Thomas Hurst of Dasher Hurst Architects says the financial viability of the Laura Street Trio redevelopment was falling victim to rising construction costs.

Project developer SouthEast Development Group LLC said the price of the project has risen 23.7% from an initial $70.4 million in March 2021 to more than $87 million.

“We had to do some soul-searching to see what we could do to get this project back on its feet,” Hurst told the Downtown Development Review Board on Jan. 13.

SouthEast and Dasher Hurst have been working since 2013 to restore the historic Florida Life Insurance, Bisbee and Marble Bank buildings that make up the Trio northeast of Laura and Forsyth streets.

The developer named the project The Laura Trio.

Hurst and SouthEast have presented a new trio proposal that adds 166 apartments to the hotel and restaurant concept, with residential density looking to improve the project’s bottom line.

The new design with the addition of multi-family units would bring the total project investment to approximately $165 million, an increase of $94.6 million.

Steve Atkins, principal and owner of SouthEast Trio, said on January 13 that the project’s financial partner, Piper Sandler Companies, had secured independent financing for a proposed hotel with 141 rooms and 14,527 square feet of retail space. and restoration.

Atkins said the previous plan for a 146-room hotel, restaurant and retail project — but not a multi-family — was “well over budget.”

The financial solution

SouthEast plans to bring in the Jacksonville Housing Authority as an investor in the financial solution.

A draft term sheet shows that the independent municipal authority is negotiating a contribution of $10 million in exchange for the completion of the mixed-income housing project.

The involvement of the housing authority would be a significant change in the funding structure of what many civic and business leaders see as a centerpiece of downtown revitalization.

After the DDRB meeting, Atkins said that financial problems were not enough for him to walk away.

“There are many ways to approach this,” he said.

“I thought the best way was to add the multi-family component and grow the project so that the strength of that market could help offset some of that.”

Atkins and Housing Authority Chairman and CEO Dwayne Alexander signed the interim term sheet Dec. 10 that, if approved, would bring the entity in as a partial landlord.

“We had great conversations with the housing authority to do something that would be a partnership – one that could fulfill their mission which is important and it fits with a personal desire on my part to provide income housing mixed for downtown,” Atkins said. .

SouthEast will have to set aside 20% of the apartments as labor housing rented to people who earn 80% or less of the region’s median income.

The apartments would be in a new 12-story addition to the Florida Life Insurance Building.

SouthEast has the same income mix in the 107 The Residences at Barnett apartments located at 112 W. Adams St., west of the Trio.

The tentative deal would make SouthEast or a subsidiary the property manager through a ground lease with an upfront payment by the housing authority of $10.3 million.

The housing authority would also pay $3.5 million to South East team entities in construction management fees.

Danis Construction is the general contractor.

The term sheet is unclear on whether the tentative agreement would make the housing authority owner of the Florida Life Building, but the new design has a landmark structure as part of the apartment component of the project.

Renegotiation of the agreement

Until the deal is finalized, it’s unclear whether SouthEast would lose any of the $26.67 million in incentives the city council approved in September.

Council approved nearly $24.7 million in repayable and deferred loans under the Downtown Preservation and Revitalization Program after unanimous approval from the Downtown Investment Authority in March.

SouthEast also convinced Council members to support an additional $2 million forgivable loan to satisfy an outstanding financial lien on the property.

The draft term sheet with the authority shows that the multi-family portion would be tax-exempt if the agreement is executed.

DIA CEO Lori Boyer said approval for design changes will be easy, but the city’s loan and grant program will likely need to be renegotiated or modified.

The extent of the changes will depend on what is exempt from tax in the final agreement with the housing authority.

The DIA budgeted for an increase in property tax revenue from a redeveloped Trio.

Boyer said removing some of the property from the tax roll will affect future fiscal year budgets for the DIA-controlled Northbank downtown community redevelopment area.

Atkins says the SouthEast development team wants to innovate in Q1 2022.

He said SouthEast approached the housing authority about a public-private partnership for multi-family apartments in the last quarter of 2021.

He hopes to reach an agreement by the end of January.

Boyer said authority leaders informed her they were working with SouthEast by sending her the term sheet.

She said the DIA wants increased residential density and mixed-income projects, but the authority will have to make up for any lost property tax revenue with other development projects.

“Hopefully in the future, if the housing authority decides to take ownership downtown, we would like to coordinate with them,” Boyer said.

“Part of our goals around workforce housing (and) affordable housing … is to ensure that we have a diverse mix of housing types available in each neighborhood so that no neighborhood has it. have everything.”

Design Reset

The Downtown Development Review Board voted unanimously on January 13 to award the final concept approval for the Trio design.

It was already planned to introduce residential units at market price in a second phase.

In late 2021, SouthEast showed renderings for a second-phase residential addition to Civic Groups.

The latest design moves the new hotel construction to the Forsyth Street side of the Trio and raises it to 11 stories.

The project will have to come back for a final review before SouthEast can begin.

DIA staff and some DDRB members seemed to prefer the previous design’s density.

Board member Brenna Durden said she thought the building height in the old design better suited historic buildings.

Hurst said the development team considered keeping the original plan through “value engineering”, but determined that using cheaper materials “won’t be enough” for the Trio.

“If we started the project from today without the accumulation of eight years of decision making on this project, would we do it the same way?” Hurst said.

“I think we decided there were better ways to do this that might be more efficient and might yield a better project at the end of the day for our client and the city.”

According to Atkins, Marriott International has signed with Winegardner & Hammons Hotel Group LLC to use its Autograph Collection flag.

On Jan. 4, the state historic preservation office said there were no outstanding issues with the latest design plans, per SouthEast’s request.

Atkins said the National Park Service has final approval.

The project will need federal approval to move forward as it is designated historic and is a contributing structure to recognition of downtown Jacksonville in the National Register of Historic Places.

A majority of the DDRB said the new design is attractive.

“Architecturally, they should be what stand out and I think that’s what this project does better in some ways than what you had before,” said Craig Davisson.

“I think it’s a sophisticated canvas for the Florida Life and Bisbee buildings to stand in front of.”