The sale-leaseback incentive provides an alternative to a traditional arrangement whereby the DIA and its partners could pay for the development of a new build-to-suit facility or renovation of an existing building for a specific employer and charges a rental rate substantially below market rents. Under a sale-leaseback arrangement, the DIA would sell a build-to-suit facility to an investor-developer for an amount above construction cost. The DIA would receive a bonus cash payment from the investor who will own the building. In turn, the DIA would sign a long-term fixed lease (15-20 years) on the facility at a rate that would provide the investor-developer a market rate of return, which would then sub-lease to an employer for the same period at Downtown Jacksonville’s rental rate.
The sale-leaseback investor will pay the community more than the brick and mortar cost of the building as the investor is paying for the building on the basis of the long-term lease commitment of the DIA. The DIA then has one of three options:
- It takes the cash bonus from the investor-developer for itself;
- It passes the bonus on to the company as a cash grant or forgivable loan; or
- It reduces the rent to the company by the amount of the cash bonus.
By investing the cash bonus into an interest-bearing account, the DIA may further reduce rents by the amount of the interest generated. Because the DIA has master-leased the entire building, it may not be obligated to pay real estate taxes. This benefit can be passed on to the DIA’s tenant as an additional incentive.