Thoughts from the Renovation of The John Gorrie

[fieldafm]

Wanna fill this up in no time? Rent them out!

Then you'll never sell the remaining units (as you won't be able to get financing due to the concentration of rental units), and the investments of the people who have bought in the complex will essentially be lost... not to mention there HOA dues will skyrocket.

Seems like the developer is comfortable selling at a certain price point.  Probably would be best to let the owner of the building continue to do what they see fit based on their original plan which has greatly contributed to the health of the neighborhood they so love.  Sounds like this particular developer may have made a wise decision once or twice in their lifetime

[CityLife]

I've heard a phrase in real estate called "waiting money". The Weavers certainly fit that bill and can afford to take their time to make sure the development goes the way they want it to. They have no need to cave to blips in the market or rush to sell to pay bills.

[jaxlore]

Great article. The Weavers are a true gem to the city. In addition to the John Gorrie conversion they have done great work with non-profits.

[simms3]

I love to see the exposed brick, really a beautiful project overall.

Does anyone know how does the low ownership rate affect the condo fees? Is it passed on to the 24 current owners or do the Weavers have to pay the shares of the vacant units?

The Weavers (or the LLC/LP set up by the Weavers) still own the remaining unsold units, so yes - they must pay HOA fees and other hold costs on those units until they are sold to outside buyers.  This includes taxes on unsold units (which will be prorated and paid by the buyers after they buy).  The developer (aka Weaver LLC or LP) also is responsible for a certain amount of repairs and problems that come up for buyers after they close on a unit directly from developer (or Sponsor I should say).  Sponsor probably has control of the HOA board at this point since less than 50% of units have been sold, but for all intents and purposes the Weavers are still fully at risk here.  They likely have a sizable "warranty" reserve to cover repairs and capital costs associated with faulty construction up until a certain point in time.

I've heard a phrase in real estate called "waiting money". The Weavers certainly fit that bill and can afford to take their time to make sure the development goes the way they want it to. They have no need to cave to blips in the market or rush to sell to pay bills.

"Patient money"   The Weavers are a microcosm of the kind of developer generally missing from Jacksonville.  It would seem to me that depending on the fund/investors that Hallmark Partners also has the opportunity to play with patient money, and hence we have seen some of the best projects come from them.

[Debbie Thompson]

The renovation is beautiful.  It's my understanding if you renovate for rental, you can get a tax credit of 25% of the renovation dollars.  They have to stay rentals for five years.  Is that still in place?  If a developer renovated for rental, and then either sold the building in five years, or converted to condo then, renovation costs would be more reasonable.

[deathstar]

I always imagined this happening with School Four, but sadly I don't think that will ever become a reality. I was thrilled when I heard it was going to become a condominium and not just another vacant lot. Riding by there on a bike ride now is nice. Just wish I could hit the lotto and maybe buy a room for the summer there

[strider]

Currently, it is a 20% tax credit for any structure within a designated district or a landmark structure. It must be for some kind of commercial use - in other words, like these condos, or rentals.  Owner occupied does not qualify (there is a different program for that).  At various times, congress has made this percentage bigger for various things, often in response to a natural disaster (thanks google).  States can also have their own programs that add to this. It comes off of income tax, can be sold (at a discount) and often are if the original developer does not need the tax breaks.  The 20% is of qualified expenses or basically the permanent things for the preservation of the structure but not the purchase costs, fencing and even things like kitchen cabinets are not qualified.  Still, for this project, I would guess a potential savings of 12 to 15% overall.  Worth doing the extra paperwork.

[MusicMan]

I love the John Gorrie. As a Realtor here in RAP I have shown them many times. I have gotten mostly positive feedback on these units. Once they have sold over 50% of the total units, then it will free up financing considerably, and I imagine sales would accelerate. Right now it is 20% down minimum, which stretches alot of potential buyers budget. All owners are entitled to a substantial reduction in their ad valorem taxes for the first 10 years, based on the historic renovation. Once the building is approved for FHA buyers I believe it will really pick up, as there is certainly a strong demand for housing in Riverside-Avondale. These units are the best priced condos in the area. The ones at 1661 Riverside are more per square foot, although they do include covered parking. There is a comment in the thread about what the city could have done with it.
The answer is 'nothing.' The city is utterly clueless about what to do with it's real estate holdings. The outcome at The John Gorrie (allowing the Weavers to purchase and renovate) is the best thing anyone could have hoped for. The day will come in the not too distant future when it will be sold out, then values there will go up from their purchase price.   

[Mike D]

It's a beautiful restoration/repurposing and a gift to the community.  Mrs. Weaver says she and her husband have a passion for Jacksonville.  This project is living proof of that.  And MusicMan is right, the city would not have known what to do with the property.  This is absolutely the best outcome for the John Gorrie.  Well done Weavers.

[TheCat]

More Before and After Pics:

[Stephen]

I looked at the John Gorrie and I was shocked at how expensive the HOA was...for very little if any amenities. ..no pool,,just a workout room.

[tufsu1]

what did the HOA fee cover?  In addition to building exterior, landscaping, security...maybe it included hot water, trash collection, etc.?

[JaxNative68]

my question is...if Jacksonville can afford to spend millions and millions on a tucking useless scoreboard...why couldn't we have spend much less to keep a school...our schools are crammed full and we give one away all the while spending money on frivolous things...now we have apartments few can afford...yes it looks great...but Id rather have a school....funny how they got a killer deal on a property the city should have kep

The City of Jacksonville and Duval County Public Schools are entirely two different entities.  It is a shame the City can't contribute more to the school board for the funding of our schools since the city and county are basically the same after consolidation.  DCPS has no interest in maintaining old structures.  Their maintenance department doesn't have the knowledge or ability to do so. If it weren't for Tommy Hazouri finding grants to restore Lee High School, I'm sure they would have cut that building loose as well or even demolished it to build new in its place.  I image the writing is on the wall for Andrew Jackson.

[ChriswUfGator]

I love to see the exposed brick, really a beautiful project overall.

Does anyone know how does the low ownership rate affect the condo fees? Is it passed on to the 24 current owners or do the Weavers have to pay the shares of the vacant units?

The Weavers (or the LLC/LP set up by the Weavers) still own the remaining unsold units, so yes - they must pay HOA fees and other hold costs on those units until they are sold to outside buyers.  This includes taxes on unsold units (which will be prorated and paid by the buyers after they buy).  The developer (aka Weaver LLC or LP) also is responsible for a certain amount of repairs and problems that come up for buyers after they close on a unit directly from developer (or Sponsor I should say).  Sponsor probably has control of the HOA board at this point since less than 50% of units have been sold, but for all intents and purposes the Weavers are still fully at risk here.  They likely have a sizable "warranty" reserve to cover repairs and capital costs associated with faulty construction up until a certain point in time.

I've heard a phrase in real estate called "waiting money". The Weavers certainly fit that bill and can afford to take their time to make sure the development goes the way they want it to. They have no need to cave to blips in the market or rush to sell to pay bills.

"Patient money"   The Weavers are a microcosm of the kind of developer generally missing from Jacksonville.  It would seem to me that depending on the fund/investors that Hallmark Partners also has the opportunity to play with patient money, and hence we have seen some of the best projects come from them.

The developer is almost never liable for HOA/COA fees while they still own units in the development.

[simms3]

I love to see the exposed brick, really a beautiful project overall.

Does anyone know how does the low ownership rate affect the condo fees? Is it passed on to the 24 current owners or do the Weavers have to pay the shares of the vacant units?

The Weavers (or the LLC/LP set up by the Weavers) still own the remaining unsold units, so yes - they must pay HOA fees and other hold costs on those units until they are sold to outside buyers.  This includes taxes on unsold units (which will be prorated and paid by the buyers after they buy).  The developer (aka Weaver LLC or LP) also is responsible for a certain amount of repairs and problems that come up for buyers after they close on a unit directly from developer (or Sponsor I should say).  Sponsor probably has control of the HOA board at this point since less than 50% of units have been sold, but for all intents and purposes the Weavers are still fully at risk here.  They likely have a sizable "warranty" reserve to cover repairs and capital costs associated with faulty construction up until a certain point in time.

I've heard a phrase in real estate called "waiting money". The Weavers certainly fit that bill and can afford to take their time to make sure the development goes the way they want it to. They have no need to cave to blips in the market or rush to sell to pay bills.

"Patient money"   The Weavers are a microcosm of the kind of developer generally missing from Jacksonville.  It would seem to me that depending on the fund/investors that Hallmark Partners also has the opportunity to play with patient money, and hence we have seen some of the best projects come from them.

The developer is almost never liable for HOA/COA fees while they still own units in the development.

Chris, I know you are a lawyer and what not, but I'm surprised at your statement.  Now I've only personally worked on 3 condominium developments - one in Atlanta with 95 units amidst a large mixed-use complex with multiple buildings consisting of retail and office (that was an interesting board and I remember when we relinquished control).  One in Manhattan that was 94 residential units and 2 retail units.  One in Brooklyn that was 242 residential units, one retail units, and one garage unit (we still own the latter two).  I remember when we gave up control on that one last October, as well.

Here's what my personal experience tells me.

In any jurisdiction, to build any single building with multiple "air rights" to be sold as condos, aka a condo building, a Master Declaration of Covenants, Conditions, and Restrictions must be filed and registered with the Office of Deeds (or similar agency).  This creates a legal entity separate from the developer's registered LLC, which could be a partnership defined by its own Limited Partner Agreement.  This separate legal entity is the COA, as it is governed by the CCRs declared by the Master Declaration filed with the city.  It incurs its own costs, and it is also in charge of common area upkeep and various expenses, from Day One of completion (often legally from the day the Certificate of Occupancy/Certificate of Final Completion is issued).

The CCRs govern how these fees the COA incurs are charged, usually in some pro rata way by SF or by bedroom, by initial estimate of list price, etc etc.  This means that whoever buys a unit from the developer, whether residential, or retail, etc, knows their initial costs while the COA is under developer control.  This also means that the developer, which owns unsold units still, must legally pay these same fees to the legal entity it created (the COA) the same way any buyer would.

IF it were not this way, IF the COA weren't already registered and governed, there would be no way for buyers to understand their costs of the units, and a developer wouldn't make a sale.  Furthermore, IF the developer didn't pay its legal share of COA fees, then the first buyers would be unfairly penalized for ALL COA fees until more buyers came, and everyone would be unfairly penalized until the building was sold out.[/u]

This is why condo buyers like to understand HOW COA fees are charged - is it by SF, is it by # BRs, etc etc.

A developer will sit at the board even after relinquishing control until a certain statute of limitations passes on its legal liability that arises due to faulty construction or various issues.  Separately from the hold cost associated with paying fees to its own COA on units it hasn't sold yet, and separately from punchlist costs as units are sold, the developer will keep warranty reserves for these unforeseen construction/legal issues.  At the end of the day, a developer chooses when to relinquish control of the COA based on a number of factors, but anything and everything to do with the whole process is legally documented and registered.

I guess think of it this way - a developer must still pay taxes and insurance on units it has not sold yet, but its tax/insurance liability passes to the next owner, the first buyer, at close.  The COA fees are no different.  These are all Development/Hold costs, as opposed to operating costs.  They get treated differently on the books, but are costs to the development entity (LP, LLC) nonetheless.