City Edgy About Hotel Calder Plaza

October 1, 2002
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GRAND RAPIDS — Despite meeting 15 times over nine weeks with city staff and spending $1.5 million on the effort, developers of a proposed hotel for Calder Plaza didn’t get the 10-month exclusive option they wanted on City Hall from city commissioners.

The commission didn’t vote on the option at a Tuesday luncheon meeting because city staff was unable to agree with developers on a number of terms in the contract, and they recommended that city commissioners not approve the agreement.

“We think that the city could be at significant risk to lose millions of dollars,” said City Manager Kurt Kimball.

Local real estate development firm Blue Bridge Ventures and Hines Interests LP of Houston had hoped to leave the meeting with an exclusive option through July 25, 2003, to buy City Hall and relocate city administrators.

Rob Buchanan of Blue Bridge said his firm needed that much time to find a new location for the city and design a new City Hall, which the developers had the city moving into in late 2004. Buchanan added that they would give the city $25,000 to cover any expenses that staff would incur in further negotiations with the developers over that 10-month period.

But longtime City Financial Services Director Robert White told commissioners that entering into the option could cost the city $30 million over the next 30 years from a projected cash flow loss over that period. He said the option locked the city into allowing the developers, or an agent of theirs, to design, build and manage the new City Hall.

Of the seven pro formas the developers gave the city, White said one had the developers paying the city $79 million over 30 years. In that projection, he said, the developers would pay the city $130 per square foot for a new site, which could cost the city $170 a square foot for a 120,000-square-foot facility, leaving the city about $16 million short.

Special City Counsel Richard Wendt said that the option didn’t allow the city to opt out of the agreement at any time, as Buchanan said the city could do. He pointed out that the agreement called for both sides to negotiate in good faith over the next 10 months and he wasn’t certain that staff could legally represent commissioners in “good faith” negotiations.

Wendt also told commissioners that a provision in the option could extend it past the contract’s July 2003 deadline.

Still, Kimball said that they agreed with the developers, known as Gallium Group LLC for the option, on a number of terms. Kimball, who characterized the talks as earnest, also said he understood that they needed a signed option from the city before they could spend more money on the effort. He also noted that he couldn’t make the numbers public at this point.

“We haven’t been able to wrestle the numbers to the ground,” said Kimball.

Buchanan told commissioners that they had spent $1.5 million on the project so far, but needed more time and more information from the city to find it a new location.

“It’s not our place to tell you what you need. In order to do that, you have to tell us,” said Buchanan, an attorney and brother of Blue Bridge President Jack Buchanan. “It’s a costly investment from our standpoint.”

The developers and city staff will meet again in an attempt to iron out their differences on about 10 elements of the option before going back to commissioners. The developers will also likely have to answer a question posed by Mayor John Logie: How can they afford to build a $50 million convention center hotel across Monroe Avenue from the new DeVos Place and spend another $40 million to $50 million to relocate the city and the county?           

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