After mayor’s office ‘mistakenly’ sweeps $4.6 million from DIA, Downtown advocates push back

Mayor Lenny Curry’s proposed budget takes $4.6 million tagged for Downtown redevelopment – a move the administration has called a “mistake,” but one that nevertheless has Downtown advocates pushing back, including a Downtown property owner and a broker representing urban core properties.

Jacksonville Chief Administrative Officer Sam Mousa quickly admitted the mistake at last week’s finance committee meeting on next year’s budget, acknowledging that by law the money can’t go into the general budget. Now, to balance the budget, the City Council will either have to waive the restriction on the money or fill the $4.6 million gap in some other way.

Still, the action perturbed some.

“It sends the wrong message,” said Mike Langton, who owns two buildings in Downtown and has been an advocate for the area for the past 16 years. “And the developer community responds very negatively to it.”

Langton said he is giving the mayor’s office the benefit of the doubt about the most recent faux pas, but wants the city to “do the right thing” and return the money for Downtown redevelopment. Langton said part of the problem with Downtown redevelopment efforts is that people are unsure about the area’s direction.

“We have to send a consistent, positive message about Downtown,” he said. “It has to come from everybody.”

That message has been an uneven one in the Curry administration, and it isn’t the first time Mousa is delivering the bad news. Many see it as a sign that the administration doesn’t prioritize Downtown, a narrative that the administration began when Mousa said there could be no additional funding for Downtown until pension reform went through.

“Without pension [reform], we just can’t do these projects. The best revenue source is to get pension done,” Mousa said at a Downtown Investment Authority meeting in January.

In an interview about Downtown in May, Curry reiterated that no investment could take place in Downtown until pension reform went through in an August 30 vote. He also declined to say what would happen with Downtown redevelopment if the referendum, which calls for half-cent sales tax increase, didn’t pass. Curry was also unavailable to talk when the Business Journal requested comment on Friday.

Now, some are concerned that Curry is taking some of the only money at Downtown redevelopment’s disposal off the table. Curry’s budget proposal, which is in the midst of being reviewed by City Council’s Finance Committee, swept the Downtown Investment Authority’s $4.6 million surplus fund into the general operating budget.

The money that was taken came from three taxing districts established in the 1980s. In those districts, a portion of property taxes are set aside to be used for improvements in the taxing districts.

DIA Chairman Jim Bailey said when the DIA was set up as its own authority in 2013, City Council passed an ordinance that the money would stay in the DIA budget. While the money wasn’t budgeted for use this year, Bailey said there are several projects on the cusp of needing the funding, including the Laura Street Trio, debt service and the JEA generator site on the Southbank.

For the money to go into the general operating budget, the City Council would need to waive a provision of an ordinance that prevented city leaders from removing the funds from the DIA, who had its balance build up over several years.

However, if they don’t waive the provision, Mousa proposed at the meeting taking the shortfall from the $78 million the city has in reserve funds, Bailey said.

City Council President Lori Boyer, who represents part of the Southbank, said she would like to see the money be used for Downtown redevelopment.

“I feel strongly about retaining it for Downtown development,” she said. “There are a lot of planned projects that we are in the middle of and working on, that I would like to see these funds available for.”

Franklin Street Managing Partner Carrie Smith said the actions of Curry’s administration leaves a “bad taste” in the mouths of those who are looking to invest in Downtown.

“It gives a sense that the administration doesn’t believe in Downtown and doesn’t want to invest in any developments in Downtown,” Smith said. “This is going to kill us down there.”

For those who have already made the move into Downtown, it can also be concerning,Smith said.

“I would think it wouldn’t sit well with any business owner in Downtown,” Smith said. “I think it would give a lot of business owners question.”

Overall, Smith said the lack of investment is having a chilling effect on Downtown’s momentum, something she said has been at its lowest point recently.

“I think for the past 18 to 24 months, it’s been the longest lull period in terms of businesses coming to Downtown and opening,” Smith said. “You had Chomp Chomp leave, Burro Bar close down and when you drive down there, there’s holes. So, to hear that our administration is pulling funds out, it’s very disconcerting.”


Central Florida Submarket Seeing Strong Activity

ORLANDO—From Kissimmee to Sarasota and beyond, Central Florida is seeing plenty of trades and new leasing deals. The activity spans retail, office and industrial. In this Deal Wrap, we focus on three from the past week.

On behalf of a foreign investor, Hampshire Companies acquired a 529,300-square-foot, grocery-anchored Crosslands Shopping Center in Kissimmee, FL. Hampshire snapped up the shopping center from Tupperware Brands Corporations and O’Connor Capital Partners.

Located at 1000 West Osceola Parkway, the retail asset is close to Walt Disney Resorts. The Fresh Market, Marshall’s Home Goods, Hobby Lobby, Forever 21, Burger Fi, Outback Steakhouse, PetSmart and Starbucks are among the tenants.

“Orlando and its submarkets have been an incredibly hot market, with a burgeoning tech-sector, massive improvements to its infrastructure and investments by the Universal and Walt Disney resorts resulting in a sharp increase in tourism to the already most-visited city in America,” says Robert Schmitt, a principal of Hampshire Companies. “The Crosslands Shopping Center has experienced immediate success and is positioned to be the premier shopping destination in Kissimmee for a long time.”

Franklin Street is now managing Maitland Promenade One. Branded Maitland Promenade One, the five-story, 230,000-square-foot class A office building is located at 485 North Keller Road in Maitland, FL. It is 93% leased with Bright House Networks as the anchor tenant.

“This assignment gives Franklin Street yet another opportunity to work with a prominent, nationally known institutional owner,” says Melissa Hazlewood, vice president of property management in the Orlando office. “The Franklin Street team assigned to this asset had managed it previously. They know the property inside out.”

Secured a LEED Gold certification for Maitland Promenade One in 2009. It was the first time in Orlando that an existing building had achieved this important environmental designation.  Constructed in 1999, the property was highly inefficient from an energy standpoint allowing for substantial improvement in overall performance.

“We were able to make significant changes to the air conditioning and ventilation system and institute other energy-efficient and carbon-reduction measures in just five months,” she says. “It ended up saving the owner thousands of dollars a year.”

Osprey S.A. has awarded Colliers International Tampa Bay the exclusive leasing assignment of 1.3 million square feet of class A office space in Sarasota, Tampa and Saint Petersburg. The Osprey portfolio consists of 14 office properties.

Eight assets are located in Sarasota and another six located around the Tampa Bay area, in Tampa’s Rocky Point and West Shore Business District, East/Northeast Tampa and Saint Petersburg’s Gateway submarket. The Sarasota properties total about 630,000 square feet and the Tampa-Saint Petersburg properties total about 700,000 square feet.

Lori Hellstrom, formerly Osprey’s director of leasing, has joined the Colliers team as a director of office services, along with Fabienne Porter as client services specialist. The properties have a combined occupancy rate of more than 80% and a high level of leasing activity.

The largest property in the portfolio is Sarasota City Center with 247,605 square feet. Wells Fargo and Merrill Lynch are among the tenants. The 105,096-square-foot Castille at Carillon in Saint Petersburg and the Westlake Corporate Center I & II in Tampa, which total 172,048 square feet, are also among notable assets in the portfolio.

“Working in both the Sarasota and Tampa markets, Colliers International has the marketing resources and global reach needed to do an excellent job in representing Osprey’s Florida portfolio and other clients throughout the region,” Hellstrom says. “With a strong presence in the Tampa Bay market and growing presence in the Sarasota market, Colliers was a natural fit.”

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Nancy Sheinberg promoted vice president of insurance services at Franklin Street


Nancy Sheinberg has been promoted vice president of insurance services at Franklin Street, Tampa. Sheinberg will be responsible for the operational features of the division’s client support team. Prior to joining Franklin Street, Sheinberg was a commercial lines manager at Bouchard Insurance. Previously, she worked for Marsh as vice president and a client advisory practice leader and a professional standards coordinator and compliance officer for the Tampa office. She also served as a Commercial Lines Manager for Arthur J. Gallagher.

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Sheinberg Joins Franklin Street

Nancy Sheinberg joined Franklin Street Insurance Services as vice president of insurance services.
Based in the firm’s Tampa, FL headquarters, Sheinberg will work alongside Tom Kersting, president of insurance services, and the client support team. Sheinberg will be responsible for ensuring operational controls are as efficient as possible and growing the division.
Sheinberg previously work for Bouchard Insurance. She is a Certified Insurance Counselor (CIC)and obtained her associate’s in risk management at the College of New Rochelle in New York.

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Kessler Joins Franklin Street

Allie Kessler joined Franklin Street Real Estate Services as a director of retail landlord leasing.
In her new role, Kessler will work closely with Brian Bern and Ryan Derriman to support growth of the firm’s landlord leasing platform in Tampa, focusing on tenant retention, new business, stabilizing operating income and maximizing value for retail landlords across West Florida. The rapidly-expanding team has added several retail landlord clients over the past year, including Retail Properties of America, Inc., Pine Tree Commercial and Sooner Investments.
Kessler previously worked as a leasing associate for the JBG Companies in Washington, D.C., where she handled numerous complex office leasing transactions across its corporate portfolio in Northern Virginia.
“Since moving back to Tampa, I’ve noticed how the city has changed in so many positive ways and I think it’s a very exciting time to be back,” said Kessler. “From a professional standpoint, it was an easy decision to join Franklin Street. It’s a well-established, mid-sized company that is on an incredible growth trajectory with a very unique, collaborative culture.”
Kessler graduated magna cum laude from Wake Forest University, and is active in the commercial real estate community as a member of Commercial Real Estate Women (CREW) and the International Council of Shopping Centers (ICSC).

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Franklin Street Wins Assignment To Manage Class A Office Asset

Franklin Street announces the assignment to manage Maitland Promenade One, one of the premier office properties in Central Florida.

The 5-story, 230,000-square-foot Class A building is located at 485 North Keller Road in Maitland, a suburb of Orlando.  It is 93 percent leased with Bright House Networks as the anchor tenant.
“This assignment gives Franklin Street yet another opportunity to work with a prominent, nationally known institutional owner,” said Melissa Hazlewood, Vice President of Property Management in the Orlando office.  “The Franklin Street team assigned to this asset had managed it previously.  They know the property inside out.”

This same team, led by Hazlewood, secured a LEED Gold certification for Maitland Promenade One in 2009.  It was the first time in Orlando that an existing building had achieved this important environmental designation.  Constructed in 1999, the property was highly inefficient from an energy standpoint allowing for substantial improvement in overall performance.
“We were able to make significant changes to the air conditioning/ventilation system and institute other energy-efficient and carbon-reduction measures in just five months,” she said. “It ended up saving the owner thousands of dollars a year.”

Hazlewood will manage the new relationship and Traci Konowal, who was instrumental in winning the assignment, will operate the building day-to-day.

Since opening an office in Orlando May 1, Franklin Street has now secured contracts to manage more than a million square feet of office space extending from Tampa to Daytona Beach.


Florida’s Density Drives Development

Developers are busy answering pent-up demand for new retail space with large-scale projects in Florida’s top markets.

Florida is enjoying a boom in the development cycle of retail and restaurant space, with several largescale developments planned or under construction in the state’s top metros. In Miami, there are billion-dollar developments underway like Brickell City Centre and Miami Worldcenter, among others. In Gainesville, there are a pair of mega-developments straddling Interstate 75. And in the other top metros of Jacksonville, Orlando, Tampa and Broward County, retail projects are springing up.

Population density fueled by job growth and in-migration is driving the need for more retail and restaurant space, along with the state’s tourist attractions like South Beach, Disney World and major cruise terminals. Retailers are expanding to the Sunshine State to leverage off the density and tourism, especially in Miami, where 70 percent of the retail sales on average come from visitors, according to Debora Overholt, vice president of retail for Swire Properties.

“It’s tricky to look at the demographics; we don’t look at the Census reports the way you would in most markets,” says Overholt. “Over the years, retail development in Miami has followed the suburban mall model. Brickell City Centre will be the first serious mixed-use project downtown.”

Swire Properties, along with co-developers Whitman Family Development and Simon Property Group, is underway on BrickellCity Centre, a $1.05 billion mixed-use destination in downtown Miami’s Brickell district. The project’s retail component will feature a 500,000-square-foot, openair shopping center housing more than 80 retailers and eateries, including a flagship Saks Fifth Avenue, Victoria’s Secret, Suit Supply, lululemon athletica, Cinemex, Coach, LIVE! and Porsche Design.

“When you compare Brickell City Centre to the other shopping options in the area, it’s certainly a strong regional destination,” says Overholt. “At Brickell City Centre we have 20 retailers exclusive to the area and/or are entering the United States for the first time, many are based in Europe or Latin America.”

Swire Properties is integrating the Miami Metromover transit system with Brickell City Centre with a stop that exits directly onto the shopping center’s third floor. The retail center is set to open to the public in November.

The Brickell district is potentially the most in-demand submarket in the Southeast from a development standpoint. According to Overholt, there are more than 30 towers either under construction or planned in the Brickell district, which makes the submarket extremely attractive from a retailer’s perspective.

“Brickell is the only area in South Florida with the highest density in daytime office, residential and visitors. To find one area that offers all three of those densities is really valuable to retailers today,” says Overholt.

“Sheer density is driving the retail market in Brickell,” adds Rafael Romero, vice president of CREC’s leasing team. “It’s difficult to compare any other submarket in South Florida to Brickell.”

Even outside of Brickell, population density and tourism are driving retail sales in Miami-Dade County, leading to new developments. Some upcoming projects in Miami’s pipeline include Whitman Family Development’s $400 million enhancement to Bal Harbour Shops; SoLe Mia, a $4 billion master-planned development in North Miami by LeFrak and Turnberry Associates; River Landing, a big-box retail development underway near the Jackson Medical Campus and Marlins Park; and Miami Worldcenter, a $1.7 billion mixeduse development that will feature seven office and residential towers, as well as a Marriott Marquis and a retail and restaurant promenade.

Miami Worldcenter Associates, in collaboration with The Forbes Co. and Taubman, aim for Miami Worldcenter’s central space to generate foot traffic much like New York’s Rockefeller Center.

“It will be interesting to see how Brickell City Centre and Miami Worldcenter perform together and how their retail tenant mixes line up. These are both world-class projects,” says Rod Castan, president of leasing and management services at Courtelis Co.

In northwest Miami-Dade, Triple Five Group, owner of the Mall of America in Minneapolis, plans to develop the American Dream Miami, a 6.2 million-squarefoot mall. The planned mall has been a boon for other retail development in the area.

“The Graham Cos. will own about 350 acres south of the American Dream Mall,” says Philip Wyllie, leasing manager of The Graham Cos. “We’re looking to do about 3 million square feet of office space, 1 million square feet of retail and 2,000 residential units. There’s a long way to go, but it will be a good thing for
South Florida, especially northwest Miami- Dade County.”

The massive amount of development in the pipeline — roughly 2.2 million square feet according to CoStar Group — comes against a backdrop of tight market conditions. Miami-Dade’s retail market is currently at 3.1 percent vacancy.

From an investment standpoint, Miami’s reputation as an international city and safe haven for foreign dollars has led to increased competition among buyers for retail space in Miami. Chris Weilminster, president of the mixed-use division at Federal Realty Investment Trust, says Miami’s strengths have led to the firm investing heavily in the market this past year.

“Federal’s joint venture with our local partners Grass River Property and Comras Co. has invested close to $200 million in the Miami market within the past year, purchasing CocoWalk in Coconut Grove and The Shops at Sunset Place in South Miami,” says Weilminster. “These neighborhoods share characteristics that are aligned with our investment criteria: strong household incomes and year-round demographics, high barriers to entry for new development and neighborhoods ripe for in-fill development.”

Metro Tampa’s retail market has grown tighter for the past several quarters with measured construction and strong leasing activity. CoStar Group reports that the Tampa/St. Petersburg market is now at 5.1 percent vacancy, with absorption more than doubling deliveries in terms of square footage in the second quarter — 671,617 square feet to 315,992 square feet.

The market is awaiting several new retail developments and redevelopments that will help answer the pent-up demand for new retail. Roughly 550,000 square feet of retail space is currently under construction, according to CoStar Group.

“Tampa is in a great anticipation stage,” says Brian Bern, senior director of Tampa- based Franklin Street. “We’ve got a lot of cool new retail developments and redevelopments that will hit the market between 2017 and 2018.”

Two of the highest profile projects in the greater Tampa area include Cypress Creek Town Center in Lutz and Seminole City Center in Seminole.

Regency Centers is developing the 240,000-square-foot, 13-store Cypress Creek Town Center. The property will be situated within the Wesley Chapel area of Pasco County near Simon Property Group’s Tampa Premium Outlets, a 441,000-square-foot outlet mall that was delivered at full occupancy in October 2015. The two retail developments are creating a retail corridor along with The Shops at Wiregrass, an outdoor mall built
in 2008.

“These new additions, situated near I-75, are effectively creating an additional trade area for restaurants and retailers, shifting much of the retail activity to the west,” says Tyler Peterson, senior associate of retail services with Colliers International Tampa Bay. LongHorn Steakhouse, BJ’s Restaurant and Brewhouse, Chick-fil-A, Cheddar’s Scratch Kitchen and Culver’s Restaurant are opening new restaurants in that pocket.

Seminole City Center is an 85,000-square-foot redevelopment of an infill site located in southwest Pinellas County. According to Bern, plans call for a movie theater, organic grocer, restaurants and big-box stores. The project is a welcome addition to the trade area, according to Peterson.

“Seminole City Center is servicing a market that has not been serviced by quality retail in decades, and will now add another opportunity for retailers and restaurants,” says Peterson. “Until now, they were limited to Tyrone Square Mall in St. Petersburg, The Shoppes at Park Place in Pinellas Park and Largo Mall in Largo. Many retailers and restaurants have had voids in this market so the redevelopment of the mall will help fill tenant demand.”

In addition to these projects, a 54,000-square-foot Publix-anchored development was delivered at 3838 Britton Plaza in Tampa, and Sembler delivered a new Publix store within Shoppes at Trinity Lakes in Odessa, Florida. Another 30,000-square-foot Publix is set to deliver in the fourth quarter at 700 Central Ave. in St. Petersburg, and two other Publix stores are set to deliver in 2016, one in Rivercrest Commons in Riverview and another in South Shore Village in Ruskin.

The Lakeland, Florida-based grocer is doing more than just expanding its footprint in the Tampa Bay area. Publix Super Markets continues to actively purchase Publix-anchored centers, especially in Florida.

“The largest single buyer of shopping centers in Florida is probably Publix Super Markets,” says Bern. Publix Super Markets recently purchased the 162,996 square foot Bayshore Gardens in Bradenton from Kimco Realty. Plaza Advisors brokered the transaction.

“Publix is investing in its own centers and it’s scooping them up at an incredibly fast pace,” adds Bern.

Recent deliveries in the metro Tampa area are skewed toward single-tenant retail, according to CoStar Group. Single-tenant retail accounts for 64 percent of deliveries year-to-date. Single-tenant, triple-net leased retail remains an attractive asset class for investors, especially those outparceled at successful shopping centers.

“There’s high competition for developed outparcels, the owners or developers that can secure ground leases are achieving surprisingly low cap rates when selling,” says Ken Stephens, managing principal of Corporate Property Dispositions.

On the horizon, the biggest development is coming to the heart of downtown Tampa. Strategic Property Partners, a joint venture between Cascade Investment LLC and Tampa Bay Lightning owner Jeff Vinik, is developing over 40 acres in Tampa’s downtown as a mixed-use, waterfront project.

According to Strategic Property Partners, the new development will include a new 400- to 500-room luxury hotel, a 650,000-square-foot trophy office tower, over 300,000 square feet of retail and restaurant spaces, the University of South Florida Morsani College of Medicine and Heart Institute and an adjoining office building for health industry-related businesses. These projects are in the planning phases with vertical construction set to begin in 2017.

When the project is completed, the development will include more than 6 million square feet of commercial, medical, residential, hospitality, entertainment and retail space with a total investment exceeding $2 billion. Tampa-based Kimmins Contracting Corp. is currently underway on infrastructure improvements and roadway configuration for the project.

Similar to the Tampa development, downtown Orlando will have its own transformative mixed-use destinations in the near future with Creative Village and the Orlando Magic’s $200 million Sports Entertainment District.

Creative Village is a public-private partnership between the city of Orlando and master developer Creative Village Development LLC that will transform 70 acres of infill space adjacent to Orlando’s central business district (CBD).

“The big story for Orlando is the emergence of Creative Village. The project includes the University of Central Florida and Valencia College,” says Thomas Chatmon Jr., executive director of the Downtown Development Board at city of Orlando. “Day 1 brings 7,700 students into downtown Orlando, but within a few years that number is likely to double. That additional density will have an enormous impact on Orlando’s retail market.”

According to Chatmon, Creative Village is a 10- to 15-year project that will bring 1 million square feet of office space, 500,000 square feet of retail and restaurants and 2,000 residential units. Creative Village Development LLC is a joint venture between Banc of America Community Development Corp. and a local team led by Craig Ustler with development partners Tim Baker and Brooke Myers.

The Orlando Magic will develop its own mixed-use development on an 8.5- acre site adjacent to the Amway Center, where the NBA team plays its home games. The team is demolishing a parking garage to make way for the new development. According to Chatmon, Phase I brings 64,000 square feet of ground-floor retail space, 100,000 square feet of office space, 250 residential units and a hotel. These projects aren’t the only mixeduse developments in the pipeline for downtown Orlando. The submarket will soon have five additional projects, including Citi Tower, The 520, The Sevens,
Lincoln Tower and Modera, according to the city of Orlando’s Downtown Development

“Those projects will add more than 1,400 residential units, 200,000 square feet of office, 183 hotel rooms and 85,000 square feet of retail space in the next 24 months,” says Chatmon. “Those are either underway now or they have permits for construction.”

A growing workforce and population base in downtown Orlando is helping precipitate these new developments. According to Chatmon, the residential population in downtown Orlando has increased by 50 percent since 2000.

“With several high-density, mixed-use projects in the construction pipeline, we are seeing continued growth in Orlando’s urban core,” says Justin Greider, vice president of JLL’s Orlando office. “That growth is driving demand for significantly more retail in those areas. We are also seeing retail fitting into the urban core’s live/ work/play model as new development is being focused on mixed-use projects rather than traditional strip malls.”

Large-scale projects aren’t limited to downtown. Retail developments are popping up across the greater Orlando area near population centers.

“The Lake Nona area and Horizons West in West Orange County continue to be hot spots for growth,” says Christopher Travis, associate vice president of investments at Marcus & Millichap’s Orlando office. “The next phase of Lake Nona Town Center will include a mix of shops, eateries, entertainment venues, office and hotels. Big-box retailers are also moving in to the area to meet the demand of the growing population; Walmart, Lowe’s Home Improvement and Sam’s Club will anchor the new Lake Nona Landing retail complex.”

Tavistock Development Co. has named Columbus, Ohio-based Steiner + Associates as its retail planning, leasing and development services partner for the Lake Nona Town Center.

BBX Capital Corp. recently delivered a 152,000-square-foot Costco at Gardens on Millenia, which will comprise 300,000 square feet of retail space and 292 apartments upon completion. The development is situated in close proximity to The Mall at Millenia near the Florida Turnpikeand I-4.

According to CoStar Group, Orlando’s retail market is at 5.9 percent vacancy on the strength of the market’s absorption, which totaled 766,203 square feet in the second quarter, its strongest quarter in the past 12 months. Retailers continue to expand in the market as leasing activity outstrips new deliveries, which totaled 516,400 square feet in the second quarter.

“Dick’s Sporting Goods and Academy Sports + Outdoors have entered the market with several stores,” says Travis. “Publix and Walmart Neighborhood Market together with specialty grocers like Trader Joes’, Whole Foods Market and Fresh Market continue to find Orlando an attractiveopportunity for growth.”

Lucky’s Market, an organic grocer based in Boulder, Colorado, with ties to Kroger, is moving into 52,752 square feet of space at 11750 E. Colonial Drive, and Whole Foods is moving into a 40,000-square-foot space at 303 E. Altamonte Drive.

Since being developed in 2005, St. Johns Town Center has been the bellwether for retail in Jacksonville. The 150-store development has gone through several phases of expansion and will soon add the market’s first Top Golf. Retailers such as Denim & Soul, Francesca’s Collections, Uniformi-T, Chicken Salad Chick, Noodles and Company, Pieology and Tossgreen have also recently leased space at St. Johns Town Center.

Members of the Skinner family have recently sold off two parcels of land at St. Johns Town Center for future development.

“The 45-acre lot near the entrance has been sold for $47 million to Preferred Growth Properties, a subsidiary of Books- A-Million. The company will develop a power retail center on that parcel,” says Cliff Taylor, senior vice president of CBRE’s Jacksonville office. “The 67-acre parcel to the north sold to Atlanta-based Core Property Capital. Both projects will have retail, in the way of shops and outparcels, some multifamily and potentially a hotel.”

Another massive development is Durbin Park, a mixed-use project that will span more than 5 million square feet upon completion. The 1,600-acre Durbin Park is a partnership between the real estate division of Gate Petroleum Co., a Jacksonville-based oil and gas firm, and Gatlin Development, a developer known best for building Walmart stores. Durbin Park will include an estimated 2.4 million square feet of retail, 2.8 million square feet of office space, 999 multifamily units and 350 hotel rooms once completed.

The first phase of the project, located on an 80-acre parcel west of the new 9B/2209 interchange on I-95, will include approximately 700,000 square feet of retail space anchored by at least three bigbox retailers. Phase I is projected to open in the second quarter of 2018.

Phase II, located east of the new 9B/2209 interchange and adjacent to I-95, is projected to follow Phase I by 12 to 18 months and will include lifestyle retailers, restaurants, entertainment components and Bass Pro Shops. The full development will be built out in four phases. In Jacksonville’s Southside submarket, Hines acquired 105 acres earlier this year for a new live/work/play destination at the intersection of I-295 and J.T. Butler Boulevard.

Developers delivered 283,422 square feet of retail space in the second quarter, according to CoStar Group. Gatlin Development recently delivered a new Walmart Supercenter at I-95 and Collins Road, and Casto is planning on building a Costco nearby. There was a little more than 800,000 square feet of retail space under construction at the end of the second quarter, according to CoStar.

Jacksonville’s job and population growth are propelling the retail market to new heights, according to Taylor. 

“For the first time in our history we are seeing real or measurable in-migration to the city, due to job growth and company relocations,” says Taylor. 

John Crossman, president of Crossman & Co., agrees that the market is adapting to the population and job growth, but Jacksonville still offers a small-town atmosphere.

“Jacksonville has a community feel, but at the same time the market is learning to bring in outside businesses,” says Crossman. “Jacksonville is leveraging off its core resources and they’re welcoming outside businesses in from various fields. It’s an exciting time.”

Similar to most markets in Florida, a big project is coming to Jacksonville’s inner core. Peter Rummell is developing The District-Life Well Lived-Jacksonville, a $400 million mixed-use destination along St. Johns River in downtown Jacksonville that Crossman believes will be a game changer for the market.

“The District is bringing in a healthy lifestyle concept, which really works with today’s market, and Jacksonville is ready for it. It’s sophisticated and will bring Jacksonville’s downtown market to a whole other level,” says Crossman. “The project will offer views of EverBank Field, and it will be a model for future projects in Florida and around the country.”

Historically speaking, Gainesville’s retail offerings have not matched the city’s demand for retail and restaurants per capita. According to developers in the area, it has been tough to get entitlements for new retail projects in year’s past, even though the city’s medical community and the University of Florida student population are ideal target markets for retailers.

“Gainesville is more than just a college town,” says Cory Presnick, chief financial officer of Butler Enterprises Inc., a Gainesville- based retail developer owned by the Butler family. “Students’ buying power is always underestimated but also having six hospitals, and growing, in the immediate market is a significant driver of well-paying jobs and discretionary income.”

Butler Enterprises is following up its successful Butler North development with the 350,000-square-foot Butler Town Center. Butler North is currently 90 percent leased and has been opening shops and restaurants throughout the year. Upon completion in 2018, the entire Butler development will span nearly 2 million square feet on 267 acres. Presnick says the market was ready for another high-profile shopping center, which should answer the pent-up demand for upscale retail offerings.

“Butler Town Center is targeting upscale, lifestyle-type retailers,” says Presnick. “Consumers in Gainesville have to travel for an hour or two to find certain specialty products, so providing an envelope to those types of retailers is the driving force behind Butler Town Center.”

Butler Town Center made waves earlier this year when Whole Foods Market chose the new shopping center for its new low-price concept, 365 by Whole Foods. Set to open before the shopping center, the new store will be the first 365 on the East Coast.

“We believe Whole Foods was impressed with the project’s traffic, access and proven track record for outperforming sales expectations. The 365 concept came out at the perfect time for us; being the first unit of its kind in Florida to be signed and announced is a great story for Gainesville,” says Presnick. “Whole Foods choosing Gainesville to be in the first tranche of its East Coast openings speaks volumes to the market as a premier retail destination and compelling option for retailers looking to grow market share while capturing the student population and rotational- based employment cohorts.”

In addition to the 365 store, Butler Town Center will feature 180 apartment units, a renovated Regal theater, hotel, restaurants and retail. The development is slated to open in 2018.

Nearby, Celebration Pointe Development Partners LLC is developing Celebration Pointe, a 125-acre, 1 million-squarefoot mixed-use development fronting I 75 and Archer Road. The destination will include a Hotel Indigo, new 10-screen Regal theater, Bass Pro Shops and the only Class A office space in Gainesville, a 60,000-square-foot corporate campus for technology consulting and software firm Info Tech.

Like Butler Town Center, Celebration Pointe will answer the need for more upscale retail space in Gainesville.

“What Gainesville has been craving is a town center, Main Street-type project that doesn’t exist currently,” says Ralph Conti, principal and managing member of RaCo Real Estate. “Celebration Pointe will also have an outlet component that doesn’t exist in Gainesville. The closest outlet mall is about 80 miles away.”

Celebration Pointe is a development that has been in the making for years. Svein Dyrkolbotn, principal of Gainesville- based Viking Cos. and managing member of Celebration Pointe’s owner and sponsor Celebration Pointe Holdings LLC, has worked on assembling the properties and getting them entitled since the mid-2000s. Conti began the pre-development process with Dyrkolbotn in 2012, when they formed Celebration Pointe Development Partners LLC to act as the development manager for the project.

The first phase of Celebration Pointe includes the opening of a five-lane, multimodal bridge in October, which will go over I-75 and act as a second major access point to the project. Also part of the first phase of development is Bass Pro Shops, which is set to open in November. Conti expects the store to be a regional draw.

“Bass Pro has a loyal following and draws customers from a large trade area. This location will be the company’s only north central Florida store,” says Conti. “It’s not unusual for them to draw customers from 100 miles away or more.”

Celebration Pointe is situated adjacent to a 700-acre, open-space conservancy. After purchasing 325 acres for the project, Celebration Pointe Holdings donated 200 acres to the conservancy, which includes access to Archer Bald Trail, a 6.2-mile walking and biking trail that runs between Archer, Florida, and Gainesville. Celebration Pointe will extend the trail in front of Bass Pro Shops and over the new bridge.

“Celebration Pointe will bring Archer Braid Trail to the east side of I-75 where the city of Gainesville and University of Florida are,” says Conti. “It was always a vision for Archer Braid Trail to connect to Gainesville and our project is making that dream a reality.”

Similar to other retail markets in Florida, Broward County’s retail market is tightening. The market decreased its vacancy rate by 20 basis points from the first quarter to second quarter, according to CoStar Group. Net absorption fell just shy of 500,000 square feet in the second quarter, while deliveries totaled nearly 340,000 square feet.

The main delivery was a 300,000-squarefoot retail development located at 301 N. State Road 7 in Hollywood. The project is anchored by Walmart. Hollywood, a city in Broward County located along the Atlantic Ocean, is driven by population growth and tourism.

“We have over 70,000 square feet of retail planned for delivery in the next few years with many mixed-use developments downtown and on Hollywood Beach,” says Brian Rademacher, corridor redevelopment manager for the city of Hollywood’s economic development division. “The city will bring many retail opportunities to market for its residents and visitors.”

Multifamily and single-family developers are underway on supply that will help support Hollywood’s employment growth. The city added 1,300 jobs between May 2015 and May 2016, according to Rademacher. 

“Pulte Homes is building 645-home community and MG3 is developing The Reserves at Emerald Hills, with 30 luxury coach homes and 85 luxury estate homes,” says Rademacher. “Downtown, 600 units are coming on line in two apartment developments — H3 and Hollywood Circle.”

On the horizon, Rademacher expects Hollywood to benefit from the growth in tourism and mass transit. Tri-Rail Coastal is planning a regional commuter line from Miami to Jupiter, and the city of Hollywood is competing to be a station stop.

“The city of Hollywood is soliciting proposals for a mixed-use development on 3.5 acres near the proposed station,” says Rademacher.

Further north and inland within Broward County, Lauderhill opened a new 1,200-seat performing arts center in January. Elijah Wooten, economic development manager of city of Lauderhill, expects the venue to help generate retail activity.

“Adjacent to the performing arts center is a 13-acre site that the owners of the Lauderhill Mall recently purchased to create the Lauderhill Marketplace,” says Wooten. “The owner invested $3 million to $4 million to upgrade Lauderhill Mall and develop outparcels. Recently Crunch Gym opened a 30,000-square-foot location on the second floor of the mall.”

In Sunrise, KGH International Development is underway on Metropica, a 65-acre mixed-use development that will span roughly 400,000 square feet of retail space, as well as multifamily residences, a hotel and 650,000 square feet of office space. Tenants already announced for the ground-level retail spaces include Ipic Theaters, Kings Bowl, True Food Kitchen, Kona Grill, Oil & Vinegar, Fogo de Chão, Shake Shack, Anthropologie, Free People and Kendra Scott. More announcements will be made in coming weeks and months prior to the project’s fall 2017 opening.

In Pembroke Pines, Terra City Center Group is developing Pines City Center, a 300,000-square-foot retail center set fordelivery in late 2017 or early 2018.

“Pines City Center will feature a supermarket,cinema, performing arts center and many exciting new restaurants and retailers at an infill location next to 1,500 new multifamily units on PinesBoulevard,” says Rod Castan, president of leasing and management services at Courtelis Co., the leasing agent for Pines City Center.

In Dania Beach, demolition is underway for Dania Pointe, a 102-acre mixed-use development that will feature 900,000 square feet of commercial space, 1,000 apartments, two hotels spanning 300 rooms and two office towers. Kimco RealtyCorp. recently bought out its partner Canada Pension Plan Investment Board’s 45 percent stake in Dania Pointe for $84.2 million.

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Banks Are Swimming in Choppy Waters

Regulations and risk considerations have led to tighter underwriting standards for banks, but low interest rates are keeping borrowers engaged.

Long seen as the best source for construction financing, banks are navigating through a tight regulatory environment in order to see deals through to completion. Borrowers, on the other hand, are enjoying this period of low interest rates and available capital sources, even in the midst of tighter underwriting standards from banks. 

“There’s always going to be money, it’s just a question of what rate and underwriting criteria it will be under,” says Michael Fay, principal and managing director of Avison Young’s Miami office.

Underwriting has become stricter as regulations like Dodd Frank and Basel III have made banks require more equity from borrowers. Under Basel III’s high volatility commercial real estate (HVCRE) regulation, which became effective on Jan. 1, 2015, borrowers must contribute at least 15 percent of the stabilized value of an asset, as opposed to the going-in equity. (The stabilized value is based off of appraisals.)

“The 15 percent equity requirement is the main thing putting pressure on our developer clients because they’re having to put a bit more money down into these deals to make sure that they stay under the HVCRE guidelines,” says Ben Miller, director of loan origination at Franklin Street’s Tampa headquarters. “Banks will consider these deals or write them in as an exception, but usually they only do that for their high-credit clients.”

Banks used to be able to count land as part of the equity in their underwriting, but Hugh Allen, vice president and commercial real estate director at TD Bank, says that the new regulations have required banks to only consider cash equity. 

“It has to be cash equity based on the ‘as completed’ appraised value,” said Allen at the recent InterFace Carolinas Conference in Charlotte. “We’re seeing that have an effect, especially on space where it’s pre-leased. Intuitively you think that’s not a highly volatile transaction when it’s pre-leased, but we’re having to treat it as such because of the regulations in place now with increased equity requirements.”

The new regulations have made it difficult for developers to meet the higher equity threshold, especially years in advance of a development’s delivery and stabilization. The regulations have acted as a governor for new construction, according to Allen. 

“It’s forcing developers to shrink down the volumes of deals they’d normally do in the course of business in an environment like we have today,” said Allen.

Multifamily developers are especially feeling the slowdown in construction financing volume as banks are wary of overbuilding. Banks also harbor construction risk and lease-up risk as developments have to be built on time and on budget.

“The brakes are on for urban multifamily in order to let the supply catch up with demand. Banks are waiting to see if the most recent wave or urban multifamily leases up and if increasing rental rates (part of the underwriting) can be sustained,” says Jeff Ackemann, executive vice president of CBRE Capital Markets. Ackemann says that multifamily rents are flattening in several markets and that providing concessions has become “the new normal” for apartment owners.

Ackemann also says that CBRE has reduced its multifamily finance activity in some of the Southeast’s top markets as new developments have yet to fully stabilize.

“We are definitely starting to tap the brakes a little in Atlanta, Charlotte and Nashville, particularly in urban locations that have seen an abundance of new multifamily supply hit the market,” says Ackemann.

Construction financing is not just tight for the multifamily industry. Casey Siggins, director of loan origination at Franklin Street, says that banks are wary of construction loans overall as a result of tighter regulations.

“We’re definitely seeing a reduced appetite for construction and development financing, not saying that there are banks that won’t still do it. It’s not as available as maybe it was two years ago,” says Siggins. “When banks do close one, they’ll do it a lower leverage than they did a year ago.”

Banks are also looking to diversify their own portfolios, so if they have a high percentage of their loan portfolio dedicated to construction, they’ll likely take a long look at the next construction financing opportunity.

“We’ve seen banks go into introspective views of their portfolios,” said Allen. “They see they’re a little heavy in construction so they slow down, or they’re extremely heavy in multifamily construction, so they stop.”

That’s not to say that banks have stopped completely on multifamily construction loans. Miami-based Ocean Bank recently provided a $50 million construction loan for a 282-unit luxury apartment development in Boca Raton, Fla. The loan represents 70 percent of the estimated total cost of $71.4 million.

Also in Florida, SunTrust Bank provided a $105 million construction loan to The Related Group and Rabina Properties for Icon Las Olas, a 45-story high-rise apartment development in Fort Lauderdale.

In Arlington, Va., Wells Fargo provided a $100.3 million construction loan to LCOR for The Altaire, a two-tower apartment development set for delivery in the second quarter of 2018.

Low Interest Rates
The Federal Open Market Committee (FOMC) passed on raising interest rates at its June meeting, citing diminished job gains, an inflation rate that remains below the committee’s 2 percent target and declining business capital expenditures, which have declined for the past two quarters according to the U.S. Bureau of Economic Analysis.

The 10-year Treasury yield, a benchmark rate for financing, has also declined to 1.46 percent as of June 27, the lowest rate since July 2012 when Spain’s economy was at its nadir. Global events such as the United Kingdom (UK) ending its membership in the European Union (EU) and the resignation of British Prime minister David Cameron have altered global finance markets, and experts have predicted that U.S. debt and real estate will benefit in the short term from the ambiguity overseas.

“Global uncertainty and a flight to quality have resulted in a significant amount of foreign capital buying U.S. debt, which is seen as both a safe haven and a decent return compared with European and Asian debt with tiny or negative interest rates,” says Ackemann. The compression of the Treasury yield has resulted in a very favorable long-term debt climate for U.S. commercial real estate.

“Buyers can still access affordable long-term debt at 100 to 150 basis points below historically low cap rates producing strong leveraged cash-on-cash returns. Commercial real estate is seen as a very attractive, risk-adjusted return compared to alternatives, so there is a lot of fresh capital entering the space,” says Ackemann. 

Having cheap capital has been a boon for U.S. commercial real estate, and has helped the market recover by getting investors and developers involved following the downturn. If the low interest rate environment persists going forward, that will likely only encourage more financing activity.

“Having low interest rates and low capital costs always helps spur on development and acquisitions,” says Avison Young’s Fay. “People overall have known that we’ve been at historically low interest rate yields and interest rates, so there is some cautiousness moving forward because there’s only one way to go, which is up.”

Brexit Impact Going Forward
In a globally watched event, citizens of the UK voted to leave the EU by a margin of 52 percent to 48 percent in a decision popularly known as Brexit. Experts expect the Brexit will ultimately be a positive for the United States as investors are attracted to the strength of dollar-denominated, fixed-income assets like U.S. commercial real estate.

“Everyone is clamoring globally for safety and security, as well as returns. With the rates going down like they are, the Brexit is going to prolong the safety and security of U.S. real estate, and that’s a good thing,” says Fay.

As far as U.S. property fundamentals, Spencer Levy, CBRE’s head of research for the Americas, says the impact of Brexit will be “minimal,” but agrees with Fay that the U.S. real estate market will likely be the beneficiary of the decision.

“In the short term, U.S. gateway markets will likely be viewed with enhanced status as havens for global capital, but heightened uncertainty will carry risks for both investor sentiment and the real economy,” says Levy.

Before the Brexit referendum vote, it was a wide-held opinion that the FOMC would raise interest rates either at the July or September meeting, but Fay believes that the committee will again pass on the opportunity to raise rates in the near term.

“That’s totally off the table now,” says Fay. “It’s going to take two years for a full exit from the EU, and in those two years a lot is going to happen. We’re going to be in a long period of low interest rates, maybe five to seven years.”

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Franklin Street in Florida Hires Sheinberg as VP of Insurance Services

Tampa, Fla.-based Franklin Street has hired Nancy Sheinberg as vice president of Insurance Services. With 30 years of commercial insurance experience, Sheinberg is responsible for managing all hands-on operational features of the division’s client support team and fills an instrumental role in the executive management’s aggressive growth strategy.

Franklin Street is a full-service commercial real estate firms in the Southeast, with offices in Tampa, Atlanta, Jacksonville, Orlando, Miami, and Ft. Lauderdale.

The family of real estate companies include Investment Sales, Tenant and Landlord Representation, Capital, Insurance, Management and Valuation.

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Rome Holdings Sells Columbus Court Apts

Tampa Multifamily Trades for $11M

SP CC Apartments acquired the 160-unit Columbus Court Apartments at 2802 Statelite Ct. in Tampa, FL from Rome Holdings LLC for $11 million, or about $69,000 per unit.

Constructed in 1969, the 146,756-square-foot, garden-style multifamily community is located in the downtown Tampa submarket.

Darron KattanKevin KelleherZachary Ames and Robert Goldfinger of Franklin Street Real Estate Services represented the seller and were the sole brokers on the sale.

Please see CoStar COMPS #3648488 for additional information on this transaction.

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