Investing in the past for the future
A lot has changed in the world of commercial development since Jonathan Rooks was featured on the cover of the second issue of Commercial Quarterly in May 1999. But one thing that has not changed is the 46-year-old urban redeveloper's ability to see value in buildings where others see only a wrecking ball.
"Functionally obsolete buildings are not worthless. Functionally obsolete buildings can be saved," said Rooks, sole proprietor of Parkland Properties in Grand Rapids.
"Ten years ago, you couldn't do this," said Rooks, because the Renaissance Zone legislation in Michigan was just two years old and many developers had not caught on to its power to make investment in ailing properties viable.
"No one had done a residential Renaissance Zone property," said Rooks.
The "this" he was referring to is his Highpoint Flats project in downtown Muskegon. The $8 million renovation of the 93-year-old former bank building into 70 condos is just getting underway, starting with construction of a sales model on the sixth floor of the nine-story building. Prices will start at $90,000 and top out at $300,000 for a 3-bedroom, 2,250-square-foot unit on the eighth floor, with a loft on the ninth floor.
It is the tallest building in downtown Muskegon — with the exception of the Shoreline Inn, which he also owns — and has marvelous views of Muskegon Lake and even Lake Michigan from the top floor.
Highpoint Flats is a state-designated Renaissance Zone, which means people who live there will not have to pay state or local income or property taxes until 2023. Rooks said that a couple earning $100,000 a year or more could live there almost for free during that time, when one subtracts the tax savings from the monthly mortgage payment.
The old office building has sat vacant for several years and its ragged appearance, inside and out, would be daunting to many people who don't have the vision Rooks has had since the start of his professional career 31 years ago — when he was 15.
A Grand Rapids native, Rooks began working for his Scoutmaster at around age 13, helping him renovate one house and build another. At age 15, Rooks persuaded his Scoutmaster/boss, Bill Buchanan, to invest $9,000 in two houses on Grand Rapids’ West Side. Buchanan and Rooks were business partners, with Rooks doing much of the grunt labor to renovate the houses.
"One was condemned and the other should have been," quipped Rooks.
Despite that, they successfully renovated the houses as rental units and sold them for a handsome profit.
Rooks, who is single, loves to travel and has visited 56 countries. His pattern is to work diligently for several years and then take a sabbatical. The first one came after two years at Calvin College when he spent eight months in Europe. There, Rooks learned that he could buy late model, high-end German automobiles from private owners and re-sell them in Michigan for twice what he had paid. (The exchange rate was greatly in his favor.) Eventually, Rooks had imported 22 German autos, gaining experience in maritime insurance, transcontinental shipping and other intricacies of business. He hired fraternity brothers to go to New York with him to drive the cars back; their "pay" was an all-expense-paid trip to New York.
Rooks completed his education at the University of Michigan, earning a bachelor’s degree in business administration. He got more education around 1989, when he bought an option on property in Ottawa County's Crockery Township. The township would not grant him the necessary permits to develop it.
"I learned the hard way for the first time how quickly you can lose money," said Rooks.
"Once you buy property, you have to be committed to it," said Rooks. The commitment means time as well as money. An entrepreneur who invests in a property for development or redevelopment can’t shift his attention to another property without risking failure. A lot of developers are good at marketing or finance or renovation and design, said Rooks. They might even have deep pockets, but if they miss one critical component — such as the likelihood of obtaining permits from the local zoning board — all may be lost.
Finance is a factor in development that has changed over the past 10 years, noted Rooks. When he was getting really busy in 1991, credit was very tight, requiring that he ante up 20 to 30 percent of the cost in cash. As the economy grew exuberantly through the 1990s and well into this decade, credit requirements went limp on commercial deals, requiring as little as 10 percent down. "Now it's right back to 30 percent again — 30 to 40 percent," he said.
Another major change is the Michigan Business Tax, which Rooks said is far worse than the bite from the Single Business Tax. He estimates his tax liability under the MBT is a 500 percent increase from the SBT; a quick call to his accountant confirmed that.
Rooks said the MBT has made commercial development "a lot less fun and more frustrating."
Another change is the greening of America — a groundswell of public support for sustainable lifestyles and less waste of energy and resources. Renovating an old building — making it more energy efficient, and re-using it rather than tearing it down — is now a "green endeavor," noted Rooks.
His business model is focused on two areas: properties on water with access to Lake Michigan, and old urban buildings redeveloped as condos. In Grand Rapids, Parkland Properties owns Boardwalk Condominiums, Union Square Condos, City View Condos and Monroe Terrace Condos. City View is sold out and only six of the 183 Union Square units are available. About 190 of the 235 Boardwalk units have sold; the remainder are currently rented as apartments and refinished as condos, to the new owner's specifications, as each one sells.
In Muskegon, Parkland Properties has Highpoint Flats and acquired title in May to the Shoreline Inn, Terrace Point Marina and the adjacent restaurant, Rafferty's. The 10-story Shoreline Inn was completed in 2002, with 140 hotel rooms overlooking Muskegon Lake. Rooks is adding business amenities to its luxury amenities to increase its potential for business traffic in the off-season. Rafferty's has 8,900 square feet and overlooks the marina. It is closed right now but Rooks' goal is to find a professional restaurateur to lease or buy it no later than September. Terrace Point Marina has 114 slips and direct access to Lake Michigan via Muskegon Lake.
In Grand Haven, Rooks has The Wharf Marina, with direct access to Lake Michigan and a 40,000-square-foot boat storage facility with racks for 199 boats. It’s a 10-minute walk from the Grand Haven business/restaurant districts.
One of his early marina projects — the one featured in the 1999 Commercial Quarterly — is Ellenwood in Montague. It includes 60,000 square feet of heated winter storage for yachts up to 80 feet long.
In all, Rooks owns 15 properties, including a large home on the beach in Norton Shores that he rents to vacationers, 62 rental units in a townhouse complex in Hudsonville, and retail space in the former Montague City Hall.
Rooks said his Union Square project — the old Union High School in downtown Grand Rapids — was the most challenging from a construction point of view. He said that for some reason, the most frustrating and challenging projects "end up being the most rewarding — the ones that we're most proud of."
The old high school, at the intersection of U.S. 131 and I-196, might have been torn down if not for its redevelopment by Rooks. In 2007, not long after the first condos were sold, Parkland Properties received the Gerald R. Helmholdt Grand Award for the project. Close to 100 Grand Rapids businesses were nominated for a variety of awards from the Neighborhood Business Alliance and Neighborhood Ventures, seeking to recognize projects that serve as catalysts for yet more investment in the city's various neighborhoods, and Union Square was judged the best overall.