Mayor Brown calls on rich and powerful to start investor fund

[downtownjag]

City Place isn't exactly inviting sometimes.  I think she's referrring to 11E and Carling, which are above 95% occupancy. 

I'm tired of people talking about the need for a grocery story downtown (not referencing your comment Debbie).  What other part of town can you live in where you walk to a grocery store?  It takes me just as long to get to the Publix in Riverside, literally 4 minutes, as it does if I live on the Southside or at the Beaches.

While a grocery store Downtown would be nice and expected in some markets, it shouldn't be listed as a detractor to Downtown residential development.  I still think I would drive, I don't want to walk with a weeks' worth of groceries in my hands any farther than I have to.

[Kaiser Soze]

I'm tired of people talking about the need for a grocery story downtown (not referencing your comment Debbie).  What other part of town can you live in where you walk to a grocery store? 

You can be tired of that talk all you want but a nicer grocery store is absolutely necessary.  This is not some other part of town; its downtown and one of the primary necessities must be a grocery store to which you can walk.

[downtownjag]

I'm tired of people talking about the need for a grocery story downtown (not referencing your comment Debbie).  What other part of town can you live in where you walk to a grocery store? 

You can be tired of that talk all you want but a nicer grocery store is absolutely necessary.  This is not some other part of town; its downtown and one of the primary necessities must be a grocery store to which you can walk.

Why?  Why can't you get in your car and go to the grocery store like the other million plus people that live in Jax?  And if that's a necessity, why don't you walk your urban behind to Winn-Dixie?  Again, current occupancy rates don't suggest we need a grocery store, they suggest we need more leasable product.

[Kaiser Soze]

I'm tired of people talking about the need for a grocery story downtown (not referencing your comment Debbie).  What other part of town can you live in where you walk to a grocery store? 

You can be tired of that talk all you want but a nicer grocery store is absolutely necessary.  This is not some other part of town; its downtown and one of the primary necessities must be a grocery store to which you can walk.

Why?  Why can't you get in your car and go to the grocery store like the other million plus people that live in Jax?  And if that's a necessity, why don't you walk your urban behind to Winn-Dixie?  Again, current occupancy rates don't suggest we need a grocery store, they suggest we need more leasable product.

Because the type of person that moves to a downtown environment expects it.  Look at other markets.  Its easy for me to go out to my driveway and hop in my car.  Its not when you live in a high rise. 

If you've been to that WD, you know why someone at the LST ain't walking to it.

[downtownjag]

I'm tired of people talking about the need for a grocery story downtown (not referencing your comment Debbie).  What other part of town can you live in where you walk to a grocery store? 

You can be tired of that talk all you want but a nicer grocery store is absolutely necessary.  This is not some other part of town; its downtown and one of the primary necessities must be a grocery store to which you can walk.

Why?  Why can't you get in your car and go to the grocery store like the other million plus people that live in Jax?  And if that's a necessity, why don't you walk your urban behind to Winn-Dixie?  Again, current occupancy rates don't suggest we need a grocery store, they suggest we need more leasable product.

Because the type of person that moves to a downtown environment expects it.  Look at other markets.  Its easy for me to go out to my driveway and hop in my car.  Its not when you live in a high rise. 

If you've been to that WD, you know why someone at the LST ain't walking to it.

If your argument were accurate, all of our leasable and condo projects would be sitting vacant currently.  People move here, despite the fact that we don't have the grocery store Downtown that you and I both want.  Other markets have grocery stores downtown becuase submarket demands it, and it's financially viable.  There is no civic-minded grocery store that is going to come downtown in an attempt to provide another amenity to downtown residents.

That's why I said it would be a benefit to DT, but shouldn't be a detractor.  I agree, I never go to that Winn-Dixie (although they have a comparable amount of wine as Publix in Riverside). 

[simms3]

Downtown has a LONG way to go before it gets a grocery store.  Plenty of other cities of similar size (Nashville and Charlotte) have far more downtown residents and no grocery store (well Charlotte arguably, but again FAR more downtown residents, workers, students, etc).

And those who live in urban settings typically don't do the suburban "week's worth" grocery run.  I go to the grocery store at least every other day to buy 2 nights worth of meat, some milk, whatever I need at the time.  Also, those who live in urban environments typically don't have families to feed, work longer hours and eat out a lot more.  My kitchen is about 50 SF including counterspace, if that.  I grab a glass of milk, maybe some cheerios in the morning, and I cook a simple chicken and ramen or rice dinner at night.  Many nights I just call in wings at Carolyn's or pizza at DaVinci's on the way in from work, as they are in my building or a block away and open til midnight or later depending on night.

Before downtown gets a grocery store, it probably needs a well-located urban market that sells the staples that everybody buys (and high quality staples from organic milk to organic sandwich meat to Tide to TP to Tostitos, etc).  Downtown also needs eateries and restaurants to stay open late, and bars that are open and neighborhoody on Mondays-Wednesdays and Sundays.

Anyway, back to topic.  I happen to work on 3 funds for a syndicator, but I'm just not going to comment.  I think the big picture idea is for the city to work with local business leaders, and for local business leaders to take risks in their own city.  The city needs to lay the groundwork and infrastructure, and get out of the way.  Local business leaders need to have pride in their own city and take risks in it.  That's the gist.  A private "fund" does not need to be created (nor can it really considering many factors).  A REIT will never/can't ever happen.  And there are tons of non-traditional lenders.  Outsiders will not invest in Jacksonville - too risky and unknown.  Locals need to get involved outside of the Jaguars (and I think the point there is that now that money is no longer restricted and can be put back to use in a different way).

[MusicMan]

I'm just pointing out that there are affordable choices downtown.

11 E and The Carling are puzzling to me. They have enjoyed 90% occupancy rates since they opened but
still claim they can't make it financially. The fact that they are always full is a great sign, you would think that
would attract another  major player to develop the Trio into similar housing. Put a Trader Joes into the Marble Bank and downtown would be kicking (I can dream, can't I?)

[downtownjag]

Downtown has a LONG way to go before it gets a grocery store.  Plenty of other cities of similar size (Nashville and Charlotte) have far more downtown residents and no grocery store (well Charlotte arguably, but again FAR more downtown residents, workers, students, etc).

And those who live in urban settings typically don't do the suburban "week's worth" grocery run.  I go to the grocery store at least every other day to buy 2 nights worth of meat, some milk, whatever I need at the time.  Also, those who live in urban environments typically don't have families to feed, work longer hours and eat out a lot more.  My kitchen is about 50 SF including counterspace, if that.  I grab a glass of milk, maybe some cheerios in the morning, and I cook a simple chicken and ramen or rice dinner at night.  Many nights I just call in wings at Carolyn's or pizza at DaVinci's on the way in from work, as they are in my building or a block away and open til midnight or later depending on night.

Before downtown gets a grocery store, it probably needs a well-located urban market that sells the staples that everybody buys (and high quality staples from organic milk to organic sandwich meat to Tide to TP to Tostitos, etc).  Downtown also needs eateries and restaurants to stay open late, and bars that are open and neighborhoody on Mondays-Wednesdays and Sundays.

Anyway, back to topic.  I happen to work on 3 funds for a syndicator, but I'm just not going to comment.  I think the big picture idea is for the city to work with local business leaders, and for local business leaders to take risks in their own city.  The city needs to lay the groundwork and infrastructure, and get out of the way.  Local business leaders need to have pride in their own city and take risks in it.  That's the gist.  A private "fund" does not need to be created (nor can it really considering many factors).  A REIT will never/can't ever happen.  And there are tons of non-traditional lenders.  Outsiders will not invest in Jacksonville - too risky and unknown.  Locals need to get involved outside of the Jaguars (and I think the point there is that now that money is no longer restricted and can be put back to use in a different way).

Your comment on the dining habits of the typical downtown demographic I would agree with.  My point is largely that we aren't getting one anytime soon, so we need to deal with that.  Occupancy in this submarket is great, to the point where we can't grow further until someone builds/rehabs.  So while I do agree it would be of great benefit to our downtown, it's not happening soon and we have managed to keep occupancy downtown up.  Penthouses rarely lease because we have no market for them.

Investors and Jacksonville... how many times I've heard us called a "tertiary" market, albeit accurate.

I agree that a smaller, local shop would suffice, and I was excited about the conceptuals for one that were displayed in the Burrito Gallery. 

[Kaiser Soze]

I'm just pointing out that there are affordable choices downtown.

11 E and The Carling are puzzling to me. They have enjoyed 90% occupancy rates since they opened but
still claim they can't make it financially. The fact that they are always full is a great sign, you would think that
would attract another  major player to develop the Trio into similar housing. Put a Trader Joes into the Marble Bank and downtown would be kicking (I can dream, can't I?)

Full doesn't mean a thing if the landlord is not making money.

[downtownjag]

I'm just pointing out that there are affordable choices downtown.

11 E and The Carling are puzzling to me. They have enjoyed 90% occupancy rates since they opened but
still claim they can't make it financially. The fact that they are always full is a great sign, you would think that
would attract another  major player to develop the Trio into similar housing. Put a Trader Joes into the Marble Bank and downtown would be kicking (I can dream, can't I?)

LOL, we'd all love that.

Carling and 11E struggle because of their "all in" number after purchase and renovation, I believe, and the fact that they can't lease their retail space doesn't help.  Vestcor originally planned on turning them into condo's so I don't believe the buildout numbers in their proforma supports rentals.  Could be wrong, but that's what I believe.

[fsujax]

We don't need another grocery store downtown, we already have one plain and simple. Now a CVS or Walgreens would be nice. Also, I looked at purchasing a condo in City Place as an investment, the place is totally dated and reminded me of something out of the Soviet Block. I couldnt do it.

[MusicMan]

City Place, several units there under contract right now. I wonder if the buyers are Russian?

[Debbie Thompson]

I don't remember seeing parking at City Place and, yes, it does look like collective housing in the USSR.  Not exactly what I meant by cool, affordable housing.  Although something simple like curb appeal, some landscaping/streetscaping, and available parking would go a long way on that project.

What's wrong with "that" Winn Dixie?  I shop there.  There is nothing wrong with it except they don't have everything I want to buy.  But they have most of it.  When I lived in Jacksonville Beach, I shopped at Terry's Country Store on Penman Road.  It's not nearly as big or nice inside as "that" Winn Dixie, and they didn't have everything I needed either.  Sometimes I had to go to a 2nd store to get the rest of what I needed. 

When I lived in  East Arlington, the nearest grocery store was about the same distance as the Riverside Publix is from Springfield.  No one in Ashley Woods was complaining that Publix needed to build a store at the entrance to our subdivision so we could walk to it.

If downtown dwellers EXPECT restaurants and grocery stores right outside their front doors, they are fooling themselves.  And if they live elsewhere in the city, they have to drive to them anyway. We all do.  That excuse for not living downtown simply doesn't hold water.  People can use it all they want, but it doesn't hold water.   It's silly, truly it is.  There's enough downtown right now, with the various restaurants, bars, performing arts, library, etc, to support the beginning of a vibrant living scene, and the rest would come.  It's already there.  It just needs a nudge, that's all.

[simms3]

I'm not sure how well capitalized Vestcor is.  That could be a factor.  Terms of the loan and the timing could have been a factor.  Jacksonville is also soooo inexpensive.  Do some quick math -

On a stabilized project:

$15M Equity
$35M standard loan at 4.75%
250 units
avg $1.25 psf effective monthly rate (this may actually be high for Jacksonville, where it may be more like $1.10 downtown/southbank)
95% occupancy
avg unit size 1,000 SF

Revenue: $300,000
Opex: at 33% operating revenue = ($100,000)
Debt service: ($182,000)

Levered CF: $18K
DSCR: 1.1

If effective rates are $1.10 or occupancy falls to 90% or expenses are really closer to 40% or debt terms are unfavorable (not hard to imagine for a risky market like Jax), then project is well in the red.  Condos are even more difficult and I bet you money was lost on almost every developer unit that sold in 2008 and later.

Then look at a 5 year hold with 3% revenue and expense growth and the numbers look BAD.  You cap T3/T12 NOI after 5 years at 6.5% and you're barely paying back your loan, let alone making back your investment.  This in particular is why you can't develop mutifamily in downtown Jax.  You can't command rents high enough for a reversion that will allow you to pay back the lender, pay back your investors with a return, and generate a profit.  You just can't.  Sure you can scrape by on an operational basis, maybe, but that reversion is going to kill you.  Condo sales are the same way, though timing is different, debt facilities are different, and it's a piecemeal payback.  There is sometimes more flexibility there, but demand for condos is so cyclical and dependent on risky factors, and they are expensive to build and require a substantial wealth base and a need for them in the housing market.  Some markets are just better condo markets than others.

There is an affordable high rise rental project going up near me where the effective rent is about $1.87 psf and the debt service coverage ratio is projected to be 1.2 and the equity multiple (like a cash on cash at the end of the day) is well below 2x.  The proforma projects a reversion cap rate of 5.25%, which is probably not a number that will be seen in Jax for a long time, but is a number that allows that particular model to work (they are banking on that reversion, and probably banking on rent growth because they are starting quite low for the submarket).

[fsujax]

I just had lunch with a friend, who just moved back to Jax he looked at place for rent in the Strand 2/2 24th floor $1,900 a month. Wow.