Jacksonville developer wants share of funding
It was thought to be a pioneering project - a historic building restored, Jacksonville's property tax coffers expanded, the urban center revived.
A decade later, the developer of the W.A. Knight Building says he's facing foreclosure amid less than 60 percent occupancy and year-over-year losses of nearly $300,000 and counting.
W.A. Knight developer Mike Langton's plight is the latest setback for downtown revitalization efforts, which hinge on filling existing residential developments and building a lot more.
Langton argues that converting the nearly century-old Adams Street office building into 12 apartments and commercial space was necessary to spark a downtown revival.
With that revival still in waiting and the investment bleeding profits, he's asking for the city's help to keep the dream alive.
His plea adds to a recent request by Vestcor Cos. for refinancing at two other city-backed downtown apartment buildings. City officials, who are considering giving Vestcor relief, say they will work with Langton to see if they can restructure $600,000 in city loans.
Langton has hinted at favoritism, getting emotional at times while comparing his needs to the millions of dollars the city has dumped into the failed Shipyards project or the support city leaders gave to developer Cameron Kuhn when he flew in on a helicopter and described a bevy of downtown projects that ultimately never happened.
"Don't give Vestcor another **** dime if you can't help me, too," he said. "Don't treat one of the most rich and powerful companies in Jacksonville better than the small businessman."
The city put up two low-interest $300,000 loans to support Langton with acquisition and restoration costs that totaled $1.7 million in 2001. The loans have been considered second and third mortgages on the property. Langton financed the majority of the project privately.
Langton said the financial troubles at the W.A. Knight Building could have him facing foreclosure as early as Oct. 1.
That debt structure is hurting Langton more than the debt itself, he explained. So far, three banks have said no to refinancing. The second and third mortgage make it too risky, he said.
Langton wanted the city to issue a grant retroactively from the city's historic buildings trust fund, which was unavailable at his project's outset. He sought $300,000, enough to wipe out one of the mortgages and go back for private refinancing with a cleaner slate.
The Jacksonville Economic Development Commission denied his request. But after a meeting Friday between Langton and city officials, they agreed to look at whether restructuring the city's loans would clear the way for Langton to get the private refinancing without a $300,000 grant.
The city has no interest in seeing the building to fall into foreclosure, said Wight Greger, the city's housing director.
"I don't want that to happen because we have a real opportunity to preserve that building and do something good for downtown and provide some housing," she said.
The building dates back to the 1920s and is listed on the National Register of Historic Places. It once housed medical and dental offices. Florida Rock Industries had office space there. Some of the business labels remained on the interior windows after the renovation.
Seven of the apartments are occupied, Langton said.
There are two commercial spaces as well, one of which is home to Chew, one of Jacksonville's newest premier restaurants. The building adds about $13,000 to Duval County's city and school property tax revenues, records show.
Ron Barton, executive director of the Jacksonville Economic Development Commission, argued the two city loans have been favorable incentives for Langton. One doesn't even require payment for 30 years, he said. In the other, the Jacksonville Housing Finance Authority has granted a forbearance, which effectively pushes back Langton's financial responsibility, Greger said. Langton hasn't been required to make any loan repayments for almost a year.
'Still no picnic'
In the downtown real estate debate, voices are many. Some say safety is the problem. Others say it's the homeless. Still others cite a lack of retail and entertainment.
On the residential front, there are varying degrees of success.
On nearby Church Street, the Metropolitan Loft Apartments building is 90 percent full, setting developer Hal Horton apart from some of his colleagues in the urban center. His tenants' rent has been sufficient operational revenue, he said.
The complex has 116 apartments and 85,000 square feet of office space. Horton had to shave down prices to make the business work, he said. He opened three years ago without the help of city incentives, although he said he would have gladly taken the money.
"All I can say is we got a good management team and a good sales team. We're thankful it's full but it's still no picnic," Horton said.
Despite his success, Horton said he has been disappointed in City Hall's treatment of downtown.
"I've seen other governments turn downtowns around. They should here. It's a beautiful city," he said.
Vestcor Chairman John Rood, who is working with the city to refinance debt on the 11 East Forsyth and The Carling apartment buildings, said downtown is about more than money. He said the city needs to make the urban center safer and cleaner. He suggests more activities, too.
"If there's not leadership from the mayor and council, we're going to go backwards," Rood said. "It's going to wind up being a few big buildings with just a few people."
Mayor John Peyton said he has made downtown's rebound a priority for his final 18 months in office.
On the Southbank, developer Jay Southerland said he doubts he would have been as successful opening the 21-story San Marco Place condominium community without the city's help. He's in the second year of a 10-year tax rebate plan that helped free up $3.6 million for the project.
To get the city to agree to the incentive, Southerland said he had to keep his prices at an average of $230 per square foot. Challenging, yes, when nearby buildings were $100 higher, but in the end he said the deal enabled him to attract more buyers with a lower price.
"Initially we sold out," Southerland said of the 141-unit building. He cited the downturn in the housing market for 22 of those condos quickly going for resale, but said soon after that the vacancy level was cut in half.
"I think it's a significant success story of a public-private partnership," he said.
City denies favoritism
Many people said the same when 11 East Forsyth and The Carling opened in the mid-2000s.
Amid falling occupancy, the parent company of both operations, Vestcor, went to the JEDC in December to push back principal-debt payments on $34 million in city-financed loans for the next three years.
This is where Langton becomes upset.
He had written the JEDC for help in December 2008. The response, saying no, came in June. Vestcor asked for help on Dec. 16. A decision is expected within weeks.
"[Vestcor] can afford to support their projects. Why does the city go immediately to the aid of one of the most profitable companies and richest men in Jacksonville?" Langton asked.
Vestcor is a Jacksonville-based real estate company that dates back to 1983.
Vestcor's Rood is known for his connections to the George W. Bush administration, during which he served as an ambassador to the Bahamas. Rood also is a fund-raising heavyweight in the Republican Party.
Langton, a former state legislator, owns a consulting firm downtown and raises campaign funds for Democratic politicians.
The JEDC's Barton said personalities and influence over City Hall have nothing to do with the situation.
He explained Vestcor's loan from the city was the primary loan on the project, meaning the city, much like a bank, could wind up with Vestcor's buildings if the rental businesses continue to retract.
Langton said the city should feel pressure from him, too. If his project goes under, he said his bank will take the building and could soil the city's chances at collecting the $600,000 in public investment in the project.
If Langton could entice more tenants, there would be no problem - nor a need to subsidize the building's books with roughly $3,000 out of pocket monthly. He's tried reducing rent, but remains optimistic the building will fill when the economy fully thaws.
For now, it's a business in the red.
"It's a real struggle, but we were pioneers and we wanted to be pioneers," he said.
http://jacksonville.com/news/metro/2010-01-31/story/jacksonville_developer_wants_share_of_funding
Having yet another housing project having difficulties is bad news indeed. It is going to be difficult to get developers to invest in housing DT even after the economy turns with these bust stories.
Better late than never, but I wish Peyton would have seen the light sooner on DT. This quote says volumes
Quote"If there's not leadership from the mayor and council, we're going to go backwards,"
The sad part is we already have. That is water under the bridge now. Now we have to work on turning it around.
Quote from: stephendare on January 31, 2010, 09:16:46 AM
I remember TUFSU literally scoffing 2 years ago at the prospect that most of the downtown restaurants would end up closing, and that the only places that could make a go of it were the night time establishments since they didnt have to deal with the parking meter trolls.
well here we are. most of the restaurants and small businesses closed. The downtown spaces are being donated to galleries (which we proposed back in 05) and the only growth industry is the nightclub district.
so how many/which downtown restaurants open 2 years ago have closed....and how many new ones have opened?
here's a quick summary of the restaurants that have closed and what has opened...although I'm sure I've missed some.
Plaza III (at Hyatt) - not on the same level, but Einstein's Bagels has opened
Shelby's (at library) - Chamblin's Cafe opened
Dona Maria's (landing) - Cinco de Mayou opened
Bourbon Bayou (landing) - Chicago Pizza has opened
Worman's Deli (which btw had a free parking lot) - Village Bread (landing) has opened
Nicky G's - Northstar Substation opened
In fact the only place I can think of that has closed and not been replaced is Starbucks at 11E...turnover in the restaurant business isn't exactly uncommon...and given the economy over thh last few yeas, is actually an encouraging sign there haven't been more closures.
Fuddrucker's never even opened.
well if you want to be so exact Stephen...
Southend Brewery closed before I moved here in 2006...was replaced by another brew pub which was closed by 2007.
And as noted, Fuddruckers doiesn't count because it never opened.
The sub place on Ocean hasn't closed, jut isn't open after lunch now...although I did forget about the Firehouse Subs that closed.
I don't even remember the Sunrise Cafe...or for that matter Healthy Bagel (where were they)?
Fianlly, didn't Boomtown close more than 2 years ago?
Sunrise Cafe was doomed from the start. You can't be a breakfast place selling cold donuts and expect to last long.
I wish JEDC or somebody would give more incentives to develop the old JEA site on the Southbank. If that gets developed, that is a heavy eyesore off our riverfront.
Which development was is, San Marco Riverfront or San Marco Village, that was poposed for the site?
Quotethe Metropolitan Loft Apartments building is 90 percent full
That says it all to me, sure the City could have spent more downtown for "other" businesses, like retail, but at the end of the day, La Cena (Moran) is still there, making it work, as are Chew and others. People here paint all of downtown as if the world is ending, and its just not the case. Some of the places that folded had bad service, bad product and I don't care if you have 100 people in line every night, bad service and bad product will cause the place to fold.
A person who made an investment in 12 properties and now has a 3,000 a month note to pay out of pocket, is that worth giving him 300,000 write off? I don't think so. Sounds like sour grapes to me. The Met Loft Apartments made downtown work, it ain't pretty, but its working. Sounds like Langton could do the same and keep his case out of the papers.
I wonder what is the Metropolitan Loft's secret? The other residential developers need to follow his model because it appears to work.
QuoteA person who made an investment in 12 properties and now has a 3,000 a month note to pay out of pocket, is that worth giving him 300,000 write off?
It is not 12 properties, it is 12 apartments in
1 property. $36,000 a year is a lot of loss to take on one property.
I wonder how the Metropolitan rents compare to Knight Lofts and the Vestcor properties?
There appears to some sort of favoritism or else just good buddies watching out for each other! If Vescor gets what they want, I see no problem with any small business getting a share also! Makes me wonder just what kinda of business plan they had............most company's should have a list of options to choose from including financial problems, property issue's and the like, that's why you have a business plan!
Having a business plan is not an insurance policy against failure. With more normal occupancy, both of these projects would be fine.
When these projects were built the economy was doing well, particularly real estate. There was momentum DT, and more than a few projects were being proposed and in some cases being built, including some very big ones. The BJP projects were going full force, and private money follows large public investments.
There was no particular reason to believe then, that the city would simply lose interest in promoting DT. Of course, the worst recession since the Depression and a huge housing bust weren't expected either.
No doubt, the principals behind these projects were prepared for periods of higher than expected vacancy, and downturns in the economy, but no project can expect or plan for 'bottom dropping out' events.
We can let these projects 'sink' but then the city loses much of it's investment and DT housing take a big setback. It was hard enough to get these folks to take a chance on it the first time. Think how hard it will be later, if these projects sink now.
Quote from: thelakelander on January 31, 2010, 10:27:58 PM
I wonder what is the Metropolitan Loft's secret? The other residential developers need to follow his model because it appears to work.
There is also an entire floor full of computer servers that Nuvox and I believe AT&T lease the space for, so it's more of a mixed use building than Carling or 11E in that respect.