Khan interested in developing shipyards

[duvaldude08]

Jacksonville Jaguars owner Shad Khan said Thursday he is interested in developing the vacant Shipyards property, which is near EverBank Field and is the most visible open space along the St. Johns River on Downtown's Northbank.

"I think it can be greatly enhanced" to bring economic vibrancy to Downtown, he said.

Khan said his organization is talking with the City, which owns the 40-acre property. He did not specify the details of those talks.

Asked if he had ideas for the property, he said, "lots of ideas. Hundreds of ideas."

"It has to be a destination," he said. "It's Downtown 101."

Khan said people come Downtown to work and then leave. He wants to change that.

Khan spoke with reporters Thursday after he accepted the 15th Annual Thompson S. Baker "Solid as a Rock" Award at the Junior Achievement of North Florida Hall of Fame event at EverBank Field.

Khan did not talk about his interest in the Shipyards in his remarks when he received the award.

In speaking with reporters, he didn't delve into details about the property or any plans, but said the property is "something we can really make a difference" in.

"That is the face," he said, calling it a "very, very high-profile" property.

He declined to talk further about the talks with the City, saying the conversations are pending.

David DeCamp, director of communications for Mayor Alvin Brown, acknowledged Khan's interest.

"Shad Khan has expressed interest in developing the Shipyards property. The discussion was preliminary," DeCamp said.

"Any disposition of City-owned land will follow the City of Jacksonville disposition process. We are very focused on activating the resident and fan experience on our waterfront," he said.

"The Jaguars are an important part of the city's economy and brand, and we look forward to hearing more about this concept as their plans develop," DeCamp said.

The Shipyards property is vacant land stretching from The Plaza at Berkman, which is near the old county courthouse property, to Metropolitan Park and the sports complex.

Late Thursday, Khan issued a statement about his interest in the Shipyards:

"I've said all along, Jacksonville has great potential. Developing the north bank of the riverfront would go a long way toward achieving our potential. The shipyards are the front door to our home, EverBank Field, as well as the entire Sports Complex," said the statement.

"A new life for the Shipyards would be good news for the Jaguars, EverBank Field, the Sports Complex and all of Downtown Jacksonville."

Several developers unsuccessfully attempted residential, office and retail projects on the site since it closed as a working shipyard. The City ended up owning the property after failed attempts by developers.

The Jacksonville Civic Council Northbank Redevelopment Task Force's February 2011 report referred to the Shipyards property as a potential "magnificent mixed-use urban fabric extending from the central business district, along the river, to the sports complex."

Khan has made inroads into Downtown investment already. In April, his Stache Investments Corp. financed the acquisition by a private group of the Laura Street Trio and the old Barnett Bank Building Downtown.

He said that deal was one of many investments and initiatives he supports in the community, including his pledge to meet with selected creators in the One Spark festival and possibly invest.

"I think for me, it's really about committing to a community," Khan said.

Khan said he supports growth in the community, including investments in local business, but prefers to do some of it quietly.

"There are many touch points to make a difference," he said.

Khan, president and owner of Flex-N-Gate Corp., bought the Jaguars in January 2012. He paid $770 million to buy the franchise from Wayne and Delores Barr Weaver and their ownership group.

Khan said at the Junior Achievement event there would be announcements in the next week or two about initiatives regarding the Jaguars that had national and international impacts.

Regarding Tim Tebow, who signed this week with the New England Patriots, Khan said he was happy for him.

"I am delighted for Tim. He's a great player and it's a great situation," he said.

Tebow is the hometown quarterback who played at Nease High School, the University of Florida, the Denver Broncos and then the New York Jets, which released him in April.

Vocal Tebow fans wanted the Jaguars to sign him, but Jaguars General Manager Dave Caldwell has said he "can't imagine a scenario" where Tebow would be a Jacksonville Jaguar

[simms3]

^^^Hmmm....

Sounds like Khan is open to bankrolling the development of the land, but my hopes aren't up...he's a smart man and probably knows that condos and offices aren't the use that will generate buzz and activity there in the Jacksonville market.  I'm sure he's thinking of highly public uses - local version of a market with vendors and restaurants, brewery, park, museum and/or attraction, etc.  I would think he would view such a loss as part of his overall nearly billion dollar investment in the city, his way of making the city a more publicly attractive and interesting place and a way to get more people interested in coming down for games, or at least pre/post game activities.

[downtownjag]

^^^Hmmm....

Sounds like Khan is open to bankrolling the development of the land, but my hopes aren't up...he's a smart man and probably knows that condos and offices aren't the use that will generate buzz and activity there in the Jacksonville market.  I'm sure he's thinking of highly public uses - local version of a market with vendors and restaurants, brewery, park, museum and/or attraction, etc.  I would think he would view such a loss as part of his overall nearly billion dollar investment in the city, his way of making the city a more publicly attractive and interesting place and a way to get more people interested in coming down for games, or at least pre/post game activities.

Hey Simms - I've been off the grid for a while.  What do you think of multifamily rentals here; assuming you don't have to build a deck?  Maybe wait to see what kind of rents 220 Riverside ends up getting first?

[simms3]

^^^I would be disappointed if the city allowed rentals to be built on the Shipyards site.  Definitely NOT highest and best use.  I don't know of many cities that allow for a development pattern that puts rentals on prime real estate (which is usually not cost effective anyway due to higher land price per unit).

Also, in Jacksonville if it's not a wrapped deck, it's what most apartments in Jax are - garden style with surface parking.  Is that what we want around the core?  Not an efficient use of more expensive land (well, relatively speaking ha).

I suppose if the market would support it, a developer could do a high rise with podium or structured parking on the Shipyards to reduce the land basis and spread it over more units.  Land isn't really expensive enough to justify that, though, and the last thing we need is poorly designed rental towers over podiums on the riverfront.  Ew.


RE 220 Riverside:  I'm outspoken on my thoughts and inquisitiveness towards the project.

Who the hell knows what kind of rents they're going to achieve at 220 Riverside ($1.50-$1.60psf?, maybe higher?).  It's an all equity deal.  One can do simple math to test what they'll need to achieve to get to a 1.5x equity multiple if they don't plan on holding the thing for a while (most development deals are not build + hold unless you're not hitting your numbers and you have persuaded your investors that patience is the only way they'll get their money back or the return you promised).  For comparison, we often do development deals seeking a 2.0x multiple or greater, and obviously an intensely high double-digit return, but most of our deals are also leveraged.

Land price per unit there is $12.5K as I believe they paid $3.7M (this is still lowww), and construction costs in Jax are among the cheapest in the country - it's still a mostly wood frame construction above the first floor and there isn't a shortage of labor/materials in the city like there is in others.  They also received $5M in incentives, which as taxpayers we should not strive for with every deal.

Still, it's telling that it took TEN years for that project to even start and it's not financed.  I'm sure there are people DYING to see how fast it leases up and at what rates and what concessions, if any.  I'm one of them.

Question is - would you want to see more 220 Riverside on the Shipyards land?  I really would not.  It's cheap cookie cutter rental housing even if it looks new and hip/fresh for Jax (believe me, that style does get old...just go to Charlotte, Atlanta, Raleigh, etc).

BTW I just did a quick test, assuming the equity in the deal is $37M and they're able to cash in within 12 months of delivery (aka it takes a short 6 months to stabilize and 6 months to bring to market and close a deal), at an opex ratio of 40%, rents of $1.50, economic occupancy of 95%, and average unit size of 750 SF, they'll basically break even, assuming a 6 cap on in-place (in aggressive markets buyers will annualize the last 30 leases or maybe 3 months over the past 12 months of expenses), which seems right for that market if there is development risk nearby and rents below $1.60psf.  Using these same metrics, a 5% cap on $1.80psf rent gets them to 1.5x multiple, which isn't really that great (we do plenty of development deals hoping for and achieving 2.0x or greater, most are leveraged...though we've certainly bombed out before, on a multifamily deal I worked on actually!).  $1.80psf effective rent is $1,350 for a 750 SF unit.  Can the market support 294 such units at that rent?  Only time will tell.

And the only people who are going to pay a 5-cap (aka they are leveraged at a swapped or floating spread 200-250 BPs ahead of 10 YR Treasuries, which are on the way up squeezing the so-called yield spread quite thin on present day pricing), are REITs and institutional funds, and they just don't look at Jacksonville.  Also, they'll only pay that 5-cap if they don't see unemployment risk and nearby development risk...they're banking only on healthy rent growth.  If 220 Riverside is successful, the catch 22 is that DT area could be viewed as highly undersupplied due to no construction, and all of a sudden dirt is moving everywhere, and there is then downward pressure on rents.  So maybe we're looking at selling this for a 6-cap, which means if you build and immediately sell, effective capped rents need to be at $2.15psf, which is impossible for Jax (Atlanta is hitting those numbers on some deals, but that's Atlanta).  Austin is hitting $2.25 on some deals.  Charlotte's down at $1.75-$1.85, maybe higher now.  So this might actually be a develop and hold for ~3-4 year deal (holding for 4 years post stabilization year at 3% rent growth on $1.60 starting gets you to 1.5x multiple and ~10% unleveraged IRR...so you profit around $18-20M).

Sorry I totally geeked out on this - but I intensely track these kind of projects.  I have the original underwriting for a rental tower that just went up in Atlanta, and I tracked that project closely and followed its progress for the same reason (even built a little model on the knowledge I do have of the project to see how it performs, who buys it, etc).  I likely will never have as much knowledge about 220 Riverside, but you can bet that the developers will be talking about it at events/panel discussions, etc...it's a big case study for the market.

My quick back of the napkin math assumes $125K/door cost and $154K/door exit, which is about the record in NE FL (Tattersall in 2012 sold for $153K/door).

NO RENTALS FOR SHIPYARDS!!

edit: found out they paid $3.7M for land and MAA the backer (REIT with low cost of capital) expects to end up paying around $39.5M, which changes my little math a bit.  MAA is merging with Colonial, another REIT, and Jax is now a top 10 Sunbelt metro focus for MAA.

[icarus]

It seems like a lot of construction is owner/occupant even in terms of commercial.  The Everbank building was originally finances with most of the tenants buying into the partnership.  Even 220 Riverside as originally proposed to me 7 years ago was commercial condo.

Absent a prearranged anchor tenant, I wonder if any commercial or residential construction can be financed in downtown Jacksonville as anything other than owner/occupant.  I just don't see the demand for downtown office space as of yet that would justify the financial speculation on an unoccupied tower.

And, without the infrastructure for residential development in place, i.e. grocery stores, retail, etc., it seems like it would take a significant equity player as developer and the ability to execute on a mixed use development.

Unfortunately, it still seems like a classic chicken and egg situation to me .. what comes first?

[Cheshire Cat]

I wonder if this "event" is part of an effort to refocus attention on the Shipyards.  Perhaps.   Ben are you going to be part of this?  Get out there and support "Intuition Ale Works"

• The Shipyards property Downtown will be the host site for Jaxtoberfest, a two-day festival featuring local breweries, restaurants, and children's activities. The event will be Oct. 11-12 and feature a 5K Beer Run, music, games and more

[Cheshire Cat]

And more on the festival.

http://jacksonville.com/opinion/blog/403251/tom-szaroleta/2013-08-13/fall-festival-planned-shipyards

Plans were announced this week for a Jaxtoberfest festival at the Jacksonville Shipyards, with German food, music and a 5K run.

The inaugural festival is scheduled for Oct. 11-12 on the long-vacant shipyard property, on the banks of the St. Johns River between downtown and Metropolitan Park.

Two stages are planned for live entertainment. The festival's website, jaxtoberfest.com, lists two bands that have been booked -- The Swinging Bavarians from Central Florida and The Rhinelanders.

Beer will definitely be a part of the festival, which opens each day with a traditional keg tapping ceremony. A beer barrel race, a stein holding competition and a "safe slam drinking contest" are among the activities planned. Nine beers will be featured, including brews from Jacksonville's Aardwolf Brewing Co. and Intuition Ale Works.

Admission is $8

[Stephen]

It would be nice if the Shipyards were developed.It certainly is an eyesore now and proof of how backward Jacksonville is. Whats with the half completed highrise at Berkman Plaza?
I'd like to see development that would include something along the lines of including something like the Pike Street Market in Seattle or Girradelli Square in San Francisco or Harbor Place in Balimore. This town needs to grow up.

[edjax]

I believe the Berkman Plaza is still mired in lawsuits due to the collapse of the garage which resulted in the death of a worker.

[fieldafm]

I wonder if this "event" is part of an effort to refocus attention on the Shipyards.  Perhaps.   Ben are you going to be part of this?  Get out there and support "Intuition Ale Works"

There was another event scheduled for the Shipyards leading up to TPC that got rained out.  Sports and Entertainment have looked at ways to activate the property with large events.  It's not really a site that you can do something small with as there are specific site considerations associated with holding events there.

The shipyards would be a great temporary event space, however as I have found out the hard way... the site itself presents some unique limitations from a risk perspective.  Jason Fisher (of Content Design) and myself talked to several people about decking out the space temporarily with shipping container storefronts, sort of like Brooklyn Flea (you can google that).  Although it was always met with a 'great idea', no one has wanted to put in the work to help make that vision a reality.  Unfortunately, you do need help with things from time to time no matter how resourceful you are.  This is one of those things you would need help with.

I believe the Berkman Plaza is still mired in lawsuits due to the collapse of the garage which resulted in the death of a worker.

What complicates that further is that all of those companies have gone belly up.

Meanwhile, the City still holds bond debt on the property.

Several parties have approached the City with creative ways to carve out at least a part of the property (sort of like the Columbus Commons model posted about extensively on MJ), but the City hasn't been really looking to get creative apparently.  Khan's proposal included a tremendous handout from the City.  From what I understand of that deal, I don't think that it would be a great deal for taxpayers on the surface. 

[Cheshire Cat]

Am I looking at the right thing Mike?  This would be a sort of antique flea market?  Something like this could also feature "food trucks" right?  Honestly, any idea that brings activity would be a good thing. Has this idea every been presented to the city?  Shoot, I sure ask a lot of questions!  lmao

http://www.brooklynflea.com/about/

[fieldafm]

Am I looking at the right thing Mike?  This would be a sort of antique flea market?  Something like this could also feature "food trucks" right?  Honestly, any idea that brings activity would be a good thing. Has this idea every been presented to the city?  Shoot, I sure ask a lot of questions!  lmao

http://www.brooklynflea.com/about/

Sorry, was actually referring to Dekalb Market (mind was spinning earlier).  Edit: Having trouble posting pics from the IPad at the moment

[Sunbeam]

Khan needs to stay out of the shipyards! That property belongs to this community and is in the borders of what the DIA is supposed to develop with public participation.

EOD is trying to usurp control from the DIA and attempting to control projects on property that rightfully belongs to the public. The EOD has caused public injury with their many failures two of which is LandMar and Trilegacy group on the shipyard property costing tax payers about $100 million.

WE just had that property returned to US about a year ago after a lengthy and expensive lawsuit and it belongs to us and the DIA gets to develop it for US, WITH public input.

This citys leadership already has a serious problem telling jaguar owners NO! Where they get everything they ask for regardless of how devastating it is to this community.

Do we really want someone threatening us even more then they already do if they dont get their way... like scoreboards? And now the shipyard? OUR waterfront property?

No! No way!

[JeffreyS]

It will be done by some developer why not Khan. That said the city should certainly have input into it's use via the DDRB.

[Rynjny]

Khan needs to stay out of the shipyards! That property belongs to this community and is in the borders of what the DIA is supposed to develop with public participation.

EOD is trying to usurp control from the DIA and attempting to control projects on property that rightfully belongs to the public. The EOD has caused public injury with their many failures two of which is LandMar and Trilegacy group on the shipyard property costing tax payers about $100 million.

WE just had that property returned to US about a year ago after a lengthy and expensive lawsuit and it belongs to us and the DIA gets to develop it for US, WITH public input.

This citys leadership already has a serious problem telling jaguar owners NO! Where they get everything they ask for regardless of how devastating it is to this community.

Do we really want someone threatening us even more then they already do if they dont get their way... like scoreboards? And now the shipyard? OUR waterfront property?

No! No way!

It's people like you that's keeping this city from moving forward...Belong to this community?? yeah like sitting there empty? Let khan develop that property into something, anything would be good for this city.