Submitted By: Charlita Whitehead
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Presentation By: Aubrey Hale
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Department: Growth Management
FORMAL TITLE:
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Redevelopment Agreement between the City of Ocala and Marion Opportunity Zone Investment I, LLC, for the rehabilitation and redevelopment of the historic Hotel Marion property, with total City incentives not to exceed $2,896,670
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OCALA’S RELEVANT STRATEGIC GOALS:
Quality of Place, Economic Hub
PROOF OF PUBLICATION:
N/A
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BACKGROUND:
In the early 2000s, the City of Ocala (City) recognized the importance of the downtown but realized it lacked a vision and proper guidance for successful redevelopment. Since this time, the City has continuously strove to refine this vision as evidenced by the following:
• Completed the Downtown Ocala Master Plan (Master Plan) in 2004, providing implementable redevelopment and reinvestment strategies.
• The City continues with and expands these redevelopment and reinvestment strategies as evidenced by the completion of the Ocala 2035 Vision, Comprehensive Plan update, and additional focus area studies/master plans.
• Midtown Master Plan was initiated in 2016 and adopted in 2017, focusing on redevelopment activities in the Downtown CRA subarea north of State Road 40.
• As of 2019, the Downtown and Midtown Master Plans are incorporated into the downtown CRA subarea plan, aiming to concentrate on new development and redevelopment within the downtown core while ensuring that development concepts achieve the highest and best use of properties.
o The Master Plans highlight numerous parking lots, vacant parcels, and underutilized properties located within the city center.
o Highlighted sites represent prime opportunities for redevelopment that will increase taxable values and reduce blighted/underused properties, an essential component of downtown’s long-term success.
• In 2024, the process of updating the 2035 Vision to extend it to the year 2050 begins.
o City selects Kimely-Horn as the primary consultant with a sub-consultant, Urban 3, a financial stability consultant.
o Urban 3 conducts a study, Economics of Community Design, examining the land-value economics, property and retail tax analysis, and community design of Ocala.
o A primary focus of the study is the downtown core with an emphasis on the importance of mixed-use, high-intensity development in the downtown area to establish and maintain key revenue sources.
The subject property, located at 108 North Magnolia Avenue (Parcel ID: 2854-043-003), falls within the Community Redevelopment Agency (CRA) Downtown subarea. Refer to the Aerial Map attached. The seven-story building, historically known as the Sovereign Building or Marion Hotel, was constructed in 1927 and is listed on the National Register of Historic Places. The property is owned by Marion Opportunity Zone Investment I, LLC (Developer) and has partnered with ARK Hospitality to rehabilitate the long-neglected structure into a 59-room boutique hotel under Hilton’s Tapestry Collection brand. This investment represents a significant opportunity to restore one of downtown Ocala’s landmark properties and strengthen the area’s position as a regional destination.
The City and the CRA have supported projects within redevelopment areas that have the potential for catalytic impact while furthering the City Council’s strategic priorities, specifically, Quality of Place and Economic Hub. Incentives designed to encourage private investment in these areas have proven successful in advancing the City's redevelopment goals.
FINDINGS AND CONCLUSIONS:
City Incentives
The City has established a maximum incentive target of 10 percent of the proposed development costs, compared to the City's incentive. The Developer has proposed a project of no less than $28,966,695, with a maximum City incentive of $2,896,670, based on the maximum incentive target. The proposed agreement allows for flexibility in the disbursement of City incentives, including Tax Increment Financing (TIF) and review contributions, as well as the Lot 6 Property Donation, in conjunction with a CRA grant paid out over five years. The Downtown CRA is set to expire in 2038, allowing TIF distributions for the duration of the Downtown CRA. An anticipated breakdown of the incentive is further defined below and in the attached City Incentive Summary. Refer to the attached document labeled Redevelopment Agreement for Hotel Marion to review the full agreement.
• City Grant: The City will pay the Developer a grant of $650,000, to be disbursed in five equal payments of $130,000.
• City Review Contributions: The City will cover all applicable building permits and impact fees, less transportation impact fees, for the project; $79,460 already paid by the developer will be reimbursed upon project completion.
• City Improvements: The City will work with the developer to implement improvements to establish a valet lane along N. Magnolia Avenue, which will require the removal of seven on-street parking spaces on the west side. Adequate public parking remains available on the east side of the street and on Lot 5, located directly across the street.
• Donation of Lot 6 with Right of Reverter: The City will convey the Lot 6 property to the developer to meet the developer’s need for parking. Lot 6 is a 1.15-acre paved facility owned by the City, featuring asphalt, curbing, landscaping, and lighting. The attached appraisal by Albright & Associates of Ocala, Inc. values the property at $1,254,000, which is included in the total City incentives. Lot 6 is identified as a catalytic site in the Midtown Master Plan; the property currently serves as public parking, supporting ongoing redevelopment efforts. Adequate parking is essential to the success of the hotel and the anticipated benefits of redevelopment, and the conveyance of the property will help achieve this goal.
o The City will have four years to exercise the Right of Reverter, signaling an intent to construct a parking facility (parking garage #3) on Lot 6.
o If the City elects to exercise the Right of Reverter, the property will return to the City at the appraised value that it was initially conveyed to the developer. The City will pay the developer the value ($1,254,000) in a lump sum or through City CRA payments if the CRA sunset date for the Downtown CRA is extended.
o The City and the Developer will establish a written agreement outlining temporary parking arrangements and terms for the dedication of spaces in the new garage.
• City CRA Payments: The City will make an annual payment to the developer representing 100 percent of the tax increment to be realized from the increase in property value. The amount will be calculated based on the applicable City and County ad valorem taxes.
o The developer must provide documentation to show that all taxes have been paid before each disbursement.
o Payments will terminate upon the earlier of either the expiration date of the Downtown CRA or the date on which the City CRA payments and other incentives cause the City Incentives Target to be met.
Project Summary
• Development Cost: The Developer is required to invest a minimum of $28,966,695, which covers acquisition, demolition, soft costs, building construction, furnishing, finishing, and equipment.
• Project Description: Developer shall cause to be designed and renovated the existing improvements on the property formerly serving as a condominium building into a 46,775 square foot, 59-room, boutique, fine art inspired hotel, together with a restaurant, gym, meeting rooms, open and enclosed pre-function areas, a business center, covered, and uncovered patios.
• Project Design: The architectural design and site improvements will align with the Downtown Form-Based Code and the principles for adaptive reuse and historic preservation.
• Project Schedule: Construction and interior renovation are underway, with anticipated completion in 2026. The developer must complete the project within 18 months of the agreement's effective date.
Historic Hotel Marion Redevelopment - Downtown Impact:
• Activates a prominent historic downtown building, transitioning from its prior office use to a full-service boutique hotel, increasing pedestrian activity, day/night vibrancy, and the presence in the surrounding area. The proposed use aligns with the High Intensity/ Central Core Future Land Use.
• Preserves a significant local landmark listed on the National Register of Historic Places, reinforcing downtown’s historic character and cultural identity.
• Expands downtown’s hospitality offerings, encouraging more extended visitor stays and increased spending at nearby restaurants, shops, and entertainment venues.
• Drives additional private investment and hospitality activity that is projected to raise the taxable value within the Downtown CRA, increasing the increment to the CRA.
• This project aligns with the goals and objectives of the Downtown CRA Plan by addressing conditions of slum and blight through the redevelopment of an underutilized property.
• Leverages existing city assets to spur redevelopment. Parking is critical to the hotel's successful operation. Upon conveyance of the property, the property value will be added to the tax base.
• The Downtown CRA subarea has the highest levels of productivity based on taxable value per acre, when compared to the rest of the city. The City anticipates that this project will reestablish the hotel as an anchor development in the Downtown CRA, with an increase in the site’s taxable value once redevelopment is complete.
Staff supports the proposed agreement given the project's close alignment with the City Council’s strategic priorities, specifically, Economic Hub and Quality of Place.
FISCAL IMPACT:
The current taxable value within the Downtown CRA is approximately $145 million. The project is expected to increase the taxable value of the property from $1,609,809 to approximately $8,765,000 at completion. This level of investment exceeds the average taxable value per acre ($5.7 million per acre), which is noteworthy given that 53 percent of downtown properties are tax-exempt. The estimated discounted payback period for the City's proposed $2,896,670 investment is approximately five years. This is calculated based on the estimated annual electric revenue of $523,978 and ad valorem revenue increment of $87,817. Refer to the Return on Investment Summary document attached for additional information on the other assumptions made.
The incentives are spread across multiple fiscal years. City review contributions will be paid from the Economic Investment Fund. The City Grant, City CRA Payments, and City Improvements will be funded through the Downtown CRA.
PROCUREMENT REVIEW:
N/A
LEGAL REVIEW:
This Agreement has been reviewed and approved for form and legality by City Attorney, William E. Sexton.
ALTERNATIVE:
• Approve
• Approve with Changes
• Table
• Deny