MSU Unlikely to Be Part of Downtown Redevelopments

Tuesday, March 7, 2017, 4:40 pm
By: 
Alice Dreger

Above: the blighted DRW/Convexity project as seen from MSU’s campus today

Michigan State University now appears unlikely to become a major tenant in either of the two big redevelopment projects being proposed for East Lansing’s downtown. MSU’s Vice President for Auxiliary Services Vennie Gore told East Lansing neighborhood representatives this morning that, while MSU will continue to talk to the developers for the Park District and Center City District projects, MSU has made no progress towards a master lease of office space or apartments.

Several times, Gore said that MSU has “hit the pause button” on the idea of becoming part of a new major downtown redevelopment in East Lansing. This in turn suggests that if one or both of the two big new redevelopment projects are built, they are likely to be filled predominantly with MSU-student renters.

According to Gore, MSU is trying to achieve four goals with a possible foray into downtown East Lansing real estate: (1) to bring vibrancy; (2) to drive economic growth and improve the diversity of options in housing and retail; (3) to get rid of the blight near MSU’s historic Abbot Road entrance; and (4) to realize a modest return on the investment. But, he said, the numbers aren’t working.

Gore told the neighborhood representatives whom his staff invited to the Kellogg Center this morning that MSU tried recently to purchase the land at the blighted northwest corner of Abbot Road and Grand River Avenue from DRW/Convexity “at fair market value,” but that the company was not willing to sell.

He also said MSU had “approached Convexity about a joint venture” in which MSU would have an equity stake, but that as a nonprofit institution MSU can’t subsidize a private entity.

And, while DRW/Convexity has indicated a willingness to build in 40,000 square feet of office space into “Building A” at the corner, in place of dozens of apartments that would otherwise go in those floors, Gore said that while MSU was interested in the possible office space, the cost was too high for MSU to sign up.

According to Gore, the lease price of the office space at DRW/Convexity’s proposed “Building A” would have come to about $26/square foot, whereas space in the Eyde building near Hannah Plaza for about $14/square foot. The $26/square foot price would mean MSU would essentially be providing a subsidy to the developer.

He suggested that the relatively high price of office space in Building A would also make it difficult to attract for-profit businesses to office space there, because there is significantly less expensive office space available elsewhere. A major challenge is that construction costs are currently running high, driving up the amounts developers feel they must charge to potential tenants.

What about housing MSU-affiliated scholars downtown through a master lease of hundreds of new apartments at the Park District site, as previously suggested? Gore said that MSU would seek, with a master lease of apartments for visiting scholars, to have about a four percent margin between what it would charge the visitors and what it would have to pay the landlord.

But, he said, the numbers work out nowhere near that goal. Many of the scholars come with a very limited housing stipend, and MSU would essentially have to subsidize the housing significantly. And that’s not doable, he said. The visiting scholars MSU is seeking to assist include researchers using FRIB, international scholars, visiting professionals, and faculty coming to MSU temporarily on sabbatical.

As for the Center City District redevelopment proposal, Gore said that his office plans to talk with the Balleins—the co-developers of that project—in about two weeks. When it was pointed out that that proposal goes to Planning Commission for a public hearing tomorrow (March 8), and that in two weeks it is scheduled to be through review of Transportation Commission, the Brownfield Redevelopment Authority, and possibly also Planning Commission, so that it would essentially be too late for the review of the proposal to include information about a possible role for MSU—Gore acknowledged that was the time table. He said again MSU has hit “the pause button” on participating in a major downtown redevelopment.

MSU has invested about $180 million in real estate development in Grand Rapid’s downtown, building the $90 million Secchia Center for the College of Human Medicine and a new research building also costing about $90 million, because the university sought to expand the medical school into Grand Rapids where it did not have space of the type available on the East Lansing campus. MSU is building several new research facilities in East Lansing, but on its own campus.

Gore also explained that there is a kind of chicken-and-egg problem with East Lansing’s downtown: the kinds of amenities (like higher-end restaurants) that would be likely to draw non-student residents and office workers downtown are not available, because the downtown has lacked the kinds of people who would support them. A member of Gore’s staff described the challenge of trying to attract businesses when what East Lansing’s downtown consists of is “burgers, beer, and tanning salons.”

Asked about a possible coming housing glut of student rentals, Gore said that they are seeing student rental options persisting much longer than in the past. He said we are already seeing MSU students renting fewer apartments in the northern tier (the apartment complexes along Abbot Road north of Lake Lansing Road).  And, he said, there are more “For Rent” signs still up at this time of year than he has ever seen before. This was confirmed by residents in the near-university neighborhoods.

While Gore expects MSU to have no problems filling its housing including the dorms this coming academic year, he suggested that we may start to be seeing so many new apartments that older apartments and houses will not rent, at least not for the same amounts as before. This means they may increasingly fall into disrepair and may become vacant, a pattern that is happening in some other university towns.

The Lansing State Journal reported in the past week that developers are looking to build apartments for 650 more tenants near Hannah Plaza—a decision that will be made by Meridian Township—and that Core Campus may build housing for hundreds more at the corner of Bogue Street and Grand River Avenue. These are likely to all be student rental apartments.

Even before these projects were announced, the LSJ suggested in an editorial that student enrollment at MSU and the apartment housing boom may be “on a collision course.” According to the LSJ, “MSU President Lou Anna K. Simon has told local officials there’s no need for more off-campus housing” for MSU students.

What Gore told the neighborhood representatives this morning would seem to echo that conclusion.

 

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