by Max Marbut
Staff Writer
Early in November, 2004, the only Downtown residential developments that were built, under construction or even on the drawing board were limited to the luxury segment of the market. The City was desirous of having more affordable market-rate inventory become part of the urban core skyline.
Up stepped Michael Balanky and Jay Southerland, partners in Riverplace Development, LLC. They entered into a redevelopment agreement with the City to build a 141-unit high-rise condominium tower on the Southbank across the street from Riverplace Tower, The Strand and The Peninsula.
For its part, the City agreed to an Economic Development Grant approved by the Jacksonville Economic Development Commission Nov. 19 of that year. The grant would not exceed $3.6 million to be paid in 10 annual installments. Conditions included that the project had to be complete by December 2009, the price per square foot could not exceed $230 for all units and all 141 condominiums had to be sold.
By December 2008, the project was complete and owners had been moving in for months, but the average price was $233 per square foot. At some point, all the condominiums had been under contract, but contracts on 12 units, the total remaining inventory, had not been closed due to buyers backing out over concerns about downward trends in the real estate market.
An amendment was considered by the JEDC at its meeting last month that would have allowed the first installment of the grant to be paid in March, but concerns over the language of the document and whether the City should alter the terms of the agreement led to the issue being deferred.
At Thursday’s JEDC meeting, a second amendment that recognizes a “substantial sellout” and “substantial performance” was approved unanimously. It also restricts the price the developer can charge for the remaining units so as to meet the $230 per square foot requirement when all units are sold and gives a time limit for that performance.
“We had a very productive conversation in December and we’re back this month with some refinements,” said JEDC Executive Director Ron Barton
He added the second amendment was “consistent with the fundamental tenets” and “addresses the language” in the existing agreement.
Barton also pointed out, “The fact of the matter is the 12 unsold units are on the tax roll.”
The remaining 12 units must be sold at a price that will bring the entire project in at $230 per square foot in order for the developer to qualify for the full amount of the grant.
“It wasn’t the developer’s intent to end up at $233 (per square foot). It’s a situation where we can’t ignore the pricing issue, but we shouldn’t punish the developer,” said Barton. “The approved amendment also creates a four-year window to sell the remaining units as a condition for the developer receiving the full amount of the grant, a poison pill.”
Next month, Riverplace Development will receive the first installment of the grant, 67 percent of the full amount described in the original document. If all the units are sold within the four-year period, the remainder of the grant will be paid.
After the commission voted unanimously to approve the amendment, Southerland said, “We’re very proud of what we’ve done. I think we hit a home run – $230 a square foot is much lower than what’s across the street.”
He then referred to the downturn in the real estate market that led to contracts on the 12 remaining units failing to close and said, “I think we could have sold some of the units for more than we did, but now it may be hard to sell them for the advertised price.”
Barton pointed out the relationship between the City and the developers was not that of an “independent compliance department” and said, “We were partners. This was the City’s project as much as the developer’s so this has been a success for the City and the developers.”
Barton also told the commissioners the process to secure a Master Developer for Cecil Commerce Center is continuing despite the real estate market and said, “We have to have a plan in place by the time the market turns around.”
Thursday’s meeting was the first for the newest member of the commission, Helen Rowan. She is vice president of strategic planning for Rayonier and has also held positions with Bombardier Capital and worked as an independent financial consultant. Rowan was an executive with Barnett Bank in 1984 and commented, “I remember what Downtown was like back then.”
Photo by Max Marbut
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