Khan: Downtown's Laura Street Trio redevelopment deal 'alive but on life support

[thelakelander]

He's right.  Whether people like Sleiman and the Landing or not, it sits in the heart of the Northbank and is downtown's largest draw.  It makes no sense to believe we can successfully breathe life and vibrancy in the heart of the core, totally ignoring it in the process.

[Cheshire Cat]

He's right.  Whether people like Sleiman and the Landing or not, it sits in the heart of the Northbank and is downtown's largest draw.  It makes no sense to believe we can successfully breathe life and vibrancy in the heart of the core, totally ignoring it in the process.

I agree Ennis and at the same time am thinking to myself what a challenge that will be in the current political climate.  Tony has aligned himself very closely with Richard Clark and along with his open criticisms, deserved or not of local political practices he may have a very bumpy road addressing the needs of the Landing.  Having said that the reality is that in spite of the ongoing criticisms of the Landing it is always the place that is featured when Jacksonville is shown on the National stage.  I really don't see a true and complete downtown rebirth without a great deal of attention to reshaping and updating the Landing.

[simms3]

Not that I want the city owning the improvements, BUT one has to wonder the legalities of the lease agreement Toney has with the city.  It's still my guess that the city really screwed itself over - either that or there's nothing the city can feasibly do if there's nobody else out there who wants the Landing.

You just know that it's a lowball ground lease given the fact that Toney can just sit on the Landing as-is and do nothing, and you have to wonder how it was structured - it must be a very lessee friendly document.

[PeeJayEss]

Noooooooooooooooo!

http://www.bizjournals.com/jacksonville/news/2013/04/15/developer-pushes-back-unveiling-of.html

Ashley Gurbal Kritzer
    Reporter- Jacksonville Business Journal

The unveiling of the redevelopment plans for the Laura Street Trio and Barnett Bank Building has been delayed.

The plans were to be revealed at a “private event” Wednesday evening, after the dedication of the newly restored Jacob’s Jewelers clock and before the official start of One Spark.

But SouthEast Group, the development group that acquired the buildings in late March with a mortgage from Jacksonville Jaguars owner Shahid Khan sent out an email last week, saying it was pushing back the big reveal:

“Like us, many of our supporters, colleagues and friends are also big supporters of OneSpark, the world’s first crowdfunding festival, which kicks-off on Wednesday, April 17 at 6 p.m. in Hemming Plaza downtown.

“So that we can all participate in the excitement, SouthEast Group is moving its launch event from April 17 to a later date after the closing of the OneSpark Festival. Look for a new invitation to join us in the coming weeks for a private event where we can celebrate the purchase of the Barnett Bank and Laura Street Trio buildings and share with you the next steps in downtown Jacksonville’s revolution.”

Steve Atkins, managing director of SouthEast Group, did not return a phone call seeking comment. In August 2012, Atkins shared a $40 million redevelopment plan for the properties with the Business Journal that included a higher education component in the Barnett Bank Building, and a boutique hotel component in both the Florida Life and Bisbee buildings, to include street-level retail.

At that time, Atkins said, a restaurant was planned for the Marble Bank Building, and a smaller parking garage than first envisioned was to be built on the vacant lot on the corner of Adams and North Laura streets.

The question that still hangs over the deal is how the redevelopment will be financed, whether that’s through a combination of public subsidies, new market and historic tax credits, traditional debt and equity, and the depth of Khan’s involvement in the redevelopment.

[Tacachale]

D'oh. Oh well, it gives us something to talk about after One Spark is over.

[Cheshire Cat]

What does One Spark have to do with them unveiling their plans?  Sounds like the event is being used as an excuse to delay to me.  Sharing the plans at a well attended event is the way to get momentum and excitement behind the vision for the Trio.  Perhaps there has been a bump in the road regarding plans and finances.  Interesting that they did not give an alternative date for unveiling their plans if indeed One Spark was the reason. 

[JUGrad]

:-\What does One Spark have to do with them unveiling their plans?  Sounds like the event is being used as an excuse to delay to me.  Sharing the plans at a well attended event is the way to get momentum and excitement behind the vision for the Trio.  Perhaps there has been a bump in the road regarding plans and finances.  Interesting that they did not give an alternative date for unveiling their plans if indeed One Spark were the reason.

+1

[fieldafm]

Not that I want the city owning the improvements, BUT one has to wonder the legalities of the lease agreement Toney has with the city.  It's still my guess that the city really screwed itself over - either that or there's nothing the city can feasibly do if there's nobody else out there who wants the Landing.

You just know that it's a lowball ground lease given the fact that Toney can just sit on the Landing as-is and do nothing, and you have to wonder how it was structured - it must be a very lessee friendly document.

The lease wasn't something negotiated by Sleiman and the City.  He just took over the existing land lease made with Rouse.  It's no secret that the remaining term of the land lease makes financing terms unfavorable in relation to the kinds of terms they usually have.  I think it is also innacurate to say he is 'doing nothing', the Landing is currently at its highest occupancy levels in over 15 years.  They have been very aggressive with getting all of the large restaurant spaces occupied (all are occupied except for the space above Fionn MacCools, which they rent out to private parties and/or use it to entertain their own guests) and filling the first floor.  Even with the exit of Body Central, they've temporarily backfilled the space until a long term lease is signed (which they do a lot, it's hard to argue against that strategy).     

[simms3]

We can talk for days about the assumption of the ground lease, what's normal for ground lease, etc.

Look, when it all boils down Sleiman likely has a lessee friendly ground lease (probably one of the things that attracted him to the Landing in the first place).  It probably has 50+ years of term left (I think original term was ~75 years?).  If he can sit on that lease and still give rent relief, sign % rent deals, etc, it can't be that crazy of a rate (remind me if there is any tax abatement and therefore burnoff for the Landing?).

I've seen these deals properly done in other [more cooperative] cities...neither the city nor Sleiman are following proven procedure here.  Sleiman won't get attractive term financing for the Landing as is, and likely his best bet for a construction loan for the redevelopment would be from the city (which would never fly in Jax).  There are some fixed-income groups out there who might be interested in sticking a subordinated high yield mezz facility on top of someone else's primary, which stinks for Sleiman but might be one of the only financing options.

The ground lease likely has *nothing* to do with the inability to finance a redevelopment of the project (unless there is some crazy legalese in that document that has nothing to do with term and all to do with rights and restrictions).  Barring any craziness aside, lenders are more scared of Jacksonville itself, of downtown Jax, of alternative retail in a very non-alternative retail friendly/experienced city, of the city and its lack of vision/support for such projects, of the fact that Sleiman hasn't done a similar deal and has no partner who has, etc etc.

For slapping a perm on the project (which would indicate no redevelopment prospects without conversion flexibility), what traditional lender can underwrite MTM/% rent/temp deals to produce a debt yield for it?  Could it be a CMBS deal?  Not a capital markets guy, but probably that before a traditional loan - and being that the buyer pool for the Landing is currently limited if not nonexistent, the pool might become further limited if the deal comes with a CMBS assumption.

[Kiva]

For slapping a perm on the project (which would indicate no redevelopment prospects without conversion flexibility), what traditional lender can underwrite MTM/% rent/temp deals to produce a debt yield for it?  Could it be a CMBS deal? 

My Google translate app couldn't convert this into English!

[fieldafm]

It probably has 50+ years of term left

It was a 50 year lease when Rouse signed it.  That's one of the issues. 

[simms3]

^^We're on the same timetable today, oddly.  That still means there is what ~24 years of primary term left?  You sure there aren't options remaining?  Especially at a 50 year term, you would think there would be options at FMV or some similar scenario (it's not like this land will ever not be subject to a ground lease with the city...it will doubtfully ever be private land nor should it).

Your loan maturity is going to be 10 years or less anyway, and your construction loan is going to be even shorter, allowing time for 2-3 more buyers after you (well...presumably, but this IS Jacksonville).  I think the risk is not the ground lease...it's the fact that this is the Jacksonville Landing in downtown Jacksonville, FL.  And both sides, Sleiman and the city, feel like the other needs to step up and neither is working with the other.  If I were a lender, I sure as hell wouldn't want to get mixed up in that.

The city has proven totally inept as a partner in deals such as this and Sleiman isn't exactly the prince of urban redevelopment or partnering with major entities such as the City, LoL.  I'm sure the terms of the ground lease are the least of a lender's concern, and I even doubt that the ground lease is the biggest of Sleiman's fish to fry.  The market itself is completely antagonistic and no party here knows how to work the crappy market and turn it around in the project's favor.

[tufsu1]

What does One Spark have to do with them unveiling their plans?  Sounds like the event is being used as an excuse to delay to me.

of course it is

[urbaknight]

What does One Spark have to do with them unveiling their plans?  Sounds like the event is being used as an excuse to delay to me.

of course it is

It's all Jacksonville speak for, "Never mind, we got nothin, sorry but just forget about it."

[vicupstate]

If memory serves, Sleiman pays NO rent for the land because the promised parking was never provided. 

I think Sleiman is sitting pat until he gets his mayor.