Months after the Downtown Investment Authority Board opted to “bunt” a new redevelopment plan for the historic Laura Street Trio to the City Council without making a recommendation on whether to enact it, the Council will consider a new package of public incentives for the project.
The new incentives deal, contained in Ordinance 2023-876, offers $36.5 million in incentives that went before the DIA board in June of 2023, but also includes a $22 million city loan that would serve to guarantee a construction loan obtained by the developer, SouthEast Development Group, from Capital One.
The ordinance, which is scheduled to go before the Council on Dec. 12, also includes a previously authorized $2 million forgivable loan from an earlier agreement, for a total public investment of about $60.5 million.
Council member Matt Carlucci, the legislation’s lead sponsor, said the $22 million loan was designed to be used if Atkins and SouthEast failed to make their principal and interest payments on the construction loan over its first two years.
Carlucci said the city’s loan would provide security for SouthEast to obtain funding from private lender Capital One for the project. He said Steve Atkins, SouthEast’s principal and the Trio’s owner, originally hoped to receive the funding through the city, but eventually began seeking other solutions and came to favorable terms with Capital One on the construction loan.
In return for offering the loan to SouthEast, the city would receive 12% of net cash flows from the project after its completion, as well as 5% of net proceeds from the sale or refinancing of the property, through the full term of the agreement.
The ordinance authorizes the city to negotiate the duration of the agreement, with a cap of 25 years.
No interest rate is stated in the legislation for the city loan. The city loan would be a participation loan, in which multiple lenders provide funding for a single borrower.
Carlucci, a longtime proponent of reviving the Trio, said the terms would likely need finetuning, but the investment would be worth the outlay. Not only would it restore several historically significant buildings built from 1902 through 1912, he said, but completing the project would rev up Downtown redevelopment efforts.
In an interview Dec. 7, Carlucci likened a modern investment in the Trio to the commitment made by community business owners to rebuild Jacksonville after the Great Fire of 1901.
“Those three buildings helped Jacksonville rise like the phoenix out of the ashes,” he said.
“(Today), this will not only be our signature Downtown development, but it will also be our signature catalyst that, ironically, 100 and some odd years later, helps lift the Downtown core out of the doldrums.”
Carlucci said that if SouthEast defaults on the construction loan, the city could end up owning the property. Although the deal exposes the city to some risk, he said other investments do the same — including a potential $1 billion outlay of public funding to build a new stadium for the Jacksonville Jaguars.
Atkins bought the Trio at Laura, Forsyth and Adams streets in 2013. The proposal would provide funding to resurrect and rehabilitate the Florida National Bank Building, Bisbee Building and Florida Life Insurance Building that make up the Trio and to construct two 11-story buildings on land adjacent to those structures on Laura and Forsyth streets.
The buildings would make up a $175.1 million mixed-use development that would comprise an eight-floor, four-star Marriott Autograph Collection hotel, a restaurant and bar open to hotel patrons and the public, and 149 apartments with market-rate and workforce housing units.
Carlucci said the interest rates on SouthEast’s Capital One loan are locked in through mid-January. As a result, the Council will consider the legislation on a one-cycle emergency basis Dec. 12.
After mid-January, the SouthEast stands to lose the advantageous interest rates “that make the project feasible,” the ordinance says. Carlucci said the locked rate is 7%.
In June, the DIA board voted 5-1 to send a term sheet including $36.5 million in incentives to the Council without a recommendation for or against it. DIA staff reported at the time that SouthEast did not meet certain DIA criteria for incentives, including the return on public investment.
DIA CEO Lori Boyer, when asked whether she saw the DIA’s June action as punting the decision to the Council, described it instead as a “bunt” to keep a potential deal moving forward.
If the DIA board had recommended against the deal, she said, it would have put the project in jeopardy by making it more difficult for supportive Council members to persuade their colleagues to back the agreement. The 5-1 vote sent the proposal back for more groundwork.
The new ordinance was introduced by Carlucci and Council members Michael Boylan, Raul Arias, Joe Carlucci and Ken Amaro. Council member Randy White is a co-sponsor.
Council President Ron Salem said Dec. 6 the DIA board’s June action was “very frustrating to me,” adding that he felt it was inappropriate for the board not to make a recommendation.
Salem, whose remarks came during the Cuppa Jax speaker series, said it was important for the bill to be heard by the Council Committee of the Whole, which comprises the entire Council, versus being steered through smaller Council committees.
“It’s such a complicated agreement, it’s gotten such fanfare throughout the community over the years, and I want to make sure we do as much as we can to engage everybody on this new proposal,” Salem said.
Asked Dec. 11 whether he would elaborate on his remarks about the DIA board and where he stood on the new incentive ordinance, Salem declined to comment.
The proposal is the third brought by Atkins to the city for public investment in the Trio.
The first, which came in 2017, would have provided $9.8 million from the city and tied the Trio renovation to the SouthEast-developed Residences at Barnett redevelopment. The Barnett building was completed in 2019, but it was separated from the Trio and SouthEast did not receive incentives.
Atkins returned with a $70.48 million hotel-only proposal for which he received a $26.67 million incentives deal in September 2021. When the development team added multifamily and new construction to the project in January 2022 in an attempt to make it more financially feasible, the changes required amendments to the development agreement with the city.
In June, members of the DIA board expressed concern that the city’s overall investment was too high, and questioned whether Atkins was bringing enough of his own equity in the project to secure his construction loan.
