City Council approved Jan. 10 a redrafted $129.75 million incentives deal with Jacksonville Jaguars owner Shad Khan’s development company for its plans to build a Four Seasons hotel and office building on the Downtown Northbank riverfront.
Iguana Investments Florida LLC asked the city to amend the redevelopment agreement first approved in October 2021 to increase the cap on the deal’s property tax refunds as the project’s cost has risen about 20.75%
Council voted 18-0 on for the new agreement attached to Ordinance 2022-0871. Council member Brenda Priestly Jackson was absent for the vote Jan. 10.
Downtown Investment Authority records show that the price for the riverfront project near TIAA Bank Field is increasing from the $321 million estimated in 2021 to nearly $387.6 million.
Coupled with higher-than-estimated costs for supporting public infrastructure, the updated incentives package advanced by the DIA board in September would bump the city’s payment for the Four Seasons project from $114.4 million to $129.75 million, a 13.42% increase.
“We’re grateful to the Jacksonville City Council for their approval tonight of the revised Shipyards redevelopment agreement,” an Iguana spokesperson said via email after the vote.
“These changes address key site-specific issues and account for disruptions in the global supply chain, while still providing an increased return on investment to the City. The continued collaboration between Iguana, the City of Jacksonville and the Downtown Investment Authority on this project is emblematic of our shared vision for the future of downtown Jacksonville.”
The Council’s action also approves Iguana’s request to purchase a 1.05-acre parcel for the project’s six-story office building for $3.2 million. It previously planned on leasing the land from the city.
The parcel is appraised for $3.43 million and the city is considering the $230,000 difference as an incentive in the new deal.
Khan first revealed he wanted to build a Four Seasons on the former Kids Kampus park at the Jacksonville Shipyards in November 2020 during a media event at the stadium.
The project comprises the 176-room hotel with 25 for-sale luxury condominiums, a full-service spa and restaurant and a 157,027-square-foot, six-story, Class A office building.
The city is paying for redevelopment of a public marina; a marina support building; an event lawn; and the Riverwalk to support the hotel and residences.
Iguana and general contractor PCL Construction Services Inc. started site work and horizontal construction in November.
A spokesperson for Iguana said in a Dec. 6 email that most of the initial cost estimates provided to the city in 2021 for the hotel and office building construction are higher.
Iguana said the cost to build the hotel and office building increased because of inflation, global labor and supply chain issues as well as higher-than-expected site cleanup costs.
Four Seasons flag
Vetting the bill in committees Jan. 3 and Jan. 4, Council members and the City Council Auditor’s Office added language meant to ensure the taxpayer investment is financing a Four Seasons hotel and not a different brand.
Council member LeAnna Cumber and Council Vice President Ron Salem said during the Jan. 3 Neighborhoods, Community Services, Public Health and Safety Committee meeting that Iguana’s public claim that the hotel will be a Four Seasons is “a significant issue in the community.”
“I have people come to me frequently (and say) ‘it’s not going to be a Four Seasons. You’re going to get bamboozled,’” Salem said Jan. 3.
“If it’s going to be a Four Seasons, then let’s put language in there that requires that,” he said.
Four Council committees approved an amendment that recoups some or all of the $25.83 million completion grant for the project if the hotel does not operate as a Four Seasons within the first five years of the agreement.
If Four Seasons rebrands or changes its company name, the amendment would allow the Jacksonville hotel to adopt that new flag — a provision requested by Iguana.
Jaguars Senior Vice President of Real Estate Development Drew Frick told reporters after a Dec. 13 Council workshop that the hotel will be a Four Seasons.
Iguana lobbyist and attorney Paul Harden told the committee Jan. 3 “it’s going to be a Four Seasons.”
Jaguars President Mark Lamping has previously said publicly the Shipyards site will have a Four Seasons. That’s despite Four Seasons Hotel and Resorts corporate office not confirming an agreement has been reached for a Jacksonville hotel.
The new deal keeps flexibility on the hotel brand in the clawback provisions for the REV grant.
Council Auditor Kim Taylor confirmed in an email Jan. 10 that to receive the $58.7 million property tax refund, Iguana or the hotel owner has to maintain or Four Seasons or an equivalent four- or five-star flag determined by Forbes Travel Guide.
That would be under the 20-year period of the REV grant.
Cumber said the concern is if the project turns out to be an equivalent five-star flag, it still would not have the “cachet” of a Four Seasons.
“Four Seasons, it’s not owned by any other hotel. It’s not a Marriott, it’s not a Hilton. … There’s a reason why it’s going to be very good for the city,” Cumber said.
“It’s the No. 1 thing we hear when we hear about the development. Is it really going to be a Four Seasons, or are they going to get the money and change it?”
According to DIA CEO Lori Boyer, Florida’s struggling property insurance market resulted in contractors being unable to find builder’s risk coverage for the project’s marine-related work.
Although Iguana agreed that its contractors will build the city-owned infrastructure for the project, the company said it would not take on the risk to pay for any environmental damage during construction.
This pushed Council members to agree to take on up to $28,856,125 in damage risk should the marina, pier or other marine improvements get damaged during construction, according to the bill amendment.
The amendment was introduced by Council member Aaron Bowman before the vote Jan. 10, and was supported by the DIA.
It also requires Iguana to acquire the builders’ risk insurance if it becomes available during the construction period which is expected to be 36 months.
Harden told Council members Jan. 3 that if the city did not agree to covering possible damages caused by storms or other natural events during construction, it would not build the marina, pier or river bulkhead.
The city would not be liable for damage caused by contractor negligence, Boyer said Jan. 3.
The biggest change in the new incentives package is to the Recapture Enhanced Value Grant, a property tax refund.
The DIA deal divides the REV grant into one based on the increased property value from the hotel and residences and one for the office building.
The total property tax incentive increases from $47.68 million to $58.7 million.
The new REV grant payout cap is $50.581 million for the hotel and $8.12 million for the office building.
It refunds 75% of the taxes on the increased property value for 20 years, unchanged from the original agreement.
Lamping first discussed rising project costs in a May 2022 interview. He said Iguana intended to ask the DIA to increase the size of the city property tax refund.
He said the increased total project investment by Iguana also would mean additional property tax revenue for the city.
During a briefing on the bill Dec. 13, Boyer told Council members that the Downtown Tax Increment District would see about $20 million in net revenue over 20 years from the more expensive Four Seasons project compared with a $15 million estimate in 2021.
For the city, rising costs are because of infrastructure work.
The city expected to spend about $27.99 million on public infrastructure and easement rights in the October 2021 bill. That increased to about $30.5 million.
A DIA financial summary filed with the bill shows the costs included as city expenditures in the deal:
• $14 million: Relocation of the marine fire station and dock.
• $3.312 million: Building a marina park.
• $6.563 million: Constructing a marina services building.
• $3.5 million: Relocation of the Fire Museum, already complete.
• $285,000: Fee value for access and utility easement parcels.
• $2.859 million: Relocation of utility lines.
The Council amendment also removes a 250-parking space requirement in the agreement and replaces it with a minimum 75,000 square feet of structured parking.
There is a list of $32.95 million in city infrastructure projects that DIA officials say are needed for the Four Seasons project, but are not included in the incentives calculation because they could have been completed anyway.
They include the marina rebuilding and dredging; replacement of the aging marina pier; building the Riverwalk along the project site; and repairing the failing river bulkhead.
“You can say it’s (the increase) partly inflation, but what it really is is refined numbers,” Boyer said Nov. 30.
“You’re further along in design, so now you have real construction numbers rather than estimates.”
While the city will pay for the completed infrastructure, Iguana will perform the design and construction.
Council approved the money for the infrastructure projects in September as part of the city fiscal year 2022-23 budget and capital improvement plan.
City engineers decided the river bulkhead reinforcing the property needed to be replaced after the original agreement was approved.
To compensate for that work, DIA pushed back Iguana’s required completion date six months from Dec. 31, 2025, to June 30, 2026.
Khan’s company has to start vertical construction by Sept. 1, 2023.
Other incentives in the new agreement remain unchanged.
There is still a $25.83 million hotel completion grant.
Iguana took ownership of the 4.77-acre property for the hotel and residences from the city for $100.
The $12.45 million land donation was considered an incentive in the October 2021 legislation and is the same in the new proposal.
Relocating Kids Kampus park, planned for the western edge of the Shipyards, is considered a $6.219 million incentive by the DIA.
A 2% room surcharge at the Four Seasons will be used by the city for marina improvements.
Iguana also agreed to donate $4 million over 20 years for maintenance and programming at the adjacent Metropolitan Park.
According to the Jaguars, the team intends to occupy three floors of the office building.
The Sept. 1 DIA resolution says that 99,000 square feet will be office space, while about 10,000 square feet will be reserved for retail, amenities and “activated” space.
The remaining square footage includes common spaces, terraces and mechanical.
Harden said during the Dec. 13 briefing that owning the building would allow for a ground-floor restaurant and the ability to “condominiumize,” or sell, some of the offices to tenants.
DIA calculates the city will receive $1.10 for every $1 it spends on the hotel project and $1.23 for every $1 related to the office building.
The original deal had an ROI estimate from the Council Auditor’s Office of 99 cents for every $1 spent.
The bill transferred $7.1 million from the Northbank Riverwalk-Riverwalk Bulkhead line item to the Northbank Central Marina project in the city 2022-23 Capital Improvement Plan.