College losing money on rentals it offers at 20 W. Adams St.
Florida State College of Jacksonville will receive $600,000 in loans from the Downtown Investment Authority to offset potential shortfalls for its student housing at 20 W. Adams St.
The DIA voted unanimously Wednesday to approve two five-year $300,000 loans at no interest.
The loans would cover any shortfall between revenue and operating expenses at FSCJ’s 58-bed student housing rentals in the historic Lerner Building. FSCJ leases the property from owner Phoenix Adams Rising LLC for $37,080 a month.
The city and DIA offered FSCJ and building developer 20 West Adams Street Development a combined $1.2 million in financial assistance in 2015 to renovate and restore the property.
DIA documents state the project’s total capital investment was $6.4 million.
The developer also was awarded $600,000 from the city’s Downtown Historic Preservation and Revitalization Trust Fund.
FSCJ previously was approved for two no-interest loans totaling $600,000, but didn’t execute those agreements.
Albert Little, FSCJ vice president of business services, told board members that the college failed to execute the first loan agreement because of construction delays by the developer.
The new loan agreement requires FSCJ to have the student housing 85% occupied by the second year of the loan and the ground-floor retail space be leased and open 40 hours per week.
Little said the college operated the student housing at a loss for the first year, with initial occupancy at 50%. It has increased to about 81% with 47 of the 58 rooms filled, but is still operating at a $5,000 to $6,000 per month loss, Little said.
“The timing was very poor. The developer could not release the rooms to us until after the fall term started. It’s very difficult to recruit students during the middle of a term,” Little said.
The request comes as Jumpin’ Jax House of Food co-founder Howland Russell announced Oct. 31 the local restaurant would lease the former 20West Cafe space on the ground floor. It will be his third location.
FSCJ opened 20West Cafe in April 2018 as a training restaurant for the school’s culinary students. The college closed it in June after 14 months of operation.
Little said Wednesday the restaurant lost $250,000. FSCJ officials projected it would break even.
Before agreeing to the loan, board member Oliver Barakat said he wants the student housing leased at market rate.
Little said they are charging students a base rate of $750 per month for a room. That increases if a student wants a private bathroom.
“Anybody can get 100% occupancy by giving away the store, but I think our expectation is you’d use all reasonable efforts to lease at market rates,” Barakat said.
The first loan will be repaid no later than June 30, 2024. The total principal of the second will be due no later than June 30, 2029.
FSCJ’s annual payments will be no higher than $60,000, according to the agreement.
Language forgiving the loan is not included in the terms approved Wednesday, but DIA CEO Lori Boyer said the board could choose to forgive the loan in the contract’s fifth year with an additional resolution.
FSCJ officials expect to request it. Little said FSCJ did not request this for cash flow but to offset anticipated loss and forgiveness could determine whether the college executes the second loan.