The Jackson Redevelopment Authority has agreed to hear Denver developer Leroy Smith’s proposal to restart Jackson’s stalled Farish Street redevelopment as part of a $100 million investment he wants to make in downtown and West Jackson.
To adhere to a Chancery Court order that the proposal be heard, former Farish Street developer David Watkins will make the proposal on Smith’s behalf.
New JRA chair McKinley Alexander, a business consultant and Jackson State University instructor, said at the Nov. 18 meeting the board will hear from Watkins rather than Smith because that is what the court specified. “The court order dictates we listen to David Watkins. This is who we are going to listen to,” he said.
Smith wants Jackson Redevelopment Authority backing on a $25 million loan. The principal of Denver’s LCS Development also is insisting on control of the project, though he is willing to share control with the JRA in proportion to the amount of money the agency puts into the revitalization project.
The 15-year-old project has been on hold since JRA’s October 2013 termination of Watkins and his Farish Street Group over frustration with the pace of progress. A year later the JRA found itself in hot water with the U.S. Department of Housing and Urban Development over a failure to legally qualify for HUD money that went into the Farish project.
The project’s mothball status changed on Nov. 10 with Hinds Chancery Judge Dewayne Thomas ordering of specially hired trial lawyers for the JRA to stop impeding consideration of Smith’s proposal.
Meanwhile, a trial lawyer for the JRA said Smith has always had access to the JRA and no one has tried to waylay a new development proposal.
Thomas ordered all parties, including trial lawyers representing the JRA in a lien dispute with Watkins, not to take “any action to preclude, frustrate or impede either the agreement of a date and time or the actual presentation of such a plan.”
LCS Development’s Smith says he has lined up partners ready to invest $100 million to help revive the one-time African-American shopping and entertainment destination and wants to get started right away. Smith said he also plans to put some of the money into projects elsewhere in Jackson.
However, LCS Development is uncomfortable going further into a deal without first removing the prospect that a lien of $4.7 million from Watkins and one of $300,000 from Dale Architects will be revived through an appeal to the Mississippi Supreme Court.
Smith said he will give the JRA $1.6 million to cover a restitution demand by the U.S. Department of Housing and Urban Development. The demand grew out of a HUD determination that the JRA was never certified to receive the $1.6 million in HUD money used to acquire the two blocks of Farish Street.
In exchange, Smith wants title to the property. “That is the crux of the proposal,” he said in a statement last Thursday afternoon.
“Our group is prepared to close on this transaction in 10 days,” he added. “Once we have title to the property, our team will immediately resume construction of the entertainment venues and will have five venues open for business in one year.”
Added Smith: “We welcome the news that Judge Thomas has ordered a meeting of the JRA to hear our proposal. We believed they will be relieved and excited.”
Smith wants to acquire the development rights by the end of the year, though that is not likely to give the JRA time to do its due diligence on Smith’s proposal.
LCS Development has already put extensive time into the deal, according to Smith, who said he began work on the project’s takeover a year ago.
Meanwhile, the JRA is eager to settle up with HUD, having been suspended from further involvement in HUD-funded projects until it meets the repayment demand.
HUD provided the $1.6 million at the outset of efforts to convert the street into an entertainment district early in the last decade but did not order the repayment and suspension until fall 2014.
Watkins put a $4.7 million lien on the two blocks of buildings after the JRA booted him from the project two years ago. Watkins, a lawyer-turned-real-estate developer, claimed the lien equals the amount of money he put into the project.
Judge Thomas voided the lien in late July. But Watkins can appeal the decision to the state Supreme Court if unable to get a settlement with LCS Development.
Acting on a report from Watkins, Thomas said in his order last week a “disconnect” between JRA’s Jones Walker trial counsel and JRA general counsel Penny Brown has “resulted in a viable development plan being withheld from the board.”
Mark D. Herbert, the Jones Walker attorney handling the lien litigation, said in an email last Friday he has “never taken any action whatsoever to try to prevent any proposal, and in particular any proposal from an entity named LCS Development, from going before the JRA board.”
In a memorandum of understanding dated Sept. 22, LCS’ Smith said he is willing to settle Watkins’ claim as well Dale Architects’ claim.
The JRA never responded to the proposed memorandum of understanding, according to Smith.
He proposes converting the two blocks into “an authentic, historically significant, diverse, economically feasible and sustainable development.”
Components would include entertainment, retail, housing, film production, innovation centers and a multi-purpose arena.
To fund the conversion, Smiths wants a $25 million JRA-backed bond issue similar to the ones the JRA awarded the under-construction Westin Hotel and the Iron Horse Grill, a restaurant and entertainment venue that opened a couple of years ago.
Smith also wants tax increment financing as well as eligibility for the state’s Tourism Tax Rebate program. With that eligibility, he could receive a rebate on a portion of sales taxes collected within the Farish Street to help cover development costs.
New market tax credits would be part of the funding, as would federal and state historic tax credits. Mississippi’s historic tax credits have been depleted and legislators have not decided whether to replenish them.
Smith said the $100 million the investors want to spend includes projects on Farish Street, elsewhere downtown and in West Jackson, near Jackson State University.
But Farish would be the priority and target of $25 million in spending in the first 8 months of the revitalization project, he said.
Smith is willing to let the JRA have some control in the project – but it will have to put some of its own money into the deal for that to happen.
Smith’s insistence on a JRA stake likely stems from the dead ends hit by the previous two developers, Watkins and John Ellington, the developer behind the revival of Memphis’ Beale Street who left the Jackson project over frustration with the JRA in 2008.
The JRA can have “some control over the property, even after we buy it from them,” Smith said, but added: “We will agree to some controls provided that the JRA/City match our private investment, dollar for dollar, up to $25 million.”
Ben Allen, the head of Downtown Jackson Partners, a public-private agency that promotes downtown, said he is pleased to see Farish Street’s redevelopment return to center stage. “At this point any movement is a positive direction,” he said. “I’m glad the judge forced the issue. We need to get this thing negotiated out.”