by Monica Chamness
Staff Writer
During his 30 years as a real estate attorney, Marty Schwartz has been involved in countless deals, but none was more difficult or complex than The Strand at St. Johns transaction.
Encompassing 3.75 acres of riverfront property on Jacksonville’s Southbank, the three-tower complex will house residential and commercial space. A sign marks the spot where development should begin by the end of the year.
Schwartz, of the Miami-based law firm of Bilzin, Sumberg, Baena, Price & Axelrod, represented American Land Housing Ventures in the deal, which began in August 2001 when the firm negotiated a purchase contract for the property. Before the ink was dry, eight amendments had been added — extending the closing date — because of complications, including liability issues over public access to the Riverwalk, environmental hazards, multiple financiers and contributions from institutional investors, splitting the property to allow for differing development strategies and the creation of 20-plus legal entities to orchestrate the deal.
“Several different components were happening simultaneously,” said Schwartz. “The purchase, subdivision [of property], transfer [to separate parties], formation of the joint venture and processing of three loans all had to be done at the same time.
“Part of the acquisition was to subdivide the land into three pieces. We had to create over 20 different entities [to obtain the title]. All of the entities are controlled by American Land, which is headquartered out of Miami.”
One of the entities served as a conduit to convey two of the land parcels to two other legal entities. Two of the three owners were part of limited liability, limited partnerships. Further complicating the issue was each of the partners in those partnerships were also partners in another partnership. In turn, those partners are partners in yet another LLLP.
Another layer of complexity was added when soil contamination was discovered at the site. While the law firm was still under contract, an underground storage tank was removed from the property. It was thought the container might have leaked. Samples taken from the site revealed high levels of arsenic and benzene (a petroleum product). Where the arsenic came from is unknown.
“We had to get the State to issue a brownsite rehabilitation agreement to insulate us from liability,” said Schwartz. “The client was hesitant to purchase [without State protection].”
State officials advised that if the developer were to raise the ground level two feet using fill dirt and then pave it over, the rainwater might not be able to penetrate the soil. Even the courtyard area between the two residential towers, the spot which allows public access to the river, had to be raised and paved. And federal funding was not available to defer clean-up costs.
“The property is full of arsenic,” said Schwartz. “It will remain but it will be encapsulated. We’re not sure about the benzene contamination. We hope with time it will dissipate. We’re still determining the best way to remove it.”
With the law firm’s year-and-a-half contract nearing the end, the final details needed to be concluded quickly. Schwartz led a team of six lawyers to finish the deal. The team worked 16-hour days, seven days a week for three weeks to pull it all together.
“Everybody though we were closing in 2002 [American Land purchased the property earlier this month],” he said. “We received a number of extensions from the sellers, but they did not want to give us any more. We had three and a half weeks to complete the financial work. We were able to handle it, though, because we are a 75-attorney firm. We have the manpower to do it. We are able to throw six attorneys on a project full-time.”
The first 30-story tower will have 700 rental apartments, which was the City’s idea — they kicked in $19 million in incentives for its development, most in the form of tax breaks. A second residential building will be sold as condominiums. Building three is still tentative, but the principals in the venture are leaning towards office space. Parking garages will be built on the lower levels. The final price tag is in the neighborhood of $150 million.
“They [American Land] thought this would be a good opportunity,” explained Schwartz of why the company expanded out of its South Florida territory. “Someone working for the City had worked in Palm Beach, knew the company and thought well of them. They [City officials] wanted to bring a developer in that would develop the area in an appropriate manner.”
American Land, which concentrates on high-end apartment developments, intends to utilize local civil engineering and consulting firms for the project. Rental rates will begin at $1,000 a month. Pools, fitness centers and a cyber cafe are part of the site plans.
“The City is very anxious to redevelop the Southbank,” said Schwartz. “Jacksonville wants to be a first-class city so they wanted to bring the residential component into the downtown area. I’ve seen pictures of the area. There is a hotel and office building next door, but off the river, the area is problematic. The City is anxious to have 24-hour activity. There is the same problem in Miami. There is no night life. The atmosphere is not conducive to city life like in New York or L.A.”