City is reaping millions from deal with developer Hillwood

Development in AllianceFlorida at Cecil Commerce Center triggering “profit events.”

AllianceFlorida at Cecil Commerce Center.
AllianceFlorida at Cecil Commerce Center.
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Dallas-based developer Hillwood paid the city $1,087,243 for the fourth-quarter sale of the JinkoSolar building in AllianceFlorida at Cecil Commerce Center to an investor.

That boosts Hillwood’s total profit-sharing payments to the city to almost $4 million.

Hillwood Senior Vice President Dan Tatsch says the company has developed about 2.92 million square feet of space at AllianceFlorida at Cecil Commerce Center.
Hillwood Senior Vice President Dan Tatsch says the company has developed about 2.92 million square feet of space at AllianceFlorida at Cecil Commerce Center.

Hillwood Senior Vice President Dan Tatsch said the “profit event” was driven by the company’s sale of the building at 4660 POW-MIA Memorial Parkway.

Hillwood built the 407,435-square-foot structure as a speculative development, but it quickly was leased by solar-panel maker JinkoSolar and furniture distributor Industry West.

Hillwood sold the building Dec. 19 for $30.7 million to Richardson Logistics Assets LLC.

The payments stem from the 25-year Master Disposition and Development Agreement made in 2010 between the former Jacksonville Economic Development Commission and Hillwood.

The agreement calls for Hillwood to build-out AllianceFlorida on about 4,499 acres of city property, the former Naval Air Station Cecil Field, off Normandy Boulevard and 103rd Street in West Jacksonville. 

It is designed for the city to share in the profits. As the master developer, Hillwood typically secures the tenant, buys the land from the city, develops the project and then sells the property to an investor.

The city receives 10% of the profit proceeds for industrial space and it will be 50% for mixed-use development.

Among other profit-sharing payments, Hillwood paid the city almost $1.53 million for the sale to investors of the General Electric Oil & Gas building and $1.37 million for the sale of the distribution center.

Hillwood sold the 510,000-square-foot GE Oil & Gas valve-manufacturing plant in February 2015 for $57.6 million. It had been built speculatively and credited for attracting the factory.

Hillwood sold the 1 million-square-foot center in January 2018 for $95.5 million.

Hillwood also sold a tract to FedEx Ground Package System for its facility.

Tatsch said previously the checks quantify the success of the concept. “When those checks happen, it means we are all doing something right.”

The agreement was effective Sept. 15, 2010, with an initial term of 10 years. Hillwood is required to meet benchmarks, but extended those twice, at a cost of $500,000 each time, during the recessionary economy.

The city said Hillwood has completed its benchmark performance goals before the 10th anniversary. It said the most significant benchmark goal was completing 2 million square feet of new development by Sept. 15, 2020.

Tatsch said Hillwood has developed about 2.92 million square feet at AllianceFlorida, comprising Wayfair,, GE Oil & Gas and JinkoSolar/Industry West.

He said the city also gives Hillwood credit for development completed on land it sold to other developers, which adds the 290,000-square-foot FedEx  Ground Package System Inc. distribution center. That boosts the total to 3.21 million square feet.

The city can extend the agreement for three additional five-year periods. 

Hillwood can request to exercise the first extension before September 2020. That term would expire in September 2025 and require an additional 2 million square feet of development.

“There have been some preliminary discussions about moving forward but nothing of substance to date,” said city spokesman James Croft, assistant director of public affairs.

Tatsch said that over the past few months, Hillwood and the city have mentioned that renewal discussions probably will begin by early  next year.

In March 2018, the City Council Auditor’s Office said the city has received more than $4.3 million in revenue since it entered into the development agreement with Hillwood.

As the master developer, Hillwood must file quarterly activity reports with the city. Last week it filed its fourth-quarter report, which has a longer deadline than the first three quarterly assessments.

Hillwood said that in addition to responding to general requests for information from prospects and brokers in the fourth quarter, it:

• Executed a long-term lease with Wayfair Inc. for a 1,012,567-square-foot fulfillment center along 103rd Street next to the fulfillment center. Hillwood bought the site Dec. 20 from the city. By year-end, it was cleared of trees and mass grading began.

• Sold the 4660 POW-MIA Memorial Parkway building to an institutional investor. The structure was built speculatively but fully leased upon the sale to JinkoSolar USA for a solar-panel assembly plant and to Industry West for furniture distribution.

• Continued to track the progress of permit applications submitted in the third quarter for Parcels H-I. Permits included wetlands, stormwater and site-clearing. 

Hillwood filed plans with the city in September 2018 seeking civil plan review to clear a site for a 1.5 million-square-foot warehouse on Parcels H and I near POW-MIA Memorial Parkway. No tenant is identified.

Tatsch said previously that Hillwood is permitting the parcels to allow site-clearing and mass grading, “all with the goal of shortening the site’s ultimate delivery timeline for a prospect, should one materialize.”

While not reflected in the fourth-quarter report, Hillwood also is proposing another speculative building.

Hillwood proposes the 450,000-square-foot Building A-2 in the 13000 block of 103rd Street next to the Wayfair distribution center under development.

A site plan shows the structure backs up to the GE Oil & Gas valve plant.

Tatsch said construction of the speculative building will depend on how quickly other warehouses lease up around Northeast Florida.

“We have no near-term plans to start another spec building,” Tatsch said.

“We feel there’s enough spec space either on the ground or under development,” he said.

Still, Tatsch said, Hillwood is monitoring market conditions. “When they change in such a way that we do feel it’s prudent to start another spec building, we’ll do so,” he said.