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Is City Hall Charging The Right Price
GRAND RAPIDS — Parking commissioners gave their support last week to the sale of a city-owned surface lot to 20 Monroe Building Co., a limited partnership headed by Gregory Gilmore of the Gilmore Partnership.
But commissioners also suggested that the city have a three-year-old appraisal of the property updated before it signs on the dotted line.
The lot is at 26 Monroe Ave. NW and is adjacent to The BOB, a warehouse at 20 Monroe NW that the Gilmores renovated into an entertainment complex. The partners want to buy the lot to add a theater, a family-style restaurant and, maybe, a boutique hotel to The BOB.
But a potential stumbling block to getting a deal done is trying to decide what the 11,360-square-foot lot is worth.
The city had an independent appraisal done on the property in July 2002, an assessment that set the lot’s value at $39.31 per square foot and at an overall price of $446,562.
In the sliding-scale option the city has offered 20 Monroe, the price is $498,818, or $43.91 a square foot, but only if the deal is closed by the end of this year. After that date, the city’s asking price rises. The current price marks an 11.7 percent increase since the appraisal.
The city’s policy is to raise the value of its property by roughly 3 percent each year. A bump of that size for each of the last three years would bring the square-foot price of the lot to $42.95 and its market value to $487,912, or about $11,000 less that the current price.
So parking commissioners wondered whether the city was overcharging for the lot, or was the property worth more than the city was asking for?
City legal consultant Dick Wendt, a partner at Dickinson Wright, told commissioners the price of downtown real estate has a wide range. He said a parcel at Grandville and Cherry was appraised at $29.27 a square foot, while a site at Oakes and Ionia sold for $61.14 a foot.
“It gives you the idea that prices are all over the place,” said Wendt.
Parking Commissioner Bob Sullivan, quoting from a fax sent by Michael McDaniels, said the former site of an office furniture showroom at Ottawa and Louis was bought by a bank for $1.9 million. That parcel is close to the lot, is somewhat comparable in size, and sold for four times more than what the city is asking for its lot.
McDaniels, who manages 50 Monroe Place, an office building just north of the lot, said the city’s asking price was soft. In a letter to Pam Ritsema, director of Parking Services, he wrote the value of the development going up on the lot should be considered in its selling price. He said that if a four-story, 40,000-square-foot building was planned for the lot, then its asking price should be $1.2 million.
Gilmore told commissioners that he wants to build a performance theater and a family-style restaurant on the lot. He said the theater would have casino-style seating for 1,200, but have a capacity of 1,500 for some events.
“It could be used for a lot of different things,” he said. “My goal is to build a theater. We’d get a lot of shows that don’t come here.”
Gilmore said he hasn’t spoken recently with the operator that inquired about building a boutique hotel over his theater, so he wasn’t certain where that portion of the project stood.
The development agreement that the partners would be required to sign with the city calls for them to build at least a 20,000-square-foot structure and invest at least $3 million in the project that has to be finished within three years of the closing date. The purchase price of the lot would be doubled if 20 Monroe failed to meet the requirements.
If a deal isn’t closed this year, the price rises to $513,813 next year and to $529,262 the following year. The option will cost the partners $10,000 this year, $20,000 next year, and $50,000 the year after that. The option payments will be applied to the purchase price at closing. But if a deal isn’t struck, the city can keep the option payments.
Besides The BOB, the Gilmore Partnership owns Bite, Rose’s, the Thornapple Village Inn, Pinhead’s, The Flat River Grill, and the Kirby Grill in West Michigan. The Gilmores have wanted to add a theater to The BOB for at least three years.
City commissioners aren’t required to update the appraisal, and Economic Development Director Susan Shannon wasn’t convinced that doing so would change anything.
“We could get three or four appraisals and get three or four different numbers. It could come in at less. I don’t want to hold up Greg anymore,” said Shannon.
“Greg has been most patient with the city,” she added. “It took some time to get the property appraised.”