Projects for three school buildings advance

April 2, 2012
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Even though National Heritage Academies owns three former elementary schools in Grand Rapids and only has plans to redevelop one, the city’s Brownfield Redevelopment Authority approved development and reimbursement agreements for all three properties late last week.

The authority approved all three because the original buyer of the three schools has a purchase option to buy two back from the Charter Development Co., a division of National Heritage Academies. Now those agreements go to the city commission for final ratification.

GR School Lofts LLC bought the Oakdale, Eastern and Lexington elementary schools from Grand Rapids Public Schools for $1.6 million and told the school board and the city commission that it planned to build rental apartments in all three. The city waived its right of first refusal on the buildings when GR School Lofts approached the commission with its plan.

But after closing on the sale and getting brownfield designations for the properties, GR School Lofts flipped the trio to NHA for an undisclosed amount, and then bought an option to repurchase the Eastern and Lexington buildings it had originally acquired.

Curiously, GR School Lofts is no longer part of Ojibway Development, as it was through the sale and brownfield process. The development entity is now being backed by Detroit Affordable Homes Inc., a nonprofit housing developer based in Southfield. According to state records, the resident agent for Detroit Affordable Homes is also the executive director of Affiliated Developers in Berkley, Mich.

GR School Lofts lists the same Berkley address. Bruce Michael, who represented GR School Lofts and Ojibway Development at the city and before the school board and is listed as a development person with Affiliated Developers, said he is also a principal in Detroit Affordable Homes. “The investors that come in are tax-benefit investors,” said Michael of the new firm.

Michael also said he couldn’t tell the city and GRPS that he was actually buying the buildings for NHA because his firm signed a non-disclosure agreement with the charter school group at its request. “We had a non-disclosure with NHA. NHA purchased the properties and we’re buying it back from them,” he said. “I think it was their requirement.”

But City Commissioner Walt Gutowski, a member of the brownfield board, disagreed with his statement. “I think that was not the case, sir,” he said to Michael. “We at the commission are supportive of this (project) because of the greater good for the city. But, clearly, Mr. Michael lied to us about the projects.” Michael did not respond to Gutowski’s comment.

“What happened is the charter school lent the money (to GR School Lofts) to buy the schools, and they are buying two back for an undisclosed amount,” said Dick Wendt, counsel for the brownfield authority.

NHA plans to turn the Oakdale building into the River City Scholars Charter Academy, which will eventually become a K-8 school after beginning as a K-4. The school plans to serve about 780 students by its fifth year. Michael said his firm will convert the Eastern and Lexington structures into apartments. In addition, NHA will develop and maintain a 1.19-acre public park and playground on its site. GR School Lofts will donate property on its sites for public parks.

The agreement for Oakdale, at 944 Evergreen SE, calls for NHA to invest $7 million into the property and make $353,000 in improvements to the site for the public park. The company will be reimbursed $1.5 million through local tax-increment financing for a number of eligible activities, including demolition, lead and asbestos removal, public improvements and site preparation.

Construction is expected to start soon and should be finished by September. NHA plans to employ 56 at the academy. City commissioners approved a revised brownfield for Oakdale last week. “We’re ready to do demolition and asbestos removal,” said Jeffrey Chamberlain, a spokesman for Charter Development Co, a division of NHA. “The commitment to deliver the park is in place.”

The agreements for GR School Lofts has the developer investing about $3.5 million into the Lexington building at 45 Lexington NW, and $5.3 million into the Eastern school at 758 Eastern SE. Twenty-five apartments will be built in Lexington and 43 units are designed for Eastern. Both projects will be done as historic renovations, and the developer will seek federal tax credits worth roughly $2 million for both.

GR School Lofts has asked the state for low-income housing tax credits and bundled the two projects into a single application for 68 apartments. But if the state only approves credits for one project, neither will get done. The firm is also applying for energy tax credits and energy incentives for both buildings. All the credits are worth a total of $2.5 million.

GR School Lofts will be eligible to receive reimbursements of about $2 million for the remediation work it will do to both properties and will create the equivalent of 2.5 fulltime jobs from both projects. Construction may begin in September.

“This (deal) was tough on the commission and especially on the mayor. But we made some lemonade out of lemons and we’re better off for it,” said Gutowski. Last week, Mayor George Heartwell said Ojibway Development breached any trust it had with the city and called the firm flakey.

GR School Lofts was also to have converted a fourth school, Stocking Elementary, into apartments. But after learning that the developer sold the three other schools to NHA, GRPS cancelled its plan to sell Stocking to the firm for $535,000. Commissioners also awarded GR School Lofts brownfield status for the Stocking school after the developer unveiled its plans for the structure.

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