How much is Cecil Commerce Center worth?
The city of Jacksonville says the 2,700 developable Westside acres are worth about $21.2 million, considering it will cost about $272 million to make the land developable. Opponents counter that it’s worth far more than that and allowing the deal to go through with Hillwood Investment Properties will depress surrounding land values.
“This is not a land transaction, but an economic development relationship,” said Jacksonville Economic Development Commission Executive Director Ron Barton. “Our priority is creating jobs and building a tax base.”
Peter Anderson, vice president of Pattillo Construction Co., estimates the city is selling the property at 80 percent less than market value. If the deal goes through, the city will lose out on property taxes that could be drawn from the site and get less taxes from surrounding sites since they’ll be undervalued.
“The city is now competing with other businesses since it has obviously gotten into the development business,” said Mark Scott, an industrial development specialist at Cushman & Wakefield of Florida Inc.
The JEDC’s board is expected to vote March 24 on the contract regarding the development of the former U.S. Navy base. The contract requires Jacksonville City Council approval.
Barton said the value of the property was set by calculating that the developed space could be rented monthly for $4 per square foot, the cost of readying the property for development and the risk involved.
“This is not a $4 market,” Scott said. “They’re pricing in a bit of a vacuum.”
The industrial market peaked at about $4.10 per square foot and leasing of new construction space runs in the mid-$3-per-square-foot range, Scott said. Hillwood sold a West Point Trade Center distribution facility occupied by Dr Pepper Snapple Group Inc. in January for a price based on a monthly lease rate of less than $4 per square foot.
“Why are they so afraid of getting an appraisal?” Anderson said. “If anyone was putting a bank note on the property, the bank would require an appraisal.”
He added that nearly all Westside property faces development challenges, including wetland mitigation and uneven land. The deal with Hillwood will discourage other developers from building in the area since they won’t be able to compete with Hillwood’s edge gained through cheap land prices and Cecil being the city’s marketing jewel.
Developer opponents “don’t know the market value of their own property, so it is hard for them to determine what the value of Cecil is,” Barton said. “Cecil is not a slam-dunk location.”
He said many developers overpaid for their industrial land because they assessed the property’s value on comparable sites instead of incorporating the cost of readying the sites for development.
The city has spent about $180 million to improve the land, but Hillwood won’t have to incur these expenses. Barton said Hillwood won’t be penalized if it walks away from the project, nor will it have to pay for past investment, because the city wants to create a favorable partnership, not a traditional land sale.
Barton said appraisals are created through the pricing of comparable land and what buyers are willing to pay. But there is no property that is comparable to the center, nor is the market stable enough to gauge the value of its land.
Barton said about 2,700 of the center’s 4,400 acres are economically feasible to develop and their value is dependent on finding a developer willing to invest in the property. Of those 2,700 acres, about 800 acres will require wetland mitigation.
The Cecil property will be sold at three different prices depending on the condition of the property. The pricing schedule is as follows:
Property on high-and-dry sites and with little utility and infrastructure needs will sell for about $23,470 per acre. Bringing this land to build-ready condition will cost roughly $35,900 per acre.
The middle-grade land that is low-lying and has more significant utility and infrastructure needs will cost about $8,800 per acre. The cost of bringing this part of the property to build-ready status is about $62,700 per acre.
The most troubled land, which is filled with wetland and requires significant utility and infrastructure investment, will sell for about $1,000 per acre. It will cost about $112,900 per acre to make these sites ready for development.
Under the proposed contract, the development schedule is split into three phases, with each phase having a mixture of each grade of property. Hillwood won’t be able to move onto the next phase until properties in the previous phase are developed.
The city will receive a 10 percent profit share in Hillwood’s industrial development and half of the profit gained through mixed-used development. The city also reserves the right to develop the nearly 750-acre Mega site until Hillwood develops 70 percent of the property north of Normandy Boulevard.
The property will be branded by Hillwood as Alliance Florida, which will bring it national attention, Barton said. Hillwood’s Alliance California development, which is at the former Norton Air Force Base in San Bernardino, Calif., includes a dozen major companies, including Mattel Inc., Kohls Corp., Kohler and Pep Boys Auto.
NAIOP of Northeast Florida’s public affairs committee is reviewing the contract, said Erik Sharpe, the commercial real estate trade group’s president.
“This has gotten very emotional and political and we want to make sure we’re reviewing the facts,” he said.
Bill Spinner, president of Group 4 Properties Inc., said he and fellow opponents aren’t planning on taking legal action against the city if the contract goes through. Instead, opponents hope the JEDC board and City Council members recognize the impact the up-to-35-year contract could have on the area.
“We’re hoping cooler heads prevail,” he said.