Preston Hollow Capital LLC’s will meet its deadline from the Downtown Investment Authority to secure bond financing to fund site infrastructure for its $600 million project The District on Jacksonville’s Downtown Southbank.
The DIA announced Dec. 22 that The District Community Development District closed on $35.56 million in bonds. Preston Hollow Managing Director Ramiro Albarran said in an interview that the money was sent by wire transfer earlier in the day.
“We think it’s going to be an energizing project for the city of Jacksonville,” Albarran said.
The Downtown project would bring retail and restaurants, office space, hotel, residential units, a public marina and new riverfront park space to 32.21 acres east of the Duval County Public Schools headquarters on the Southbank.
The District CDD board, which manages the site, met Dec. 14 in Jacksonville Beach and voted to authorize the tax-exempt bonds.
The CDD was established in October 2018. It’s a state-regulated extension of city government that allows developers and communities to secure financing for constructing, acquiring, operating and maintaining public infrastructure improvements.
Dallas-based Preston Hollow assumed control of The District on Oct. 16 when it became title manager of landowner Elements Development of Jacksonville LLC from RummelMunz Equity LLC, according to documents filed with the Florida Department of State Division of Corporations.
The $35.6 million in bonds are required as part of Elements’ July 2018 economic development agreement with the city and DIA.
A Dec. 18 report from project engineer Kimley-Horn and Associates Inc. shows the financing will be applied to estimated $58.349 million in site infrastructure improvements.
The CDD bonds will cover $31.8 million of the work plus $3.53 million in estimated cost overruns in the DIA’s portion of the project.
The CDD will pay for roadway, water, stormwater, sanitary sewer and electrical connections that will be owned by JEA, according to the engineering report.
It also is responsible for the construction of a pedestrian promenade; a public marina; an acquisition of 5.35 acres for road right of way; and a 1.73-acre parking lot for the DCPS headquarters that will be owned by the schools.
The DIA will pay up to $23 million for city-owned infrastructure to fulfill its deal.
The public contribution covers the construction of new riverfront city parks and bulkhead; a boardwalk and trails; a water taxi stop; and extensions to Prudential Drive, Broadcast Place, Riverside Drive and the Southbank Riverwalk to support and connect The District to the rest of Downtown.
City Council approved the agreement in July 2018, which includes an up to 20-year, $56 million, Recapture Enhanced Value Grant.
The tax refund will not begin until The District has vertical development.
Cranes and timeline
The infrastructure work is expected to start in early 2021 and be completed in early 2023, the Kimley-Horn’s report says.
Albarran said Preston Hollow has received “a lot” of developer interest for The District’s vertical construction.
The firm plans to put the project’s retail, hotel, residential and office uses out to the private market in early 2021. Albarran said he expects public announcements at that time.
Albarran would not say if each individual component at The District will be contracted with its own developer, but he said the strategy is to overlap vertical construction with the infrastructure work as it is completed.
“The goal is to start doing some of the development in parallel and to not wait until every last tree has been planted and every paver has been placed,” Albarran said.
The infrastructure plan needs city, JEA and St. Johns River Water Management District and state environmental permitting before work can begin.
Boyer said Preston Hollow will transfer ownership of 4.39 acres of parkland to the city by the end of December. The CDD will be responsible for the park maintenance, according to the agreement.
Preston Hollow has a deadline to complete all infrastructure project permitting by the end of February, DIA CEO Lori Boyer said Dec. 22.
“The steps are finalizing the plan and finalizing the engineering drawings,” Albarran said. “There are still tweaks that need to be done.”
According to Boyer, The District plans include a high-rise but she sees construction costs moving the market toward mid-rise density.
She said The District could begin with mid-rise construction with a high-rise after it.
Before the ownership change, Elements struggled to meet a performance schedule with the DIA and secure bond financing. Boyer granted Elements a force majeure pause in its city contract in March because of the COVID-19 pandemic.
When Preston Hollow took control, Boyer approved the final 90-day contract extension in October after the equity firm pledged to close on the bonds in mid-December.
Former Elements co-lead Michael Munz announced in September that Preston Hollow would assume the rights and responsibilities for The District.
Munz and RummelMunz Equity partner Peter Rummell led the proposed development since 2014.
Preston Hollow helped Munz and Rummell make a $18.59 million payment to Elements in July 2018 to purchase the 32-acre site from JEA, which had cleared the site from its former use as a generating station.
Elements had a $20 million mortgage with Preston Hollow at that time, according to Duval County property records, then closed on the property.
Boyer noted, despite its setbacks, Elements kept the project moving. She said Preston Hollow’s access to capital and resources allowed The District to move more quickly.
Boyer said the year-plus extension is longer than anticipated, but large projects like The District take time.
“Sometimes it was perceived as faltering and not moving forward but it’s still moving forward,” Boyer said. “It’s not that this project was ever dead.”