Michael Shalley is the vice president of development at the St. Joe Company. Although the company has been responsible for major developments in the Panhandle and farther north, Shalley is looking forward to the evolution of Jacksonville, and downtown in particular, as construction to the company’s new headquarters on Riverside Avenue is nearly complete. Shalley met recently with Daily Record staff writer J. Brooks Terry to discuss the local real estate industry.
Question: You came to St. Joe in 1996. What changes have you seen from within the company?
Answer: The changes in the company have been tremendous. I got here a couple of weeks before Peter Rummell [CEO of St. Joe] got here. At that point, the company was in a bit of a transition from a holding company format which had transportation ownership, sugar company, telephone company, container and box plants, timberland — that sort of thing — and very little real estate development was actually done at the St. Joe Company. It was mostly done through a subsidiary company called Grand Central. So when we came in, we turned the company’s direction completely around from a conglomerate to a real estate development company focused on the million acres of assets that we had acquired from the mid-1930s onward. Obviously, it required a completely different personnel group. The people that were running railroads, sugar plants and timberlands weren’t really qualified to do the real estate development. Peter really brought in a talented group of people that we have continued to supplement over the years.
Q: Sounds like a lot of growth has taken place.
A: Absolutely. It has been change and growth. As any company grows quickly there is additional change that goes with it. You take your steps forward and backward to focus on what things are going to make money and what isn’t. It’s taken four or five years, but the focus of the company is clear now. We’re onward and upward.
Q: What are some of the projects coming online that are you most excited about?
A: For me, the most exciting project we’re working on is our new headquarters building at 245 Riverside. It is a project that has been discussed for about four or five years. When Peter started with the company, he came to me and talked about wanting a new headquarters. We looked at just about every opportunity in the downtown quarter, all the way to San Marco. To be able to acquire a new location and move forward has been very exciting.
Q: Why downtown?
A: St. Joe has been in Jacksonville forever, so there was really no consideration to relocate the company. Although our primary assets are in West Florida, the roots of the company are pretty deep in Jacksonville. Peter and the board wanted to stay, so we started looking at our options. We have done a lot of suburban development and that was discussed early on; whether or not we would relocate to a more suburban area. Again, the board decided that the best place to stay is in urban downtown. We all felt that it was good for the company and also good for the city. San Marco was the farthest we were willing to move. I think that was really a commitment of the company to stay downtown. Additionally, it is convenient for our employees. It’s centrally located.
Q: How many employees will be in the new headquarters?
A: We have about a total of 2,000 or 3,000 employees in our subsidiaries but I would say that the new headquarters would occupy 80 to 90 people.
Q: You own the new building. Will that change any day-to-day operations?
A: No, not really. I do know that we are all looking forward to getting into a building that we developed. It should really reflect the personality of the management and the design is appropriate for the city. I know I’m looking forward to moving over there. Riverside, as a community, is really taking off. They’re expanding and they’re strengthening the infrastructure there. That whole quarter is going to change tremendously. It is a great place to locate a building and we’re looking forward to it.
Q: Your building is really one of the many new projects coming online downtown. What is your take on downtown development?
A: I’ve been involved in the real estate market here for almost 30 years and I’ve seen downtown Jacksonville ride the cycles up and down. I think it’s a difficult prospect to get new downtown office development until rents go up 20 to 30 percent from where they are now. The good things that are happening now — Better Jacksonville, the City’s investment in the Riverwalk, the Sports Complex, the return of residential to the area — all are positives, but I think it will be three to five years or longer before you see significant office development in the downtown quarter. Having said that, you say, ‘Why then build downtown?’ We decided that we were going to build in Jacksonville because there is enough demand to fill up an 140,000 square-foot building, which is what we’re building, because it will be the first Class-A office building built in downtown since 1989. We believe that there is a bit of pent-up demand. We have one lease for about 13,000 square feet and we’re talking to several other organizations about filling an additional 75,000 square feet. We’re crossing our fingers that we will have the building about 70 percent occupied by the end of the first year.
Q: Have you been targeting any specific kind of business, in particular, to fill the space?
A: The design of the building has big efficient floor plates, which allows for any kind of user. We also have a parking space that is one and half times larger than what the downtown environment is used to. Basically, we’re targeting people who have made the decision to stay in the downtown environment. By that nature, we see a lot of professionals and professional service companies — the lawyers, accountants, banks. The big office user will continue to go the Southside or to the suburban offices. The first firm we signed was a law firm and we’re talking to a few other law firms. There seems to be a demand for law firms to increase their efficiency and floors plates. Parking convenience is another big demand. Downtown access is also important, so we have a parking lot there that we’re sistering up with that allows lawyers to park in our lot as part of their lease in our building as an added benefit.
Q: Any other Jacksonville projects?
A: We finished a project called TNT last year for TNT Logistics, which is about 85 percent occupied. The suburban market is a little slow right now, but it has been well received. It was actually recognized as the development of the year, which was nice. We’re really just keeping our eyes open. We have responded to the RFP [Request for Proposal] for the Southside Generating Station that came out about a month ago. That’s a potential development site.
Q: How does Jacksonville’s potential for growth stack up against other cities.
A: Obviously, against the Pensacolas and Panama cities, we have a lot more economic engines driving development. The difference in that area is that we control a significant amount of development so it’s a creation effort on our part. Jacksonville, on the other hand, is already up and running. We are buying buildings through one of our programs in Tampa, Orlando, South Florida, Jacksonville and out of the state so we get to see how the competitive communities are doing. I think we’re more than holding our own. However, Jacksonville has historically had five to 10 percent lower rentals rates so it’s difficult to get someone to build here when the rates are higher in cities like Orlando or Tampa. So we do have our bearers to entry here. There are significant land holders that control the majority of the suburban land, too. They, sort of, control the development activities. There are a lot of people who don’t want to compete with that. For the most part we are doing well, though. The quality of life is excellent here and the Chamber of Commerce does an excellent of job of marketing the city.
Q: What about in the next 10 or 15 years?
A: I think Jacksonville has come a very long way. I’ve been here for 41 years. I’ve seen great strides over the past 10 years and I feel like we’ll have even more of the next 10 years. We have to do a better job with education. That’s one of the things that gets a black mark when people want to come here. I know the mayor and the mayoral candidates are focused on that and I think the quality of life really is good here. There is a great work force and moderate temperature, all of the positives are in line for us to continue to grow. Hopefully, in won’t become another Miami. Atlanta? Well maybe a mini-Atlanta but I don’t think we have the drivers that they do. But I think we’ll see good things for Jacksonville; people living downtown, you’ll see a 24-hour environment there which we haven’t had in a long, long time. That will be one of the keys to becoming a first-tier city.
Q: What has the role of the government been? In your opinion, is it an enabler or a disabler for commerce?
A: I think it has a strong play in development activities. The City has done a good job of re-looking at things like land use and zoning and mixed usage. I know there’s been a lot of discussion about incentives to lure people downtown. I think it is a necessary evil that should be used prudently. It can create jobs and a tax base. But I don’t think we should be throwing money at companies who are already here. I have sympathy and empathy for people on the Council and at the mayor’s office who have to deal with it. The reality is that incentives are here to stay while we are trying to compete with other cities who are using them.