by Bradley Parsons
Staff Writer
Developers and real estate analysts say a slow-moving City Hall has produced a slow-moving Downtown real estate market.
The developers are confused by what they see as City Hall’s inconsistency in handling high-profile development deals.
Meandering negotiations over the Landing, old public library and new county courthouse risk portraying Jacksonville as a tough place to do business, they say.
“I think there’s a risk of that,” said Mitch Legler, a partner at Kirschner & Legler and Landing owner Toney Sleiman’s attorney. “There’s a lot of cities wanting to build world-class downtowns.”
Despite natural resources that distinguish Jacksonville from most downtowns, Jacksonville still must compete to attract top developers, said Legler, who has first-hand experience in downtown real estate. He was part of a partnership that sold the Greenleaf Building in 2004.
Legler has negotiated with more than his share of municipalities in a four-decade career in transactional and business law. Red tape is expected, but he said he’s rarely had a deal change so radically so late in the game. Legler estimated that the negotiation with the City cost Sleiman $1 million before Mayor John Peyton pulled the plug.
But City officials said they took a big step toward resolving the dispute when they offered late Wednesday a deal to provide the Landing with parking. Ron Barton, the executive director of the Jacksonville Economic Development Commission, said the deal satisfied the City’s contractual obligations to Sleiman. Legler called the proposal a starting point for further negotiations.
Barton said the expensive end of the Downtown market was moving. “There’s no way I can look out my window at three cranes and see a lag in momentum,” he said.
But Barton has been preaching the need for affordable housing downtown. Tax rebate incentives helped launch Downtown’s luxury construction. Barton is hoping similar incentives will boost market-rate development.
Developer Hal Horton’s Renaissance Lofts was one of the first entries into downtown Atlanta’s affordable housing market. He was hoping to duplicate the 200-unit highrise in Downtown Jacksonville, but that hope is fading.
Horton is unconvinced that market-rate housing is a priority for the City.
“I came here two years ago and met with (former Downtown Development Authority head) Al Battle, and he had me all pumped up about coming in here,” said Horton. “But from what I’ve seen, it’s been all talk and no action. If I had it to do over again, I wouldn’t have come here.”
Horton’s frustration stems largely from the City’s two-year overhaul of its Jacksonville Economic Development Commission, which has stymied much of the commission’s economic development functions.
To be fully back in business, the JEDC needs City Council approval for its incentive policy.
In a March 13 e-mail, Barton told Horton “if time is of the essence then you may need to move on with your deal.
“I cannot tell you when the policy will be adopted as it is subject to the political process. Sure we are serious (about market-rate) but we can’t use the tool until Council approves this policy. It is a frustrating place to be.”
Horton said Orlando and Atlanta, two downtowns he judges uglier than Jacksonville with worse traffic problems, have reputations as easier places to do business. That’s why a dozen cranes are currently poking out of Orlando’s skyline, he said.
Horton said Atlanta’s downtown buzzes with activity at all hours due to its success attracting low-cost developers. Luxury buyers don’t fill restaurants and bars, he said, market-rate buyers do.
“If you can sell 500 luxury condos, you could probably sell 10 or 20 times that number in market-rate,” he said. “That’s thousands of young people making $60,000, $70,000 a year, buying clothes, going to restaurants and bars.”
Barton is counting on the same tax rebate grants that helped launch Downtown’s luxury development to also boost market-rate construction. But developer Mike Langton said the Recapture Enhanced Value grants are worthless to builders of low-cost condominiums.
Developers like Langton want to build condominiums, sell them and move on. Tax rebates that might take a decade to claim won’t work, he said.
“If they passed their incentive policy today it wouldn’t do me any good,” said Langton, who hopes to turn the Heart of Jacksonville Hotel on Main and Union streets into market-rate condos selling for between $135,000 and $175,000. “Investors and lenders aren’t going to wait 10 years to be repaid.”
Langton said the City would have to be creative to figure out a way to provide upfront subsidies to market-rate projects. Other Florida cities have pooled land into trusts waiting for market-rate developers or they have provided low-interest financing.
Without subsidies, market-rate construction won’t happen, he said. Without help, rising land and construction costs force developers to charge top dollar.
“The City has some talented people working on this, and I have high hopes they’ll figure this out,” said Langton. “But if the City is serious about encouraging market-rate housing it will figure out a way to offer subsidies.”
Langton said his project can probably wait for two to three more months. Then he will look elsewhere.