Khan, Jaguars expect Lot J development to begin early 2020

[thelakelander]

Under no circumstance have I ever believed this project would not be approved by council. I always thought that the market could not support what they were showing in the early renderings. I am surprised at the unravelling of how bad taxpayers are blatantly getting screwed on this one though. Value engineering generally happens much later down the road. It's shrunk tremendously in the conceptual stage, yet the incentives requested have not. That part is very shocking at this stage in the game.

[vicupstate]

Anytime you are dealing with the NFL, you KNOW you are dealing with very experienced and tough negotiators. When you think you have a deal, they ask for still more or agree to provide less than before. It was no different when Ed Austin was negotiating to get the team in the '90s.  Even so, I can't help but fully believe that the NFL never had bigger pushovers to deal with than Curry and co. 

[Ken_FSU]

You're missing that they're likely pocketing millions in cash straight up.

As a positive, optimistic guy who likes to assume the best of people and give the benefit of the doubt wherever possible, I have a hard time believing that a billionaire would knowingly fleece a cash-strapped small market out of tens, if not hundreds, of millions of dollars during a global pandemic. Drive a hard bargain and demand a 50/50 split on a private development? Sure. But falsely sell a $460 million project to the public, with the intent to build for $300 million and pocket the difference? I have a harder time with that.

That said, it's really hard to ignore the fact that the numbers just don't seem to add up.

Even the giant, flashy renders includes in the original expanded scope didn't add up.

Here's the project description from the ORIGINAL term sheet, before the project was dramatically scaled down:



Looking at each component and comparing it with a comparable Cordish development, here's what we get:

- Live Entertainment District, similar to Philadelphia, St. Louis, or Arlington (Xfinity Live in Philadelphia, cost $60 million)*
- Luxury 300-Unit Hight Rise Residential similar to Kansas City and St. Louis  (OneLight in Kansas City and One Cardinal Way in St. Louis both cost $105 million)**
- 200-Room Boutique Hotel ($65 million for Live by Loews in St. Louis)***
- 120k of Class A Office Space ($80 million for Cordish's 200k square foot office tower in Philadelphia, so let's generously say $65 million)****

*https://www.designcollective.com/portfolio/project/the-cordish-companies--xfinity-live/
**https://www.kansascity.com/news/business/development/article48607905.html
***https://ballparkdigest.com/2018/07/12/work-begins-on-live-by-loews-at-st-louiss-ballpark-village-expansion
****https://cordish.com/portfolio/pattison-place

So, looking at the original development, and assuming the residential component is a glass high-rise residential tower ($105 million), the office is a glass, 120k tower ($65 million), the hotel is an upscale 200 room Live by Loews ($65 million), and the Live! component is similar to Xfinity Live! in Philadelphia ($60 million), that puts us at a total of $295 million for the fully pimped out shiny glass renders presented back in 2018.

And that still leaves $155 million unaccounted for in the $450 million project cost.

All of the above projects have parking elements included in their cost, so I'm not adding that in. but even if we factored in worst case scenarios for other remediation and infrastructure, we're still $100 million light for the flashy renders.

But now, the scope has been reduced even further, and we're now down to a minimum of 350 mid-rise residential units (e.g. no shiny high-rise tower), 40,000k of office space built into the other buildings (e.g. axe the 120,000 k glass office tower), and 120 hotel rooms (compared to 200 in the above estimate).

To Lake's point, and to something that Mike pointed out a while back, Cordish has set retail and restaurant partners they work with, and build-out of their spaces is included in construction costs, so the numbers are going to look a bit larger than other non-Cordish developments. But that should have been included with the above costs from similar developments in other cities as well.

When you factor in the recent reduction in scope though, really does feel like a good $150 million of that $450 million project is falling into a hole somewhere. Even if you account for increases in construction costs in the last few years.

And it is rather interesting that one of the last 7 remaining non-negotiables between the Jags and the City is paying out the public cash incentives as the private investment is made, and having overall visibility into what the developer is actually spending on the project.

See section 8.3 from a letter that Megha Parekh sent out yesterday following meetings with the Auditor:



I don't think we're ever really going to know what the true cost of this project is/was.

[marcuscnelson]

So that's it? We're just going to get robbed of over a hundred million dollars, and then watch them ask for even more?

What are the odds that we're going to come back from the holidays to find the $100m ask for Four Seasons sitting there? After watching groundbreaking followed by six months of silence because they actually have to make blueprints now?

I hope keeping this NFL team is somehow worth it, even if it doesn't add up to do so.

[thelakelander]

I think we all know that this isn't a $450 million investment. That number is just as inaccurate as much of the other claims the mayor's office initially said about this deal. It leaves me no choice but to believe this is very much about funneling a certain amount of funds their way.

If not, issue a RFP for the same project scope and offer to pay 50% of the development costs. I'm sure lots of developers would take that deal and deliver a similar product for a fraction of the cost mentioned when we were being sold office, hotel and residential towers. However, that doesn't help the Jags out directly because that profit would go into another entity's pocket. We'll be back here again with similar requests for Lot J Phase II, Metropolitan Park, a new stadium and whatever else is dreamed up before then. It's imperative that if we're going to play the NFL game we need better negotiators on behalf of the public.

[fsu813]

I preface this with saying I'm definitely not a development expert, but could the apparent discrepancy in cost be resiliency related?

Ie) the extra money would be used for (likely) flooding infrastructure in the coming decades.

[Tacachale]

Given all we've seen, I fully believe that Brian Hughes could be sold a $295 million deal for $450 million.

[Charles Hunter]

I preface this with saying I'm definitely not a development expert, but could the apparent discrepancy in cost be resiliency related?

Ie) the extra money would be used for (likely) flooding infrastructure in the coming decades.

With the interest in some quarters, including C/m Carlucci, over "resilience" you would think they would mention that in their fancy slide shows.

[marcuscnelson]

I preface this with saying I'm definitely not a development expert, but could the apparent discrepancy in cost be resiliency related?

Ie) the extra money would be used for (likely) flooding infrastructure in the coming decades.

If it was that simple, why wouldn't they just admit it?

Surely it can't be that hard for Mark Lamping or Paul Harden to stand up at one of these City Council meetings and say "we expect a substantial portion of the cost to be for resiliency and flood mitigation" or anything of that nature.

And even then, $100 million for flood resiliency? Really?

I think we all know that this isn't a $450 million investment. That number is just as inaccurate as much of the other claims the mayor's office initially said about this deal. It leaves me no choice but to believe this is very much about funneling a certain amount of funds their way.

If not, issue a RFP for the same project scope and offer to pay 50% of the development costs. I'm sure lots of developers would take that deal and deliver a similar product for a fraction of the cost mentioned when we were being sold office, hotel and residential towers. However, that doesn't help the Jags out directly because that profit would go into another entity's pocket. We'll be back here again with similar requests for Lot J Phase II, Metropolitan Park, a new stadium and whatever else is dreamed up before then. It's imperative that if we're going to play the NFL game we need better negotiators on behalf of the public.

If nothing else, this is presidential-level grift. Good on them for having us by the balls so tightly that they can just guilt us into handing them free money. And remember, this is the backup plan. Imagine if they'd actually pulled off the JEA sale, and gotten their hands on billions.

I think it's reasonable to say that Curry is still in office by the next round of negotiations (because he's not recalled for the level of misfeasance and incompetence in this deal), taxpayers are going to get screwed. Now that we know $240 million actually means $390 million, by the time the Four Seasons and stadium reno deals go through, it's almost certain that we'll have spent a billion dollars to keep the Jaguars. When we didn't actually have to.

[thelakelander]

Seriously doubt it would take an extra $100 million to make that parcel more resilient. Plus this thing is still at the conceptual phase. Really have no idea how these numbers were plugged out of thin air and why they haven't been truly questioned publicly.

I preface this with saying I'm definitely not a development expert, but could the apparent discrepancy in cost be resiliency related?

Ie) the extra money would be used for (likely) flooding infrastructure in the coming decades.

With the interest in some quarters, including C/m Carlucci, over "resilience" you would think they would mention that in their fancy slide shows.

This!

[thelakelander]

I think it's reasonable to say that Curry is still in office by the next round of negotiations (because he's not recalled for the level of misfeasance and incompetence in this deal), taxpayers are going to get screwed. Now that we know $240 million actually means $390 million, by the time the Four Seasons and stadium reno deals go through, it's almost certain that we'll have spent a billion dollars to keep the Jaguars. When we didn't actually have to.

$1 billion by 2030 is child's play. I suspect we're going to be in way over that if we don't change the way we negotiate. We're around $500 million of nickel and diming now if we count the cost spent on related projects that have gotten us to this point.

[Ken_FSU]

Seriously doubt it would take an extra $100 million to make that parcel more resilient. Plus this thing is still at the conceptual phase. Really have no idea how these numbers were plugged out of thin air and why they haven't been truly questioned publicly.

I preface this with saying I'm definitely not a development expert, but could the apparent discrepancy in cost be resiliency related?

Ie) the extra money would be used for (likely) flooding infrastructure in the coming decades.

With the interest in some quarters, including C/m Carlucci, over "resilience" you would think they would mention that in their fancy slide shows.

This!

The vast, vast, vast majority of any resiliency efforts for this project will be covered by the city out of that $77-$93 million infrastructure contribution already identified. Jags ain't paying a dime to get the site ready for long-term development. We're even paying for the building pads for Lot J. The missing money is all on the private side. I'm sure they'll slightly raise the ground floors of their buildings and maybe locate the utilities on the second floors, but nothing that's going to eat up a huge amount of budget.

[jaxlongtimer]

For our further reference, below are some relevant quotes and numbers from DIA.  When you read the detailed report, it looks like they have even more concerns than what the (diluted for politics) summary represents.

I also find it interesting that the Jags are asking for payments to cover furniture, fixtures and equipemnt that will be mostly worthless after 5 to 10 years.  No collateral there for a long term "investment."  And, what does included  "reserves" and "costs beyond hard and soft costs related to construction" refer to?  Really?

Note this too: Infrastructure: Horizontal and vertical infrastructure includes residential garages thus $77.7M less $18M for garages = 59.7$ million for clean up, etc.

DIA'S analysis shows they also cannot come anywhere close to the proposed construction costs with this conclusion:  Costs "significantly exceed those seen in the Jacksonville market..."

Bold highlights added.

A.  Current Terms

The  City  and  DIA  are  providing  the  following  financial  participation  to  the  project  in  a  total,  or  rather  maximum,  obligation  of  $233,300,000 together   with   a   donation   of   land   valued   at   $12,000,000.Additionally,  the  DIA  has  allocated  development  rights  sufficient  to  accommodate  the  development.  These development  rights  were  provided  free  of  mobility  fees.  Further,  it  should  be  noted  that  of  the  $233,300,000 in public funds, $65,500,000 is in the form of a zero-interest loan, paid back over 50-years.

• $50,000,000 for the Live! component.  The  City  will  contribute  50%  of  the  construction  costs  of  the  Live!  Component  paid  pari  passu, up to a maximum of $50,000,000.

• $12,500,000 REV GrantThe REV Grant is paid over a 20-year period at 75% of the tax increment, the base year of which is  2020  and  the  land  value  base  is  $9  per  square  foot.  The  REV  Grant  only  applies  to  the  residential portion of the mixed-use component. The REV Grant is conditioned upon a minimum private capital investment of $95,000,000 (for the Mixed-Use component inclusive of the parking garage  and  Live),  noting  that  any  amount  less  than  $111,000,000  results  in  a  proportionate  reduction  of  REV  Grant  value.  In  other  words,  a  private  capital  investment  of  $111,000,000  or  greater entitles the developer to 100% of the maximum value of the REV Grant, noting that the actual  annual  payment  and  ultimate  value  of  the  REV  Grant  is  based  on  the  incremental  ad  valorem taxes paid.

• $77,700,000 for Horizontal and Vertical Infrastructure plus $15,100,000 for additional costs over $77,700,000 for a total of $92,800,000 towards infrastructure.

• $65,500,000 50-year loan, zero interestThe  City  loan  is  for  the  Hotel  Component  and  Mixed-Use Component up-to  a  maximum  amount  of $65,500,000. The loan is paid back over 50-years at zero percent interest. The Developer must deposit into a trust account, 20% of the amount of the loan drawn, which trust fund will provide the source of loan repayment.

• $12,500,000 hotel completion grantThe  $12,500,000  is  paid  upon  completion  of  the  hotel  component,  payable  in  five  (5)  equal  installments  as  follows:  first  payment  upon  completion,  then  one  payment  per  anniversary  of  the substantial completion date over the next four years.

Total potential Direct COJ Incentives are estimated at $245,300,000 which includes the following:

REV for the Mixed-use Residential Component  $12,500,000
Completion Grant for the Hotel  $12,500,000
Property for development of Mixed-use properties  $9,000,000
Property for development of the Hotel property  $3,000,000
COJ contribution towards Infrastructure improvements  $77,700,000
COJ contribution towards Add'l Infrastructure improvements   $15,100,000
COJ contribution towards Live! Component  $50,000,000
COJ Loan for Mixed-use and Hotel Components  $65,500,000

TOTAL  $245,300,00

....While the exercise above reduces costs to square foot for each component, it should be noted that the budgets  also  include  related  costs  such  as  equipment,  FF&E,  reserves  and  costs  beyond  hard  and  soft  costs  related  to  construction.  Estimates  per  square  foot  in  the  table  above  are  inclusive  of  those  amounts  as  detailed  development  or  construction  budgets  were  not  provided  to  make  eliminations  for  analytical  purposes.  A  cursory  review  would  confirm  that  these  costs,  even  including  FF&E  and  soft  costs, significantly exceed those seen in the Jacksonville market, especially with respect to the hotel and Live! Recent multi-family construction budgets (net of land and garage but including landscape, lighting, sidewalks, etc. and first floor retail) for Doro, Related, Ford on Bay and Vista Brooklyn range from $206-$290/psf.

On  a  per  residential unit  basis,  $200,000  per  unit  is  typical  of  a  Class  AA  multi-family product  without  incentives or cost reductions. Taking into consideration the land and garage incentive and the additional signage, landscape and hardscape costs included in the Vertical Infrastructure, a reasonable assumption for vertical  construction  of  a  Class  AAA  luxury  product  in  the  Mixed-Use  Component would  be  in  the  range  of  $150,000  per  unit.  Based  on  the  developer  provided  budget  of  $111,000,000  for  vertical  construction of the MF units only, divided by 400 units, the resulting per unit cost provided is $277,500 per  unit.  The  Downtown  Jacksonville  market  is  characterized  by  a  gap  of  approximately  $40,000/unit  between  construction  costs  and  stabilized  value  with  a  reasonable  (1.2x)  return  on  equity.  The difference  between  the  construction  cost  contained  in  the  Developer's  budget  and  what  we  would  expect to be a realistic cost substantially exceeds that delta.

As  to  the  Hotel,  taking  into  consideration  the  donation  of  a  development  ready  pad,  the  Vertical Infrastructure,  and  the  City  contribution  for  Live!  Components  which  would  include  restaurant  and  venue  space,  a  generous  per  key  construction  cost  for  a  luxury  boutique  hotel  is  estimated  to  be  $275,000/key.  While  one  national  survey  prepared  by  HVS  identifies  luxury  hotel  development  costs  approaching $700,000/key, that figure includes substantial value (several hundred thousand) in land and site  costs.  The  study  further  reveals  that  the  increased  cost  for  full-service  vs  limited  service  was  approximately  $140,000/key.  We  have  been  advised  by  the  Developer  that  the  restaurant  and  event  space within the Hotel will not be Live! Elements.  The budget of $118,500,000 for the hotel, even if the full 250 keys are developed, yields a per key cost of $474,000.

[marcuscnelson]

It's funny, I ended up in a conversation on Twitter with a lobbyist for Southern Group. The guy was insisting that Jacksonville needs "significant P3s" to jump start underserved portions. And yet, wouldn't you know that the deal he's so strongly supportive of is laughably out of line with the market or any sense of sustainability.

[acme54321]

One thing I haven't seen discussed here are other reprocussions of the Jaguars leaving.  For one, I don't think FL-GA would stick around without a modern stadium and the city isn't going to (and shouldn't) maintain the stadium to that level without the Jags.