By TED CARTER
Jackson Redevelopment Authority is preparing to pay law firm Watkins & Eager $90,000 to examine the financial soundness of the proposal selected for building a convention center hotel.
Though the scope of work has not yet been determined, the Jackson law firm would supposedly look into the financial viability of the deal Engineering Design Technologies offered on building a $75.5 million multi-floor hotel on land across from the Jackson Convention Complex on Pascagoula Avenue. A contract for the evaluation has not been signed, though the JRA board agreed at its March 23 meeting to hire the firm.
JRA Commissioner Jennifer Johnson says she hopes the board will soon get a better idea of the scope of work the Redevelopment Authority will get for what she views as a sum above what the JRA can pay. The proposal to hire Watkins & Eager came from John Dinkins, a Ridgeland commercial real estate broker recently named to the JRA board.
Dinkins said in an email he knows neither the scope of the work nor the time period for completing it.
Johnson, an attorney who chaired the JRA until replaced in the summer of 2015 by McKinley Alexander just after he joined the board, said Watkins & Eager is in line for the vetting work despite not being among the firms that responded to a JRA solicitation for the work.
Johnson has questioned EDT’s “capital stack” for the hotel project and says she is unconvinced the development team can complete the project while keeping a pledge not to request money from any government entity in Mississippi. She said she welcomes the vetting by Watkins & Eager but insisted “we can’t spend that much money.”
Alexander, the new JRA chairman, emphasized belt tightening soon after becoming chair but followed that with support for hiring a co-counsel for the redevelopment agency.
The JRA spent $772,849 for legal and professional services in 2014. Last year, it spent $338,145 on them, according to figures the JRA published.
At this point, Watkins & Eager has promised only to “review, analyze and advise” on the project, according to Johnson.
“It didn’t even say it would produce a written report,” Johnson said of the law firm.
Though Dinkins said no date has been set for completion of the due diligence, Johnson said she understands Watkins & Eager plan to wrap up the work by December.
The hotel project is already far behind schedule. The JRA had planned to select a developer by the end of October but did not do so until February, when it tabbed EDT over Herndon, Va.-based Red Leaf Development.
Johnson has questioned the selection ever since. In an email shortly after EDT’s selection, Johnson said EDT is asking for a JRA/City of Jackson loan despite insisting it would not need backing with public money.
“EDT’s capital stack includes $11.3 million ‘JRA/City loan’ and their CEO sent a letter saying that EDT is not requesting any money from any government entity in Mississippi,” Johnson said. “They have not explained this discrepancy in writing.”
EDT’s capital plans also include $3.8 million in federal New Market Tax Credits, but Johnson questions whether the developer can compete and obtain the credits in time to begin the hotel project in a timely fashion. “They have not shown any evidence that they are in the pipeline for these tax credits, and the timing would put them at July 2017 for a federal award. So this impacts their timing of when they can actually get started,” she said.
“So, my feeling was, at the very least there is a $15M hole in their funds sourcing that we know from the start.”
Johnson further questions whether EDT has the experience required for a project as large as a convention center hotel. Experience, however, was among the strengths that led to EDT’s selection, according to JRA Commissioner Rodric Donaldson, chair of the JRA’s projects review committee. Donaldson’s panel reviewed and endorsed a JRA-appointed hotel evaluation committee recommendation to award EDT the project.
Johnson countered, however, that EDT has not shown that it has done a project that is similar in cost or purpose. “They offered us two senior housing projects, a municipal office building, and a police headquarters, and a VA outpatient clinic,” she said.
“The highest budget of these projects was $41 million; the others were significantly lower budget projects.”
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