The Downtown Investment Authority board voted 9-0 March 17 to approve a $24.67 million taxpayer-backed incentive package to partially finance SouthEast Development Group LLC’s planned historic Laura Street Trio renovation.
City Council could take the final vote on the incentive agreement by the end of June for SouthEast’s $70.48 million proposal to adapt the vacant structures into a 145-room Marriott Autograph Hotel with a restaurant, lounge, ground-floor retail and a bodega grocery store.
The Trio buildings, built between 1902 and 1912, are historic and contributing structures to the Downtown Jacksonville National Register District, which makes the adaptive reuse project eligible for the DIA Downtown Preservation and Revitalization Program.
The Florida Life Insurance, Bisbee and Marble Bank buildings comprise the Trio at Laura and Forsyth streets. Plans also call for an eight-story addition to complete the hotel.
DIA staff called the Trio renovation March 17 a “critical step” in Downtown Jacksonville’s redevelopment.
The DIA board added two amendments to the deal during the meeting — one to speed up the project and the other to control the city’s buy-in compared to private investment dollars.
According to documents prepared by the authority, the city will finance 36.8% of the project. The taxpayer contribution is based on the $66.98 million portion of the project paid for by debt financing and government incentives and excludes $3.5 million in management and developer fees.
The incentives have three components:
• A $9.377 million five-year forgivable loan.
• A $10 million five-year forgivable code compliance loan.
• A $5.279 million deferred principal loan.
The investment from SouthEast and its Minneapolis-based financing partner, Piper Sandler Companies, includes $25.76 million in debt; $9.46 million in expected Federal Historic Tax Credits; and $6.8 million in owner equity.
The amendment will require the developer to return to the DIA board should the project cost drop by more than 10%. It includes city clawback rights should the developer sell its interest in the project.
DIA Director of Downtown Real Estate and Development Steve Kelley said the city will get a return of 87 cents for every $1 invested.
Board member Todd Froats said he sees the Trio project as an example of an investment that’s worthwhile despite the city not breaking even.
Board member Oliver Barakat praised SouthEast Principal and Managing Director Steve Atkins for the project, but he cautioned the DIA about cost increases the Trio project has shown since the developer first began to pursue the redevelopment in nearly 11 years ago.
When the Trio renovation was tied to Atkins redevelopment of the Barnett National Bank Building completed in 2019, the estimated combined construction cost was about $90 million.
Barakat noted the city incentives will pay for nearly $150 per square foot of the $440-per-square-foot Trio project.
“These are high, potentially record watermarks for this organization,” Barakat said. “If there was a project to get us there, it would be this one. But we are broaching, for me personally, an uncomfortable arena (and) level of incentives.”
Barakat said that while Trio contractor Danis Construction has a good reputation, he wants to ensure DIA staff are confirming that construction costs are in line with what’s happening in the market.
“I recognize that this is a great deal of money in terms of incentives,” Atkins said. “We will be cognizant of that as we restore these buildings to the highest standard.”
DIA CEO Lori Boyer said the city will not pay out the $24.67 million in loans until the project is completed, which she said would minimize taxpayer risk.
The Trio buildings are locally protected landmarks. Atkins told the board that he submitted paperwork to the National Park Service in January to get the project approved for the historic tax credits, which he expects will be approved soon.
The DIA amended the proposed term sheet to require SouthEast to obtain park service approval by January 2021.
The change also tells the developer to apply with the Downtown Development Review Board for final design approval within 60 days after the federal government’s acceptance.
Atkins said he intends to break ground much sooner, likely by late June or early July after SouthEast officially closes on its private financing.
The city deal gives the developer 36 months to complete the renovation after work begins.
Atkins has contracted with Winegardner & Hammons Hotel Group LLC to manage the Trio’s hotel.
Dasher Hurst Architects designed the project.