Next Big Development Ideas Pursued, as Commission Urges Dublin Square Building Be Preserved

A specially-appointed East Lansing stakeholder committee is preparing to recommend that a series of downtown, publicly-owned properties be offered up for major redevelopment. Because a redevelopment there could also include the privately-owned land housing the Dublin Square building, East Lansing’s Historic District Commission is now urging preservation of that structure.

The area up for redevelopment consideration, shown on the map below, includes a series of properties along Evergreen Avenue owned by East Lansing’s Downtown Development Authority (DDA). The properties currently have on them a series of older rental houses and also a modern, brick-faced rental building, across the back alley from Dublin Square.

As ELi previously reported, developer Paul Vlahakis, whose company owns Dublin Square, has stepped up with a $100 million plan to redevelop the Evergreen properties along with the Dublin Square property and adjacent City parking lots.

But DDA Chair Peter Dewan confirmed for ELi yesterday that a special committee he appointed will soon make recommendations about how to market the Evergreen Avenue properties to all comers. That means a series of proposals may come in from various developers besides Vlahakis.

Dewan tells ELi, “I believe the City has a responsibility to its citizens to consider any reasonable offer from a developer or any prospective purchaser.”

Why the DDA needs to unload the Evergreen Avenue properties:

The Evergreen Avenue properties were purchased in 2009 at higher-than-market-value prices by the DDA to support the failed “City Center II” project envisioned by developer Scott Chappelle. Since that time, the DDA and the City Council have had to try to manage the $5.6 million debt on those properties. (Plans to include the Evergreen Avenue properties in the DRW/Convexity Park District plan fell by the wayside in that project’s restructuring.)

As Tom Fehrenbach, East Lansing’s Community & Economic Development Administrator, explained in a recent memo, until now the debt has been requiring interest-only payments. Those payments have been covered by the income generated from the Evergreen rental properties (shown above and below).

But starting in April 2019, payments on the principal will also be required, so the required payments are going to rise significantly, and the rental income will no longer cover the payments. Therefore, City staff have been exploring options for refunding or restructuring this debt. (See a staff-prepared chart showing various options.)

That means the DDA and City Council have to either figure out a way to pay off the debt – for example, through a sale of the properties – or to refinance the debt, as done in the past.

What Vlahakis wants to do:

Vlahakis is hoping to get the City to strike a deal with him fast. In the plan he’s calling “Park Place,” Vlahakis wants to build an approximately $100 million redevelopment project on the sites of Dublin Square, the Evergreen Avenue properties, and adjacent public parking lots.

According to plans shared with ELi in August along with further updates provided yesterday, Vlahakis envisions “Park Place” having two major new buildings. The Abbot Road-facing building (shown below) would be 12-stories-tall and include 12,000 square feet of retail space, 25,000 square feet of office space, market-rate rental apartments and condominium apartments on the top two floors.

The condos would be included in order to satisfy the City’s Ordinance 1384, which requires that downtown developments of this size dedicate at least 25% of their housing units to something other than typical student rental apartments.

Along Evergreen Avenue, a second new building (shown below) would hold a twelve-screen movie theatre. Above that would be two levels of robotic parking – a system to be owned and operated by the City, in which drivers drop their cars and robots automatically park them. (This is a still-uncommon emerging technology that has had some problems.)

Above the parking in this Evergreen Avenue-facing building would be several floors of market-rate rental apartments, with some additional apartments on lower floors on the building’s sides. Vlahakis tells ELi he’d like this building to be ten stories tall, with the top two floors holding condominium apartments facing Valley Court Park.

Vlahakis says it’s in the best interest of the City to quickly make a deal with him and his partners, Chicago-based Royal Properties. That’s because he wants to time construction to coincide with DRW/Convexity’s Park District project “for the purpose of reducing the amount of time that the area will be under construction.”

Vlakis also notes that the sooner a deal happens, the sooner the DDA debt will be paid off.

Vlahakis is pushing, but the DDA may want to see more options:

Twice now, Vlahakis has shown up during DDA meetings to use the “public comments” portion of the meeting to present his architects’ renderings of his project. He has also now submitted to the City Attorney a “letter of intent” to buy the Evergreen properties for the full amount owed on them.

Vlahakis tells ELi his letter of intent contains “no contingencies other than the ability to build an economically feasible structure as proposed. The DDA property will be paid in full for the property at the closing.”

So why wouldn’t the DDA just sell him the properties, particularly given that, on the open market, they’re probably not worth nearly the amount owed?

Well, when Vlahakis says he seeks “no contingencies other than the ability to build an economically feasible structure as proposed,” what he means is that he’s asking for specific fiscal concessions from the City. Odds are good he’s going to be looking for a tax increment financing (TIF) deal that will use future tax money from the project to pay his team back for the cost of buying the properties.

Use public money to reimburse a developer for buying public land for private redevelopment? That’s actually something Michigan DDAs are set up to do, and in fact, the DRW/Convexity project (shown in rendering below), includes $500,000 in its TIF plan for paying the DDA for a strip of land that will go to DRW/Convexity’s private development.

But Vlahakis isn’t the only developer who might want to set up such a TIF deal with the Evergreen Avenue properties. Dewan tells ELi it makes sense to see who else out there is interested in redeveloping these properties, and what ideas they might have for the location:

“The financial sale of the property is one of a multitude of issues to consider. In my view, key terms to consider include: the scope of a development project; the mix of proposed uses; does the project enhance the downtown; does the project support the comprehensive plan; is it a harmonious addition to the downtown, surrounding properties and neighborhoods.”

That’s why Dewan’s special committee includes stakeholders from downtown businesses, property owners in the Evergreen Avenue area, residents of the nearby Oakwood and Glencairn neighborhoods, members of the Downtown Management Board, and more.

Why the Historic District Commission issued an unusual letter:

Knowing that Vlahakis’ plan seeks to demolish the Dublin Square building, East Lansing’s Historic District Commission decided late last week to send a letter to the Mayor and City Council urging preservation of the building.

The Commission rarely issues a statement urging preservation of a particular structure. But in this case, the Commission said, the building “is clearly an important historic building in East Lansing.”

The Historic District Commission is urging the City Council, Downtown Development Authority, and Planning Commission “to protect the building in its current site or at a new East Lansing location.”

Built by the Works Progress Administration (WPA) in 1933, the brick structure served as East Lansing’s main post office from 1932 to 1972. But the building is not designated as a historic structure, nor is it in a designated historic district.

Vlahakis tells ELi, “I completely understand the desire to preserve certain historic buildings, however, the Dublin Square building has previously undergone extensive renovations not only to the interior but to the exterior as well.” He says the time to “preserve” this building would have been back in 2006.

“If the Historic District commission wants to move the building,” he adds, “we would be willing to discuss the feasibility of that process depending on how the timing affects our timeline.”

What’s next?

Vlahakis says his team “cannot submit plans to the City Council for the full project unless we have prior authorization from the DDA to submit a project that will include their properties. Once that is received, plans will be ready for submission to City Council by the end of this month.”

Dewan says his special committee “has been preparing a matrix to produce a [Request for Proposals] to market the Evergreen properties. . . . This matter will be forwarded to the DDA for their review and consideration. I anticipate the DDA receiving this recommendation at its October 25 meeting.”

Meanwhile, City Council has on its consent agenda for tomorrow’s meeting the introduction of consideration of a zoning change that would expand the area of downtown where developers can build to 140 feet – an expansion that specifically moves to encompass the Evergreen Avenue properties.

Can a project there go through all the layers of site plan review, zoning changes, TIF plan review, and local and state approvals fast enough to do construction at the same time as DRW/Convexity’s adjacent Park District project?

That seems highly unlikely. The DRW/Convexity plan awaits only state-level approval, which is expected to come through in late November. That project – the long-coming successor to Scott Chappelle’s City Center II project, for which the Evergreen properties were originally purchased – is expected to break ground early next year.

Disclosure: The reporter’s spouse, Aron Sousa, serves on the Historic District Commission, and the couple own a home in the Oakwood Historic District, the neighborhood which also includes some of the Evergreen Avenue properties.

Correction: When this article was published, we wrote that the zoning change being considered tomorrow encompasses the Evergreen Avenue and Dublin Square properties. The Dublin Square property is already in a zoning area that allows building up to 140 feet by a vote of 4 or 5 Council Members.