Goodbye And Good Buy

March 24, 2006
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GRAND RAPIDS — The island shrank on its way to the market.

The city-owned PublicWorksIsland at

201 Market Ave. SW
, the biggest chunk of the 30-acre mystery development, was listed in January as being “approximately 19 acres” in size. But a recent appraisal downsized the island to 15.8 acres, or 130,680 square feet less than initially thought.

Although smaller, the property still carries a big appraised asking price of $35 million — which works out to be almost $2.22 million per acre or $50.96 per square foot. The site sits on the east bank of the Grand River with about a quarter-mile of river frontage. And the city plans to hang on to 38,550 square feet of it, just under an acre, for public access to the river.

The city is also selling a 31,345-square-foot parking lot on

Ottawa Avenue
near
Fulton Street
for $1.725 million or $55 per square foot. The lot isn’t on the river. And the city sold the former City Centre parking ramp site at
Division Avenue
and
Fulton Street
, a 37,000-square-foot parcel, for $2 million, or $54 a square foot, late last year. It doesn’t have river frontage, either.

So is $50.96 a square foot a good price for the island?

Rockford Companies COO Kurt Hassberger told the Business Journal that the square foot price was in line with other parcels located south of

Fulton Street
. But the other properties are much smaller and, of course, carry a much tinier price tag.

“The per-square-foot number is probably in the ballpark. But one of the issues obviously is, when you have a site that large, would it command that big a price per square foot as smaller sites would? I don’t know the answer to that question necessarily,” he said.

The buyer will be responsible for the environmental assessment of the property and any remediation cost associated with the site, which raises the development cost. The buyer will also be responsible for demolition, site investigation and preparation, and utility relocation, if that becomes necessary. And the buyer will have to build the public walk along the river on the portion of the property the city will keep.

“There are just a million factors that enter into the value of real estate. So whether that is a good price or not, I really don’t know,” said Hassberger.

Blue Bridge Ventures CEO Jack Buchanan said the true value of the property doesn’t lie with the appraised price, but with the development planned for the site.

“You’ve got to figure out the type of project you’d build, how much it would cost, what the market is willing to pay you for that, and from there you back in and figure out what you can afford to pay for the dirt,” he said.

“Then combine that with the (tax) incentives that would help justify that number,” he added.

But the city plans to use the brownfield tax incentives from the project and the proceeds from the sale to relocate the 200 city vehicles and piles of rock salt currently stranded on the island, although no new sites were identified last week.

“We’re working on that,” said Deputy City Manager Eric DeLong.

Buchanan said a project that could pay $35 million for the island should be able to create enough tax-increment revenue that some could go to the developer and the city could use a portion to back its bonds, especially since there isn’t any tax coming from the property now.

“My point is there probably are additional dollars that could be utilized by a developer and still fund the relocation of a public use by the city. That is how we promoted the model in the past, that it was something that could work for both sides,” said Buchanan, who was the first to approach the city with that funding concept.

DeLong didn’t reveal how much it would cost the city to relocate, but he did say that the city may have to bond to cover the difference between the sale price and the relocation cost.

“We may incur debt,” he said.

Still, city commissioners began waving goodbye to the island last week as they agreed to accept “letters of interest” on the parcel from potential buyers through May 19.

But 2nd Ward Commissioner Rick Tormala, the lone vote against requesting those letters, said the city should have found a relocation site first in order to lessen the moving cost. He said property sellers can now demand top dollar from the city for a new site knowing the old one is for sale and the city has to move.

“We don’t know what the cost will be, but we do know it will be substantial,” he said.

One public official, not quoted in this story, told the Business Journal that vacating the island for a new site would likely cost the city about $70 million.

The city will pay a brokerage fee of up to 2 percent for the sale of the island, based on the cash payment the buyer makes at closing. Closing would take place before June 30, 2007

Potential buyers are to include their interest in the property, their plan for the site, their past experience with projects, and their financial ability to develop a project in their letters to the city. Actual requests for proposals will be made in June.    

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