Studio One Piles Up Some Firsts

November 5, 2008
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Studio One Apartments, at 4501 Woodward Ave. in Detroit, could just as easily have been named Studio First Apartments because the development has captured at least three firsts.

The $36 million project was the first time three Grand Rapids developers — Marcel Burgler of Prime Development, Michael Houseman of Houseman Construction and Thomas O’Hare, a retired executive vice president from the North American division of Host Marriott — headed east, a direction that not very many West Michigan developers have taken.

The mixed-use development was also the first Motor City project to be honored at a Grand Rapids event. Studio One Apartments earned a Development of the Year award at the University of Michigan Urban Land Institute Real Estate Forum held here last month for the very first time.

It was also the first time that Wayne State University participated in a public-private real estate partnership. Not with an east side firm, though, but with the trio from Grand Rapids.

Studio One Apartments is a five-story, 155,000-square-foot structure on the Wayne State campus that features retail space on the ground floor, 124 apartments on the other levels, and a 950-space parking deck on the five-acre site. More than a third of the upscale loft-apartments were leased and five businesses were getting ready to take over the 30,000 square feet of retail space when CQ spoke with the developers.

“We have letters-of-intent, we have interest, we have some signed leases with other tenants, but we don’t expect to really hit full occupancy on this building probably until sometime next year. It’s a big project,” said Burgler, a principal with Prime Development.

“We’re on track with our (leasing) expectations,” said Houseman, president of Houseman Construction.

Burgler said WSU, the state’s third largest university with an enrollment of 34,000 and a noted research school, is transforming from a commuter college that draws most of its students from a three-county area to an urban campus in a growing portion of Detroit called Midtown, an area that has seen $2 billion worth of investments since 2000, according to the University Cultural Center Association.

WSU and the Detroit Medical Center anchor Midtown. The neighborhood also is home to Ford Field, Comerica Park and a slew of cultural attractions, restaurants, theaters, condominiums and nightspots. Midtown annually attracts over two million visitors.

“For Wayne State University to go out on a limb in a public-private partnership with somebody from the west side of the state — I think was a big deal for them, and it was a big deal for us,” said Burgler, a principal with Prime Development.

“This piece of the puzzle for them was the outflow of their strategic planning process in which they said we want to be more of an urban campus, we want to have the lights on at night,” he added.

Burgler said O’Hare played a key role in getting the project headed in the right direction, as his lengthy experience with Marriott and vast knowledge of commercial markets pegged the development as something they should do.

“He has been kind of a mentor to both of us. He is a patient, wise and very diligent man. He has been very, very instrumental in us being able to pull this off,” said Burgler.

The partners invested $22 million in Studio One, while WSU put another $14 million in the project, which is at Woodward Avenue and Canfield Street, less than two miles from Comerica Park. Fifth Third Bank was involved in backing the project, and the city and state awarded the development brownfield and business tax credits. Design Plus of Grand Rapids served as the architect.

Even though the work on Studio One is done, the affiliation the partners have with the university may not be over, as they may do another project together on a nearby site owned by WSU and on which the developers have an option. The original plan for the second phase of the development was to build a series of multi-family residences there. But the jury is still out on whether those buildings will house condos or apartments, and whether economic conditions will allow the project to go forward in a timely manner.

“What you can’t foresee before you sit down as far ahead as two years before you do a project is how the market changes, and the market has changed dramatically over the last year. Certainly, at this point in time, you wouldn’t want to build additional condominiums,” said Burgler.

“We’re still actually doing some construction on the (Studio One) site, the retailers are building out and we’re finishing off some issues. You’ll see some construction on the site until next year sometime. So for us to say at this point we’re going to do Phase 2 would be premature. I think we’re going to need some time to assess where we are and to reflect on the market.”

As for doing a project in a city that he hadn’t worked in before, Houseman said things went fairly smoothly. About the only bump in the road was dealing with a city mandate called Executive Order 22, which Detroit officials approved after the passage of Proposal 2 in 2006. The order requires that local residents make up half a project’s labor pool when public dollars are part of a development’s financing.

“We felt obligated to meet that requirement, but we couldn’t do it by just using the unions. So we were more of a split shop, which was a risky thing to do because downtown Detroit is a stronghold for the unions,” said Houseman.

“We were the first one to actually meet all of their needs for the project, and it was not an easy effort. All the trades had to come together and work with the city to incorporate those people in it. It was quite a success for the city and the university, and we were happy to be part of that.”

Actually, Houseman was being very modest with his comment. At the project’s ribbon-cutting ceremony, Burgler said Ed Tuggle, the Detroit official that oversaw the project, gave Houseman more credit for the development’s success in meeting the city’s labor requirement than he was willing to take for himself.

“He was there to publicly state that Houseman Construction did a phenomenal job in implementing that executive order, and he held up our project as a model for future projects in the city,” said Burgler of Tuggle’s comment.

“There isn’t one person or organization, meaning Wayne State, Detroit or the financial institutions that are involved, that doesn’t see this as a glaring success, which is neat.” CQ

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