An utter lack of Class A, large-block office space in Orlando's Central Business District has prompted city officials to help stimulate development, with plans to offer up to $4.225 million in future tax rebates to Lincoln Property Company for its planned 28-story Tremont Plaza mixed-use tower.
The city and its Community Redevelopment Agency (CRA) are proposing to support the project through a CRA tax increment recapture for the developer's affiliate Lincoln Church Street, LLC. Up to 35 percent of the development's tax increment revenue would be offered for a five-year period, not to exceed $2.725 million.
The city would also contribute up to $1.5 million from transportation impact fees for LPC's construction of a new SunRail station platform, which currently lies south of the tower site and a full block south of W. Church Street. No general fund revenue dollars will be directed to the developer.
Tremont Plaza is being marketed as a 28-story tower (25 floors accessible), with 214,800 square feet across seven floors of office space, 5,000 square feet of ground-level retail, 10,000 square feet of meeting space, an eight-story, 180-key AC Hotels by Marriott hotel, and 650-plus parking spaces across a nine-floor garage.
"As a city we're at 90 percent occupancy in our office space for the first time in 10 years, and what we lack is contiguous Class A large floor space," city spokeswoman Cassandra Lafser told GrowthSpotter. "So that is certainly a need and is why the CRA incentive is there, and then the hotel part of the project and its location right at Church Street, which we see as the 'Main and Main' of our entertainment and arts district, is another reason behind this decision.
"This is one of the first mixed-use office towers to be built in a decade," she continued. "Where we can help move that development along and happen sooner rather than later will only help our community."
LPC and investment partner Robert Mason of Atlanta-based Mason Capital Partners paid $11 million in mid-April through an affiliate to buy 1.5 acres for the tower at 225 S. Garland Ave., roughly half of which is now home to the popular Ballroom at Church Street.
The CRA incentive agreement will go before the CRA Advisory Board on Wednesday. If approved, it would go with the transportation impact fees deal before the City Council on July 24.
The CRA's five-year tax increment recapture would start on June 1 of the city's fiscal year, after a Certificate of Occupancy is issued for the tower and SunRail station. LPC can elect to defer the start of that recapture period for up to five years.
LPC can only collect up to $2.725 million of that tax increment recapture, even though the full five-year tax increment anticipated to be created by the project could reach $5.6 million.
LPC's property currently has a county appraisal value of just over $6.28 million, according to city staff. The developer will only receive a tax increment recapture for the new tax value created.
As for giving LPC up to $1.5 million for building a new SunRail platform at the tower's base, payments from those impact fees will be made in two installments.
The first of $750,000 would occur after Oct. 1, 2017, and within 30 days of the Florida Department of Transportation's approval of permits for LPC to build the SunRail platform. A second payment of $750,000 would come after Oct. 1, 2018, when the city inspects and approves the platform construction is at least 50 percent complete.
"Originally when SunRail was planned that platform was envisioned right on Church Street, so this will help realize that goal and become a new south platform for the Church Street station," Lafser said. "The other platform will still be used, but we imagine the one closer to Church Street will become (more popular)."
As part of the deal, LPC must begin construction of the tower and platform within 18 months of the agreement date (as late as January 2019), and finish the work within five years.
LPC was expected to begin site work in May on a parking lot south of the ballroom, but that has yet to happen. The developer does not have its city building permit for the site, and must still get the FDOT permit for the SunRail platform.
Officials with the company did not return calls seeking comment on Tuesday.
LPC will have to provide annual donations of $3,000 during the recapture period for community special events approved by the city's Downtown Development Board. It must also include a public art component in the project, as approved by the city.
Downtown Orlando is starved for new large blocks of Class A office space that only a massive tower like Tremont Plaza can deliver.
"There are no large blocks of contiguous space in the CBD right now, if you're looking for 50,000 square feet or more you won't find it here, and anything over 25,000 you're very limited," said A. Todd Davis, managing director of office services for Colliers International, which represents roughly 700,000 square feet of office space in downtown between the Citrus Center and Bank of America buildings.
The submarket, with 106 buildings totaling more than 8.98 million square feet, had a 13.1 percent vacancy rate at the end of March, and the highest or second highest average price per square foot in the region at $24.68, according to Cite Partners' First Quarter 2017 local office market report.
Orlando's CRA has used tax increment revenue in the past to help drive economic development in downtown. Such projects include the 16-story and 21-story Chase Plaza towers, the 16-story Paramount on Lake Eola mixed-use building, and the 34-story mixed-use 55 West building on W. Church Street.