Preston Hollow Capital LLC provides $18.59 million to purchase former JEA site for 30-acre mixed-use development.
With the property now in their possession, developers Michael Munz and Peter Rummell say there should be no skepticism their ambitious mixed-use development along the Downtown Southbank will break ground.
“I’m over the naysayers, I’m over the doubters,” said Munz hours after the team announced it had closed on the 30-acre site next to the Duval County School Board building for The District.
Dallas-based Preston Hollow Capital LLC facilitated the $18.59 million payment to the group’s Elements Development of Jacksonville LLC to secure the land, formerly home of JEA’s Southside Generating Station.
According to Duval County property records, Elements on July 13 secured a $20 million mortgage with Preston Hollow Capital, then closed on the property through a transaction with JEA.
“Anybody who is doubting that we will move forward and get the development going as quickly as possible, is just being foolish,” Munz said.
It’s a major step, nearly five years after the team began negotiations with the city, JEA and its financing partners.
“I actually have the first email from Peter from December 2013 where he shared with me thoughts and ideas about creating what we, at that time, were still calling ‘Healthy Town,’” he said.
The estimated $600 million project would transform the Southbank with 1,170 residential units for sale and lease; 200,000 square feet of office space; more than 200,000 square feet of retail; riverfront restaurants and bars; a 3.5-acre riverfront park and an extension of the Southbank Riverwalk; a 125-slip marina and a 200-room AC hotel by Marriott.
The sale, tied to a 2014 purchase agreement with JEA, also marks the start of a new phase of the project, establishing the Community Development District which Elements will use to finance the horizontal construction, or infrastructure.
“We will be filing the petition as required by state law with the city early next week,” said Munz.
The Community Development District could then issue up to $30 million in bonds to help Elements fund the horizontal development, which includes new roads, sidewalks and other infrastructure.
The city has no obligation for that debt.
After the Community Development District bonds are secured, Elements must convey about 4.5 acres of unencumbered land to the city for the public space.
“We’re not letting any time slip away between the work we had to close and to forming the CDD,” he said.
On June 12, City Council approved an economic development incentives package for the project worth up to $82 million.
The city pledged up to $26.4 million to build public infrastructure.
The Downtown Investment Authority plans to build three riverfront parks totaling 3.5 acres, another 1-acre pocket park, a 1,900-foot expansion of the Southbank Riverwalk and bulkhead construction, a walking trail around the development, a 100-space parking lot and the expansion of three roads for public access.
Elements also can receive up to $56 million through a Recapture Enhanced Value Grant through 2040. The final encumbrance is based on the actual construction and the property value when the project is completed. Elements will use the money saved from paying property taxes to repay the bonds.
“We’re really fortunate that our capital partners stuck with us through this process and watched patiently on the approval process that we went through with the city,” Munz said.
Munz said that in the short time following the property sale, buzz from outside investors already is starting to grow.
“That tells you right there that when somebody steps up to the plate and closes on a parcel of dirt that people are going to start paying attention,” he said.
JEA interim CEO Aaron Zahn said through a Friday news release that he commends Elements for “bringing a forward-thinking concept to the Southbank.”
“This project is important for Downtown development and the community,” he said. “It also demonstrates JEA’s commitment and value by ensuring the property and the proceeds are used to benefit the community.”
Zahn wants sale proceeds to go toward Jacksonville’s ongoing septic tank phase-out, a plan the JEA board will consider at its July 30 meeting.
In March, Elements announced Kitson & Partners would execute the development plan for the site, beginning with horizontal construction.
The Palm Beach Gardens group plans to oversee all phases of the construction process. Rummell serves on the advisory board of Kitson & Partners.
Munz said there was no update on when Elements could apply for permits, or when they would announce additional agreements with potential tenants.
When asked if there ever was any doubt about closing on the sale after receiving the OK from city officials, Munz simply said “no.”
“We’ve worked hard to get here, and we know what’s ahead of us.”