Watkins frustrated but hopeful amid Farish Street strife

by Ted Carter

Published: November 1,2013

Tags: Business, downtown, Farish Street, JACKSON, Mississippi

David Watkins

David Watkins

» Developer says he’s optimistic ‘city leadership and new mayor are going to get to the bottom of this.’

Though the first downtown block of Farish Street to its corner at East Griffith can be walked in a minute or so, the longest tape measure might not cover the distance between views of the main players on why the redevelopment effort has returned to its limbo state of 2008.

But this time instead of the $1.5 million in debt, derelict block and unenforceable tenant leases left behind by Beale Street developer John Elkington’s Performa Mississippi, the block has repaired water and sewer lines, brick pavement and new, historically correct building facades along its entire length.

» READ MORE — Displaced Farish St. developer says project ‘basis’ gives him edge in JRA fight

» READ MORE — Liens are first battleground in Watkins fight with JRA

That progress — completed since granting of the master development lease in January 2010 — came far too slowly, the Jackson Redevelopment Authority said in grabbing back the project from David Watkins and the Farish Street Group, LLC, of which he is managing partner.

The JRA has declined to address media questions about its Sept. 25 severing of the 45-year lease it had with Farish Street Group. However, in a court filing last week objecting to developer liens against the project, the redevelopment agency claimed that Watkins and his partners failed to meet certain deadlines included in the lease agreement. This failure “would constitute a default,” the JRA said.

The JRA further charged that any construction done on the site through Watkins Development – the development arm of Farish Street Partners— was done illegally and without a certificate of responsibility, an action JRA says violates the laws and regulations of the Mississippi State Board of Contractors.

Farish Street Group minor partner Leroy Walker, a Canton McDonald’s franchise owner, called the JRA’s impatience and desire to remove Watkins “understandable.”

“I think that David is a credible individual,” but “I do think some mistakes were made…. I think his effort was outstanding but not the results,” Walker said.

To put in context, though, critics should consider that the economy tanked just after he took over the project, a circumstance that dried up lending for both the project and potential tenants, Walker noted. “There have been some constraints which prohibited us from moving forward like we wanted to.”

Minor partner and Jackson lawyer Robert Gibbs said he saw the negative direction matters were headed with the JRA. But at the moment, he said he is not prepared to judge “who is right or wrong” in this.

He said he nonetheless did not agree with the JRA’s decision to snatch the lease away from Watkins. “We felt that we were getting closer every day,” Gibbs said of the Farish Street Group.

“A lot of extenuating circumstances that the public does not know about” kept the project from hitting certain deadlines, Gibbs stressed.

A particular obstacle was the public perception that City of Jackson money had gone into the project, he said. “That’s just not the case.”

In fact, the JRA stood to gain 25 percent of the project’s annual revenues upon completion of the redevelopment without to this point putting up any money, according to Watkins Development

Another public perception Watkins has battled is that he has not actually sunk $4.5 million of his firm’s money into the project – a claim Watkins Development says a series of audits done on the project can readily disprove.

Some of the perception on the part of the council rests with the JRA putting Farish Street Group contact with the City Council off limits, Watkins Development says.

“We had a discussion last April with a council member who will remain unnamed who asked, ‘What about that $10 million we gave you?’” Watkins said.

“They haven’t been able to get any communication from us. The JRA says, ‘We’re going to handle all of the communications with the mayor and City Council.’”

Meanwhile, both Walker and Gibbs say that any hope for reviving the effort to transform Farish Street must be minus Watkins.

“We’re seeing if we can organize and pull together additional interested entities that may want to participate, if we are allowed to go forward,” Walker said.

Watkins conceded the slow pace of construction and acknowledged the complexities of taking a block abandoned 30 years ago and transforming it into a music, food and cultural destination.

“Nobody has ever written ‘How to Build an Entertainment District for Dummies’,” he said.

Watkins said he has nonetheless emerged from the experiences he’s had since recruited to rescue the project in 2008 with a fairly firm idea of what went wrong and how to fix it.

In a several-hour interview last week, the former lawyer and developer of Jackson’s King Edward Hotel and Standard Life residential building detailed the challenges of repairing a faulty city utilities system installed a decade earlier and the painstaking work, expense and time required to maintain the early 20th century historic integrity of the revamped buildings. He further recalled the frustration of relying on JRA-provided engineering reports attesting to the structural stability of the anchor building at the street’s south end only to learn in mid 2012 that the two-story former dry cleaning building lacked a true foundation – an oversight that piled new expenses of from $1.4 million to $1.7 million onto the project.

The frustration mounted, he said, after former Mayor Harvey Johnson and the JRA directed him to stay mum about the foundation snafu and his attempts to bring fresh private-sector money into the project. In the meantime, members of the JRA board, the City Council and other political voices initiated a media backlash against him, he said.

The drumbeat against his efforts has come, Watkins said, “because people don’t understand what is going on.”

At the same time that Farish Street Group is “spending millions of dollars and there are contracts going out and we have these deals with the artists, they are saying ‘get rid of the developer,’” he added.

Ready to oblige his detractors, Watkins began looking for a co-developer or – better still – a developer to take over for him. The main motivation came from the need to plug the $1.5 million or so hit the faulty building foundation had put on the project’s already tight budget, according to Watkins.

Further incentive came from the realization that meeting conditions for federal and state historic tax credits would require the Farish Street Group to do the tenant buildouts or risk losing the credits, he added.

“Just one section of buildings on the block would be $5.6 million to build out. That does not include any of the kitchen and other fixtures,” he said.

A chunk of the money from a $5.4 million loan from the Mississippi Development Authority had to be diverted to rebuilding the buildings, “keeping the buildings from falling over,” Watkins said.

Getting the MDA money required the partnership to put up a 10 percent match and another 18 percent of hard costs at the end of 2011, according to Watkins.

 

Partner Quest

Some partnership interest came from Hope Enterprise, a community redevelopment agency that seeks to bring economic vitality to distressed communities in Mississippi and neighboring states.

Hope Enterprise could bring a vital offering to the project: Federal new market tax credits, a valuable tool for Mississippi developers to use to cut project costs.

Watkins said he stepped aside as the JRA and minority partners negotiated. Construction stopped for the four months the talks went on with Hope, Watkins said.

“I wanted to allow the JRA and the minority partners to work out a deal without me. That was fine,” Watkins said. “My goal was to get Farish Street done.”

Hoer Enterprise would ultimately deem Farish Street too risky to put a significant share of its New Market Tax Credits allocation into.

Next up: Yates Construction, a deep-pocketed Philadelphia company.

Watkins said Yates fell in love with the project earlier this year and offered to buy out the project for more than $6 million and have Farish Street Group operate it upon completion. Mayor Harvey Johnson and some of the minority partners gave that plan a thumbs down, however.

But Yates wasn’t entirely out of the picture. Three of the partners and JRA attorney Zach Taylor made a clandestine pitch of their own to Yates, Watkins said.

He said he did not know the partners had approached Yates until he discovered an email revealing the negotiations.

Walker, the minority partner, acknowledged the talks occurred but said ultimately the numbers just weren’t right.

Watkins attributed Yates’ dropping of the deal to a realization that the project carried “just too much politics.”

Watkins said he is willing to continue the project or give it to another developer. Whichever route it goes, the numbers add up to the potential for a successful redevelopment of the first block of Farish Street, he said.

The revamped development model – one that does not include the millions in New Market Tax Credits originally envisioned – can work, he said. The plan, he added, rests on securing the federal and state historic tax credits that will cover 20 percent and 25 percent, respectively, of the construction costs; the tourism tax rebate that will generate $12 million over 15 years; and the $10 million bond commitment the JRA made but has yet to follow through on.

“I’m optimistic that the city leadership and the new mayor are going to get to the bottom of this.”

If the chance comes to address city leaders, he said he would make one main point: “We have a great opportunity here and we don’t want to throw the baby out with the wash water.”

 

[RSS Feed] [del.icio.us]



To sign up for Mississippi Business Daily Updates, click here.

One Response to “Watkins frustrated but hopeful amid Farish Street strife”

  1. Displaced Farish St. developer says project 'basis' gives him edge in JRA fight - Mississippi Business Journal Says:

    […] » READ MORE — Watkins frustrated but hopeful amid Farish Street strife […]

POST A COMMENT

 

Twang & Tourism: The Country Music Trail

Our annual "Come See Us" magazine offers ideas for spots in Mississippi ranging from golf to culture to history to food. Click the photo for ideas, stories and access to the digital edition of this year's magazine.

Still planning that summer vacation?

Our annual "Come See Us" magazine offers ideas for spots in Mississippi ranging from golf to culture to history to food. Click the photo for ideas, stories and access to the digital edition of this year's magazine.

FOLLOW THE MBJ ON TWITTER

Top Posts & Pages

%d bloggers like this: