Developers Want City Hall Option

September 20, 2002
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GRAND RAPIDS — Developers proposing a hotel for Calder Plaza had originally planned to come to tomorrow’s meeting with city commissioners with an offer on the City Hall property and the Government Center parking ramp, but after two days of meetings with city staff last week, that changed.

Although local developer Blue Bridge Ventures and Houston-based Hines Interests LP won’t lay out financial details Tuesday, they will ask the city commission to enter into a binding option on a buy-sell agreement for the property.

“We’ll be coming in with the option, but no numbers attached,” said Blue Bridge spokesperson Ed Kettle.

The developers want to build a 24-story hotel on the city hall’s site and are trying to work out a deal that would relocate City Hall to some other site compensate the city for the move and the ramp’s parking revenue.

The city would retain, in the form of a license agreement or easement agreement, perpetual control of Calder Plaza so it would remain a public place.

“I think a lot of people assume that we’re going to be able to come forward with everything Tuesday. That’s impossible to do,” said Jack Buchanan, president of Blue Bridge.

“Our issue is we know we have to provide the spot for the city, build out the building and take the risk on delivering that, and we intend to do that. But we really need direction from them as to where they want to go and what they want.

“That’s the next step and it’s a pretty expensive and exhaustive process.”

The developers are agreeing to pay the out-of-pocket costs associated with that process that the city requested, but don’t want to move forward on it “unless we know we have basically the concept of a deal,” Buchanan said.

Thus, they want to secure an option on a buy-sell agreement that confirms the city is serious about relocating if an adequate replacement property can be found, he explained. If the city doesn’t like the replacement property options presented, it can get out of the option agreement.

That will be a focus of discussion at Tuesday’s meeting.

The developers also are putting together an agreement for a new property for City Hall but don’t know yet what property it will be among those being considered. They can’t tell the city what the replacement property might be until they know exactly what it is the city wants, Buchanan said.

At this point they only know what the city needs in terms of approximate square footage.

If they secure an option on a buy-sell agreement with the city, the next step would be for the architect to go through City Hall department by department to determine what each department needs and how it relates to other departments to identify a replacement property that can be customized to the city’s specs.

“Once we figure out what site works better than others, then we develop floor plans for that site,” Buchanan explained. “Then we take that to a contractor, who can tell us exactly what it’s going to cost us, and can tell the city exactly what it’s going to get.”

Then they can put actual numbers on the deal, letting the city know to the inch and the penny exactly what it’s going to get.

“It is an awkward approach, but it’s absolutely the cleanest way and the most honest and upfront way to go,” Kettle said.

“Why do we need a commitment? Because Jack needs the security of a commitment to go forward and spend the kind of money he will have to spend.

“Quite frankly, it’s time for a commitment,” he said, adding that developers have been working on the proposal since they originally made it in March 2000.

For the city, it comes down to two choices, Kettle said. It can either relocate its offices now and make way for the hotel or stay in the same location for 30 years.

“It isn’t like we’re asking the city to do something that only we are going to benefit from. This hotel is going to be a public benefit, so we feel there is a level of responsibility on their part to cooperate.

“This commitment we’re asking for only gets us to the next step and provides them a lot of safeguards and a lot of protection for the people’s interest. The city has nothing to lose by doing this. We’re only asking them to go to the beginning, not to the end.”

They have spent more than $30,000 to figure out what the property is worth.

“We’ve analyzed it from the angle of what it’s worth as a 400-room hotel, which is what the market will allow for in this city right now. Then we look at what it’s going to cost to build the hotel and boil that back down and say, ‘ what can we pay for the property?’

“It’s not ‘the sky’s the limit.’ There’s a very limited value, depending on what you’re going to put on the site. The issue is the value of the land depends on what’s going to go on it.”

Typically, costs related to tearing down a building come off the property’s market value, but the developers will eat those costs.

Buchanan thinks most people would agree a hotel is probably one of the highest, best uses of the property, considering the convention center is across the street.

“We think it’s a dynamic, phenomenal and exciting use for that site. The argument is, it’s what you put on it that makes it worth what it’s worth.”

Kettle said some people seem to be under the impression that developers are going to tear down the parking ramp, which is not the case.

The way the architect designed the hotel tower, it would be built right inside the same footprint the city and county occupy, he said.

City and county employees occupy slightly more than 350 parking spots daily in the ramp, Kettle said, and on a peak night the hotel would use 350 parking spaces.

The bulk of the 900 spaces are taken up through private monthly parking passes. Even during the day there are a couple hundred spots unoccupied. At night it’s virtually empty.

So it’s basically a swap, with hotel guests filling spaces at night that city and downtown employees typically vacate after 5 p.m., Kettle said.

“Virtually nothing changes for the public in the use of that ramp; the availability remains the same.”

On a couple of replacement sites developers are looking at, parking could be added for city employees and other potential sites would be near a ramp that has vacancies.

Buchanan maintains existing parking ramps have more than a 30 percent vacancy rate and could use some kind of business generator to fill up those spots.

“It doesn’t make sense to build a new garage because we don’t need it. We’ve already got a system that’s over saturated.”

The developers are offering to pay the city for the revenue stream of the garage — for what the garage is worth financially, he said.    

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