DDA backs Brookstone project, again
The Grand Rapids Downtown Development Authority made an unusual move recently and gave additional financial support to a historic renovation project that promises to bring affordable housing units to the district.
The DDA awarded two limited liability companies, which were formed by Brookstone Capital, three grants totaling $228,550. Those awards came 11 months after the DDA and city commissioners granted Brookstone Capital a payment in lieu of taxes for the project. The tax-replacement program is more commonly known as PILOT and is applicable to construction work that delivers affordable housing.
“The project has come up with a (funding) gap and has been trying to fill that gap,” said Eric Pratt, a planner with the DDA, about why the development was receiving another incentive from the board.
In the past, Pratt said the DDA has limited its financial support for a specific project to a single award, but he added that a precedent to that rule-of-thumb exists: The DDA gave the redevelopment of the former Steketee’s Department Store on Monroe Center several awards.
One DDA grant gave $137,800 for façade work, utility upgrades, barrier-free access and a few other eligible items to the buildings at 209 and 217 S. Division Ave. Another $75,000 grant for the same type of work went to 17 Williams St. SW. A third DDA grant worth $15,750 will go toward filling the areaway in front of the Williams Street building.
The PILOT will allow Brookstone Capital, which is based in Midland and headed by developer Karl Chew, to take the buildings off the property-tax roll for 18 years. Instead of paying property taxes, the firm will pay the city 4 percent of its total rental income that it gets from the housing units. Commercial space in the buildings will pay property taxes. Rents are projected to range from $80 to $687 a month.
“That payment (PILOT) is not captured by the DDA,” said the board’s Executive Director Jay Fowler. “We did spend quite a bit of time evaluating our Building Reuse Program.”
The BRIP, as the reuse program is known at the DDA, accounted for the two largest grants the board awarded the development firms. The two totaled $212,800. Fowler said board members considered all the taxes that will come from the project, such as the income taxes the buildings’ residents would pay and the tax receipts that would come from the construction work, before they made the additional awards.
Brookstone Capital plans to spend roughly $11.7 million to renovate the three buildings into 45 rental units, with six of those to be live-and-work apartments. The firm is using federal and state historic tax credits, brownfield tax credits, low-income housing tax credits and some private investment for its financing. The apartments will qualify as affordable housing and the rent won’t be subsidized. The ground floors will feature commercial space. All three buildings will be LEED certified, most likely at the Silver level.
“The area, as you all know, is challenged. The buildings have been vacant for years,” said John Byl, a partner at Warner Norcross & Judd, who represents Brookstone Capital. Byl said work on the project would get underway this spring.
DDA Chairwoman Kayem Dunn said one reason the board went to bat for Brookstone Capital a second time is that Chew has a good track record and has secured financing for the project. Reportedly, an out-of-state and unidentified investor has agreed to buy at least a portion of the tax credits from Chew, and that move helped fill much of the financing gap.
The three buildings are in the Heartside Business District and are close to Brookstone Capital’s two completed housing projects: the Metropolitan Park Apartments at 350 Ionia Ave. SW and the better known building at 101 S. Division Ave. The Division Lofts Apartment building won a development-of-the-year award from the University of Michigan and the Urban Land Institute in 2009, and the Michigan Downtown Conference gave the structure its top downtown living award last fall.
“The successful redevelopment of the 101 South Division building and its acceptance in the Heartside community inspired our firm to continue the revitalization along the South Division corridor,” said Kristine Hibbard, operations manager for Brookstone Capital.