"We’ve got to do it and there’s going to be a price.”
That’s how Mayor John Delaney described what he thought City Council was thinking when it unanimously approved the Vestcor deal to develop the vacant Lynch building and old Roosevelt Hotel into residential units.
The deal— reborn after its first incarnation failed earlier this year because of inaccurate cost calculations — received a lot of attention in the media because of the $17.8 million, 1.5 percent low-interest loan the City agreed to give Vestcor. The company also will receive a $3.2 million Federal Historic Tax Credit Equity and a $2 million Community Development Block Grant float loan. Vestcor will put $1.1 million developer equity into the deal.
The deal had spurred some grumbling among other developers and historic building owners who had been seeking similar deals to develop their properties. Faced with the higher costs of the second deal, the Jacksonville Economic Development Council barely approved it on a 3-2 vote. Yet, when the deal came to its Council vote two weeks ago, no one on the Council or in the audience spoke against it.
Delaney said the lack of contention or discussion probably stemmed from the fact that the Council had already passed the original, scaled-down version of the deal earlier this year by a unanimous vote.
“The sense was, if we’re ever going to get these buildings done, we’re going to have to incentivise them. So, it swept through,” he said.
The mayor also contended that the fact that Vestcor and its president, John Rood, have an honest reputation and were from Jacksonville, didn’t hurt either. He scoffed at claims that Rood had an inside track because of friendships or political donations.
“That’s just crazy. I think you had a whole lot of confidence in Vestcor and John Rood — that they weren’t trying to rape the City,” said Delaney. “Their potential profit is on the low end. Normally, the business people look for a 20 to 25 percent margin, and John was less than half of that, and on a somewhat risky deal to boot.”
He said the new deal, while costing the City more initially, has more “potential upside” for the City and puts a little more risk on Vestcor. But, the bottom line, he said, was that developing these buildings was not likely to get done any other way.
“The buildings are vacant for a reason,” said Delaney. “They can’t otherwise be economically developed.”
Even through the development boom of the 1980s and 1990s, and even with the economy roaring, he said, “They were just sitting fallow. The only historic buildings of any size that have gotten any redevelopment look have been what the City’s done with this building [City Hall/St. James Building], Florida Theater and the St. Andrews Church. It’s just too hard to go in there economically and make it work.”
The mayor said he hopes the Vestcor investment will become a seed that grows a market for such redevelopment, because the City won’t likely be offering large deals like this in the future. He compared it to the investments the City made to get hotels to build in the city.
“Everyone’s different,” he said. “The ratios are all a little bit different, and we’re trying to decrease what we give. For example, the original hotel near the convention center [a deal that fell through] was virtually 20 to 25 percent public money. Adam’s Mark dropped down to 15 to 16 percent. And we’re turning down hotel deals now. People are coming in and saying ‘we want the deal you gave Adam’s Mark three years ago or we want the deal that you gave the original hotels near the convention center.’ Well, those are gone.
“Some of the developers have gotten very greedy,” he added. “They just think that they’re going to get a blank check and that they’re going to get all return with hardly any capital investment. The Vestcor deal has a risk. They’ve got capital in it. They’ve got loans guaranteed. They’ve got to market and maintain it, and they don’t get all the upside. The upside gets split with the City at certain levels.”
He said other proposed deals for developing three historic buildings at Forsyth and Laura streets, which includes the marble bank building and one concerning the old Ambassador Hotel, “weren’t even close.”
As for criticism from those fronts, Delaney said, “It’s kind of a stupid thing to poke the people in the eye that you’re wanting to give you money. I get to questioning, ‘Well, can I trust these people or not? Is that the way they’re going to deal?’”
The mayor did hold out hope that there could be a “parallel deal” concerning the marble bank building and its two neighboring historic high-rises.
“I hope we can make something like that work, but they’re tough. That’s the nature of the business.”
As for the Ambassador, Delaney said, its proposal “was just ridiculous. And that’s in a hard location. I think they wanted apartments. That would probably be better as law offices. That’s where you got the law complex going. I’ve told a bunch of lawyers that you ought to try to get that Ambassador and try to convert that into office space.”
As for people who say it’s unfair that the City can do what it wants with the historic buildings on the proposed site of the library while other historic building owners can’t, Delaney said there is a world of difference between those buildings in question. The most constant comparison is with the three Laura and Forsyth buildings.
“This is a hard thing, but to me, that’s a good example,” he said. “Everything is relative. The significance of the three buildings that [Craig] Meeks’ group controlled are light years away from that old Army-Navy story [Rhodes building] and the exterior of the LaRose shoe store. I mean, that is comparing the United States Capitol to the . . . old City Hall annex. Or the St. James Building to the old City Hall. It’s just light years away.”