Home Team Hits The Road

April 30, 2007
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GRAND RAPIDS — Three Grand Rapids businessmen are building the first of two residential developments.

But this isn’t a typical construction story, because the trio is going against the grain and building in Detroit, a city that hasn’t drawn a lot of interest from local developers or inspired a lot of confidence in the local business community.

Michael Houseman, Marcel Burgler and Thomas O’Hare began construction a few weeks ago on a five-story, 155,000-square-foot, mixed-use development at 4501 Woodward Ave. in the Midtown section of Detroit on the Wayne State University campus. The site sits across the street from the Detroit Medical Center and less than two miles from Comerica Park.

Construction is expected to take a year. When it’s finished, there will be 128 market-rate apartments and 23,500 square feet of retail space on the ground floor. Fifth Third Bank has already signed on as the anchor tenant; it will occupy 9,000 square feet when the building opens next March.

Wayne State owns the property, and school officials agreed to give the developers a 99-year lease on the five-acre site.

Upon completion of that project, known as Studio One Apartments, the partners will move into Phase 2 by building multi-family residences on a nearby parcel they will buy from the university. Those units will either be condominiums or apartments.

The home team decided to hit the road for the Wayne State project only after building an $8.5 million residential project in Big Rapids for Ferris State University.

“We thought we’d like to repeat this model, so we started doing a search of different universities. We set certain criteria that would make it similar to the opportunity we had at Ferris,” said Houseman, president of Houseman Construction Co.

“Three or four universities came to the top, and Wayne State was one of the strongest in that they had a large student enrollment but not a very big on-campus population. But we were very hesitant about going into Detroit. The developers in Detroit are all making the exodus over to the west side,” he added.

After researching Midtown, however, they were less hesitant about investing in that sector. From an effort led by O’Hare, a retired executive vice president for the North American division of Host Marriott, they learned that $1.6 billion has been invested there just since 2000. In addition to that massive investment, the sector has two solid organizations that will help support their projects.

“Basically, you have two large institutional anchors there: the Detroit Medical Center and Wayne State University. The Detroit Medical Center alone has 10,600 medical professionals working on campus. They see 1.5 million patients a year. This is much bigger than Spectrum (Health),” said Burgler, a principal with Prime Development Co.

Wayne State has a student enrollment of 33,000, with 13,000 working toward graduate degrees. In the last five years, university officials have built 6,000 student-housing units on campus.

“The traffic count at our front door is 23,500 a day on Woodward alone. But then on the expressways, on both sides of our project, it’s 117,000 cars a day. It’s a very, very busy urban setting,” said Burgler.

Financing for the $20 million project includes SBT and MEGA credits, as the city and state declared the site a brownfield. The city also approved a TIFA capture the developers will give to the school, so it can build a three-story, 800-space parking ramp for the project.

“We have received great cooperation from the city of Detroit. We’ve been welcomed. They made things happen for us, especially the mayor’s office. They’ve been very helpful, and so has the state of Michigan. They’re ready in Detroit to do business,” said Burgler.

The partners and Wayne State are investing a combined $34 million in the property at Woodward and Canfield. Houseman Construction is managing the project. Design Plus is the architect.

Even though Midtown has garnered plenty of enthusiastic press in the Detroit media for its recent revival — efforts that include Ford Field, Comerica Park and a slew of restaurants and residences — the reaction the partners received here on their project didn’t have the same gusto.

“It’s very counterintuitive to a lot of people in West Michigan to talk about Detroit,” said Burgler. “When you say ‘I’m developing in Detroit,’ they kind of stare at you blankly.”

A few locals went so far as to suggest that they should seek psychiatric help.

“At first, they thought we were nuts. Quite honestly, I think we thought we would chuckle back and forth with ‘What the hell are we doing?’” said Houseman with a laugh.

“But after looking at it, we found it to be a great market. It’s a growing market, and there is a big need for what we are doing there.”

Midtown Detroit: A Money Magnet

The Midtown neighborhood in Detroit annually attracts at least 2 million visitors, with many attending cultural and sporting events at places like the Detroit Science Center and Comerica Park. But Midtown also has been an investment magnet, as nearly $1.6 billion has been invested there from 2000 through 2004.

Here is what that money has been invested in:

Type of   Amount of
Investment   Investment
Institutional Campus   $561,600,000
Educational Facilities   $261,700,000
Medical Facilities   $188,700,000
Commercial Residential   $389,200,000
WSU Residential   $103,200,000
Commercial & Arts-Related   $34,000,000
Public Sector Improvements   $38,050,000
Total Investment    $1,576,450,000

Source: University Cultural Center Association, April 2007 

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