JEA board Chair John Baker II said May 5 that buying the utility’s proposed Downtown corporate headquarters from developer Ryan Companies US. Inc. or leasing from another owner both are viable options.
In an interview May 5 after a special board meeting, Baker said he needs to examine JEA’s lease agreement to see “what degree of control” the utility would have if Minneapolis-based Ryan decides to sell the property after developing it to rent to the utility.
A Ryan spokesperson told the Jacksonville Daily Record on April 30 the company is exploring options to sell the building at 325 W. Adams St. after construction is complete in April 2022.
“Interest rates have never been lower. If you were ever going to buy it, now would be the time,” Baker said. “We’ve got to make sure that we’re comfortable with the new lessor (and) that they’re somebody who’s as responsible as Ryan is.”
An internal JEA memorandum dated April 15 states the municipal utility did not execute the right of first offer clause in its lease agreement when Ryan told JEA in early April about the possible sale.
The lease requires Ryan to give JEA the first option to purchase the building.
The possible sale comes as JEA board Vice Chair Bobby Stein and board member Tom VanOsdol begin a four- to six-week review of the project’s scope.
The utility hopes to reduce the cost of the headquarters from $78 million to $66.77 million, a savings of $11.23 million.
Baker asked the two board members to consult with JEA interim CEO Paul McElroy, utility management, project real estate consultant CBRE Program Management and Ryan on plans to cut the proposed square footage, value engineering expenses and other costs.
JEA officials hope to reduce the proposed 196,900-square-foot building to 173,975 square feet.
The smaller headquarters would lower JEA’s 15-year, $160.5 million lease by $18.3 million, according to JEA board materials.
The proposed redesign would reduce both the square footage of the building and connected parking garage by 12%, according to documents included in the April 28 and May 5 board material.
Doug Dieck, president of Ryan Companies Southeast Region, told board members the developer wants design changes approved in time to meet deadlines for a June 8 construction loan and property closing.
“To me, there are probably more opportunities to buy this project down with where construction is in this county right now,” Stein said. “What is the exact size per person, how many hoteling opportunities are there?”
Stein said JEA could increase space efficiency and reduce the building’s square footage by eliminating executive office space and using huddle rooms and small conference rooms.
VanOsdol and other board members suggested some job duties could be performed remotely or in other city facilities Downtown, allowing a reduction in the building’s footprint.
“COVID-19 is teaching many of us, and this meeting is one good example, we can be far more productive working remotely than we probably ever thought possible. What opportunities are there for folks not to be in this building and perform support functions in other locations,” VanOsdol said.
Board members also want to look at increasing the building’s resilience to storms and wind speed.
Stein and board member Joseph DiSalvo said the 130 mph wind resiliency rated under the current building design might not be adequate to fulfill JEA’s role in disaster response during hurricanes.
“I think if that’s what the recommendation is, to go to 130 miles per hour resistance, I think we’re low-balling it and taking on undue risk,” DiSalvo said.
DiSalvo said top sustained wind speeds during Hurricanes Maria and Erma in 2017 were 175 to 180 mph, according to National Hurricane Center data.
Nancy Veasey, JEA’s special projects director, told the board that JEA’s emergency operation center during hurricanes is at a hardened location separate from its headquarters.
The Downtown Development Review Board gave final approval Dec.12 to the current design for a 196,900-square-foot building, which includes 7,170 square feet of retail space on the ground floor of the parking garage.
