Time is running out for Imperial Metals project
After nearly seven years of trying to redevelop the former Imperial Metals factory into office and retail space, Irish Twins III may have only a few weeks left to get a development deal done with the city, because commissioners are set to review a binding contract April 21.
Commissioners chose that date in what may turn out to be their deadline day regarding the project, which requires Parking Services to buy property on the site at 801 Ionia Ave. NW and build parking spaces to support the development. But Irish Twins owes back taxes on the site and the land is in receivership. That status caused commissioners to lose confidence the project could be completed, so they amended a proposed purchase agreement the department had with Irish Twins.
Instead of buying two parcels and building two lots, they decided to buy one parcel and build one lot, then get an option on the second parcel and construct the second lot when the project’s build-out was done. Doing that would cut the city’s purchase cost from $1.6 million for almost 48,000 square feet to an estimated and prorated $640,000 for about 19,200 square feet, or roughly 40 percent of the original deal.
Commissioners tabled their contract change a few weeks ago to give both sides time to write a new agreement. But as of early last week, an accord hadn’t surfaced.
“We have been in discussions with them and we have not reached a conclusion,” said Parking Services Director Pam Ritsema.
Ritsema said Irish Twins, headed by developer Jack Buchanan, made a counteroffer; she suggested commissioners extend the tabled motion that changed the purchase agreement indefinitely, so negotiations could continue. But commissioners wanted an end date.
First Ward Commissioner James Jendrasiak said not having a deadline would just drag everything out. Second Ward Commissioner Rosalynn Bliss said the city has done its due diligence on the transaction and has worked with the developer to try to reach an agreement.
“I’m not comfortable with not having a timeline,” she said. “Either the project is going forward or it’s not.”
Ritsema said she may return to the commission April 14 with a recommendation on what action commissioners could take. But it’s likely at least one board member, 1st Ward Commissioner Walt Gutowski, will not only be looking for a change in the number of parcels the city will immediately buy; he will also be looking for a lower purchase price.
The amended agreement still has the city paying roughly $33 a square foot for the single parcel, which is the base price the city is being asked to pay. Gutowski, though, has felt all along the land was priced too high.
“If you look at the cost of parcels that have been for sale throughout the city, and the things that we’ve purchased and I have (purchased) as a personal developer, it’s been clear to me the value of that property is about $800,000,” he told the Business Journal.
“We were told that the acquisition price was $1.2 million. But we learned, quite honestly, that the acquisition price was $800,000 in 2002,” he added.
Gutowski said the city learned that Irish Twins Group, the first firm formed to develop the site, bought the property in 2002 for $800,000 and then later sold it to Irish Twins III for $1.2 million.
“It went from Irish Twins Group to Irish Twins III, and I think some of their carrying costs were added to that acquisition cost, bringing it up to $1.2 (million). But the value of that property, from my perspective, is $800,000, and we did learn that when we came out of executive session,” said Gutowski of the closed-door meeting held on March 10, the day commissioners amended the purchase agreement before they tabled it until March 24.
Under the original purchase agreement, the city would pay $33 a square foot for nearly 48,000 square feet, resulting in a total price of $1.6 million.
“That is correct. For us to spend that kind of money is not responsible and I don’t see the economic benefit in that area. So it’s an awful lot to bite off,” said Gutowski.
Also part of the initial contract, the city was to have spent $1 million to build both lots and to add some on-street parking around the site at Ionia Avenue and Newberry Street. The city intended to issue $2 million in bonds to pay for the acquisition and construction, but Ritsema said the securities haven’t been sold.
The original agreement required Irish Twins to invest a minimum of $1.04 million into the project and to create a development with a taxable value of at least $2.86 million. The developers also had to provide the city with two letters-of-credit and make personal financial guarantees. Irish Twins want to turn the vacant building into 40,000 square feet of modern office and retail space.