisition costs were... this is a really good investment, especially considering the favorable mix of office space in the city that is starting to tilt in downtown's favor.  Throw in a subsidized parking garage and the financials work even better.  They'll flip this thing in under 3 years.     

Regardless, none of these things have anything to do with a zoning exception and the merits of the design review.

If the developer has a dedicated parking garage (in an environment where some large incentivized deals are brewing) that building can be leased out relatively quickly.  It offers some of the largest available chunks of built Class A office space in the city.  Downtown is where you'll see most(not all, Flagler has a lot of land) of the large deals migrate to over the next couple of years simply due to the size of office space available there. 

[JFman00]

What coercive power does the city have to ensure that the build-out occurs at all/on-time if the occupancy requirements are met?

[simms3]

You're making a lot of assumptions.

First, the building is Class A.

Yes, there was previously a mortgage on this property (it is not at all difficult to finance such a project).  Parador bought the building from the bank who had a default judgement against Kuhn.

No one has said that future tenants will be buying office condos... you can still lease out significant space in the building. 

There is a world of financial and commercial transactions out there that work differently than what your experience may be. 

You keep calling this a bad investment.  Frankly, with how low the acquisition costs were... this is a really good investment, especially considering the favorable mix of office space in the city that is starting to tilt in downtown's favor.  Throw in a subsidized parking garage and the financials work even better.  They'll flip this thing in under 3 years.     

Regardless, none of these things have anything to do with a zoning exception and the merits of the design review.

If the developer has a dedicated parking garage (in an environment where some large incentivized deals are brewing) that building can be leased out relatively quickly.  It offers some of the largest available chunks of built Class A office space in the city.  Downtown is where you'll see most(not all, Flagler has a lot of land) of the large deals migrate to over the next couple of years simply due to the size of office space available there. 

Thanks for answering my questions.  I guess I jumped the gun a bit, but because the building has multiple ownership there still has to be some sort of association, which never makes anything easier for anybody.  Good to know DT will be a favored deal zone in the future and it makes sense given the blocks of space available and the rates, and obviously dedicated parking attached to a building is a nice amenity anywhere, but I still debate yours and other's opinions that the building is Class A.  For Jacksonville, yes; for most other cities, no.

If this is as good an investment as you say (I suppose the acquisition cost was extremely low given the submarket, the occupancy, and the fact the seller was a bank which probably wanted to offload this baby from its balance sheet ASAP), why is the city giving them ANY money?  And if the city gives them $3.5MM, can we have full disclosure on the deal?  Can they make public their projected cash flows, their business plan, their financials (I'm talking the mothership, whatever entity holds the pass throughs that individually own the land for the garage and the remaining office space in SunTrust)?  Still waiting on just one story yet in my lifetime written by an outsider for a national publication on the upside for investors of the Jacksonville or downtown Jacksonville office market.  Not much has been written on the topic.

[simms3]

One more questions: is there precedent for the city acting as a preferred equity partner?  So let's say the $3.5MM will help Parador's backers and principals be made whole.  Who's to say the city shouldn't be rewarded with a little 12% interest on its investment in the project?  If city leaders are going to fuck over the cityscape in the name of a possible tenant that may not come and in the name of a disgruntled strip mall king who demands parking for his pet project, but hasn't actually done anything worthwhile yet to the Landing and may not even with his parking, then can the taxpayer or city at least make a little money off of the deal to sell its soul?

[simms3]

And if not quite preferred equity return, senior to Parador's pass through which owns the SunTrust of course (not the garage), what's the cost of capital for the city on average?  Can we at least get that sort of return on the $3.5MM?  We all know the Sleiman money (~$135K/year) is completely free, technically, but that can be arranged to produce a return, too, and Sleiman should pay it.

Let's force the city either to generate returns on its money for the taxpayer, or only to invest in or lend to projects with experienced backing AND major benefits to the cityscape AND to the tax rolls.  If landing a major tenant to SunTrust will produce tax returns greater than the $3.5MM discounted at the city's cost of capital over 10 years from the initial investment, then I suppose that's better than nothing, but can we see the analysis or the plan?

Does the city have analysts on this?  In my city a lot of special financing packages are made pretty public and the city and its development agencies have an army of analysts.  Is it the same in Jacksonville?  Can just anyone get money for their project in Jacksonville?  How are projects chosen?  What are the criteria?  Who sets the criteria?