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Jekyll Island Lessons Learned

FMFADA Board

July 16, 2009

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Today’s AgendaToday’s Agenda

Quick Comparison

Jekyll Island as “City”

Challenges

Commercial Lessons Learned

Residential Lessons Learned

Key Insights

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Quick ComparisonQuick Comparison

Fort Monroe: Urban context; more residential and office

Jekyll Island: Large natural setting; more acreage and lodging facilities

Inventory Fort Monroe Jekyll Island

Acres 570 4,226Residential 1,048 801 Seasonal Rentals 25% (a) 50% Seasonal units (262) (400)Hotel Rooms 75-100 (b) 2,100 (c)Public Facilities 353,000 460,700Other Commercial 303,500 87,300

Notes:(a) Assumed in financial model(b) Per Reuse Plan(c) Per 2004 Master Plan Update

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Almost all municipal services provided by Jekyll Island Authority (“JIA”)

• Fire/EMS

• Water and waste water

• Roads, beaches, and trails

• Sanitation

Law enforcement services provided by Georgia State Troopers

• Office and dispatch at entry

• No cost to JIA

Permitting services provided by Glynn County

• Building and construction permits for new construction

Jekyll Island as “City”Jekyll Island as “City”

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Jekyll Island Fire DepartmentJekyll Island Fire Department

Small permanent staff (4 FTEs)

• Use part-time firefighters employed by other fire departments

• Three pumper trucks and ambulance

• Current budget $825,000 to provide fire and EMS service demand

• With new resort redevelopment expect fire fee revenue to permit expansion of permanent staff (new budget = $1.2+/-M)

Specialized services

• Small local department can provide niche services:

• Example: rescue swimmers at high tide on sand bar

• Off-road rescue trailer for bike-path and trail access

• Hurricane disaster preparedness

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Taxes and FeesTaxes and Fees

JIA levies:

• Hotel tax 5% on rooms and rentals ($1.7M)

• Fire service and other municipal fees ($1.6M)

• Fire fees based upon assessed value

Glynn County

• Property taxes

• Building and construction permit fees

Overall, there is “room” for the JIA to levy extra charges

• Need to look at overall “holding costs” of property

• Millage rate, fees, and lease payments

• Other Georgia island communities charge $300 to $500 annually for association dues for amenities and services that the JIA provides at no cost

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Jekyll Island Residential ProgramJekyll Island Residential Program

Residential

• 801 single-family homes, duplexes & condos

• Homeowners lease lots

• 50% of units are available for vacation rental

• Local brokers specialize in Jekyll Island

• $209,000 generated by residential leases

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Jekyll Island Lodging ProgramJekyll Island Lodging Program

Lodging/Retail/Commercial

• Six hotels/motels with 828 rooms

• Plans for up to 2,100 rooms/new and expanded properties

• Shopping Center, 3 restaurants, gas station, bike rentals, & gift shops

• $3.2M in business lease revenue

Jekyll Island Club HotelJekyll Island Club Hotel

Days InnDays Inn

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JIA Amenities & EnterprisesJIA Amenities & Enterprises

JIA owns and operates a variety of visitor amenities and enterprises

• Convention center (62,000 sq.ft.)

• Restaurants

• Museum & Summer Wave

• Golf and other concessions

Total Visitor Amenity Revenue $8.9M (half of operating budget)

Summer Waves Water ParkSummer Waves Water Park

Convention CenterConvention Center

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Jekyll Island ChallengesJekyll Island Challenges

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Lessons Learned CommercialLessons Learned Commercial Declining Visitation

• Visits declined by 10%

• Hotel/motel occupancy fell to 52%

• Competition among leisure destinations in southeastern U.S.

• Conference center losing business to other locations

Obsolete Lodging Facilities/Conference Center

• Older properties needed reinvestment/replacement

• Limited services and lack of amenities

• Lack of architectural guidelines - uneven design quality, including condos and homes

• Several hotel/motels went into bankruptcy (prior to current downturn)

• Old commercial leases lacked strong provisions re: maintenance, reinvestment, and overall quality standards

Lack of Focal Point/Community Center

• No focal point to Jekyll Island

• Heavy automobile orientation

• Lack of connectivity between facilities

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Commercial RevitalizationCommercial Revitalization

Master Plan Update in 2004

Design and Conservation Standards formulated

Demolition of 700 rooms

Selection of development partner (Linger Longer LLC)

Formulation of “Beach Village” concept

• 22 acres - $100M+ of private investment

• Redeveloped and expanded convention center to 76,000 SF

• Mid-scale hotel (200 rooms)

• Economy hotel (150 rooms)

• Vacation ownership (160 units)

• Retail (30,000 SF)

$25 G.O. million bond

• Road realignment

• Conference center upgrade

• New beachfront park

• Issued by state; repaid by JIA

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Lessons Learned Residential Lessons Learned Residential

Original JIA leases did not have escalation or reappraisal clauses

• Started at market but now substantially under-market ($420 annually versus $8,000)

• Major foregone revenue generation

• Rents for lots should be priced between 5 and 7 percent of value

• 40-year lease term and lack of affordable flood insurance has limited reinvestment

Major effort to restructure leases and encourage investment

• Homeowner stakeholders resistant to change - balancing economic interests

• State extended lease to JIA to 2089; JIA can now renegotiate lease terms and offer another 40-years

• JIA now formulating “preferred alternative” for renegotiating leases

• Ideas: add CPI-based escalation, levy leasehold “transfer fee,”

• Apply new structure only when leaseholders voluntarily sell, refinance, or obtain reverse mortgages

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Key InsightsKey Insights

There is precedent for operating as a small city with modest building base

Commercial leases need to be structured to ensure high quality development, maintenance, and customer service

Lease structure needs to provide incentives for reinvestment

Once FMFADA and its master developer establish a residential leasehold program there is no going back…so careful structuring is a must

FMFADA needs to identify non-real estate based revenue streams to support its operations and programming