Old Building Finally Getting New Owner
GRAND RAPIDS — Brookstone Capital LLC closed on a building in the Heartside Business District last week, a structure the city unsuccessfully tried to auction off years ago.
Brookstone Capital, a real estate developer based in Midland, bought the 123-year-old Watson & Heald building at 101 S. Division Ave. from Bantam Capital Investments LLC, a local development firm, for an undisclosed amount last week.
Brookstone Capital Principal Karl Chew said his firm hopes to find commercial tenants for the ground floor of the three-story building and build 21 rent-subsidized apartments on the upper levels. Chew recently told the city that it would cost Brookstone Capital about $6 million to renovate the building and that his firm needs incentives from the public sector to complete the project.
“Once we develop the housing part of it, folks will take interest in the retail,” he said.
Chew said the units would be loft-style apartments with high ceilings.
“We feel we have the right strategy to market the building,” he added.
The company plans to apply for Low-Income Housing Tax Credits from the Michigan State Housing Development Authority, which holds a lottery to determine who gets the awards. Chew successfully received the credits for two projects last year, including the 24-unit Metropolitan Park Apartments his firm opened at 350 Ionia Ave. SW. The other was a 48-unit complex in Kalkaska.
Chew also said Brookstone Capital would apply to the state for historic tax credits, which could be worth up to 20 percent of the firm’s investment in the project. In addition, Chew said he plans to seek New Market Tax Credits for the commercial space and ask the city to base its assessment on rental income instead of the property’s value.
“We’re eager to see this project develop,” said Mayor George Heartwell.
Downtown Development Authority Executive Director Jay Fowler said the DDA would prefer market-rate housing for the site that falls within the board’s border, but the authority wasn’t opposed to the project.
“The current offer is preferable to allowing the building to sit vacant for an additional period of time. Mr. Chew is putting considerable capital at risk by purchasing this property with no assurance that the tax credits would be awarded,” wrote Fowler in a memo to the city.
Fowler said the DDA should be given an opportunity to comment on the Brookstone Capital request, known as a PILOT, before the city commission acts on it. The DDA is scheduled to meet next week.
“I don’t think this will negatively affect the DDA’s tax increment. The ground floor commercial space will be renovated and will remain on the ad valorem tax roll. This should provide a modest increase in tax increment, albeit substantially less than if market-rate housing were constructed,” wrote Fowler.
Chew said the housing would be a mix of one- and two-bedroom units, and qualified renters would have jobs that pay between $13 and $20 an hour. He said calling his housing “low-income” is a misnomer; a better term is “moderate income.” But he also acknowledged that the low-income housing tax credits were worth about two-thirds of his firm’s equity in the project, or roughly $4 million.
Chew also said he hoped to interest Calvin College in the first-floor space. The college leases gallery and work space in the Avenue of the Arts development, which is just south of the Watson & Heald. He said renovating the vacant building would cost from $105 to $125 per square foot.
The city took possession of the building five years ago after the then-owner failed to pay the city $165,000 for the emergency repairs the city made to the roof. The city listed it for sale the following year and even tried to auction it off at a series of Wednesday morning auctions held in the lobby of the old police station and courthouse at Monroe and Michigan.
In 2004, Bantam Capital outbid two other firms for an option on the building and secured the deal with a performance bond worth $165,000, the amount the city spent on repairing the roof.
Bantam Capital planned to build market-rate apartments on the upper floors, and office space and a restaurant on the ground floor. But the firm, doing business as 101 S. Division LLC for the renovation, wasn’t able to find tenants for the commercial space.
Dwelling Place had an option to buy the building from Bantam Capital for six months, but Bantam Capital decided not to renew the agreement when the option ran out in May.
With its sale to Brookstone Capital, Bantam Capital now has to pay the city for the performance bond.
“We have made provisions with them, and they will be getting their money as per the agreement,” said Ted Lott, a Bantam Capital principal.