DIA to discuss new convention center in downtown

By Derek Gilliam  –  Reporter, Jacksonville Business Journal

Jan 16, 2018, 4:06pm

The Downtown Investment Authority will discuss selling the old city hall annex and courthouse properties to a developer to build a convention center along Bay Street at its Wednesday meeting.

The agenda item would allow DIA CEO Audra Wallace to send out a request for proposals that would seek development of a minimum of a 350-room, full service convention center, parking garage and public convention space at 220 and 330 Bay streets.

“The DIA envisions a new convention center, hotel and parking garage, if developed, to be an immediate enhancement to the financial viability and dynamism of surrounding facilities in the urban core and sports complex and to the city,” the proposal read.

The resolution puts the following requirements for development of the convention center:

• Food and beverage (including a full service restaurant)
• Recreation
• Retail
• Function space (wedding receptions, banquets etc.)
• Full service hotel (minimum - 350 rooms)
• Public exhibit hall (minimum - 200,000 square feet)
• Ballroom (minimum - 40,000 square feet)
• Meeting / breakout rooms (minimum – 45 rooms)
• Transient boat slips (optional)

Parking Garage

• Hotel Parking Spaces (minimum 400 spaces)
• Convention Center Parking Spaces (minimum 1,300 spaces)

The meeting will take place Wednesday at 2 p.m. on the eighth floor of the Ed Ball Building.

East San Marco Apartment Project on Hold — Some Thoughts

The inability to finance the development of the East San Marco mixed use development has received a lot of press lately. As I said in my last post, I answer YES to the question “Is Downtown Revitalization Important to Jacksonville’s Future?” San Marco and Riverside tie into downtown revitalization because of our geography and lifestyle patterns. So, while the amount of press coverage for the project reflecting apparent interest in greater central Jacksonville is good news, it saddens me that financing could not be arranged.

I am a veteran of trying to do downtown redevelopment back in the late 1980’s and early 1990’s. The issues I faced were in many ways similar to those faced by Whitehall in trying to do East San Marco. In a speech to a local planning group back then, probably in one of my more downhearted moments, I described trying to do a downtown deal as similar to attacking a bastion with gun turrets on all corners and in the middles of all but one of the walls. Not something for the faint of heart to try!

Why is this project so hard to finance?

One reason advanced is that Jacksonville is a tertiary market, not a secondary market. Classification as a secondary or tertiary market is important because it affects investors’ perception of the liquidity risk in the market, and less risk is always better than more risk and perception is more important than reality. The smaller the market, the less diversified is the economic base and the shallower is the tenant pool. But the biggest concern for investors is the risk they are assuming on the exit strategy: Will there be sufficient buyer demand when it comes time to sell? Once you get out of the primary markets, the classification process is subjective. I think Jacksonville is a secondary market, and Real Capital Analytics in its Commercial Real Estate Glossary agrees.

A major necessary condition for market liquidity is transparency. The Jacksonville apartment market is followed by multiple national analytical services providing the necessary transparency to be a secondary market. But that can be a double-edged sword. In their forecasts for 2013, the national analysts underestimated the strength of the Jacksonville apartment market (see my previous blog posts for 2013).

Irrespective of the market classification, however, in either a secondary or tertiary market the size of the tenant pool is critical to understanding the reluctance of investors. Net absorption of apartments in Jacksonville during 2013 totaled 1,844 units according to REIS, and they project absorption for 2014 to be 1,495 units. That’s for all of Jacksonville!

In many urban settings today, urban infill is a very popular product. However, in Jacksonville the population flows are still migrating away from the central core into the suburbs and exurbs, not towards the core. And as Ben Carter (50% owner of St Johns Town Center, a major out migration destination) said in the Jacksonville Business Journal, there’s no leadership or broad support for revitalizing the central core. 220 Riverside is bringing 294 units into the market, and Pope and Land are proposing an additional 310 units in Riverside. Both of these projects are directly competitive with the East San Marco project’s 280 units based on lifestyle and geography. Is it realistic to think these projects combined can capture 59% of the net apartment unit absorption in Jacksonville with the current demographic patterns?

Back to the bastion analogy, 220 Riverside was first to the wall with no gun turret in the middle. Combining the fact that investors realize these projects are swimming against the current with the perception that Jacksonville is a weak apartment market, there are not investors out there with the risk tolerance to tackle a project such as East San Marco whatever locals may think of its prospects. I expect that until the market sees how 220 Riverside is absorbed (create a reality versus a perception, the pioneering project problem), there aren’t going to be a lot of investors rushing to charge the other walls. No investor wants to be confronted with finding an exit strategy for a half-filled building.

That is why East San Marco could not be financed at this time.

If you would like to discuss these thoughts in more detail, please contact me:

            Paul B. Hazlett
            Real Estate Investment Advisor
            Coldwell Banker Commercial - Benchmark
            904.421.8523
            PHazlett@CBCWorldwide.com

Is Downtown Revitalization Important to Jacksonville’s Future?

I recently read an article titled "Apartment-Poor NY Suburbs See ‘Brain Drain’" on GlobeSt.com. It reported that, “Affluent suburbs to the north and east of New York City are experiencing a ‘brain drain’ of younger residents …” My first reaction was oh well, too bad for them, what does it matter to me. What got me thinking about Jacksonville was this quote further on in the article, “Studies of millennials—those born between 1978 and 1996—indicate they prefer lively urban environments to suburbs, rental housing and are more comfortable with racial diversity.”

The bright lights of Jacksonville

Why could this be applicable to Jacksonville? When I moved to Jacksonville in 1982, Jacksonville was experiencing a brain drain as many baby boomers were moving to major metropolitan areas like Atlanta and New York seeking a more vibrant environment. However, many moved back in the late eighties as economic development picked up and amenities previously only available in those other major metropolitan areas became available in Jacksonville. This was because of the aggressive growth policies adopted by the City administration.

Jacksonville has long been a multiple nuclei city. In addition to the Downtown, the Jacksonville Beaches have been a nucleus for many years. More recently, another nucleus has developed in the St Johns Town Center area of southeast Jacksonville. We may be seeing a nucleus developing around the River City Marketplace in north Jacksonville. And soon another nucleus for the metropolitan area could develop in St Johns County. As additional nuclei have developed, Downtown has declined further and further.

“So what,” many say, “who needs Downtown?” Maybe if we want to keep those millennials, they may want a revitalized downtown. Studies have shown that the millennials want arts and culture to be available. Most of Jacksonville’s major arts and cultural resources are located in or near Downtown. To name just a few:

·         Times-Union Performing Center
·         Florida Theater
·         Ritz Theater
·         MOCA
·         Cummer Museum
·         MOSH
·         Riverside Art Market
·         Storefront art galleries

None of the other present or potential Jacksonville nuclei come close to Downtown in their offerings of arts and cultural resources.

“Who cares about Downtown, we need to spend our scarce resources in the suburbs where voters live.” I can’t tell you how many times I have heard that statement. If we don’t care about a revitalized Downtown and creating an environment attractive to millennials, and Jacksonville starts experiencing another brain drain, here are a few potential consequences (amongst many that could be conceived):

• Suburban moms and dads, maybe get ready to say goodbye to your sons and daughters as they begin moving away from Jacksonville like the baby boomers did in the past, a situation I know no parent relishes;
• Jacksonville aspires to improve its economic base, but if we can’t keep our own millennials, let alone attract more, were does the talent come from to develop industries such as biotech or space launch; 
• For those of you worried about tax dollars, consider this statement from the article: “Those that are losing younger residents … have begun paying a price. The areas hardest hit are already closing schools and sharply reducing their projections of school children… Volunteer fire departments may become a thing of the past, and office vacancy has reached 19% in Westchester County and 11.5% on Long Island…” That has direct impact on community services for the remaining residents and both municipal government receipts and expenses. And Downtown has historically generated more revenue than expenditures in the area, the surplus of which goes to the suburbs.

So, maybe Downtown is important even if you don’t live there or ever go there. My colleague, Ramonda Fields, recently blogged that Downtown is Developing!. I would suggest that even more effort and resources are needed to revitalize Downtown if we don’t want to go the way of the New York suburbs. A revitalized Downtown may be necessary for the City as a whole to reach its potential.

If you would like to discuss these thoughts in more detail, please contact me:

            Paul B. Hazlett

            Real Estate Investment Advisor

            Coldwell Banker Commercial - Benchmark

            904.421.8523

            PHazlett@CBCWorldwide.com