UPDATE: DDA Follows Council’s OK for 95-Day Extension of Exclusive Redevelopment Contract

UPDATE, Oct. 22, 2020:  At today’s Downtown Development Authority (DDA) meeting, DDA members voted unanimously to extend the exclusivity agreement with River Caddis Development on the Evergreen Avenue properties another 95 days, bringing the next decision point to late January 2020.

Based on what was said at today’s meeting, River Caddis still has no commitment from a tenant for the office building conceived in their pitch. And the new City Attorney has not yet reviewed July’s proposed sale agreement for the properties, which as we reported includes some big “asks.”

Developer John McGraw told the DDA today that he has been “working diligently to continue this process,” but did not elaborate. McGraw also declined to say more when contacted by ELi after the meeting. He said at the DDA meeting only that his group has been achieving “leeway” on “philosophical” issues with City staff.

East Lansing Planning Director Tom Fehrenbach told the DDA the staff is seeking to add some things to July’s draft sale contract, like payment of prevailing wage to construction workers and key performance deadlines for the project. He did not specify what deadlines would be expected and did not comment on the site plan proposal, the tax incentives, or the idea of the City building and taking on the expense of parking for the project.

In response to a question from DDA member Jeff Smith, Economic Development operations analyst Heather Pope reported that one other developer, from Chicago, recently expressed interest in building luxury apartments on one of the DDA’s properties on Evergreen Ave., an inquiry which Pope noted did not seem to reflect an understanding of the situation.

The DDA’s agreement with River Caddis prevents the DDA from entertaining other offers while the exclusivity period remains in effect.

Our report from October 15, 2020, follows:

East Lansing’s City Council wasn’t asked to formally weigh in Tuesday on River Caddis Development’s proposal to redevelop publicly-owned land along Evergreen Avenue near Valley Court Park, just north of Peoples Church. 

But Planning Director Tom Fehrenbach did come to Tuesday’s meeting seeking some sense of what they might tolerate. And that amounts to another 90 days of exclusivity, as River Caddis figures out if they can get a deal to cohere. 

The first 90-day exclusive contract was signed with River Caddis in April 2020. That was extended in July for another 90-days. These exclusive contracts prohibit East Lansing from seeking other potential developers for the publicly-owned land during the period of the contract.

Council members expressed skepticism that River Caddis’s plan for The CITADEL — an 8-story building with 250,000 square feet of office space — is really viable, particularly after what the Covid-19 pandemic has done to white-collar work practices. River Caddis still has not identified tenants for the space.

Some also expressed concerns about the City taking on the expense of another parking garage, and a reluctance to use tax incentives to subsidize the companies that would develop and rent the property.

It’s not actually up to City Council to decide whether to do an extension, short or long, of the exclusive contract. That’s up to East Lansing’s Downtown Development Authority (DDA), because that agency owns the properties and so gets to decide who will be given the right to formally propose site plans on the land.

The draft agenda for the Oct. 22 meeting of the DDA doesn’t mention the deal. But with the existing exclusive contract expiring shortly after that meeting, something is going to happen.

The goal is to solve a long-term debt. But is this the way to do it?

Fehrenbach’s presentation to Council (see the slides here) included a polite gloss through the history of these properties, which have been through one would-be deal after another.

The DDA’s “Evergreen problem” started when the DDA bought these properties in 2009 as part of a partnership with a developer who has now been indicted for fraud on unrelated matters.

The most recent deal the DDA attempted on the properties, prior to River Caddis, was with co-developers Vlahakis Development and Royal Properties. The Royal Vlahakis proposal kept morphing for more than a year, until City Council finally killed it last October.

At this week’s meeting, Council member Lisa Babcock alluded to that drama when she said she didn’t want River Caddis to become an ELi serial featuring movie theaters and condos one week and an ice rink with student rentals another.

The saga that started in 2009 has left the DDA with weighty debt on the properties. So much that these properties have been almost impossible to redevelop because the dollar value of the debt is more than the land is worth.

The principal is currently at $5,360,000 and the City’s full faith and credit backs the debt, so there’s no easy way out of it.

River Caddis is apparently hoping to get enough tax incentives to basically get the land for free for The CITADEL. River Caddis has also changed its proposal since the original exclusive agreement, shifting the high cost of interior parking from their tab to the City’s.

Council member Ron Bacon said repeatedly on Tuesday that the debt had left the City and DDA with “a weak hand.” Bacon told Fehrenbach he saw the problem as “a two-lane highway running against you.”

In response, Fehrenbach said that the DDA can actually handle the debt payments “without becoming insolvent” because staff restructured the debt a few years ago to make it manageable.

The DDA can pull money out of the taxes it obtains from DDA district property owners to pay this debt. But, Fehrenbach noted, doing so would make it hard for the DDA to do “a lot of the good things they do to move the downtown forward” with other projects.

Eliminating the debt is not the only goal, Fehrenbach noted. The goal is also to “find a project that is desired by the community.” 

Is The CITADEL what is desired?

Fehrenbach acknowledged that what River Caddis is proposing is a more “intense” land use than was recommended by the Planning Commission in the comprehensive plan. While recognizing the land would logically be used for commercial redevelopment of some type, the Planning Commission wanted something less massive near Valley Court Park and the Oakwood neighborhood.

That said, occupied office space is something a lot of people want downtown. But would it be occupied?

Downtown is already replete with unoccupied office space, and that’s been true since before the pandemic. And, right next door to these properties, MSUFCU is going to be building an office building including two floors they plan to rent out, and they haven’t identified a tenant yet.

MSUFCU actually cut down their building proposal from 8 stories to 7 out of recognition of the low interest in office space at this point.

Council members give their thoughts on the matter

At Tuesday’s meeting, Mayor Aaron Stephens pushed to get feedback from other Council members, all of whom are new to Council since Council killed the Royal Vlahakis deal in October 2019. Stephens is a member of the DDA by virtue of his office, which means he’ll be voting on what to do next at the DDA, and he made clear he wants to know what his Council colleagues want him to do.

On the issue of potentially building another municipal parking garage – this time on the west side of Abbot Road – Mayor Pro Tem Jessy Gregg referred to the city’s “broken relationship with parking.”

She said she sees garages as “hugely beneficial” from an environmental perspective compared to surface parking. But Gregg also expressed concern about whether the City can afford to take on more parking garages, a concern strongly seconded by Stephens.

Stephens said he thinks it’s time for people in East Lansing to learn they can walk two blocks from a garage to where they want to be – and that in those two blocks, they may discover businesses like coffee shops, restaurants, and gift shops they could be patronizing.

But Gregg said a lot of people struggle with the idea of walking across a major road from where they park to where they are going, and said that she is hearing from fellow downtown merchants fear that the Graduate Hotel valet parking will take up a lot of spaces in the new Center City garage. (The hotel has no on-site parking and has a contract for 25 spaces in Lot 8, near Peoples Church.)

Gregg told Fehrenbach she wants a comprehensive report on the state of the municipal parking system.

About the possible use of tax increment financing (TIF) for this project – whereby future taxes from the redevelopment would go to reimburse costs related to the redevelopment – Gregg made clear that she isn’t against all TIF but would want it used very carefully.

Babcock agreed with Gregg, with both of them indicating they would want to see a real benefit to the region, not just East Lansing, from a project benefitting from TIF. That’s because TIF used in East Lansing pulls taxes away from other local taxing jurisdictions (Ingham County, Lansing Community College, Ingham Intermediate Schools, etc.) for use on East Lansing redevelopment.

Ninety more days, but not more, emerged as a consensus

In the end, Council indicated a consensus that a 90-day extension would be acceptable, chiefly because they didn’t see, in Gregg’s words, “enthusiastic competition for the opportunity to redevelop “this complicated parcel.” 

Both Babcock and Council member Dana Watson indicated they didn’t want to go beyond another 90-day extension of the exclusive agreement while River Caddis tries to figure out a deal with the DDA. Watson said she didn’t want to be headed down the same track as previous failed deals.

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