New Infrastructure and Development in Jacksonville, Florida

5 Replies

There is significant debate in Jacksonville about the benefit that the recently proposed Shipyards could bring to the city and surrounding areas. I want to solicit the feedback of the bigger pockets community to see what your thoughts are regarding downtown development, infrastructure spending, and their possible impact on real estate and real estate investors. For those of you not familiar with the Jacksonville market these two links highlight the proposal recently brought to the city by Shad Khan - owner of the Jaguars and someone who has been keen on investment there since our new mayor opened the city up for investment and development. 

http://www.bizjournals.com/jacksonville/news/2015/...

http://www.bizjournals.com/jacksonville/news/2015/...

The plan includes commercial space, residential space, retail space, hundreds of boat slips, public parks, an amphitheater, and dock space for the USS Adams to become a museum. Additionally, another developer has proposed a large aquarium near this development. We currently have a few SFR's in the suburbs and wonder what a project like this means for the future of the local market.

- Since these are currently just proposals, is the significant upside potential of growth in the city worth buying SFR's in the suburbs now with the hopes that the city will draw new interest for those looking to relocate to FL?

- As a small investor would you attempt to invest on the ground floor (or as close to the ground floor as is allowed) in some of the new residential space being proposed in the Shipyards?

- What are the potential negative effects of a project of this scale on a small city like Jacksonville? What are the potential risks for small investors?

- For those of you who are investors in Jacksonville - what are your thoughts regarding the project and its relationship to your local business?

I understand that there are some obvious answers to these questions - but my experience with the BP community it that there are always robust conversations around those answers and many contributions that were not so obvious at first glance. Thanks everybody. 

I personally would love to see the shipyards finally developed. However that seems unlikely given the scope of the project. It seems more likely that several smaller projects will be completed and then if they're successful we could see something like this. I live in Riverside and it would be great if downtown had as much going on as here or Avondale. 

There are 600 residential units and some commercial space along Riverside Ave in Brooklyn that are nearing completion. They are apparently selling/renting well because they are already planning on building more. All of this will bring a lot of people on the doorstep of downtown and then maybe we'll have something going on after business hours. There are plans to develop the Laura St Trio also but this is probably the fifth plan in as many years, so we'll see. 

I wouldn't base my current investments on a project  that may or may not be completed years from now. Jacksonville will continue to grow either way and that's good enough for me. If you were interested in investing in downtown it would be a different story but right now that's going to be high risk. 

I wouldn't consider buying any residential units they would be selling unless I was going to be living in it. You'd be paying full retail and have no cash flow. It would be a straight appreciation play, not my thing personally. 

I don't think the project brings much if any risk for small investors. And as  far as the city is concerned if it was tried and failed it might set back the redevelopment of downtown, but what else is new? 

I think @Tim Czarkowski  is spot on with everything he wrote. 

I do look at downtown for investment opportunities but it's tough to find the right sweet spot for value in this really slow and drawn out revitalization process. Most landowners have been speculating for awhile, so they have an inflated value placed on their property. And many existing structures are in bad condition which makes the cost of rehab nearly prohibitive for regular folks. There was discussion of seeking out patient capital (i.e., not seeking large or immediate returns) to fund large scale improvements, but the low-risk opportunities aren't really there for most people. I have seen the Southeast Group's plans and they are impressive. It's a lot more than just the Laura Street Trio...they have proposals for about a dozen different adaptive reuse projects throughout several blocks of the urban core. Honestly I'd much rather see them get their financing and/or tax incentives and/or DIA grants over any of the other potential large-scale downtown area projects (Shipyards, Healthytown, Landing redevelopment), as the Laura Trio impact would be far more effective per dollar than any of the others. 

 Anyway, to address your specific comments/questions:

 since our new mayor opened the city up for investment and development. 

I disagree about this mayor. Behind the smoke he's done very little for downtown development (and development in general), though he's quick to claim credit whenever he can. In fact, he just forced his planning director to resign out of pressure from the development community, who aren't going to vote for him in the impending reelection next month anyway. 

 - Since these are currently just proposals, is the significant upside potential of growth in the city worth buying SFR's in the suburbs now with the hopes that the city will draw new interest for those looking to relocate to FL?

As Tim said, this is really pie in the sky and certainly nothing to influence immediate business decisions. Most architects and major underwriters I've spoken to consider the "plans" that were flashed before the public to be impossible. It really was simply a way to get the public excited and to support him when he asks the city for big-time handouts (which he subsequently did a week later) Now, I kinda have the feeling Khan has an ace or two up his sleeve, in terms of major economic announcements perhaps from some British or German corporations, and so perhaps you could see this as a positive sign for the city's growth, but it's a bit much to use it as a factor in overall market analysis right now. 

- What are the potential negative effects of a project of this scale on a small city like Jacksonville? What are the potential risks for small investors?

In all likelihood I doubt there are negative effects. There are disaster scenarios (since the proposal calls for the city to clean up the land to the tune of potentially $35 million that it doesn't have, spend millions more to reclaim 5 acres of the river, sign away almost all of its rights to profit from land sale or collect property taxes) so if things went south the city could be even more broke than it is. But I have faith in both Khan and the city that that wouldn't happen. Other risks are that they overbuild and saturate the market, since it is a relatively small city. But most likely it will develop very slowly (if at all) and suit market demand accordingly. 

- For those of you who are investors in Jacksonville - what are your thoughts regarding the project and its relationship to your local business?

I strategically invest in urban areas and rent mostly to young professionals who want a somewhat more urban lifestyle in Jax. I love the concept of the project and think eventually it's gonna be a crucial piece in a fully-revitalized urban Jacksonville, but I suppose in the short-term it is competition for me. So I keep my eyes on all this stuff constantly, so I can adjust my deals accordingly. 

Thank you Tim Czarkowski for your comments. It's great to get the feedback of others in the community. Good point about Jacksonville continuing to grow either way. I have faith in the revitalized business community to get things moving more than they have in the past - but its good to never count chickens before they hatch. I will look into the developments going on in Riverside - Riverside/Avondale is one of the areas that I could see gaining the most from a project like this and downtown development in general. Murray Hill could also continue to move in the right direction. Springfield on the other hand would probably be a longer term buy - with great potential and historical significance but with a longer way to go for revitalization. 

Thank you Maxwell Lee for your comments. It great to get your feedback and perspective. Your insight into the sweet spot downtown and the facts related to building quality even if there was a sweet spot are well taken. It seems that would require very patient capital to accomplish. If a project like this were to get done that could help attract some of the patient capital you speak of. 

I hope Khan does have an ace or two up his sleeve. This project does seem very aspirational and after living in Jax for 8 years I certainly understand how things can get cynical when the large scale downtown development conversation comes up. It seems we always hear about great intentions while seeing very little action. Khan just strikes me as someone who is different and combined with the city will work to get things done. A journalist in the Jacksonville Business Journal referred to the project as "Dubai on the St. John's River". It's that kind of aspiration that gets me excited. I have now lived in the middle east for 2 years and have spent a lot of time in Dubai - I have seen what high expectations combined with the will to succeed can do and it is truly amazing. If we had just some of that aspiration and vision turned into action in Jacksonville it could reach its potential to become a bustling city center. 

In terms of the mayors role I am sure we could debate debate his leadership - I was simply referring to his ability to open up the city to business development since he took over. The influence of the FBC in the community is well documented as is their opposition to  downtown development. Since he came onboard other constituencies, like the business community, can be heard and have more influence than they did in the past. Hopefully this leads to Jax becoming more like Charlotte like was stated in the JBJ article. 

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