Michigan Hill Heats Up

July 22, 2005
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GRAND RAPIDS — A lot has changed since Jeff Lobdell renovated an abandoned gas station at 450 Michigan St. NE as his first Bagel Beanery location.

In the 10 years since, Bagel Beanery has spread across the region, and Lobdell, president of Restaurant Partners Inc., acquired other concept properties, including Sundance Grill and Beltline Bar.

President of the Michigan Street Business Association from 1996-2003, his success was par for the

Michigan Street
corridor. During the day, breakfast and lunch establishments like his and the Red Geranium Café a block away serve a bustling crowd from the nearby commercial and medical districts.

At night, a cluster of popular taverns has created an alternative downtown entertainment

district of Michigan Street east
of College.

And to the west: over $1 billion in health-care investment.

"The area has undergone a dramatic change in the last 10 years and particularly the last five years," Lobdell said. "All the added business related to the medical industry helps my business more and more."

Nine years ago, there was only ButterworthHospital perched atop the

Michigan Street

Today, the red Butterworth sign is gone, replaced by the green neon of Spectrum Health. Behind it, the five-block area sometimes called "Health Hill" represents some of Michigan's most exciting development.

In five years' time, the hill became home to (from east to west): GrandValleyStateUniversity's Cook-DeVosCenter for Health Sciences, Spectrum Health's DeVos Children's Hospital and Fred and LenaMeijerHeartCenter, Grand RapidsCommunity College's CalkinsScienceCenter, and the Van Andel Research Institute (VARI).

For nearly twice that amount of time, the region's health-care and medical research infrastructure has been steadily pulled toward the hill, propelled by consolidation efforts and research initiatives, defined, respectively, by Spectrum Health and the Van Andel Institute (VAI).

In 1997, Butterworth Health System and BlodgettMemorialMedicalCenter consolidated into Spectrum Health.

With the completion of the $78-million Lemmen-HoltonCancerCenter in 2007, Spectrum will bring all of its cancer treatment under one roof at

145 Michigan St. NE.
This marks the second phase of Spectrum's Patient Care Services Plan that began with the MeijerHeartCenter across the street and has already led to a consolidation of obstetrical, pediatric and cardiology inpatient practices at Butterworth.

While Spectrum is a research leader in its own right — 8 percent of its cancer patients participated in clinical trials in 2003 — it is VARI that is leading the hill's medical research.

Presently, the state's third-largest cancer institute has 17 laboratories and 189 full-time employees. Already one of the region's most lauded ventures, VARI and its sister organization, the Van Andel Education Institute, has hopes to become a nationally, if not globally, recognized program. A rumored partnership with the Barbara Ann Karmanos Cancer Institute could earn the VAI a shared ComprehensiveCancerCenter designation, and its endowment, possibly as much as $2 billion, rivals any in the world.

In May, VAI announced plans for a Phase II expansion that will eventually create 400 new labs. It intends to invest $120 million to $150 million in private funds and bonds to construct an additional 280,000 square feet on the west side of the facility, fronting

N. Division Avenue
. The east side of the existing building has 186,000 square feet of space, fronting
Bostwick Avenue
and the eastern boundary of the Butterworth campus.

Ground will be broken on Phase II in spring 2006 and construction will take about two and a half years to complete.

Shortly after the VAI announcement, plans were revealed for West Michigan's most ambitious private development ever in the life science field.

Construction should begin this fall on a 700,000-square-foot, five-acre medical complex that stretches from

North Division Avenue
Coit Avenue
on the north side of Michigan Street Hill.

Expected to cost more than $120 million, the Michigan Street Development project will consist of three office towers, a 2,300-square-foot parking ramp and, as part of a separate development, the cancer center.

The towers are designed to house medical offices, a food court and minor retail operations. With 100,000 square feet of lab space, it is the region's first private development aimed toward research-based tenants.

"Unlike other development projects, we're not just geared toward the physician office practices," said Joe Hooker, development services manager for Christman Co.

"We're taking extreme measures in the design process to make sure that we're able to recruit, attract and have facilities for high tech businesses as related to the SmartZone and Life Sciences Corridor."

A year ago, Christman entered into an agreement to redevelop the TowersMedicalBuilding at

21 Michigan St. NE
for East Lansing insurance company American Physicians Capital Inc.

With its premium position on the hill and within Grand Rapids' SmartZone, Hooker felt the seven-story medical office building was being underutilized. Its major tenant is Spectrum Health — at nearly 80 percent — and with any luck, the new redevelopment will be able to both retain those tenants and attract research-driven clientele.

Following its IPO, AP Capital re-evaluated its involvement in the venture, deciding it did not fit its core business. The insurance firm stepped out, and RDV Corp., Alticor co-founder Richard DeVos' development firm, stepped in.

DeVos purchased the 1.2-acre lot adjacent to the Towers building in 2002, until this winter the site of a Burger King restaurant. The cancer center broke ground on the site last week.

The first phase of construction will begin with an 11-story tower with

North Division Avenue
frontage, followed by an eight-story tower immediately to the east. A parking deck, built in partnership with the city of Grand Rapids Parking Services, the state of Michigan, Spectrum Health and VAI, will be built beneath the four-building complex, the majority carved into the hill.

The first phase should take two years, Hooker said. The second phase, which will replace the Towers building with the third tower, should take an additional two years.

Like the Michigan Street Development Project, Mid Towne Village is a direct response to the growing need for medical space.

S.J. Wisinski & Co.'s Mid Towne is a mixed-use urban redevelopment project uniting residential, retail and office properties. In stark contrast to the Michigan Street Development Project, which is centered upon lab space, the centerpiece of Mid Towne is the Village Green, a 15,000-square-foot open space around which most of the community is set.

It is located just outside of the SmartZone, and was carved out of a residential area.

Like its competitor to the west, Mid Towne is attracting medical users, including the West Michigan Women's HealthCenter. The 75,000-square-foot, three-story medical office building will house a team of obstetricians and gynecologists and offer leasing opportunities to physicians in other women-focused practices.

The market for such facilities appears to be far from saturated. At presstime, a scan of the Commercial Association of Realtors Web site showed only one available finished property in the Life Sciences Corridor other than Mid Towne, which had barely broken ground. That property, at

400 Michigan St. NE
, was a large house converted to office space.

As Spectrum continues its consolidation efforts and more research enterprises move in, the demand for Michigan Street Hill real estate can only grow, said Brad Rosely, vice president of S.J. Wisinski & Co.

"Everything that happens up there, it helps each other out," he said of the competing development. "We've had plenty of landowners call me and say they appreciate what we're doing up there, boosting land prices all over the place."

Mid Towne is listed at $16 to $19 per square foot.

Lobdell believes that the hot real estate market may actually stunt the neighborhood's growth.

"You have something like a big hospital come in, and people buy up a bunch of property and just want to sit on it," he said. "They look at how much that Burger King went for and they get dollar signs in their eyes."

These speculators won't make a capital investment, nor will they sign a long-term lease, Lobdell said. Instead, they are hoping to be bought out to make way for a large-scale development, with hopes toward the precedent DeVos set in 2002 with his $6.25 million purchase of the Burger King site.

A notable example is

421 Michigan St. NE.
The 105-year-old, 5,016-square-foot building owned by Martha's Vineyard proprietor Kameel Chamelly has a taxable value of $49,877. It is listed for $648,000.

There are two uncertainties weighing against speculators.

The first is seen in places such as Priority Health's East Beltline campus, the consolidation of West Michigan Heart at

2900 Bradford St. NE
Leonard Street
and I-96, the razing of the vacant Army Reserve center at
1234 Michigan St. NE
for a two-story medical office building, or even the Spectrum Health Kent Community campus at
450 Fuller Ave.

All are close enough to be considered part of the

Michigan Street
cluster, but in areas where space isn't at such a premium.

For similar reasons, the SmartZone extends into the North Monroe district, but as Jack Buchanan, president of Blue Bridge Ventures explained, it hasn't had an impact.

"We haven't seen any medical activity," said Buchanan. "I know they really promoted the SmartPark thing, but we haven't seen any.

"I think it would be great if we had some medical users that come in, but in the foreseeable future we're going to still be selling it as a unique neighborhood and a unique aspect of the core downtown."

The other hot-button issue for speculators is the possibility of the relocation of MichiganStateUniversity's College of Human Medicine, which would almost certainly be located on or near the hill.    

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