Grand River felt Flat Iron was a home run
The youngest bank in the city decided to finance the historic renovation of one of the oldest buildings in the city. The collective age of the trio of downtown structures that make up today’s Flat Iron building borders on 400 years, give or take a decade, while Grand River Bank just turned two a few weeks ago.
The restoration project is being done by Locus Development, and the firm’s partners, John Green and Andy Winkel, were fairly ecstatic that Grand River provided the financial support to go forward with the work.
Why did Grand River Bank finance what might become the last historical renovation in downtown for quite a while — especially when many developers and building owners are having tough times getting loans for commercial projects?
Grand River President and CEO Dave Blossey told the Business Journal there were a number of sound reasons for the bank backing the project. Topping his list were the developers and the project they wanted to do.
“One, obviously, we look to deal with quality people, and we did our investigating and were excited to work with them. They’ve done some great projects in the past. Also is the fact that we’ve been able to help with the redevelopment of a really historic property downtown, and that is a real benefit to the bank. I think it came down to having an opportunity to work with great people on a great project. It really is as simple as that,” said Blossey.
Then there is the commitment a financial institution like Grand River makes to its hometown.
“I think one of the things that every bank looks to do is to help the community that they’re in redevelop properties that are out there. Core-city development is critical to any area, and when you can get involved in a project like this, which is bringing a historic property back to life, it’s a good thing. They’ve got great plans for that building and we just think it’s a home run,” he added.
Grand River Bank Vice President and Commercial Lending Officer Ryan Wolthuis echoed Blossey’s words. He said another solid reason the bank chose to finance the project was because Locus Development already had a “great tenant” lined up to take almost all the available space in the 32,000-square-foot office building. Local law firm Smith Haughey Rice & Roegge plans to be operating in the building by early October.
“That’s a huge plus for us, as you can imagine. Having that cash flow is a key situation for us,” said Wolthuis. “The deal itself stands on its own, but the fact that we can get downtown, help out and show a commitment to downtown was an added bonus.”
Locus Development also came to Grand River with a pile of state and federal historic tax credits as part of its equity in the project. Wolthuis, who dealt directly with Green and Winkel on the loan agreement, said that was another key reason the bank financed the project.
“A project like this, as you can imagine, is fairly complex and had some details that we had to work through. But the tax credits allowed us to overcome a couple of issues and it’s something that we were more than willing to work through with them, especially when you look at a quality project like this,” he said.
The tax plan passed by the state House follows Gov. Rick Snyder’s directive and repeals the Michigan Business Tax, which was the source for the state’s historic tax credits. If that credit hadn’t existed, would it have been tougher for Locus Development to get the project financed?
“It absolutely would have been tougher. Those certainly served as a great economic incentive to get a deal done and it allowed us to structure a deal that works for both us and the customer. And without those types of incentives … I’m not saying this deal would not have gotten done, but it would have been much more difficult,” said Wolthuis.
Green and Winkel were so pleased with Grand River’s decision that they hung a sign on the Flat Iron that touted Grand River as their lender of record and Smith Haughey as their tenant.
“While most banks are burying their heads in the sand, it is refreshing to see a bank step forward and make a commitment to good quality commercial real estate projects in West Michigan. When the FDIC loosens their noose on the banking community, those who were loyal to their customers or step up first to make new loans will end up winners,” said Green.
Another key factor behind Grand River’s decision to finance the project relates to what Green said, and that factor is the bank’s youth. Being only two years old, Grand River didn’t have a history of making bad real estate loans, so its books are clear of the debt that has caused other financial institutions to cut back or even stop making loans.
“Most banks have somewhat of a restriction on the amount of commercial real estate that they’re willing to be involved in these days. We have an advantage from the standpoint that, being a new organization, we’re not saddled with some of those legacy issues that the other banks have. So we’ve been very aggressive in looking at commercial real estate deals,” said Blossey.
“When Locus Development was looking for a partner, we were very excited to take a chance and work with them because, again, we don’t have the same kind of restrictions that a lot of the other banks have right now.”
When the Business Journal joked with Blossey that he was likely to get a lot of calls from commercial developers after making that statement, he indicated that was fine with him.
“We’ve been able to do very well because we’ve been able to fill a void in the market that some of the other banks had left, for a while anyway. I think it’s very true that competition is coming back, but we’ve been able to establish, I think, a good network of relationships and we expect to continue to do deals like this,” he said.
Grand River is a locally owned, independent bank that opened for business when the nation’s financial market had almost crumbled from the subprime mortgage crisis, and money from the Troubled Asset Relief Program was being handed out to the country’s largest banks — not exactly a good time to make a debut.
“That’s exactly right. I think as we dealt with the circumstances at the time, it was evident that we were either going to be geniuses or we were going to be crazy. There wasn’t much waffling on that,” said Blossey with a chuckle.
“But I think it’s been shown that even though times were tough, there was still a need for a bank that was willing to look at the good deals that were in the marketplace, and Grand Rapids is a solid market. There are good things happening in this market and there were good people that couldn’t get financing and we were able to fill that void. So it’s been a real interesting ride for the last two years, but we think it’s been a successful ride.”