City approves brownfield plan for $42M Diamond Place
Third Coast adds another piece to financing package for multi-income project.
A new development on the Michigan Street corridor is in line for $10.7 million in brownfield redevelopment money.
City officials recently approved a brownfield plan amendment for Diamond Place, a $42 million mixed-use, multi-income project near Michigan Street and Diamond Avenue NE in Grand Rapids.
Diamond Place LLC, established by Third Coast Development for the project, has an option to acquire the 2.8 acres at 412 Diamond Ave. NE; 1005 Proos Court NE; and 1003, 1015 and 1037 Michigan St. NE. Although Proos Manufacturing Inc. currently has it operations at the site, the company plans to relocate to Oak Industrial Drive in Grand Rapids.
The proposed redevelopment project would include three new multi-story, mixed-use buildings with approximately 160 residential units of one- and two-bedroom apartments, and about 23,000 square feet of ground floor commercial space. The project, which is estimated to have a hard construction cost of $33 million and overall investment of $42 million, would also have a multi-story parking structure with 270 parking spaces.
David Levitt, principal at Third Coast Development, said the project is fairly complex and is a mixed-use redevelopment of the Proos Manufacturing site, which has environmental issues.
“We have to do some environmental mitigation, as well as we are going to be building a parking deck that goes along with the housing and commercial space, and those are all brownfield eligible,” said Levitt. “That is really why we went after the brownfield incentive package, to really augment the rest of the package.”
The $10.7 million brownfield plan amendment would provide tax increment financing from local taxes, school operating taxes, and state education tax millage for a number of brownfield-related activities: environmental assessment, demolition, site preparation and public infrastructure improvements.
Since the project will have about 125 units dedicated to income-restricted tenants, city commissioners “conditionally approved” a payment in lieu of taxes program for that portion of the project, resulting in a reimbursement of $4.2 million, according to the city commission agenda.
“We have worked with the city both in the Michigan Street Corridor plan as well as the Great Housing Strategies plan,” said Levitt.
“One of the sort of solid messages that has come out of those projects and that has come out of the research they used in developing those is that mixed-income neighborhoods are stronger than neighborhoods in one direction or the other.
“The city is hoping to use this as an example of how to develop and redevelop portions of the city in a way that makes the city sustainable for people of all income levels,” he said.
Diamond Place LLC partnered with PK Development Group LLC of Lansing as a tax credit expert to help develop the project, since the income-restricted portion of the project has a federal tax credit through the Low-Income Housing Tax Credit program administered by the Michigan State Housing Development Authority.
The LIHTC program allows state and local agencies an equivalent of about $8 billion annually to provide tax credits for acquiring, rehabilitating or constructing rental housing for lower-income households.
For the state of Michigan, the federal tax credit incentive tool is administered by MSHDA after a competitive application process.
On Jan. 25, MSHDA named Diamond Place among the 18 projects to receive a LIHTC funding award, and was awarded approximately $1.48 million.
“The credit has been around for 30 years,” said Levitt in reference to LIHTC. “It allows us to bridge the gap between what a new building would cost to build and what income-restricted residents can pay in rent.”
The developer is also seeking a Neighborhood Enterprise Zone tax exemption for the market-rate portion of the project and support from the Michigan Economic Development Corp.’s Community Revitalization Program, according to city documents.
“We still have to make sure the whole package comes together,” said Levitt. “There are a lot of moving parts and pieces — tax credit, bank financing — related to putting the whole deal together.”
After acquiring the property from Proos Manufacturing, Levitt said initial steps for the construction portion of the project include demolition of the existing facility and site cleanup. Site work is anticipated to begin this summer, and construction will commence in the fall with a projected completion date in the late third quarter or early fourth quarter of 2017.
“We are really excited. This has been in the works for several years and it involved input from residents, neighbors and the city. We are proud of the fact that we can pull this together in a way that is going to benefit everyone,” said Levitt.
“It has been a great process so far and hopefully we are getting near the end. You do so much work up front. Most people don’t see that, when you finally get to the groundbreaking, you take a deep breath and can be happy.”