The utility says it will save $27 million in its lease with the developer.
JEA and developer Ryan Companies US Inc. reached an agreement to reduce the size and cost of the utility’s next Downtown corporate headquarters.
In a special meeting May 21, the JEA board unanimously approved plans for a 153,000-square-foot, six-story headquarters at 325 W. Adams St. with a 650-space, six-story parking garage.
JEA board Vice Chair Bobby Stein also requested the board authorize the utility procurement staff and interim CEO Paul McElroy to work with real estate firm CBRE Jacksonville to find a site for a 40,000-square-foot “hardened” facility for an emergency operation center resilient to flooding and severe weather.
McElroy and board member Joe DiSalvo said there would be logistical merit to locating the smaller facility near JEA’s corporate headquarters Downtown because of its proximity to the Jacksonville Sheriff’s Office and Fire and Rescue Emergency Operations Center and an Interstate highway.
“I’d be willing with anybody else to start looking for a design-build firm and start putting up criteria of exactly what we want for that building and start moving as fast as possible,” Stein said. “I think this will be a bit easier because we’re going to own the building.”
No cost of the hardened structure was given at the meeting.
Documents show the smaller headquarters and amended lease agreement with Minneapolis-based Ryan will reduce JEA’s gross rent cost by $27 million over the life of the lease. Ryan will build the headquarters and lease it to the city-owned utility.
The previous design was for a $78 million structure and the updated design will reduce construction costs by $10 million to $14 million, according to a presentation May 21 by CBRE Northeast Florida Project Management Lead C. Stewart Green.
JEA officials expect the smaller headquarters option will save the city-owned utility $19 million to $35 million in operational costs from its existing 360,000-square-foot, 19-story tower and campus at 21 W. Church St.
McElroy said negotiations with Ryan have ended with a 15-year, $153 million lease and a five-year extension at a reduced rent escalation rate of 1.25%, down from 2.5%.
Ryan will set aside $1.5 million in a fund between years 15 and 16 of the lease for JEA to make tenant improvements.
The JEA board selected Ryan on April 2, 2019, to develop the headquarters. On June 25, City Council approved the sale of 1.5 acres on West Adams Street to Ryan for $2.6 million. Ryan executed the lease with the utility July 9. The company is required to begin construction by Dec. 31.
Ryan expects to close on the property purchase June 8, board documents state.
The new headquarters will house about 784 JEA employees. About 200-220 workers will work at the 40,000-square-foot facility that will house backups for the utility’s customer communication infrastructure and water, wastewater and electric systems.
DiSalvo reassured JEA employees during the May 21 meeting the smaller building size does not mean a smaller workforce.
“Just so there’s no angst, the size of the building as we decrease the square footage does not mean a reduction in the JEA employees,” DiSalvo said. “It’s because of those 200 full-time employees that would be working in that separate, hardened 40,000-square-foot facility.”
The smaller building will require the project to return to the Downtown Development Review Board for design approval.
The DDRB approved the previously proposed 196,900-square-foot, eight-story building and eight-level parking garage in December.