Hotel Developers Ready To Move

November 1, 2002
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GRAND RAPIDS — Although the developers of a proposed convention hotel for Calder Plaza got only one of the changes they wanted in an option they received from the city last week, they said they were satisfied with the agreement that commissioners approved and were ready to move forward with the project.

The lone amendment to the option, but perhaps the most important of the four the developers wanted, limited to $25,000 the amount of money that Blue Bridge Ventures and Hines Interests LP must reimburse the city for any expenses it might run up over the next year in negotiations with them.

The city had wanted that reimbursement amount to be unlimited, because City Manager Kurt Kimball reported that the city had spent $29,000 on negotiating the option since the two sides began talking in July, with $17,000 of that total going for attorney fees.

But Blue Bridge President Jack Buchanan felt that request was unreasonable and was something that they hadn’t agreed to in their recent discussions with the city.

“We were surprised to learn that city staff had changed previously agreed upon issues, and added conditions that offered us little or no protection,” said Buchanan.

Buchanan said his group, which includes Hines Interests LP of Houston, had spent $1.5 million on the hotel project through September.

Third Ward Commissioner Scott Bowen introduced the amendment that restricted the reimbursement, saying that the city hasn’t charged other developers for time put in by city staff and attorneys on their projects, and he felt it would be unfair to begin that practice now.

All but Mayor John Logie and 2nd Ward Commissioner Lynn Rabaut agreed with him.

“We’re very happy. We had other items that we had questions on, but we’re willing to go forward with this as written. They have told this community that we have a progressive commission that wants to go forward with an open spirit and that is the way we’re going to proceed,” said Ed Kettle, Blue Bridge director of public information.

“Over the next few weeks we’re going to provide this community with the justification on why we need a new hotel on this site, what this is really going to cost us, and why, or do we need a new City Hall,” he added. “So those are the kinds of issues we’re going to uncover for people and that is how we’re going to go forward.”

One change that the developers didn’t get was securing an option on the Kent County administration building, which also sits on the plaza, instead of having to buy the building during the one-year option period. The option requires the developers to do so before the city will go ahead with a deal.

Another change they hoped for was an exclusive claim to buy the city property for the entire year, but the agreement gives the city the right to terminate the contract for any reason at any time during the option period — and the developers can’t sue the city for doing so.

If the city does terminate the agreement, say in six months, it would then be free to negotiate a deal with another party or sell the property to someone else. The developers wanted that language changed, too, but didn’t get it.

The option, however, does restrict the city from selling the property to another developer for the year — unless it terminates the agreement.

What the option does give Gallium Group LLC, the firm Blue Bridge and Hines formed for this project, is a year to work out a deal with the city for a new City Hall and to replace the parking the city would lose from selling the Government Center ramp located below the plaza.

In addition, the city retains the right to reject any sites offered by the developers for a new headquarters and parking structure, and the agreement requires that both sides have to agree to a construction or renovation plan.

Also, Public Act 99 has to be amended so the city can legally enter into an installment purchase agreement with the developers on its new site. The current law limits these contracts to 15 years and this one could last for as long as 30 years.

But regardless of the conditions, the bottom line to the option is that the developers have to get to zero — that is, move the city to an equivalent site and not have the relocation cost taxpayers a penny. Blue Bridge feels it can do that, but Logie and Rabaut don’t think it can be done.

“I think it is becoming increasingly clear that is not going to happen,” said Logie.

In fact, the mayor said he expects a deal would cost the city somewhere between $40 million and $50 million, and he considers that a subsidy to a private developer for a project on public property.

But five other commissioners were willing to wait and see what the numbers will tell them. Some many even be willing to allow public dollars be used for the project. As the Business Journal reported two weeks ago, few convention hotels get built today without a subsidy.

Third Ward Commissioner Robert Dean said he felt the city was doing everything it could to handicap and discourage the developers from doing business with the city.

“I think it is counterproductive to what the city is about,” said Dean, while adding that the city has “given away the store” to other developers with Renaissance Zone status, tax breaks and variances.

Dean and 2nd Ward Commissioner Rick Tormala also remarked that they want city staff to tell them how much it will cost the city to upgrade and maintain its current home, which was built in 1968. They felt that figure should be thrown into the equation in relation to what a deal might cost the city.

Tormala also emphasized that he didn’t want the city to lose the income tax revenue that it gets from workers at the U.S. Post Office’s downtown headquarters, a site seen as part of a possible expansion project for a new hotel based in the former Olds Manor.

Amway co-founders Richard DeVos and Jay Van Andel recently said they intend to buy the vacant manor, a building just north of the new convention center, from Peter Secchia, and talk has the post office moving to property it owns in Kentwood and delivering its tax revenue to that city.

Logie pointed out that the option doesn’t stop others from looking at other sites for a downtown hotel that would cater to DeVos Place, the new convention facility going up on Monroe Avenue.

“I don’t read this option as foreclosing on,” he said, “or not encouraging others to proceed with their projects .”           

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