Texas company takes over development of The District
A young, feisty independent specialty finance company has taken over The District project on the Southbank.
Preston Hollow Capital of Dallas bought the Elements Development of Jacksonville LLC, including the 30 acres of land, from Peter Rummell and Michael Munz in early September. “They stepped into our shoes,” Munz said.
Preston Hollow was founded in 2014, the same year Elements Development was formed. It has $2.1 billion in assets, $1.3 billion in equity capital, and has closed on $2 billion in projects. It specializes in the municipal bond market and has worked on projects for schools, hospitals, and senior living. It prides itself on speed and flexibility,
“We put a lot of money, heart and soul into the District,” Munz said. “They’re a really good company. They like the master plan. Preston Hollow is committed to that concept. We made the decision that they’re the right group to make sure the vision is realized. We are looking forward to how it all comes together.”
The District is a 30-acre site formerly occupied by JEA’s Southside Generating Station. Preston Hollow gave Elements a $20 million mortgage on the property last year.
Rummell and Munz planned to develop the site as a mix of residential, retail, office and hotel space, with a marina and waterfront park with a completion date in 2022.
But the $600 million project was mired in complications, including environmental issues, and delays.
In 2018, the City Council approved a redevelopment agreement that would give Elements $56 million in property tax rebates. The rebates, called Recaptured Enhanced Value or REV grants, are 75% of the property taxes and are dependent on how much of The District is built and added to the tax rolls.
The city committed to paying $26.5 million to construct 3.5 acres of park space, a 1,900-foot Riverwalk extension with bulkhead, a boardwalk trail, 100 parking spaces and three road extensions.
Elements agreed to issue $31 million in Community Development District bonds to finance the infrastructure, transfer property to the city and submit the permits for the horizontal construction. The deadline was Jan. 13 this year but the company asked for and received an extension until April 13.
When the coronavirus pandemic hit, Elements requested a suspension of performance deadlines, citing a “force majeure” provision.
Lori Boyer, CEO of the Downtown Investment Authority, put the deadline on hold until Sept. 1 and then gave Elements until Sept. 30 to issue the bonds.
On Sept. 4, Elements issued a press release announcing that Preston Hollow had assumed “all the rights and entitlements” to the project, including the land. Two weeks later, Preston Hollow said it would issue the bonds by the end of the year.
Preston Hollow has financed a similar project, Pinecrest, in Cleveland, Ohio.
The 58-acre Pinecrest has 87 luxury apartments, 400,000 square feet of retail and dining space, a dine-in movie theater, two Class A office buildings with 164,000 square feet of space, a 145-room AC Hotel by Marriott apartments and a 754-space parking deck. Retailers include Whole Foods, Urban Outfitters and Sephora.
While Preston Hollow provided the financing, the lead developer was Fairmount Properties, an company in Orange, Ohio, that specializes in large-scale, mixed use specialty districts.
Last year, Pinecrest received the gold designation — the top honor for mixed-use developments — in the New Developments category at the International Council of Shopping Centers Global Awards for North American Design and Development.
In comparison, The District is a small project, with 950 residences, 134,000 square feet of retail, a 147-room AC Marriott, 200,000 square feet of office space and a 125-slip marina. The city plans to use four acres on the riverfront to extend the Riverwalk, add greenspace and trails.
In a David vs. Goliath move, Preston Hollow captured the attention of the financial world last year when it sued the old, established asset manager Nuveen, owned by TIAA, for defamation, antitrust and business interference.
Preston Hollow accused Nuveen of organizing a boycott against the smaller company and issuing “a series of threatening and anticompetitive communications,” including threatening to withhold business from Deutsche Bank if it did business with Preston Hollow.
This spring, Preston Hollow won the case when a Delaware judge ruled “Nuveen used threats and lies in a successful attempt to damage the plaintiff in its business relationships.”
By Lilla Ross
Resident community News
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