Carling, 11 East Bleeding Money: developer asks city for more help

[Miss Fixit]

+3

Restructuring the note to allow interest only payments for a period of time seems the most sensible thing to do given the current economic environment.  Relative to what many other developers (and single family home owners, for that matter) are asking of their lenders, Vestcor's request is exceedingly reasonable.

[Tripoli1711]

Forgive my ignorance, but if the Council did not approve this, and if the debtor were unable to make the principle and interest payments, wouldn't the buildings just go into default and ultimately foreclosure?  At that point it is anyone's guess how much, if anything, it would bring at a sale and the city would probably end up losing money.  At least this way they are still making interest and they aren't lowering the principle any.  It really seems like a no-brainer to me if the company has been truthful and submitted proof that at the moment it simply cannot pay both the P and the I.

[CS Foltz]

Treipoli1711.........you do realize that Vescor got two loans from the City for these bldgs? One @1.4% and the other at 1.5%..........total cost around $36.5 Million Dollars! I don't know about you but I could not get that kind of money at those rates. Where would you draw the line at............I am not comfortable with shoving more money into their hands and these loans were from an administration that is going to be $58 Million Dollars in the hole next budget cycle. I am not comfortable with this at all!

[Tripoli1711]

I know they got low interest loans.  How is this shoving money into their hands?  I do not believe saying "You basically are because you are not making them pay it" is an adequate answer due to the premise of my statement.

If the two options at this point are 1) Let them pay interest only with no principal reduction for 3 years or 2) They default and go into foreclosure, the city has to either eat the properties and let them sit vacant or sell them at foreclosure sale for a lot less than $36.5 million..

I am all for option 1.

[CS Foltz]

I understand your viewpoint and concur to a degree! My issue is not everyone has that option! Is Vescor part of the GOB Network and can get bailed out because of it? I would say there are more than one business's that are having the exact same problem and I don't see JEDC giving them that option! Financial Institutions are concerned about the bottom and don't hesitate to pull someones plug because they have a money flow problem or force someone into foreclosure.

[Miss Fixit]

It is likely that the market value of this project is lower than the principal value of the loan.  A lot of developers would choose to walk away.  I don't know whether or not Rood personally guarantees the debt, but I think in this case he may actually be trying to honor his commitment to his GOB buddies.

[fieldafm]

Financial Institutions are concerned about the bottom and don't hesitate to pull someones plug because they have a money flow problem or force someone into foreclosure.

No one is pushing anyone into the foreclosure door right now... that I can assure you.  

This is not principal forgiveness nor does it amount to anyone giving anyone MORE money.  This is a sound business decision based on common sense and rational thought.  We should be so lucky in this city  

You need to get past the GOB rhetoric and look at the merits of the individual situation.  Bankers by and large need to do this as a whole, Lord knows they didnt for the past 5 years.

[Tripoli1711]

Those were my thoughts Miss Fixit.  Basically it seems to me that the alternative to letting them pay interest only is a bigger detriment to the city.

Whether all of this is GOB network, I am unqualified to answer.  If it is, the problem is with the loan in the first place, not working something out now.  

[Tripoli1711]

  This is a sound business decision based on common sense and rational thought.

Except, shockingly, for where fair Councilman Yarborough comes in.  His quote about downtown revitalization seemed so convincing... =)

[CS Foltz]

Fellow posters...........like I said .....I agree to a point! Something beats the hell out of nothing, unless the City wants foreclosure on $36.5 Million Dollars worth of buildings! This is the smartest thing the current administration has done in quite some time but I still have reservations because no bank is taking this tack! The intial loans should have not been done to start with! City does not have the expertise nor the outright money to squander in any fashion since it is Taxpayer money to begin with! The taxpayers are not in the business of banking nor are we a loan institution and yet this took place. Now the Council, whom I am suspicious of for common sense, will rubber stamp this!

[fieldafm]

With all due respect CS... I used to be a firecracker that was full of rhetoric.  Then I realized that you have to get past the rhetoric and start making decisions after careful examination of the task at hand.  Otherwise you end up with nothing while you pat yourself on the back for keeping a tight grip on to that rhetoric all the way to the bitter end.

Im all for no taxation without representation.  I hear ya, my friend.  But allowing two crown jewels of downtown preservation and revitilization to fail b/c we were all so blind and clouded by the rhetoric serves no one's best interest.

[CS Foltz]

fieldafm.......much thanks but you could not offend me...........really! You do have a point....I have been in the Old American Heritage Building(11 East) back when it was empty and smelled badly! Installed the first Cell Site for Powertel on the roof back when there was little coverage in downtown. Now there are three more up there and back then I could see the possibilities and then some! Elevators did not work so had to muscle radio cabinets up the fire escape stairs in the dark............lots of fun! You do have a point regarding "crown jewels of preservation and revitalization" and you also have a point regarding payments of the interest until they can start paying the full amount back with an upswing in the local economy. But those loans should not have been made by JEDC to start with! City of Jacksonville is not a lending institution by any means and with the City $58 Million Dollars, still counting, in the hole next budget cycle where does anyone draw the line? Fiscal responsibility should be foremost  in the public servants minds but is not and that is my biggest grip! If everyone had access to the Bank of Jacksonville, great but we the people do not do we? Don't forget instead of cutting cost spending wise, John Boy wants a 4% increase in our property taxes to help balance the books..............so like I asked before where do we draw a line?

[cline]

But those loans should not have been made by JEDC to start with!

Had they not made those loans those buildings would not have been rehabbed and would currently be a part of our large inventory of empty downtown buildings.  Which would you rather have?

[xian1118]

But those loans should not have been made by JEDC to start with!

Had they not made those loans those buildings would not have been rehabbed and would currently be a part of our large inventory of empty downtown buildings.  Which would you rather have?

I'd rather have the buildings...they about the only residential that ties downtown together. Clearly they wouldn't have been possible without subsidies - it's not like the city threw money at the buildings - they offered an alternative solution because the building improvements would directly benefit the city's effort to improve downtown. Rehabilitating the building saves the taxpayers money by eliminating the need for new infrastructure (especially downtown) and improves the value of the surrounding buildings. These buildings were supposed to be a catalyst for downtown re-development but the other pieces to the puzzle for numerous reasons...cough cough Cameron Kuhn cough cough...I understand your point Foltz, but I think this is a bad example to apply it to. To be honest, your complaint is misplaced...it might find a better home with the rhetoric from the message board whiner wasteland of Jacksonville.com...

[Jerry Moran]

DOWNTOWN
Support the pioneers

Just a few years ago, downtown Jacksonville was saddled with two derelict high-rise buildings.
One was in such bad shape that every time it rained, water ran under the front door to the street.
John Rood and his Vestcor company came forward at the city’s request and refurbished the buildings into spectacular modern apartments.

Of course, the deal involved some grant money and low interest loans underwritten by the city.
No developer could take on such a project without those incentives, considering the risk of the location and amount of work required to save two historic, but dilapidated buildings.
Vestcor spent a lot of its own money, too, and saved the city the millions it would have cost to tear down the buildings.

The city assured Vestcor, and many other urban pioneers, that it would do its part to make downtown a safe, secure and attractive neighborhood. That has not happened. Vestcor has found it cannot attract or retain residential or commercial tenants due to the deplorable condition of downtown.
Complaints to City Hall from property owners and the few residents and merchants left downtown have fallen on deaf ears.

At this point, no one expects any progress until after the next local election.

It is not unreasonable to extend Vestcor’s debt payments by a few years. Rood is an honorable businessman.
He could easily walk away from the development, but won’t. Burdened by the terrible circumstances in downtown Jacksonville, he just needs more time to pay the loan back.

JERRY MORAN,
restaurateur,
Jacksonville