Khan's Jacksonville Shipyards Plans Revealed

[Rynjny]

So Khan just wants the land, clean up of the land and some tax breaks..this is such a city friendly deal. the shipyard land cost 28 mil and the clean up cost 35 mil.

[jcjohnpaint]

Sorry for the ignorance, but what does this mean?
"The company also wants all Tax Increment Funding from the development and potentially state and federal funding for the project."

[simms3]

I see I'm a little late as the JaxDailyRecord article came out, however, this was going to be my response to latest discussion (and imo 99% of this is still applicable).  $35M for cleanup and remediation of an industrial shipyards/waterfront site that large seems like a small number, though.  TIF funding won't be nearly enough for this kind of project.  And investors still have to have confidence that tax values will come through - this is Jacksonville we're talking about where not only are there market forces, but also political forces against taxes.

TIF in a nutshell is issuing a bond for today based on future tax value/revenue.  That's an oversimplification, but it's basically paying for a project now using future tax revenues generated by having the project built (this includes supposed future tax revenues of neighboring properties in a defined district that see a lift in value by having the project built).  But there has to be a group of investors willing to buy that bond - there is no credit precedence for such a thing in Jax, to my knowledge.  Investors are going on good faith and it won't be a "cheap" bond as a result.  A TIF district likely has to be created.  A ratings agency will end up involved.  All a step in the right direction. 



This project won't be one phase, nor will it be "crossed" into one parent JV between the same group of parties (in Jax?).  IF this thing gets done, there will be multiple, likely building by building, phases and multiple development groups.  In a sense it won't be all that different from an incrementally/organically developed Shipyards that some, including myself, have advocated for.

Think about it.  There are only a few groups in the entire world in the grand scheme of things that can write $100M+ equity checks for single real estate investments in a single market, or those kinds of checks period (not that a building in this development will necessarily require that large of a commitment...maybe $25-50M at most...which also implies that there will be a debt stack for this, another set of players who need to get comfortable).  And only a portion of those can write checks for ground up development (and even then, someone who can write a check for a new office building likely can't write a check for a new hotel).  And only a portion of those can go to a city like Jacksonville.  And only a portion of those can go to downtown Jacksonville, specifically.

Maybe there will be EB-5 funding, or some sort of similar scheme (which will require some sort of guaranty...what if the thing doesn't end up getting built, and so even if you have a sponsor not coming out of pocket to the extent it normally would, you need a sponsor that can provide that guaranty).

And don't forget, there will have to be some level of crossing, further complicating the deal.  There's a public use component, and likely a public funding component.  There will be some sort of legal framework for a master plan / development that legally binds separate parties together and merges separate intents, conflicts of interest, etc (i.e. something along the lines of a Master Assoc, which becomes super complicated once you introduce residential condominiums into the mix).



For precedence, there are projects of this size that do happen in the larger cities.  But they don't happen frequently and they aren't any less complex.  But it's easier to find a demand for these projects in these cities, there are far more players writing those kinds of equity checks (it's easily a $100M++ equity check just to build a single skyscraper in NYC or SF, or land alone!), and there have been decades of such projects in these cities.  Even so, even in NYC, Chicago, SF, Boston, or DC, it could take 10-20 years to build out such a crossed/mixed use/master-planned project on politically contentious highly public land using any sort of public funding or variance to zoning (with that many ego'd parties sitting at the same table standing to benefit, or lose).  And that's with precedence in place.

In terms of phases - here's the difference between this and a similar master-planned thing going up in DC.  In DC, there is a light at end of tunnel / a concrete vision for buildout and a publicly known and accepted demand.  A building might be surrounded by dirt for a couple of years, but it's a fact that it won't be that way for long.  In Jax, this is not the case.  So there's a tug of war between multi-phase and leaving dirt around buildings in Jacksonville with the scary thought that it may actually forever be dirt (and then I picture a Revel Casino financial scenario for the project), or finding the impossible scenario where this all gets done as 1 phase in Jax with the risk that a lot of it sits empty for a while and default on multiple loans is practically ensured.

Now, as 1 phase, think about the size and scope of the current office market / apartment market / condo market / hotel / retail and restaurant market in DT Jax.  Now add 10-50% for each kind of product in one fell swoop.  THAT's what never happens, no matter the boom (Austin, Miami, Toronto, etc...as boomy as they are aren't purposefully adding 10% of the existing office stock in a year or 50% of the condo existing condo supply in a year or two).


There are a lot of nearly impossible uphill battles for this.  Good luck to Khan, but I want to hear more specifics about what iterations are proposed for the site (what mix of uses, what scopes).  Besides Populous, a firm that focuses 99% of design efforts to stadiums or sports district master planning, what other firms with experience and capability are presently involved or who may become involved.

Honestly, Khan needs to be talking to a RE or FIN or alternative Banking division and a good legal team for product / transactional expertise to learn how he can raise funds (Khan's team has guys on speed dial I'm sure), and some private equity / hedge fund groups (and maybe a Park Hill).  I'm sure he is, but I want to know that he is.  Nothing's serious until you know who Khan's talking to about this, and if THOSE are serious names.  Remember, as I said before, Khan is many things, but he is not a real estate developer, a finance guy, a lawyer, a CIVIL engineer, an architect, etc etc.

[InnerCityPressure]

All a step in the right direction. 

I'm so confused.  This must be some sort of sarcasm that I don't understand.   

So when are you moving back?

[Tacachale]

So he wants us the city to give him our land for free, pay to clean up that land, and give him all the taxes it generates, and still be on the hook for any future issues. Okay, y'all.

[Rynjny]

So he wants us the city to give him our land for free, pay to clean up that land, and give him all the taxes it generates, and still be on the hook for any future issues. Okay, y'all.

Better than let it sit empty for who knows how long...no wonder this city is not moving forward, with thinking like this..

[edjax]

^^at least we may have something to show for it Unlike the mayor that failed miserably with the TriLegacy debacle.

[CityLife]

TIF in a nutshell is issuing a bond for today based on future tax value/revenue.  That's an oversimplification, but it's basically paying for a project now using future tax revenues generated by having the project built (this includes supposed future tax revenues of neighboring properties in a defined district that see a lift in value by having the project built).  But there has to be a group of investors willing to buy that bond - there is no credit precedence for such a thing in Jax, to my knowledge.  Investors are going on good faith and it won't be a "cheap" bond as a result.  A TIF district likely has to be created.  A ratings agency will end up involved.  All a step in the right direction. 

The DIA is a TIF, so Khan may simply be asking for the TIF that this project is projected to generate to go back to the development/financiers rather than into the general TIF fund for other DT projects. This wouldn't be very different from the city's REV Grant, which has been used on similar projects. 220 Riverside for instance got a $4.9 grant based on projected future tax gains.

[simms3]

^^^Yes.  That's what I gathered as well.  And it's a reasonable request.  Are Shipyards presently part of DIA's TIF district?  The Shipyards could easily be its own district - one would have to look no further than Atlantic Station in Atlanta for nearby precedence (and another example of a large scale master-planned mixed-use infill development on former brownfield).

Your quote on what 220 Riverside received indicates to me that this is not a strong funding source in Jax, presently.  It's just another layer in a project's capital stack (as it is anywhere...TIF by no means alone gets a project done or puts members of an investment committee somehow on board with a plan).  It does show city commitment.

[simms3]

So he wants us the city to give him our land for free, pay to clean up that land, and give him all the taxes it generates, and still be on the hook for any future issues. Okay, y'all.

Better than let it sit empty for who knows how long...no wonder this city is not moving forward, with thinking like this..

Agreed, if there is a concrete plan for getting something done.  This is the ONLY option, at this point and likely in general, and I'm still not sure it's even real yet.

[CityLife]

The Shipyards is within the Downtown CRA. Creating a new CRA/TIF District is time consuming and a major undertaking.

I'm pretty sure the existing CRA was created with projects like The Shipyards in mind. In fact, I think its pretty safe to assume that Khan and his team were involved in the process. I'm skimming the CRA Plan right now and see a section that says when $100 million of private capital investment is exceeded, a project has to meet some general qualifications in order to receive the maximum incentives. Khan won't have any trouble meeting that requirement.

You're right, the REV Grant is by no means a way to entirely fund a project, but it can help plug a gap where normal market conditions can't support a type of development. Its also a relatively fair way to dole out incentives for a major project.

[edjax]

Lets just get the ball rolling. The City needs to get a RFP out there and lets just watch all the proposals roll in!  NOT.  So then the City can either decide to work with somene who can likely get it done or just let it sit like this for another 25 years.  And everybody can stop with relating any cost of remediation as a give away to Khan. That will be required regardless if Khan or it just sit there empty for the next 25 years.

This is a chance to actually have significant private money invested in our downtown..(Northbank)  When was the last time that happened?  The Godbold mayorship?

[copperfiend]

World Golf Hall of Fame doesn't appear to have ever been completed.

I seem to remember there being a talked about retail expansion of the World Golf Village about 15 years ago. But I agree. I feel like that first part was built, most of it failing miserably, and they just gave up.

[ProjectMaximus]

I'm a bit torn. I really really want this to happen, and I'm all for higher taxes to support progress and better quality of life, but the cost to the city does seem pretty steep. I dunno, I keep going back and forth.

Can someone give me examples of projects of this magnitude, or for that matter half this size, that occurred in one phase, excluding NYC, Chicago, LA?     
Projects that are strictly public works would not count.

48-acre site
1 million square feet of office space
100,000 square feet of commercial space
662 residential units
350 hotel rooms

Well, I'm sure in SF, DC, etc. But not in Jax...probably not anywhere with less than 3-4 million population, I'd imagine, except Vegas cause it's Vegas.

[Marle Brando]

Interesting points after reading the full term sheet available on the TU.
-City to pay for environmental cleanup up to 35mil,
-bulkhead improvements and maintenance,
-infastructure pertaining to bay street,
-the Riverwalk improvement and extension,
-public park portions and
-Hogans Creek improvements up to Liberty St.
Also:
-City 20%/Iguana 80% land sale profits
-Shipyards to be rezoned, free of mobility fees forever.
-Shipyards keeps all TIF futures generated.
-City required to fill 5+ acres of land according to an existing agreement?? DEP Pemit #16-192176-003-EI
I still feel this may be the best deal the city may get, but I must admit it's hard to see the city commit funds to the extent of Hogans Creek redo and filling in 5 acres of waterfront on top of only seeing profits in the way of net land sale profit. I believe the long term benefits will make up for cost at some point but it is a steep price the city must agree to. Its time to put up or shut up. Someone correct me if I missed anything, but do you guys feel the city can fund said obligations?
If so, without a raise in taxes, how are they funded?