Fishy Deal at Cecil Commerce Center?

[CityLife]

In a matter of days, Cecil Commerce Center's master developer turned a quick $3.2 million profit — almost $70,000 an acre.

In a land deal recorded this week with the Duval County Clerk of Courts, the city sold 46.19 acres at the city-owned Cecil Commerce Center to master developer Hillwood, through its New World Avenue Bldg 1 LLC company, for $407,349.

New World Avenue in turn sold the property to Charlotte, N.C.-based SunCap Jacksonville LLC, developer of the new FedEx center, for almost $3.62 million.

That means the city sold the property for $8,818.99 an acre and Hillwood resold it for $78,345.20 an acre.
That's a $69,526 per-acre gain by Hillwood.

Property records show the city sold two parcels — an almost 45-acre site along with 1.25 acres of entry-road land — to Dallas-based New World Avenue Bldg 1 LLC, which shares an address with Hillwood in Dallas.

The deal might have been months in the making, but the land changed hands in a matter of days and was recorded in a matter of minutes.

The deed by the city to New World was executed and effective Oct. 28, although the first date of Oct. 25 was crossed out and Oct. 28 written beneath it.

Chief Administrative Officer Karen Bowling signed the deed on behalf of Mayor Alvin Brown.

Meanwhile, New World Avenue Bldg 1 LLC Executive Vice President Dewitt Hicks III signed the deed as the seller Oct. 24 and Jason Bria, manager of SunCap, signed it Oct. 25.

The city's deed was recorded with the Duval Clerk of Courts at 3:33 p.m. Oct. 29 and Hillwood's deed was recorded 15 minutes later at 3:48 p.m.

Hillwood is the city's contracted developer for Cecil Commerce Center, a former Naval Air Station.

The city contracted with Hillwood, a Ross Perot company, to develop the AllianceFlorida park at Cecil Commerce Center.

In June 2010, City Council approved a 25-year agreement with Hillwood to serve as the master developer of about 4,475 acres owned by the city at Cecil.

FedEx is one of the first major deals there. It confirmed in June it would build the distribution center and transfer 180 employees from its 2480 Lane Ave. N. facility to the larger hub.

Construction is expected start in November toward a summer 2015 completion.

The city is reviewing permits for the $18.7 million construction project on 34.7 acres at 13509 Waterworks St. The developer is shown as SunCap Jacksonville LLC, part of SunCap Property Group of Charlotte, N.C.

SunCap Property Group and Jacksonville engineering firm Prosser Hallock filed plans that show a 297,246-square-foot warehouse center on 46.2 acres north of the Saft America plant.

In another recording Oct. 29, Branch Banking and Trust Co. of North Carolina issued an almost $21.5 million construction mortgage and security agreement to SunCap Jacksonville to develop the Fed Ex FedEx Ground Package System center.

There has got to be more to this deal right? That seems like a pretty significant discount from the city for Hillwood's development of the site. Can anyone shed some light into this?

http://www.jaxdailyrecord.com/showstory.php?Story_id=540930

[fieldafm]

COJ entered into a contract with Hillwood to sell specific portions of Cecil at specified prices.  There was a price for improved land and a price for unimproved land.  There was a performance measure in the contract where Hillwood would need to develop (purchase) X amount of land by specified timeframes.

Hillwood is just executing sales at those contracted prices as the master developer of the non-JIA owned portions of the Cecil land as spelled out in the previously signed master development agreement.

[CityLife]

Gotcha. Thanks for the clarification.

Obviously as currently staffed, COJ can't develop the site as well as quality private developer can...and the city has something to gain from the property tax increases, but did COJ get worked over on that original contract? Just seems like an excessive profit for the developer.

[fieldafm]

Several commercial property owners were upset at the time that the sale did/would negatively set the market (as any Cecil sale would be used for a comp on their property).

Without getting into the debate on what a fair price was... Hillwood has a track record of success in developing master planned logistics-focused commercial developments (notably Alliance), there were really no other qualified suitors and as you note.. COJ has a horrible record in development and lacked the proper staff and subject matter experts to grow into such a role.

There can be debate as to whether FedEx was a 'new' development, and a debate on price as it related to the previous master development agreement... but there is no denying that COJ should not be in that business, and turning over Cecil to someone that is an expert in that field was a wise idea IMO.

[icarus]

... but there is no denying that COJ should not be in that business, and turning over Cecil to someone that is an expert in that field was a wise idea IMO.

+1,000

[spuwho]

Any way this approach could be used for the rich inventory of vacant downtown lots COJ owns?

Does it apply? (Apples vs apples?)

Creating a bundle of parcels and contract a developer under a master agreement for development.

[simms3]

Any way this approach could be used for the rich inventory of vacant downtown lots COJ owns?

Does it apply? (Apples vs apples?)

Creating a bundle of parcels and contract a developer under a master agreement for development.

In response others' comments in the FL Blue thread that DT/core landowners are holding out for unrealistic pricing, I was going to say that in the small world of commercial property INVESTMENT, enemies (and friends) are easily created.  Resetting values for your peers by selling out (unnecessarily) is a good way to shut yourself out of the business of owning again.  Best to sell off your house and personals first, pissing off your down the street or condo building neighbors before the people you could be doing business with in the future.

Clearly the city created an interesting contract and "gave away" land, but it's chump change in the grand scheme of things - I'd consider it "risk cost" for Hillwood to master develop a Westside Jax industrial site.  It's not like Hillwood's selling off or developing parcels right and left - these incremental profits seem to be trickling in for them.

If demand were higher and there was a distinct possibility for a master developer to make a huge profit on the flip side or the development side as an LP to sub-entities, then I would hope the city would negotiate a better deal for itself.  I don't think it would even be wrong for the city to act as an LP in that case, with Hillwood the GP.  For now I'm glad the city's not sitting on borderline useless land and is able to focus on other things.

[thelakelander]

^I remember opposition to the idea of COJ's deal creating an unfair competitive advantage for business at Cecil.  While things work out great for Hillwood, what about the private industrial developer essentially going after many of the same businesses for their developments. How does the Cecil deal help developments like Imeson, Northpoint or the industrial parks off Pritchard Road?

[mtraininjax]

but there is no denying that COJ should not be in that business, and turning over Cecil to someone that is an expert in that field was a wise idea IMO.

Take it further, shut down the JEDC division that works with properties and outsource all management of properties to Hillwood. They would appear to have a GREAT track record, so why not watch them work some more magic!

[CityLife]

Really good article on this today from Karen Brune Mathis at the Daily Record. I agree with a lot of the sentiment in the article....

http://www.jaxdailyrecord.com/showstory.php?Story_id=540937

Someone correct me if I'm wrong, but didn't Gate or the Peyton family make some real estate moves near Cecil back when Peyton was mayor?

[river4340]

Appears to be a little more to it than the Daily Record story indicated:

The selling price of $8,819 per acre was set in that agreement, which also gave Hillwood responsibility for providing the infrastructure: roads, drainage and connecting to utilities. The cost of that was estimated at $62,715 an acre in 2010.

http://members.jacksonville.com/business/2013-10-30/story/property-new-fedex-building-sold-twice-two-days

[thelakelander]

We'd probably have to dig a little deeper than the newspaper articles.  For example, depending on the site's location, infrastructure could already be in place. Plus, land values should dramatically increase in upcoming years since the state has started construction of the First Coast Expressway through the property. When complete, Cecil will have multiple interchanges funded by taxpayers.


Cecil Commerce Center in 2010


Cecil Commerce Center in 2010

[spuwho]

I read the Brune Mathis story.

Essentially, COJ has offloaded the risk profile of trying to develop the property to Hillwood.

Hillwood assumed all of the risk of development and therefore gets to assume all of the margin in the sale.

They still have to meet certain parameters of the master agreement, (like the spec area) and develop the wetlands and infrastructure.

I can see where the neighbors might complain, but if you take a long term view, ultimately it will increase the value of the whole property.

We don't know how much of that margin Hillwood has to use to pile back in to improvements or finance other efforts.

Much ado about nothing at the moment. Lets see what the next deal Hillwood can work out, then some proof will materialize.

[thelakelander]

It really doesn't matter at this point. The deal is done. Only time will tell if it pays off for the rest of the city and local private sector competition.

[CityLife]

It really doesn't matter at this point. The deal is done. Only time will tell if it pays off for the rest of the city and local private sector competition.

It is worth studying and evaluating though, particularly if COJ ever wants to work with a private developer for the Shipyards or other city owned properties.

The real question here is how much in infastructure improvements does Hillwood have to make? If there are none or minimal improvements, COJ and its residents got worked over. If we're going to practically give the land away, why not use it as a relocation incentive for huge deals, rather than allow a developer from Texas to reap the rewards? As I mentioned in the Florida Blue thread, part of the reason Orlando's Medical City happened, is that the land was free for part of it.

I know that a private developer can do a much better job at developing a site than COJ can on a level playing field...but with the ability to offer land that is HEAVILY discounted, even morons could attract quality development to that area at those prices...and if the city still couldn't, they could recruit a couple people from the private sector to do so, and still make out better than they are in this deal.