City of Jacksonville has difficult choices about Cecil Field

[thelakelander]

The city of Jacksonville never wanted to be in the land development business, at least not on this scale.

That's what JEDC Executive Director Ron Barton says when he speaks of the 4,475 acres Jacksonville acquired when the U.S. military closed Cecil Field Naval Air Station in 1999.

Efforts to ignite development at the site have failed to achieve anything close to success. Over the last 10 years, the city has managed to close two deals, including the recently announced Saft battery factory.

Much of the land is low-lying and prone to flooding and only 2,800 acres are developable.

JEDC's board is now set to weigh a proposed contract with Hillwood Investment Properties, a Dallas-based company that developed a similar project in California.

According to the proposed contract outlined by Barton, the city will make roughly $21 million off the sale of the land in a three-phase development.

The initial contract would be for 10 years, with 5-year extensions that could take it up to 25. Hillwood would invest more than $229.5 million on land development and $1 billion for vertical development of buildings over that time.

Some private developers are opposed to the deal.

Peter Anderson, vice president of Pattillo Construction Co., has been the most vocal critic of the contract. One of his points of contention is the fact the contract could set land sales prices now for up to 25 years. Anderson believes that could negatively impact the value of private holdings.

While sympathetic to opponents of the plan, one Jacksonville commercial real estate broker says any potential developer wants some type of assurances that it can make money off the deal, particularly in today's environment.

"The city is trying to actually entice a developer at some of the worst times in the market," said Colliers Dickinson senior vice president Gary Montour. "That's a difficult proposition."

The city has tried to make the project attractive to Hillwood by splitting it into phases. While land purchase prices in Phase 1 are higher, the cost to Hillwood to bring the property to market is significantly lower, pushing higher development costs to the final phase. At the same time, Barton says the city has worked a profit-sharing agreement into the contract where it will share a portion of the proceeds made from Hillwood's developments.

Hillwood won't pay property taxes on the land until it actually purchases it, whether that be for a build-to-suit project or for a spec building.

So why doesn't the city wait for the market to turn?

"What does wait mean?" Barton asks. "One year? Two years? Three years?"

Determining if the city is getting a fair price for the land is difficult but not impossible, says Ann Gilbert, manager of appraisal services at Cantrell Real Estate.

Gilbert says any appraisal would be complicated and expensive, particularly because of the condition of the property and the lack of current activity.

And, would an appraisal give the full picture?

Barton argues there's much more than the sales price at stake for the city. He says he's also factoring in job creation and the chance to boost future revenues by growing the tax base.

JEDC's board will now weigh the contract, and, provided it approves the deal, the City Council will have the ultimate say.

http://jacksonville.com/business/2010-03-21/story/city_of_jacksonville_has_difficult_choices_about_cecil_field

[thelakelander]