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

[tufsu1]

Just setting aside the principal for three years and making interest only payments does not seem right somehow! I don't see why a normal banking institution could not service this type of a problem! I mean the taxpayers are allready into this project  for a $5 Million Dollar grant and a low interest loan that's about $21 Million ($34.5 Million has been kicked around also, so I am not sure about the loan amount, but am confident about the grant) So why must we continue to foot the bill, I am still not too clear on this..........oh don't forget about the incentives for the first floor retail layout! At that rate, foreclose and hire professionals to run & rehab and lets start getting downtown up to speed!

there's no "footing the bill"..as long as the interest payments are made, there is no discount...and the principal still gets paid over time!

[CS Foltz]

nestliving............I agree! Short term cash without a long term outlook and they wonder why they can't get something going? tufsu I understand how that is to work...........what concerns me is they are having to finagle a deal to make interest only payments PLUS incentives for retail on the ground floors! They did not take that into consideration from the beginning? I know about the bottom falling out of the real estate market but so far all we have received for the money the City has given them is what? Lip service? This just does not sit well with me after coughing up what has already been provided!

[mtraininjax]

I swear this will take on the life of the Moon River Pizza thread.....it will never die.

[tufsu1]

I know about the bottom falling out of the real estate market but so far all we have received for the money the City has given them is what? Lip service?

2 large historic buildings renovated and occupied...about 300 new downtown residents (that support the burgeoniong nightlife scene)....a really cool Starbucks (until corporate offices made them close as part of downsizing)....a downtown barbershop....an artist's cooperative....

Shall I keep going?

[CS Foltz]

tufsu............if they are doing so good, why do they wish to make interest only payments? To me it look like their business plan did not take all possibilities into account........other than COJ is allways good for a touch and they happen to have an in with Johnny! So like I said before.......why not approach a banking institution rather than using my (and your) tax dollars?

[vicupstate]

tufsu............if they are doing so good, why do they wish to make interest only payments? To me it look like their business plan did not take all possibilities into account........other than COJ is allways good for a touch and they happen to have an in with Johnny! So like I said before.......why not approach a banking institution rather than using my (and your) tax dollars?

CS, what they are asking to do is restructure the loan, to REDUCE their ongoing expenses, and by extention, their losses.

How will getting a loan from a bank help?  That is just adding another expense.  They are not insolvent, they just want to stop the bleeding.  Restructuring with the CURRENT lien holder is the only way to do that.

You are not providing a viable alternative.

No business plan is based on a worst case scenario either, because virtually every worst case scenario involves red ink, thus no business plan would be profitable.  When this project is at normal occupancy levels, it is profitable, that would describe ANY rental project.

I do think that if lower rents on the commercial properties had been availbale previously, there would be a higher occupancy now and thus lower losses.  That is the only real fault I lay at Vestcor's feet.  17% occupancy for an extended time demands a reduction, IMO.

[cline]

I know about the bottom falling out of the real estate market but so far all we have received for the money the City has given them is what? Lip service?

CS, you stated that all that the City has received from the developers of the Carling and 11E was "lip service".  TUFSU pointed out that they have provided 2 renovated buildings, new residents as well as other commercial activities.  I would say that is more than just lip service.  But we get it, you are pretty much anti anything that involves YOUR tax dollars.  Oh, and you're against any tax increases.

[fieldafm]

via today's Daily Record....


http://www.jaxdailyrecord.com/showstory.php?Story_id=530918


Finance approves Vestcor bill

A bill that would suspend principal payments on City-issued loans to The Vestcor Companies for 11E and The Carling Downtown was approved Monday by the Council Finance Committee, but support was not unanimous.

If Council passes the bill, the real estate development company would make interest payments only for the next three years. Jacksonville Economic Development deputy director Paul Crawford addressed the issue to the committee, citing the downturn in the economy as the chief reason for the request. The deferred payments would still be paid once the company maintains profitability, he said.

All finance committee members in attendance spoke on the issue. Council member John Crescimbeni questioned the fairness of such an action given the economic troubles personal businesses are facing. Council member Clay Yarborough agreed with the questioning.

“I personally believe the taxpayers shouldn’t be on the hook for this,” said Yarborough. “It’s not to say there aren’t folks out there who want a vibrant Downtown and want Downtown investment, and I’m not advocating we don’t do that, but in a matter of priorities and in the times we are facing right now with budget cutting, I don’t believe this is in the best interest of our taxpayers. I don’t believe it’s fair.”

Others agreed with the measure, given the alternative.

“The reality is we have to make a responsible fiscal decision based on the facts as they exist today,” said Jack Webb. “As far as being on the hook, we are on the hook. We are the note holder. The decision now is, ‘What do we do?’ The fact is, we are in the (real estate) game, we are in the market.”

Webb reminded the committee that the measure is principal deferment, not forgiveness, and it’s in the best interest of the taxpayers to avoid default. Council member Bill Bishop agreed, comparing the situation to what commercial banks are doing working with clients.

“I think it would be remiss on our part to give up now,” said Council member Don Redman.

The measure was approved 5-2.

[CS Foltz]

It is amazing to me that Vescor has the temerity to ask for this! I am against this and have E Mailed my representative with my view! If this is done for Vescor .....why not others? Or is this just the GOB Network watching out for one of there own again?

[buckethead]

Is this request neccessary for the continued viability of the building?

I don't see it as being entirely unreasonable, other than the smack of insider back scratching. So long as interest is being paid, and the principal is still owed, I could envision a bank working a similar deal with a mortgagee.

[fieldafm]

Is this request neccessary for the continued viability of the building?

I don't see it as being entirely unreasonable, other than the smack of insider back scratching. So long as interest is being paid, and the principal is still owed, I could envision a bank working a similar deal with a mortgagee.

As a banker, this is a scenario I encounter daily... 8 times a day, 14 days a week.  You have to look at each case's merits.  But in the end you can do nothing and cross your fingers and hope things don't get worse, or you can be proactive about your loan portfolio and make prudent decisions to ensure the viability of your business during these economic times.  The old way of doing business the last few years necessitate that bankers be much more prudent and actually have to make decisions based on commen sense(which was not done for many years).  

This quote sums it up.... “The reality is we have to make a responsible fiscal decision based on the facts as they exist today,” said Jack Webb. “As far as being on the hook, we are on the hook. We are the note holder. The decision now is, ‘What do we do?’ The fact is, we are in the (real estate) game, we are in the market.”

I am not in favor of principal forgiveness... but there are other ways to ensure your loan does not go south.  Working with an established developer to ensure your investment(the city CLEARLY has a substantial investment in the matter) does not deterioate further is the way business should be done.  Giving away grant money to people who know nothing about the real estate market and ultimately screw you over when they dont do what they say they can do, is not the way to do things.

[buckethead]

I am not in favor of principal forgiveness... but there are other ways to ensure your loan does not go south.  Working with an established developer to ensure your investment(the city CLEARLY has a substantial investment in the matter) does not deterioate further is the way business should be done.  Giving away grant money to people who know nothing about the real estate market and ultimately screw you over when they dont do what they say they can do, is not the way to do things.

Which is the case here?

[fieldafm]

Yes, Vestcor is an established company that is going to be here tomorrow.  They're not some fly-by-night 'developer' that has taken the city's money and run over the last 5 years.

These are unbelievably challenging economic times.  You can't just cross you arms and be stubborn and expect things to magically get better.  People can be upset b/c John Rood is behind the company(I don't personally know the man), and his political connections may rub people the wrong way... I understand that.  Lord knows this city has taken quite a few steps back b/c certain deals have been made at the benefit of a very select few.  I know how you feel. 

But, the company is stable(if thats even a word in today's economy) and they want their investment to succeed... sometimes the lender needs to make some concessions when it makes sense to do so that results in a win-win for all parties.  Otherwise you wind up with a situation in which everyone loses.  I think this is a win-win compromise.  It ensures the city's investment is more secure in a very shaky rental market and it ensures the urban core has the infrasctructure in place so when things do turn around, the groundwork is at the very least started.  Imagine if both of these beautiful renovations went south.  How does ANYONE win in that situation?

[buckethead]

I tend to agree with that assessment.

[Dog Walker]

+2