Development firms play waiting game
Third Coast, PK Development wait on contracts for $42 million Diamond Place project.
Third Coast Development and PK Development have waited patiently to begin their $42 million Diamond Place project on a 2.8-acre site at 1003 Michigan St. SE.
The wait to break ground might soon be over, Third Coast Development Principal Max Benedict said.
Demolition begins Oct. 3, and Benedict still is hopeful construction will begin this fall, even if it pushes right up to Dec. 21.
As the developers are using seven streams of funding for the project, they now have to wait as the contracts fall into place. All major hurdles have been cleared, Benedict said.
“I’m optimistic with a timeline of breaking ground yet this fall,” he said. “It’s feasible, but we’re in that critical step of getting all those streams together in an agreement. It’s out of our hands right now.”
Last week, the Michigan Strategic Fund approved a request from City of Grand Rapids Brownfield Redevelopment Authority for local and school tax capture for activities worth up to $9.9 million over 25 years. The MSF approval was the final city or state approval needed for the project, Benedict said.
Currently, the estimated school tax capture is $5.1 million, according to a briefing memo from the Michigan Strategic Fund.
The development also received an approval for a Michigan Community Revitalization Program loan worth $2.8 million.
The developers have secured an $8.7 million loan from Mercantile Bank, along with $2.95 million in New Market Tax Credit equity, $1.6 million in owner equity and a $3.1 million Capital Impact Partners loan.
“The structure of this deal is a web of ins and outs,” Benedict said. “It’s kind of a work of art in the structure of a deal.”
The project will raze the Proos Manufacturing facility and, in its place, build a five-story, mixed-use building with 42 apartment units, 22,000 square feet of commercial space and 240 parking spaces.
Proos now is in a facility at 2555 Oak Industrial Drive NE.
Another piece of the development on the site will include 123 apartments — 98 affordable units — supported by the Michigan State Housing Development Authority Low Income Tax Credit program. Benedict said of the 165 units, more than 100 will be affordable apartment units.
Of the 22,000 square feet of commercial space, Third Coast has committed to include a 15,000-square-foot grocery store. Some of the funding will be used to help subsidize the cost of the grocery store, Benedict said.
Third Coast is in discussion with several grocery store chains to fill the location, he said.
“It was necessary to subsidize this deal,” he said. “You can’t build a modern grocery store and rent it out to be profitable without some incentive to fill it out. You’d be paying $8 for a gallon of milk if you did it without subsidies, and grocery stores don’t want to do that.”
Along with the grocery store space, there’s also a 3,500-square-foot space Benedict said would be ideal for a restaurant, and the developers already are in discussions with interested parties. Tenant announcements will be made once the financing deals are closed, Benedict said.
A final retail space, with a dual drive-thru, also will be rented out, he said, but there haven’t been any discussions with interested parties. He did say he expects it to be the last drive-thru on Michigan Street, west of Fuller Avenue.
Benedict said aside from working on several iterations of drawings, the project is the same as it was when it was announced last year.
“It was just waiting on these hurdles,” he said. “I’ve never worked with this much of a complicated fabric of pieces.”