Prospects are in doubt for the top two bids in the Duval County Public Schools' solicitation to sell and relocate its administration building from the Downtown Southbank riverfront.
In a workshop Aug. 8 at the 1701 Prudential Drive headquarters the school district wants to sell, some Duval County School Board members appeared hesitant to support offers by Florida Blue and a collaboration of the Jacksonville Transportation Authority and Preston Hollow Community Capital LLC to buy the building and provide new office space off the river.
The board left the workshop with more questions for its staff and its real estate consultant, CBRE Inc., about lease terms, deal costs, changing district space needs and other options for its headquarters.
“I think we all want to get off the river,” board member Warren Jones said.
“At this point, I can’t support — with the questions we are faced with today — I just can’t support either one,” he said.
After five months on the market, the schools received 16 bids in April 2022 in its invitation to negotiate the sale of five surplus properties, including the riverfront headquarters, and provide sufficient administrative office space at a new site.
CBRE is handling negotiations for the school board and by June 2023 narrowed the search to three bids.
Florida Blue offer
According to a PowerPoint presentation created by CBRE, Florida Blue is offering the district a 21-year, three-month lease of 124,312 square feet on four floors of its 20-story tower at 532 Riverside Ave. in Brooklyn.
The estimated net lease cost is $67.475 million over 20 years.
After new tax revenue and proceeds from property sales, CBRE estimates the plan would cost the district $27.47 million over 20 years or a net cost of $1.37 million per year.
According to CBRE’s presentation, selling the 1701 Prudential Drive building to a private owner would put it on the tax rolls and provide the district an estimated $10.6 million in property tax revenue over 20 years.
JTA-Preston Hollow offer
JTA and private developer Preston Hollow is offering to build JTA a new facility near the Jacksonville Regional Transportation Center in LaVilla.
The JTA-Preston Hollow bid is a 40-year, lease-to-own model. The payments would net $206.299 million over the lifetime of the lease.
The district would own the building after 40 years, but would have the option to buy the facility after six years, the report says.
The district also would be responsible for $84.97 million in building operating expenses during the life of the lease.
After new tax revenue and proceeds from property sales, the district could pay $239.29 million over 40 years in the deal, or a net cost of $5.98 million per year.
Selling the building
JTA-Preston Hollow is offering to buy the district’s 4.98-acre headquarters building for $15 million after it moves to its new home.
Texas-based Preston Hollow is the master developer of the estimated $693 million, mixed-use development RiversEdge: Life on the St. Johns on 32.21 acres east of the district headquarters.
Florida Blue is offering $10.8 million for the site. Barakat said the insurance company doesn’t want the property and plans to flip it within five years and will split the proceeds with the district.
The Duval County Property Appraiser assessed the Prudential Drive site at $11.15 million in 2021.
CBRE Jacksonville Senior Vice President Oliver Barakat said in a June 20 workshop that a third respondent, Merritt Acquisitions LLC, is offering $13.5 million for the district’s 11231 Philips Highway property that was part of the invitation to negotiate.
Those proceeds could be used to reduce the costs of the JTA-Preston Hollow and Florida Blue deals.
The real estate consultant said they are close to a final and best offer with Merritt and urged the board not to reject the entire invitation to negotiate to preserve sale proceeds from the Philips Highway site.
The city Downtown Investment Authority considers the district’s 4.98-acre Southbank headquarters site as valuable for economic development.
The current ITN is the closest DCPS has moved toward its goal of moving from the St. Johns River since making it a priority about two decades ago.
Board reservations
The six board members meeting Aug. 8 said they had questions that need to be addressed before they vote on an offer.
Board member Charlotte Joyce was absent from the workshop.
Board Chair Kelly Coker wants site visits for board members with Florida Blue and JTA and to schedule workshop presentations by the bidders as part of due diligence.
Jones said he liked the location of the JTA-Preston Hollow proposal, which would be near JTA’s headquarters in LaVilla, but he called the offer “cost prohibitive.”
Board members expressed concern that after the lease term with Florida Blue, there is no guarantee of a renewal option that could leave a future board looking for new accommodations.
“But I don’t want to put a future board in a position where they have to find another location in 20 years,” Jones said.
Coker said she wants to know whether there would be options to exit either agreement if the enrollment trends continue or significantly change altering the district’s space needs.
The board chair cited impacts on the district’s nearly 9,000-student enrollment decline over the past five years with 5,000 moving to charter schools and the state’s Family Empowerment Scholarship expansion in House Bill 1 providing public funding for students to attend private or charter schools.
According to jaxtoday.org, the district is forecasting full-time student equivalent enrollment will fall below 100,000 this school year, a 9% drop from five years ago.
“If we have to downsize because we don’t need as much space because the enrollment is shifting and changing on us, have we obligated a board 10 years from now, 15 years from now, into something they can’t afford?” Coker said.
Board member Lori Hershey pointed out the discussions about relocating and selling the administration building started before the coronavirus pandemic, House Bill 1 and the development of RiversEdge.
Coker also asked CBRE and district staff to produce more complete cost calculations on retrofitting existing district buildings, including soon-to-be-vacated schools or other facilities, to determine whether that would be more cost-effective than the two proposals.
Coker and the other board members appeared concerned about losing out on equity returns from its riverfront office building if they sold it under the offers from JTA/Preston Hollow or Florida Blue.
“I feel like we’re sitting on a very valuable piece of property. I’m having a hard time giving it away and having a developer just go and make a ridiculous amount of money on it to developer it when we can do that ourselves,” board member April Carney said.
Board Vice Chair Cindy Pearson asked district staff to provide more cost estimates and the impact on revenue to updating and remaining in the Southbank building.
What’s next?
The next School Board workshops are scheduled Sept. 12 and 19 where members could hear the bidder presentations.
The board could add a final vote on the agenda for the Oct. 9 regular board meeting where members could accept more than one bid or none.