DDA keeping watch over Heartside buildings

November 7, 2008
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The Downtown Development Authority was able to provide financial support recently for the renovation of one building in the Heartside Business District, but was unable to help eight other building owners in the district with façade upgrades.

As for the building the board was able to assist, Grand Rapids Mayor George Heartwell was very pleased with that outcome. He called the renovation of the eight-story building at 35 Oakes St. SW a major project for the business district.

“This is a facility that has deteriorated over the years and has been vacant,” he said. “This sort of remains the big sore thumb in that neighborhood.”

In response to the renovation plan that Rockford Development Group has for the structure on the northeast corner of Oakes Street and Commerce Avenue, the DDA agreed to award the firm a 10-year tax capture to help pay for eligible activities such as creating barrier-free access throughout the building.

“You’ll likely have to reimburse about $180,000,” said DDA counsel Dick Wendt of the 10-year payback.

Board members approved the capture even though the amount Rockford will pour into the project fell short of the board’s 2006 policy, which requires a minimum investment of $5 million before the DDA can become involved in a project. They waived the policy’s required minimum investment amount for Rockford, which proposed sinking $4.5 million into the building, a figure that includes $500,000 worth of soft costs. The agreement the company received from the DDA requires Rockford to spend at least $3.75 million on the renovation.

“We might want to lower that threshold for renovation projects,” said DDA Executive Director Jay Fowler, who added that very few renovations of existing downtown buildings meet the board’s minimum $5 million mark.

“But that’s a discussion for another time,” said Fowler.

In addition to qualifying for DDA assistance, the project also is eligible for a Michigan Business Tax credit. Rockford, though, has to receive local funding to be able to collect the credit, and Fowler said the funds the firm will get from the DDA meets the state’s standard. Rockford may also seek brownfield tax credits for the renovation.

Rockford Development CFO Kurt Hassberger said his firm bought the building in 2003 when it had been vacant for about a year. The company plans to turn the top seven floors into 42 market-rate studio, one-bedroom and two-bedroom apartments. The ground-floor space would be dedicated to the building’s residents and could contain a mix of things like retail, a fitness center and food service.

Hassberger said he hopes to fill the building with students from the Thomas M. Cooley Law School. The school is across Oakes Street from the structure, which was previously known as the New Merton Hotel and later as Heartside Manor.

At first glance, the revival of this building was thought of as being the last piece of the $100-million-plus Cherry Street Landing project, which Rockford has been involved with for more than a decade. But when Rockford Companies CEO and co-founder John Wheeler revealed that he would like to build a new baseball park and amphitheater downtown, he referred to that project as the landing’s last piece.

The DDA agreement requires Rockford to begin the renovation of 35 Oakes by July and have the apartments ready for occupancy by the end of 2010.

But the DDA’s plan to help eight building owners restore the facades on their South Division Avenue structures has been put on hold.

Last April, the DDA applied for a new grant created in February by the Michigan State Housing Development Authority that offered money to improve the exteriors of a series of buildings. The grants ranged from a low of $25,000 to a high of $100,000. The DDA asked for a grant totaling $99,500, and the board agreed to match those funds if MSHDA approved the application, meaning there would have been a pot with $199,010 to make exterior upgrades to the buildings on the west side of the 100-block of Division.

But Fowler learned that MSHDA didn’t approve the board’s application.

“We were disappointed to hear that,” he said.

Fowler then indicated that the plan to restore the building fronts wasn’t dead.

“We’re going to see if we can make something happen,” he said.

Under the original plan, each building owner had to kick in 20 percent of the façade-improvement cost, and the DDA and MSHDA would split the rest of the cost.

The addresses of the buildings designated for the improvements run from 101 to 139 S. Division and are in the Heartside Historic District, meaning the city’s Historic Preservation Commission would have to approve the upgrades.

Fowler said the DDA chose that block of South Division as its target because new facades are badly needed for most of the structures and because the buildings on the east side of the street have been renovated.

As a sign that the board hasn’t given up on improving those buildings, the DDA awarded Brookstone Capital LLC a $50,000 building reuse grant. Brookstone Capital, a firm based in Midland, is renovating the old Watson & Heald building at 101 S. Division, an address that the DDA included in the MSHDA application.

The DDA grant can be used to give the 124-year-old structure barrier-free access and a fire-suppression system. Grant funds can also be spent on preparing the ground-floor for commercial use. Brookstone plans to build 20 rent-subsidized apartments on the second and third floors.

The Watson & Heald building is only about a block south of the construction site for the $34 million Gallery on Fulton project at the southwest corner of Division Avenue and Fulton Street. The Gallery will be the new home of the Urban Institute for Contemporary Arts, 66 rental apartments, and a parking ramp being paid for by the city.

The project’s developer is Two West Fulton LLC, a partnership between CWD Real Estate Investments, Triangle Associates and Chicago-based RSC Associates.

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