Costs are rising for Jacksonville Jaguars owner Shad Khan’s plans to build a Four Seasons hotel and office building on the Downtown Northbank riverfront.
The city’s investment could be rising, too.
Downtown Investment Authority records show that the price for the riverfront project near TIAA Bank Field is increasing from $321 million estimated in 2021 to nearly $387.6 million, a 20.75% jump.
In response, Khan’s development company, Iguana Investments Florida LLC, is asking the city to approve a redrafted development agreement that increases the cap on the deal’s property tax refunds.
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.
Khan’s company also would purchase the 1.05-acre parcel for the project’s six-story office building for $3.2 million instead of 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.
City Council is expected to debate and vote on the new agreements in Ordinance 2022-0871 early next year after its two-week holiday recess.
Khan first revealed he wanted to build a Four Seasons hotel on the former Kids Kampus park at the Jacksonville Shipyards in November 2020 during a media event at the stadium.
Jaguars Senior Vice President of Real Estate Development Drew Frick confirmed to reporters Dec. 13 the hotel will be a Four Seasons.
The project comprises a 176-room Four Seasons 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 125-slip public marina; a marina support building; an event lawn; and the Riverwalk to support Khan’s 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 costs to clean up the site.
“Virtually all project costs have escalated significantly since then due to changes in the economy and additional scope of work discovered during due diligence on the site,” the spokesperson said.
“Due diligence/scope of work-related cost increases are primarily due to additional site cleanup (gantry rail removal and other forms of environmental clean-up) and additional work needed on the City marina, which include bulkhead and pier replacement to the scope of work for the marina.”
New vs. old deal
The biggest change in the incentives deal change for the Council to consider is the Recapture Enhanced Value Grant, which is 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.
Jaguars President Mark 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 brief on the bill Dec. 13, DIA CEO Lori 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 due to infrastructure preparations.
The city expected to spend about $27.99 million on public infrastructure and easement rights in the October 2021 bill. That’s up to about $30.5 million.
A DIA financial summary filed with the bill show 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.
Infrastructure work
There is a list of $32.95 million of city infrastructure projects that DIA officials say are needed for the Four Seasons project to be successful, 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.
Boyer said Nov. 30 that the money for the infrastructure projects was approved by Council in September as part of the city fiscal year 2022-23 budget and capital improvement plan.
The city approved a demolition permit Nov. 30 for PCL Construction to remove the 3,040-square-foot Marine Fire Station and restrooms building at 1406 Gator Bowl Blvd. at a cost of $40,000.
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.
More incentives
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 agrees to donate $4 million over 20 years for maintenance and programming at the adjacent Metropolitan Park.
Council committees are scheduled to take initial votes on the bill at their Jan. 3-4 meetings. A final vote could take place by Jan. 10.
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.
Paul Harden, a lobbyist and an attorney contracted with Iguana, 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.
“The changes to the RDA (redevelopment agreement), including the ability to sell portions of (the) office building, were requested to allow flexibility in future potential uses of the office spaces,” the Iguana spokesperson said Dec. 6.
“Again, we do not yet have any tenants identified at this time, outside of our organization.”
ROI and debate
Boyer said spending more on city infrastructure in the short term and the increase in property tax revenue expected from the hotel and office building means a better return for the city.
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.
Council Auditor Kim Taylor said in an email Dec. 12 that her staff has not completed its review of the latest bill.
To pass, the bill will take more than a simple majority vote by Council.
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.
Amending the plan requires a two-thirds vote, or 13 of 19 Council members, to approve the new agreement.
Twelve Council members attended the Dec. 12 briefing.
Council members Randy DeFoor and LeAnna Cumber discussed whether allowing Iguana to buy the office property would allow the company to flip it after construction and eliminate the city’s control on what could happen to the riverfront property in the future.
After the meeting, Council member Brenda Priestly Jackson said the cash offer for the property is “more clear-cut” than a ground lease.
“We have no more control over what a future property owner will do on that than anything else,” she said.
“There’s nothing that I’ve seen from the Jaguars, Shad Khan or his various companies that (flipping properties) is what he does.”
