Report Rejects Calder Hotel

June 24, 2003
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GRAND RAPIDS — A noon report released by city staffers today offered more than two-dozen reasons why city commissioners should soundly reject a proposal from Blue Bridge Ventures LLC to relocate City Hall from Calder Plaza in order to build a 24-story hotel on the site, which is across Monroe Avenue from the new convention center.

But the biggest reason behind the recommendation is that the developer failed to reach zero, meaning that the city doesn’t believe that Blue Bridge and its partner in this venture, Hines Interests LP of Houston, can move the city into a new building without raising the city’s operating budget.

Blue Bridge CEO Jack Buchanan, the catalyst behind the proposal, took the report in stride and said he would continue with his effort to build a 400-room hotel geared to the convention and tourism business on the plaza. He said he has spent millions of dollars on the project, one he has promoted for nearly eight years, and wasn’t ready to quit.

Assistant City Manager Gregory Sundstrom said Blue Bridge failed to meet six conditions found in an option Gallium Group LLC, the partnership Blue Bridge formed with Hines for the project, received from the city last October. Sundstrom said failure to meet any of the six gives the city the right to unilaterally terminate the agreement.

One of those conditions required Gallium to buy the county administration building, also on the plaza. But a Kent County subcommittee unanimously voted on June 3 to remain on the plaza. But after the vote was taken, Kent County Commission Chairman David Morren said the county was open to selling the building outright to Gallium.

Sundstrom also reported that the developer failed to fulfill any of the 17 ‘predicates’ that he said the city and Blue Bridge agreed to during their talks. Perhaps the biggest item on that list was the developer’s inability to get the Michigan Economic Development Corp. to designate City Hall and the plaza as functionally obsolete.

Gaining that status would have given the city $45.7 million in brownfield reimbursement revenue over 30 years. That money would have paid for 42 percent of the $109.6 million in mortgage charges the city would have had over 30 years for its new building.

But without those brownfield dollars, Sundstrom said the $21 million net cost to the city for a new building over 30 years — which has a present-day value of $6.45 million — jumps to nearly $67 million that the city would be on the line for over three decades.

“Sixty-seven million is not zero,” said Sundstrom. “You can present-value that number all you want, but it’s still not zero.”

Sundstrom added that Gallium didn’t make a strong enough offer for the Government Center parking ramp located under the plaza. The developer offered $11.3 million for the site, and pledged to spend $5.9 million on improvements to the ramp and $2 million to upgrade the plaza. The city report said the ramp would generate more than $98 million in total revenue over 30 years, resulting in net revenue of $61 million for the city’s general fund over that period.

“We think the Government Center ramp is worth far more than what they’re offering for City Hall, the plaza and the parking ramp,” said Sundstrom.

In addition, Sundstrom said Gallium was $9.3 million short of the $111.4 million it needs to pull the entire deal off, and that the city could put up its own building for $39 million — or about $80 million less than the developer’s proposal.

Sundstrom concluded that the proposal from Gallium would likely result in significant additional costs to the city and that the city should not pursue the matter any further.

The next step is for city commissioners to decide whether to terminate the option they gave the developer with a 5-to-2 vote in October. Sundstrom told the Business Journal that a date for that vote hasn’t been assigned yet.

Sundstrom said the city met with Blue Bridge more than 50 times since last July, logging more than 300 total staff hours in those meetings. In addition to Sundstrom, Eric Delong, Susan Shannon, Richard Wendt, and Robert White represented the city in those talks. White was part of the city team until he joined the county at the beginning of this year.

Sundstrom added that through June 13, the city had run up more than $28,000 in outside legal fees from the talks.

Blue Bridge paid the city $25,000 for the one-year exclusive option to buy City Hall, the parking ramp and the plaza. The option expires in October.           

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