Developers will not face eminent domain suit

July 19, 2010
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A purchase agreement was reached late last week between Ed De Vries Properties and Grand Valley State University for the former A&P Warehouse at 38 Front Ave. SW, which De Vries Properties owned. GVSU will buy the property for $4.42 million.

The university plans to raze the four-story structure, which sits on the west bank of the Grand River just south of Fulton Street, and put up a new building for its Seidman College of Business. The business school is currently housed in the downtown Pew Campus at 401 W. Fulton St.

In the lawsuit GVSU filed in June in Kent County Circuit Court, the public university offered De Vries Properties $2.34 million for nearly two acres of land and the 100,000-square-foot building that sits on it. The property is near the U.S. 131 expressway, alongside the S-curve. The university’s board characterized the legal action as “necessary … in order to expand and enhance its educational facilities in the city of Grand Rapids, which will benefit the public.”

Mike De Vries, who manages the company with his father Ed, said they were still trying to understand the legal ramifications of the suit when the Business Journal first contacted him shortly after it was filed. He said then they were speaking with their attorney and hadn’t had a chance to decide what their next step would be.

“I’m disappointed. I’m disappointed in the lawsuit itself, but also in the manner that we learned about it. We learned about it indirectly,” said Mike De Vries, who added that a third party, not GVSU, notified him of the legal filing.

Mike De Vries said he and his father had been in negotiations with the university for a long time and thought they had reached a purchase agreement late last year for a price that was roughly three times the amount GVSU cited in its legal document as “just compensation” for the property.

“They bounced around on what they said they wanted to do, and we always did our best to accommodate that. But it’s been a couple of years,” he said of how long ago the talks took place.

“It’s substantially more than their offer,” he said of the property’s value. “There aren’t a lot of large downtown parcels left. I don’t know if there are any.”

The De Vries property is 75,000 square feet, which means the $2.34 million purchase price named in the lawsuit works out to be $31.20 per square foot. In recent years, downtown parcels have sold from $55 to $70 per square foot. Downtown properties along the river have gone for even more.

A source in the commercial real estate industry, who wished not to be identified, said that two vacant buildings directly across the river from the De Vries warehouse sold for $168 per square foot more than a year ago. Those buildings are at 74 and 90 Market Ave. SW.

“It’s a large downtown riverfront parcel that, in addition to the land, has other components to it,” said Mike De Vries of the warehouse site. Two of those components are the revenue the firm receives from the building’s tenants and the lease income it receives from the cell towers on the site.

An eminent domain suit normally leaves a property owner with few options. A governmental entity that files this type of suit claims there isn’t a reasonable alternative available to the property it wants. So if a property owner can show there are other practical parcels to choose from, then he or she could win such a case.

An eminent-domain price must be based on an appraisal of the property, and a property owner can contest that price by filing a dependable counter-appraisal. An owner also can argue that a property’s value is worth more than the “just compensation” figure listed in the suit and file an appraisal of that value with the court. An owner also can argue that the government’s intended use for a site doesn’t actually serve a public purpose. The best solution, though, may be reaching an out-of-court settlement.

“We have had some productive discussions with Grand Valley,” said Mike DeVries when the Business Journal re-contacted him for the story, about a week before the potential agreement was reached.

The De Vries had been working with the university to redevelop the warehouse for the business school. Cornerstone Architects President Tom Nemitz was selected to redesign the building for that purpose. But that plan, which included an addition to the building, disintegrated last fall when the school said it wanted to put up a new structure on the site instead of redeveloping the warehouse. The university’s board told the De Vries at that time that GVSU would file an eminent-domain suit if they didn’t accept the school’s $2.34 million offer.

“There have been other real estate people and other business people who have just asked us, ‘What’s going on. What are these people doing to you?’ When it happens to you, you have kind of a strange feeling about it,” Mike De Vries said.

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