Southeast asks for $64 million Incentive Package to complete Laura Street Trio

[jaxoNOLE]

"I don't know whether the gap is exactly $25 million, we haven't vetted all the construction numbers to that level, but there's no doubt there's a gap," Boyer said.

She said the completion grant for new construction requires a return on investment of 1, which the DIA determined the project did not meet.

"We're now going below an ROI of 1 on new construction, it's making sure you give us guidance with how we distinguish every other new construction project going downtown that we don't go below 1, or what the basis is we do go below one because that's the criteria in our plan," Boyer told council members.

It sounds like the completion grant is meant to close the gap Atkins alluded to. I'll be interested to see how far below 1.00 this grades out to, and I wonder what level of completion grant (if any) would comply with the target of 1.00. At a minimum, I would hope the grant is conditioned on and pro-rated according to what is actually spent.

As ridiculous as this may seem, Lot J's hotel rooms implied a cost of something like $1 million per key and nearly passed. Atkins is no Shad Khan, but he is providing the pro forma for DIA review, so I doubt $550k/room alone raises too many eyebrows on Council.

With a price range like that, you can really only hope this project turns out to be a gem with super high-end finishes. In my mind, that's the only way the public can get a small win from this. I hear ya on the 4S project.. but the costs there are at least shared amongst several other uses. I guess because this project by Southeast is basically an infill project, the price range of it seems crazy. The Lions skyscraper (which many have doubts on its pricing anyway) claims to be "cheaper" per unit than the Trio now? How can a 40-story building be cheaper than the Trio? lol

So hopefully this thing turns out to be an absolute gem, to make it somewhat worth the tag?? I unfortunately feel like this is a scenario where the city has already shown its full hand.

I'm not really saying $550k is reasonable, I just don't think it's likely to be a stumbling block for council approval. It goes back to the issue of precedent. While this deal looks like a huge increase in ask, in reality the prior deal had crept up to $26.7M city incentives on a $70M project for 140 hotel rooms and no multifamily, or $500k/room at a city subsidy rate of about 38%.

The new ask of $62.5M on a $179M project at a rough rate of $550k/room with a city subsidy rate of 35% looks pretty reasonably aligned to the existing deal--they're just expanding the scope using the same terms. The city has already lost the credibility to challenge the project based on cost.

[Jax_Developer]

"I don't know whether the gap is exactly $25 million, we haven't vetted all the construction numbers to that level, but there's no doubt there's a gap," Boyer said.

She said the completion grant for new construction requires a return on investment of 1, which the DIA determined the project did not meet.

"We're now going below an ROI of 1 on new construction, it's making sure you give us guidance with how we distinguish every other new construction project going downtown that we don't go below 1, or what the basis is we do go below one because that's the criteria in our plan," Boyer told council members.

It sounds like the completion grant is meant to close the gap Atkins alluded to. I'll be interested to see how far below 1.00 this grades out to, and I wonder what level of completion grant (if any) would comply with the target of 1.00. At a minimum, I would hope the grant is conditioned on and pro-rated according to what is actually spent.

As ridiculous as this may seem, Lot J's hotel rooms implied a cost of something like $1 million per key and nearly passed. Atkins is no Shad Khan, but he is providing the pro forma for DIA review, so I doubt $550k/room alone raises too many eyebrows on Council.

With a price range like that, you can really only hope this project turns out to be a gem with super high-end finishes. In my mind, that's the only way the public can get a small win from this. I hear ya on the 4S project.. but the costs there are at least shared amongst several other uses. I guess because this project by Southeast is basically an infill project, the price range of it seems crazy. The Lions skyscraper (which many have doubts on its pricing anyway) claims to be "cheaper" per unit than the Trio now? How can a 40-story building be cheaper than the Trio? lol

So hopefully this thing turns out to be an absolute gem, to make it somewhat worth the tag?? I unfortunately feel like this is a scenario where the city has already shown its full hand.

I'm not really saying $550k is reasonable, I just don't think it's likely to be a stumbling block for council approval. It goes back to the issue of precedent. While this deal looks like a huge increase in ask, in reality the prior deal had crept up to $26.7M city incentives on a $70M project for 140 hotel rooms and no multifamily, or $500k/room at a city subsidy rate of about 38%.

The new ask of $62.5M on a $179M project at a rough rate of $550k/room with a city subsidy rate of 35% looks pretty reasonably aligned to the existing deal--they're just expanding the scope using the same terms. The city has already lost the credibility to challenge the project based on cost.

I do agree with you on that! I guess because the ask is so high now, it's harder to digest.

[jcjohnpaint]

I don't like this. I l always though this project as 1st priority, but this guy needs to go. Let's start again!

[Ken_FSU]

For those more familiar with historic rehab and general construction costs than myself, does $180 million seem within reason for what's proposed here?



I only have other projects to compare it to:

Independent Life building rehab - $23 million

New JEA Headquarters - $75 million

RISE Doro Project - $50 million

Union Terminal Warehouse Project - $75 million

Jags Sports Performance Center - $120 million

FIS Headquarters - $156 million

One Riverside Phase 1, with 270 residential units, a 600-spot garage, and retail/restaurant - $83 million

I have a tough time understanding how a 143-room hotel, 169 apartments, and restaurant net out to more than Union Terminal and One Riverside combined. Or as much as FIS Headquarters and Independent Life combined. Or as much as the Jags new Sports Performance center and new parks at the Landing and Shipyards West combined.

From my understanding, Southeast doesn't even have to build structured parking, as VyStar took that burden off their hands with the new garage.

I know it's more expensive to bring these old buildings up to code than to build fresh, but is THIS much more expensive? These buildings aren't exactly huge, much smaller than the Barnett, for example, and a good chunk of this project is new construction as well.

$180 million pass the smell test?

[Captain Zissou]

One Riverside Phase 1, with 270 residential units, a 600-spot garage, and retail/restaurant - $83 million

Just a point of clarification here.  The $83M for One Riverside is to build the phase one residential only.  The total project is valued at $250M. 

However, in my opinion the Trio should not cost two and a half times what Union Terminal costs.  I think it should cost about $100M.  The old structures are already stripped down and ready to be built back as their new use and the new construction component is not a large development.  $180M for this work is tough to comprehend.

[heights unknown]

One Riverside Phase 1, with 270 residential units, a 600-spot garage, and retail/restaurant - $83 million

Just a point of clarification here.  The $83M for One Riverside is to build the phase one residential only.  The total project is valued at $250M. 

However, in my opinion the Trio should not cost two and a half times what Union Terminal costs.  I think it should cost about $100M.  The old structures are already stripped down and ready to be built back as their new use and the new construction component is not a large development.  $180M for this work is tough to comprehend.

Either someone doesn't know what they are doing or, SOMEONE is putting money in their and others pockets and coming up to the table greedily for more money. I smell a skunk in a pickle juice barrel.

[marcuscnelson]

Update from the Daily Record.

https://www.jaxdailyrecord.com/news/2023/jun/16/dia-committee-advances-3655-million-laura-street-trio-deal-amid-caution/

[thelakelander]

Unfortunately, I'm not confident about this one, but wish them well.

[Jax_Developer]

- Historic levels of incentives from the city
- National Historic Tax Credits
- No built parking

Couple that with this project being estimated at 36 months to complete.. This is just another form of money laundering. Holding valuable city assets hostage and proposing absolutely insane deals. Thank you to those in city leadership taking a stand for what is right in the long run. Those buildings need to be left vacant if this is what the city has to pay to make it happen. Hard to imagine with historically low interest rates, Southeast couldn't make this happen. What makes anyone think now they can? I'll be okay with waiting until the next boom cycle.

[heights unknown]

- Historic levels of incentives from the city
- National Historic Tax Credits
- No built parking

Couple that with this project being estimated at 36 months to complete.. This is just another form of money laundering. Holding valuable city assets hostage and proposing absolutely insane deals. Thank you to those in city leadership taking a stand for what is right in the long run. Those buildings need to be left vacant if this is what the city has to pay to make it happen. Hard to imagine with historically low interest rates, Southeast couldn't make this happen. What makes anyone think now they can? I'll be okay with waiting until the next boom cycle.

OK with waiting until the next boom cycle? WHAT???!!! None of us know when that will be; it is a very uncertain world and the next boom cycle may not happen; and I, and most of you as well, might be dead before the next boom cycle. However, that doesn't mean that we let these thug developers keep wringing money out of the taxpayers coffers screaming high prices for materials and supply and demand issues. If this keeps up, Jax might be declaring bankruptcy very soon (I know it's hard for that to happen). Insane, insane, insane.

[Jax_Developer]

- Historic levels of incentives from the city
- National Historic Tax Credits
- No built parking

Couple that with this project being estimated at 36 months to complete.. This is just another form of money laundering. Holding valuable city assets hostage and proposing absolutely insane deals. Thank you to those in city leadership taking a stand for what is right in the long run. Those buildings need to be left vacant if this is what the city has to pay to make it happen. Hard to imagine with historically low interest rates, Southeast couldn't make this happen. What makes anyone think now they can? I'll be okay with waiting until the next boom cycle.

OK with waiting until the next boom cycle? WHAT???!!! None of us know when that will be; it is a very uncertain world and the next boom cycle may not happen; and I, and most of you as well, might be dead before the next boom cycle. However, that doesn't mean that we let these thug developers keep wringing money out of the taxpayers coffers screaming high prices for materials and supply and demand issues. If this keeps up, Jax might be declaring bankruptcy very soon (I know it's hard for that to happen). Insane, insane, insane.

36 months, with $100M in debt @ 10% net (all assumptions are conservative) is $30M in interest payments alone.

36 months, every percentage on debt is a net is $3M increase in cost.

Given this project has a negative ROI, we are literally fronting money because of the debt cycle we are in now. In other words, this projects equity gap is wild and should the city really pay for a private project to be even remotely feasible? Maybe if there was a city component, but there isn't.

[Ken_FSU]

This one just makes me sad.

Feels like we're looking at years of additional decay and blight at this site.

Southeast should sell it to VyStar (or another developer with deeper pockets) at market rate and let someone else move the project forward.

VyStar would be HEROES in the local community if they found a way to finally solve the Trio problem.

Curious, does Jacksonville have/has Jacksonville ever considered a vacancy/blight tax on unoccupied buildings and surface parking lots like we see in other cities? Just to put a little extra pressure on owners of these properties to develop or sell more quickly?

[Jax_Developer]

Really agree with you on that first part. There has to be another use for the building, with a limited-income %. Corner Lot got incentives for that Cecil apartment project which only had like 30% of the development slated for income-limited units.

There are other programs and ways to finance this, outside of a fully market rate product. This is a legacy project for Southeast, and clearly are trying to steer clear from an affordable component, as evident in them not being able to bring a prior deal to the table when there was some affordable components on the board. There are so many state & local programs.. which clearly this project could warrant that interest.

But having this entire project be $500k net per door, with 0 parking, makes you wonder on all the numbers honestly. Construction costs included. I see this whole thing imploding pretty bad.

[heights unknown]

I thought that there was a parking garage in their plans/proposal(s) on the corner, or was that a previous vision and plan for this trio?

[Jax_Developer]

I could be mistaken but I believe Vystar took that over completely with their new garage & the updated proposals do not include a parking component.