The Downtown Investment Authority approved the redevelopment agreement Wednesday for The District, a mixed-use project on the Downtown Southbank.
The DIA board voted 8-0 to approve the deal, which includes the formation of a Community Development District and $26.4 million from the city for public infrastructure on the 30-acre Southbank site. The deal includes a Recapture Enhanced Value grant worth up to $56 million over 22 years.
Developers Peter Rummell and Michael Munz are leading the estimated $600 million healthy living-inspired mixed-use development through Elements of Development Jacksonville LLC.
“We’re very happy about today’s outcome,” said Munz, who called the development a “postcard project for Jacksonville.”
When completed around 2022, it could include 1,170 residential units for sale and lease; 200,000 square feet of office space; more than 200,000 square feet of retail; riverfront restaurants and bars; a 3.5-acre riverfront park and an extension of the Southbank Riverwalk; a 125-slip marina; and a hotel.
Rummell said previously the group has a commitment from a “green” grocer to anchor the retail portion of the project and a large office user to occupy most, if not all, of the 200,000-square-foot office tower planned for the site.
Elements also has an agreement with a hotel partner to operate a 147-room AC Hotel by Marriott.
Palm Beach Gardens-based Kitson & Partners will oversee all aspects of the development, including coordinating with contractors.
The developers didn’t explain how they will finance the project, except to say, “Discussions with capital partners are ongoing.”
“Of course, this step gives them assurance that we’re moving forward positively,” Munz said.
He also declined Wednesday to name other prospective tenants, saying only that negotiations continue.
Elements plans to buy the land from JEA for $18.6 million by a July 18 deadline, nearly four years after the group signed a purchase-and-sale agreement with the utility. The deadline has been extended four times since 2015.
JEA previously used the site for its Southside Generating Station.
City Council must approve the redevelopment agreement and eventually the formation of the Community Development District before any construction can begin.
Munz said the next step for his team is to hold individual meetings with council members to answer questions before legislation is introduced in May.
Council member Lori Boyer, who represents the Southbank and supports the project, said the road through council likely will be difficult.
“But, I think that ultimately if this project is approved, it is a big signal for Downtown redevelopment in general,” she said.
Elements also has an agreement with the Duval County School Board to exchange tracts of land to proceed with the development. The school board will take possession of a new parking lot that Elements will build, and a new roadway will be deeded to the city.
Community Development District creation
DIA CEO Aundra Wallace said the project has two components.
The first step is establishing a Community Development District that will encompass the 30-acre project site within the Southside Community Redevelopment Area.
He said Elements is responsible for working with the city’s Office of General Counsel to set up and maintain the Community Development District, a process Wallace said will likely take seven to eight months, “based on other examples.”
The Community Development District could then issue up to $30 million in bonds to help Elements fund the horizontal portion of its development, which includes new roads, sidewalks and other infrastructure.
Munz said Elements is negotiating with a Florida-based underwriter to purchase the bonds, but would not say who.
“That will be disclosed as we move forward at council,” he said. “We haven’t signed the term sheet with them yet.”
Wallace said he’s spoken with the lender and that the interest rate being offered on those bonds is 6.25 percent.
Wallace said he anticipates council approving the Community Development District by the first quarter of 2019 after engineering designs are approved.
According to a working timeline for the project, the city would then solicit bids from contractors to establish final construction costs. Only then would the Community Development District issue the bonds. Elements would oversee construction.
Over 22 years, Elements must repay the bonds through a Recapture Enhanced Value grant worth 75 percent of the taxes generated from vertical construction. The REV grant is worth the lesser of $56 million or the total principal, interest, fees and cost of any credit enhancement of the bonds.
Wallace said the DIA and the city are not responsible for either securing or paying for the debt.
“How they pay back that debt is based on the vertical construction,” he said.
Those figures, Wallace said, are based on a “post-construction assessed value” of $215.9 million, an estimate derived from the current development plan.
The REV grant’s lifespan coincides with the termination of the Southside CRA on Dec. 31, 2040, regardless of when Elements receives Certificates of Use.
Public participation
The deal also hinges on the city committing $26.4 million to build public infrastructure.
The DIA plans to build three riverfront parks totaling 3.5 acres, another 1-acre pocket park, a 1,900-foot expansion of the Southbank Riverwalk and bulkhead construction, a walking trail around the development, a 100-space parking lot and the expansion of three roads for public access.
After the Community Development District bonds are secured, Elements must convey about 4.5 acres of unencumbered land to the city for the public space.
Wallace said the riverfront property is valued at $2.5 million.
Wallace estimates the city will see a return of $1.39 for each $1 invested based on the $215 million estimated assessed value. He said the development also should create about 1,400 jobs through retail, dining and office tenants.
According to a framework of the deal, the DIA “through a separate Cost Reimbursement Agreement,” will pay “for the design, development, and construction of the Public Space.”
“The Southbank TID will pay for this project,” Wallace said.
He said the Southside Community Redevelopment Agency fund has $5 million allocated for those costs and another $4 million could be earmarked over the next two fiscal years.
He said Mayor Lenny Curry’s office is committed to backing the estimated $22.3 million shortfall through a low-interest loan from the city’s general fund, to be paid back over 15 years.
Wallace said the Southside TID has enough money to pay the principal and interest on that loan each year, and have about $2.1 million to $3.4 million left over for other projects.
Curry’s Chief of Staff Brian Hughes said the redevelopment agreement’s structure protects taxpayers.
“It looks like a good project,” Hughes said. “We’ll talk to our friends in council and see how it all washes out.”
Wallace said May 8 is the earliest that legislation could be introduced to council committees.
If no delays occur there, the full council could give an up-or-down vote on the project by June 12.
Munz said construction could begin in 2019.
