The Jacksonville City Council is poised to add $2 million to a $24.67 million taxpayer incentives deal previously approved by the Downtown Investment Authority to renovate the historic Laura Street Trio.
The Council Finance Committee voted 7-0 on Sept. 8 to amend pending legislation with a $2 million forgivable loan to help SouthEast Development Group LLC satisfy an outstanding financial lien on the property.
SouthEast Principal Steve Atkins has been working for nearly a decade to restore the Florida Life Insurance, Bisbee and Marble Bank buildings that comprise the Trio at northeast Laura and Forsyth streets.
His $70.48 million proposal would adapt the vacant structures into a 145-room Marriott Autograph Hotel with a restaurant, lounge, ground-floor retail and a bodega grocery store.
If the full Council approves the deal Sept. 14, the city’s total investment rises to $26.67 million.
“It’s gratifying to have a unanimous approval from the Finance (Committee). It’s a big deal. There’s been a lot of time and resources invested in (the Trio),” Atkins said after the vote.
“I’m anxious to get through next Tuesday. That’s the last check of the box for us in terms of diligence to close. Then we’ll be mobilized as quickly as we possibly can.”
Lien at issue
City officials said the lien on the Trio is a $4 million bridge loan from the nonprofit Local Initiatives Support Corporation Jacksonville tied to SouthEast’s renovation of the Barnett National Bank building completed in 2019.
That structure is across the street from the Trio.
The total lien outstanding on the Trio is $4 million, according to Charles Shealy, LISC Jacksonville real estate and lending program officer.
Shealy said Aug. 20 that US Bank, SouthEast’s construction lender on the Barnett, would not approve a second lien on that building. LISC financed against the Trio, owned by Atkins through Laura Trio LLC, to secure the bridge loan.
This is the second time the Council could grant SouthEast incentives for the Trio – but the first time the developer would receive any money.
In 2017, the Council approved $9.8 million in grants and a tax refund for SouthEast and its then-development partner The Molasky Group of Companies to renovate the Barnett and the Trio.
However, that deal fell through after the DIA said SouthEast missed a construction deadline for the project’s parking garage. The garage project was later taken over by VyStar Credit Union and is under construction.
In September 2019, the DIA and SouthEast begin renegotiating the city agreement to ensure the Trio is renovated.
The result was a $24.656 million incentives package through the DIA’s Downtown Preservation and Revitalization Program comprising:
• A $9.377 million five-year forgivable loan.
• A $10 million five-year forgivable code compliance loan.
• A $5.279 million deferred principal loan.
According to Atkins, losing the Barnett grant made repaying the full LISC loan on the Trio a challenge.
“I basically agreed to absorb the second $2 million into the Trio pro forma, so we asked for the initial ($2 million). We thought that was fair given all the work that went into Barnett,” he said.
Atkins said the Barnett renovation went over budget by $17 million, reaching $55 million from the estimated $38 million. He said without the city incentives, SouthEast had to apply for federal New Market Tax Credits to finish the project.
The credits are a U.S. Department of Treasury program that provides incentives to attract private investment to distressed communities.
SouthEast and the DIA had not previously raised the lien as an issue.
The Council Neighborhoods, Community Services, Public Health and Safety Committee approved the $2 million forgivable loan as a floor amendment 5-1 on Aug. 16 with Council member Joyce Morgan voting no.
With the amendment, the committee advanced the bill 6-0.
Attorney Steve Diebenow of Driver, McAfee, Hawthorne & Diebenow represents Laura Trio LLC.
He said Sept. 8 that the city’s $2 million forgivable loan would partially satisfy the LISC loan and allow the nonprofit “to reconfigure their debt that exists on the property today.”
It would allow “the entire deal to move forward,” he said.
DIA Downtown Director of Real Estate and Development Steve Kelley told the committee Aug. 16 that the lien will be lifted with a $2 million payment.
John Sawyer, Governmental Operations Department chief in the city Office of General Counsel, said Aug. 16 that without satisfying the lien, Atkins’ group would be unable to get a construction loan for the Trio.
According to the amendment, introduced by Council member Michael Boylan, the $2 million loan would be forgiven after SouthEast can show improvements to the Trio of at least $50 million.
If the project investments do not reach that level, SouthEast, through Laura Trio LLC, would have to repay the loan after substantial completion of the project or within five years of the development agreement with the city taking effect.
“This Laura Street Trio project has sort of been the flagship of Downtown development and stalled for number of years,” Boylan said Sept. 8.
“To see this back on course, I think, sends a message to our community as a whole that Downtown development is on its way.”
Atkins’ holding company, Southeast Holdings LP, bought the property in March 2013 through Laura Trio LLC.
The Trio buildings, built between 1902 and 1912, are historic and contributing structures to the Downtown Jacksonville National Register District, which makes the adaptive reuse project eligible for the DIA historic incentive program.
Construction
If Ordinance 2021-0453 is approved next week, Atkins said he expects site work to begin by early November.
He said foundation work on the planned addition will be completed simultaneously over 10 to 11 months with structural remediation on the existing Trio buildings. That would ensure it is safe to begin vertical construction, he said.
According to a legislative fact sheet with the bill, the Trio’s historic buildings would house 86 hotel rooms while the remaining rooms would be in the addition planned at the northwest corner of the property.
Dasher Hurst Architects designed the project and Danis Construction is the contractor.
The full project will take 24 months, Atkins said.
