Development Plan Clouded By Precedent
GRAND RAPIDS — One term in the purchase option city commissioners approved last week for a city-owned downtown surface parking lot requires the buyer to submit a detailed development plan that includes information on how the project will be financed.
Second Ward Commissioner David LaGrand said he liked that idea, which also calls for the buyer to post a performance bond equal to the property’s purchase price of $1.9 million, just in case the project doesn’t go forward as detailed.
“We have a performance guarantee,” he said.
But is the development plan relevant and enforceable when the city has already set a precedent by letting one buyer of a city-owned property make major changes to its project?
Two West Fulton LLC is in the process of buying the former City Centre parking ramp property at Division Avenue and Fulton Street, but isn’t building the project it detailed in its plan.
Two West said changes in the economy made it impossible to draw a major retailer to the project as planned, declining housing prices turned the condominiums it planned to build into apartments, and the parking spaces the firm planned to provide were wiped from the development plan.
All the changes were OK’d by the city. Commissioners didn’t hold Two West to its plan, and extended the purchase option three times — extensions the firm paid for.
But instead of buying the entire property, according to the purchase option, the city is letting Two West purchase about half of it, with the Downtown Development Authority financing the deal, and the city is paying for the parking to the tune of $9.4 million.
20 Monroe Building Co. LP had its option extended last week on a roughly 30,000-square-foot city-owned parking lot at 26 Monroe Ave. NW for a project that would expand The BOB, at 20 Monroe Ave. NW. The firm wants to add a theater, a hotel, 40 condos, two plaza levels of restaurants, shops and service businesses, and five floors of parking on the lot, which is to the immediate north and east of The BOB.
Will the city give 20 Monroe the same consideration it gave Two West if the economy doesn’t improve? Will changes be allowed to the development plan for The BOB expansion if that project isn’t finished in four years, as the purchase option requires?
The Business Journal asked Gilmore Collection CEO Gregory Gilmore, a lead partner in 20 Monroe Building Co. and co-owner of The BOB, whether he feels his firm should get the same treatment that the city has given Two West.
“I can’t speak to that,” he said, adding that his development plan isn’t due until the end of the year.
But Gilmore did say he is optimistic that the expansion, which could reach up to 20 stories, will go forward as planned. He believes economic conditions will get better by the time the project has to be done. He also said the market research he has conducted and the people he has spoken with, such as hotel operators, have given him confidence the expansion will get built.
“The reality is, it’s four years away,” he said.
First Ward Commissioner Walt Gutowski asked Gilmore why he included condos in his project after Two West switched from condos to apartments for The Gallery on Fulton.
“There are just 40,” he said of the residences in his development while Two West had about 70 condos in its original project.
“I think with the amenities we’re bringing to the project and with our unique mixed-use, we will create a demand for those,” he said of the condos.
Mayor George Heartwell asked Gilmore to share his group’s financing plan for the project with the Commission and a cable television audience, but he declined.
“It’s too early to reveal that right now. We have some partners at The BOB who have some ability,” he said. “Until we get this tied up, I can’t go any further right now.”
A multi-purpose, below-ground, 600-seat theater with space for 1,500 customers for some events such as concerts anchors the development. Above the theater would be the two plaza levels, then five levels of parking, then a six-story hotel, and then the condos.
“It’s a very mixed-use project with a lot of offerings,” said Gilmore.
Parking Services Director Pam Ritsema told commissioners the sale price of $1.9 million represents $65 a square foot. The square-footage price is higher than first reported because a right-of-way off Monroe Avenue was inadvertently included in the sale.
The purchase price rises to $2.09 million if 20 Monroe doesn’t close by the end of this year. The one-year option extension gives the developer until March 30, 2009, to close.
“The option period gives him the time to figure out the feasibility of his project,” said Ritsema.
20 Monroe is paying $100,000 for the option, money that will be applied to the purchase price if the deal closes. But it’s money the city can keep if the deal doesn’t close. 20 Monroe also spent $80,000 on its first option for a smaller portion of the lot in March 2005. That contract was good for three years and was set to expire at the end of this month.
As for The Gallery on Fulton, the state approved Two West’s request for a $3.4 million state tax credit last week. Two West is a partnership between Second Story Properties of Grand Rapids and RSC Associates of Chicago. The Gallery will become the new home for the Urban Institute for Contemporary Arts, and also will offer 66 apartments and 2,500 square feet of retail space. Two West is investing $34 million into the project, which is expected to create 38 new jobs.
Two West has until March 31, next Monday, to close on its purchase agreement with the city for its portion of the property at Division and Fulton.