Can East Lansing “Get It Right” on the Next Big Public-Private Land Deal?

Clockwise from top left: Lynsey Clayton (DDA), Lisa Babcock (City Council), Van Martin (commercial real estate expert), Luke Hackney (DDA), Tom Fehrenbach (Director of Planning), Peter Dewan (DDA Chair). Photos by Raymond Holt.

Yesterday’s special “work session” of the East Lansing Downtown Development Authority (DDA) was called to try to get greater clarity about what to do with the DDA’s properties on Evergreen Avenue. But as more options were put on the table, things got complicated.

The meeting was anything but dull, with two more development teams angling for exclusive agreements and a commercial real estate professional chastising East Lansing for its history of big public-private deals.

By the end, many DDA members agreed on the need for a joint meeting of the DDA and the City Council to try to arrive at a common vision for what is desired at this location at the west end of downtown, just north of Peoples Church.

The DDA owes $5.6 million on the land, and that debt needs a solution. The DDA wants to avoid a repeat of their approving a project for this location that the Council then rejects.

It looks like that joint meeting will happen next Tuesday evening.

A pro in the redevelopment business tells the DDA to “get it right” this time.

At the previous meeting of the DDA, members wanted to consult with an expert about the process of issuing a Request for Proposals (RFP) on the Evergreen properties.

Consequently, the President of Martin Commercial Properties, Van Martin, came yesterday to share “reflections on what we have observed over many years.” Martin (below) alluded to a number of projects in East Lansing which, he suggested, were not handled well.

Going back about a decade, he referred to the protracted failed “City Center II” deal that left blight downtown for years because the City “ended up in a situation legally” that it should not have found itself in. He also alluded to the more recent failed deal with Royal Vlahakis over the Evergreen properties.

Sitting at the table and speaking frankly to the DDA, Martin implicitly and sometimes explicitly criticized deals with developers using public land – deals that have lacked RFPs and appraisals.

He asked rhetorically what Lot 1, the City’s surface parking lot on Albert Avenue, was worth before it was promised to Harbor Bay Real Estate and Ballein Management for the Center City project. (No one really knows what it was worth, as there was no current appraisal or RFP.)

Turning to Greg Ballein (below), who is a member of the DDA and co-developer of the Center City project, Martin congratulated Ballein on the great deal he got on the City’s downtown land.

But, Martin told the DDA, “I’m here to tell you, [the City] missed the economics on that deal.” There should have been a competitive bid process, he said.

Martin let drop that he had had a client – a developer with “extensive experience” – who had wanted to redevelop Lot 1 several years ago. But, he said, when they brought the idea to the City, they were met with a “stiff arm” – held off and told there would have to be an RFP.

“What happened to that [RFP]?” he asked. (The simple answer is Council and the DDA agreed to the exclusive deal with Harbor Bay and Ballein Management instead of issuing an RFP.)

Financial risk management around commercial real estate deals, said Martin, is something that requires professional experience, yet the City of East Lansing has not brought in professionals to help manage risk in major public-private redevelopment projects.

He told the DDA that the RFP as drafted is “so convoluted,” many potential developers are going to stay away.

“In my opinion, you need to bring a little bit of reality into this,” he told the DDA. ”Identify what you want there.”

Below: Some of the DDA's Evergreen Avenue properties.

He asked why the Urban Land Institute had not been consulted. (The ULI is a nonprofit organization recognized as a leader in helping cities think about redevelopment.) A group like ULI, he suggested, could help the City understand what is economically feasible and what kind of RFP will “attract national attention.”

“You need a process with integrity,” he said, and “you need to open it up” to bids.

Two more development teams are hoping to avoid the bid process.

Before Martin spoke, attorney David Pierson representing DRW Convexity told the DDA that his clients had submitted a “letter of intent” late the day before, hoping to obtain an exclusive deal with the DDA, to once again stop the process of issuing an RFP, as happened with the Royal Vlahakis deal. (See the DRW Convexity letter here.)

DRW Convexity is the development team currently building The Abbot and The Graduate hotel along Grand River Avenue as part of the “Park District” project. As part of the “Park District” deal, DRW Convexity is also planning to build a third building at 341 Evergreen Avenue – land the company owns across Evergreen Avenue from the DDA’s properties.

That building at 341 is supposed to feature mostly income-restricted rental apartments in order to satisfy the City’s requirement that big downtown housing projects dedicate 25 percent of their housing units to low-to-moderate income housing, or owner-occupied condos, or senior housing.

Now DRW Convexity has told the DDA it could give the City the land at 341 Evergreen Avenue to expand Valley Court Park. Under the deal, the developers would also buy the DDA’s properties for $3 million, and solve the DDA’s additional debt plus fund infrastructure needs by expanding the tax increment financing (TIF) deal made on the DRW-owned land on Grand River Avenue.

What does DRW Convexity want to build on the DDA’s Evergreen land? A “tastefully designed” building rising from 80 feet on the north to 120 feet on the south, with 230 market-rate residential apartments (likely to be of interest to undergraduates) with 180 parking spaces.

Above: A rendering of DRW Convexity's proposal, looking east, showing in the center what they propose for the Evergreen properties, with Peoples Church at center-right in the image. See more here.

DRW Convexity wants to use this package offer to get out of the City’s requirement to dedicate 25 percent of units in big downtown housing projects to “diverse housing” types.

Pierson focused on describing unique advantages that DRW Convexity has – namely that it owns the property across the street from the DDA’s land and owns the big TIF-able land nearby.

DRW Convexity says that because it plans to start construction at 341 Evergreen Avenue this spring, it can’t wait for the RFP process to play out to learn if this is what the City prefers.

Pierson wasn’t the only developer’s representative to show up at yesterday’s meeting. Paul Vlahakis was also in attendance, but did not speak, and River Caddis Development’s John McGraw (son of Kevin McGraw) also came.

McGraw (above) told the DDA that his team has been working on a plan for these properties for “about a year in the background” and that they want to bring forward “a project that has local presence with national firepower.” He did not elaborate about the plan, but he said that their firm, also, would like to enter into an exclusive agreement with the DDA.

City Council has suddenly transformed, and that matters.

Projects like this require not just the approval of DDA but also the Council. That makes deciding what will happen to the Evergreen Avenue properties politically complicated, and the political winds have changed with the recent election.

The Mayor of East Lansing is automatically a member of the DDA. With newly installed Mayor Ruth Beier away in Ann Arbor yesterday, newly installed Mayor Pro Tem Aaron Stephens stepped into the DDA meeting, with new Council member Lisa Babcock (below) also coming mostly to listen.

Both Stephens and Babcock quickly said they would welcome a joint meeting with the DDA and could help arrange it. Stephens tells ELi this meeting is likely to be next Tuesday night, November 19.

We have not in recent history seen a joint meeting of the DDA and City Council, so whatever happens, it is likely to be interesting.