Plan to lure 1,000 Everbank jobs downtown

[Tacachale]

^Well, there are indeed reasons for moving downtown, not the least of which is the pretty substantial incentive EverBank would receive if this went through. If not for that, we probably would never be talking about this now. There's also the ability to get their people in one location - options for that much space in one building may be limited downtown, but they're even more limited in the Southside, if they even exist at all. I don't know what the deal is here, but it's hard to imagine the owner of a mostly empty building not wanting to fill it with a big tennant unless there was some ulterior issue.

[ronchamblin]

This EvBk move into the core is probaby one of the biggest practical steps anyone could envision to "begin" a process of revitalization.  More retail moves into the core cannot be expected "until" more customers arrive via such projects like EvBk.  Over the five years I've been downtown, I've seen several retail operations open in the core, only to depart after a few months or a year to two; and this, because there is simply not enough people to support most types of retail.  The "only" reason by bookstore/cafe survives in the core is because of my personality. 

If EvBk does move into the core, my feeling is that we position ourselves such that one more similar type of corporate entry into the core could be the one that would produce the critical mass of people that would allow "some" interesting new retail to open and survive.  These new retail operations would then permit a more attractive environment for new residents to the core. 

Fundamentally, I'm saying that we cannot expect any new residents or retail "until" one or two more corporate operations move into the core.  Right now, there "are" negatives obstructing new residents or retail to enter the core.  However, there and "no" significant negatives obstructing new "corporate" moving into the core.  Corporate entries are the "only" viable entities that can "survive" in the core simply because they "do not" need other people in the environment to survive.  They don't need walk-in customers.  Residents hesitate to move into the area because they need retail for convenience, and they need other people to feel safe and to avoid the feeling they are not living in an urban desert.

[mtraininjax]

Corporate entries are the "only" viable entities that can "survive" in the core simply because they "do not" need other people in the environment to survive.

Agreed, but do you think the downtown building owners are willing to bend over and give away their livelihood.

[simms3]

So the Bellsouth building was rumored to be going into servicing.  Do you know what that means?  It means the debt on the building is collateralized/securitized.  It means a bunch of bondholders hold the debt to the building.  It means the current owners are close to default...they are probably collecting an asset management fee as a percentage of Effective Gross Revenue on the building...but without tenants, there is no EGR.  It means there aren't many or maybe not any options for selling the building...the servicer can't rearrange the debt on behalf of the hundreds of investors, and it's not like El Ad can afford to pay yield maintenance on paying down the debt...where's their equity?  I have this info somewhere, but I think they bought the building between '05 and '07; I could be mistaken.  I can look it up...

There probably aren't many options here.  This is why the city needs to be aggressive in providing assistance for moves if we are to turn around downtown.  Building owners cannot afford to offer massive concessions and they likely don't have much equity in the buildings.  Tenants are all happy where they are and see no reason to make a move...outside influence is necessary.

[Tacachale]

"Rumored to be" is different from "is". Where did you get that information from? And this incentive deal is clearly an example of the city giving, well, incentives to try and get a company that's looking to move downtown.

If anyone knows what the deal is here, I think we'd all be interested to hear, especially those of us who supported the incentive.

[ronchamblin]

Corporate entries are the "only" viable entities that can "survive" in the core simply because they "do not" need other people in the environment to survive.

Agreed, but do you think the downtown building owners are willing to bend over and give away their livelihood.

I agree that it is unrealistic, even impossible, for the building owners to give away their livelihood, but the current economy means it’s time for all to consider “giving” a little.  During the current economic climate, the three entities involved (city / bldg owners / tenant) in bringing a corporate project into the city core must give up the ultimate gains which could be expected in good times.  The building owners must accept for a time a low to moderate profit income from the tenants.  The city must offer moderate assistance for a time to bridge the gap between what the new tenant can pay, and what the building owner needs.  And the corporate entity must accept perhaps a less than optimum retail, parking, and any mass transit deficiencies until these items improve. 

All three parties realize that the corporate entry into the core is, for a time, a move that does not possess the natural and actual attributes which usually would provide optimum gain for all concerned.  It is a time for “giving up” the usual high gain objectives for a time, in order to achieve eventual permanent gain for all concerned.       

[JaxNative68]

both parties are blaming the other party for it not happening yet.  last i heard the property managers were trying to back out of some of the allowances for construction that were promised up front.  both in reality, they both a probably playing hardball.  everbank trying to get the best deal possible and the property manager trying to get the highest dollar possible; and neither side is backing down.  i also heard a rumor that city incentives have a drop dead date for a least to be signed by or the city will not grant them.  not sure if it is true though.

[duvaldude08]

both parties are blaming the other party for it not happening yet.  last i heard the property managers were trying to back out of some of the allowances for construction that were promised up front.  both in reality, they both a probably playing hardball.  everbank trying to get the best deal possible and the property manager trying to get the highest dollar possible; and neither side is backing down.  i also heard a rumor that city incentives have a drop dead date for a least to be signed by or the city will not grant them.  not sure if it is true though.

Yup there is a drop dead date. The city has already have extended it once.

[jcjohnpaint]

Well someone needs to compromise somewhere or everybody walks away with nothing.  I guess the only entity that does not lose is Everbank.  Does Everbank have any other considerations aside from the ATT T building? 

[simms3]

Guys,

I have looked as hard as I can into this today.  Here is some history on the building, as simplified as I can make it because neither I nor those around me can really tell what's going on based on 4 documents we have (1999 loan docs, '99 deed, '04 deed, and a document from '04 related to CMBS offering).

In 1999, Bellsouth sold the building to Capital Growth of Jacksonville (actually based in Greenwhich, I did not research this entity).  It was sold for $67,000,000 at a supposed 9-cap (even though it was about 95% occupied at the time).  The entity secured a $57,200,000 loan from GE Capital (about 85% LTV).  Supposedly the only vacancies were on the top two floors.  Bellsouth entered into a sale leaseback for their space, which was 443,762 SF, or about 46% of the GLA.  10 year term with three 5-year options.  So at a 9-cap with credit tenants, lots of term, 95% occupancy, the rents must have already been BELOW MARKET, even for Jacksonville.  Either that or our market was shaky at the time (fundamentals) and nobody wanted to pay up, even for stable cash flows.


Enter July, 2002.  GE Capital assigns the loan to CDC Mortgage Capital, which then modified the mortgage to securitize $49,000,000 of the remaining balance through Salomon Brothers Mortgage Securities VII, Inc, Commercial Mortgage Pass-Through Certificates, Series 2003-CDC1.  It assigned La Salle Bank National Association the role of trustee for the registered holders of the CMBS loan.

Keep in mind, at 30-year amortization and a 6.5% interest rate, the balance on the original GE Capital loan (as hereby assigned to CDC Capital) was $54,833,190, so you have a dual loan structure - $5.833M permanent (probably a 10-year term), and $49M packaged (also probably a 10-year term).

In 2004, El-Ad Florida, LLC purchased the building from Capital Growth of Jacksonville, Ltd. for $90,900,000, and "the obligations of the Mortgagor was assumed by El-Ad Florida, LLC...So Elad became responsible for assuming all debt, which probably contained a balance on the permanent portion and a balance on the CMBS portion for a total balance of around $52M.

How it paid the balance between the ~$52M and the $90.9M purchase is unbeknownst to me, but according to a BizJournal article, there is a $70M loan balance associated with the property, so if it is in special servicing (which it is...CW Capital has it), then that new loan piece must have been a mezz piece that Berkadia Capital originated and someone securitized and packaged in with the original $49M 1st Mortgage piece to create a collateralized debt obligation (CDO).  The BizJournal article states that Berkadia was the originator for the loan (I don't think they could have originated all of it, considering Berkadia is basically Capmark and Warren Buffet and was not around in 2002), but I do know that in 2004 Capmark (now Berkadia) was issuing a lot of CDOs.


Long story short, CWCapital has the loan for the building and as special servicer is supposed to represent the bondholders who invested in the loan (they are like the "lender", except not).  As part of their fiduciary agreement to represent the financial interests of the bondholders, they must prevent default on the building.  The bondholders basically have 10-year bonds packaged as debt to finance the acquisition of this building, and they won't get paid back until the bonds expire, which they have not yet.  CWCapital should find a way to prevent default, and securing a lease backed by $3M in incentives from the at least BBB+ rated City of Jacksonville would I presume be a quick and easy way to do this.

There are two to three reasons they could be holding this process up:

1) They don't know what they're doing...which some people say is a theme with special servicers like CW Capital and Lennar (my father is currently working with Lennar on a deal)

2) They don't know how bad the Jacksonville office market is, let alone the downtown submarket, and so they may have been presented a lease that seems very biased towards the tenant, and they don't think they can get the numbers to work with that lease (this may be the case, and in that case default is imminent because they aren't going to get better)


Hopefully this explains what may be happening.

[simms3]

Corporate entries are the "only" viable entities that can "survive" in the core simply because they "do not" need other people in the environment to survive.

Agreed, but do you think the downtown building owners are willing to bend over and give away their livelihood.

I agree that it is unrealistic, even impossible, for the building owners to give away their livelihood, but the current economy means it’s time for all to consider “giving” a little.  During the current economic climate, the three entities involved (city / bldg owners / tenant) in bringing a corporate project into the city core must give up the ultimate gains which could be expected in good times.  The building owners must accept for a time a low to moderate profit income from the tenants.  The city must offer moderate assistance for a time to bridge the gap between what the new tenant can pay, and what the building owner needs.  And the corporate entity must accept perhaps a less than optimum retail, parking, and any mass transit deficiencies until these items improve. 

All three parties realize that the corporate entry into the core is, for a time, a move that does not possess the natural and actual attributes which usually would provide optimum gain for all concerned.  It is a time for “giving up” the usual high gain objectives for a time, in order to achieve eventual permanent gain for all concerned.       

Mr. Chamblin,

Please refer to my above post.  In the world of real estate, no side ever considers charity.  Given the timing of going into special servicing, one had to wonder if Elad had the option of going forward with the lease or giving up control to CW Capital, the servicer.  If so, I'm sure they ran numbers and found out that they were on track to an 8% levered IRR, then that shrunk to a 2% levered IRR, and then the Everbank lease would have brought that back up to a 5% levered IRR and it just was not worth it for them to keep interest in the building any longer.  These numbers are so highly fictitious, but investors are in the business of making their money work for them at a certain return, and they can hit that return by doing various things, always having options.  Elad will exit this building and move their money elsewhere.  CW Capital has a totally different interest in the building, plus they just don't want to get sued by the bondholders of the CMBS note.  The only "give" case is economic development within the City of Jacksonville...it's up to the City to fulfill any charitable implications.

[Tacachale]

Well someone needs to compromise somewhere or everybody walks away with nothing.  I guess the only entity that does not lose is Everbank.  Does Everbank have any other considerations aside from the ATT T building? 

At least at the time the incentives were approved, they had a couple of other suburban places they were looking at, as well as possibly just staying where they are. One of the locations was the old Southside Generating Station site on the Southbank. What Everbank really stands to lose in not going with this building is the full incentive package, which should at least cover their moving expenses (which they'd have to pay wherever they go).

[simms3]

From the recent grapevine:

Oliver Barakat is representing Everbank, and he is very silent on the matter, but here is what people familiar with the matter are saying:

The delay is all on Everbank.  They have estimated their move-in costs at $2M, and they are not being decisive on whether they think they can justify a move in this economy, or whether it is very necessary.  It is not on the special servicer or on the city.

There was a blurb in the Daily Report about a month ago detailing a permit to do work on 9 floors in the AT&T Tower, so that is a good sign.

Nothing has officially happened yet.

[JaxNative68]

They permit was probably for preliminary demolition by the building owner to make the propective floor more inviting to posible tenants (EverBank).  I am told the construction drawings were completed a few weeks ago and the issue date on them has changed a few times, but they still haven't been issued.

They spent more than $2 mill on their two floors in EverBank plaza.  Tecchnically the delay may be on EverBank, for not signing the lease yet, but the property managers are trying to play a shell game with the costs.

[Dog Walker]

They guys who run Everbank are very, very smart and experienced.  They are going to squeeze every possible penny out of this move from the landlord.  Everbank is now the most heavily capitalized bank in Florida, too.  They have to be using the strong possibility of future growth and space needs as a lever.

Also, don't forget that one of their senior vice-presidents, Greg Anderson, is a City councilman representing Ortega.