Core Spaces, the national student-housing developer looking to build a large new project called The Hub on the edge of MSU's campus, told East Lansing’s Planning Commission last month that the company will continue to own and manage the property after construction. But a review of the company’s record by ELi suggests that might not be the case.
Tonight at 6 p.m., East Lansing’s Transportation Commission will review plans for The Hub. Proposed for the southeast corner of Bogue Street and Grand River Avenue, The Hub would be a ten-story, 585-bed development with retail space on the ground floor. The site now houses a 7-11 store and Georgio’s Pizza. Both would be provided new space in the development.
When the project went for initial review to Planning Commission on October 25, the chief concerns raised were the height of the building and the relatively low number of parking spaces provided in the design. The building would be 124-feet-tall at its highest and have only 131 spaces for residents of the 347 apartments to park cars.
At the October 25 Planning Commission meeting, David Pierson, the local attorney for Core Spaces, said he would be working with the Transportation Commission to push up their November meeting so that Core Spaces could receive that Commission’s recommendations and get the project to a second hearing before the Planning Commission on November 15.
Pierson said they wanted this schedule to avoid delaying construction. Since The Hub is now on a Transportation Commission agenda for tonight and the Planning Commission agenda for this Wednesday, it appears that the developer’s plans were successful.
Core Spaces’ website opens with a splash page describing the company as a “vertically integrated company focused on acquiring, developing and managing the best real estate in educational markets.” During his October presentation to the Planning Commission, Core Spaces Chief Investment Officer Andrew Wiedner also described the company as “vertically integrated.” And it’s how the company is described in the October 20 memo on parking requirements that the company prepared for the members of the Planning Commission to justify the low number of parking spots.
This description of the company as “vertical integrated” is meant to assure that the company retains ownership of its properties after development and manages them as rental properties. Why provide such assurance? It means the City knows who is going to be in charge of the property in years to come.
But, since the October meeting of Planning Commission, ELi has found that, in September, Core Spaces and DRW Real Estate entered into an agreement with another large student rental corporation to “recapitalize” seven of its major properties. According to an article from Business Wire, the agreement between Core Spaces, DRW Real Estate, and American Campus Communities (ACC) means that ACC will “ultimately acquire” six of Core Spaces’ developments, with a right to purchase option for a seventh.
Two of the properties, The HUB Eugene (built in 2014) and State on Campus Fort Collins (built in 2016), were acquired by ACC in August of 2017. Both of these properties are still listed on Core Spaces’ website, and The HUB Eugene was included in Core Spaces’ October 20 parking memo as an example of the company’s experience with student-focused development.
ACC has purchased a partial interest in four as-yet-uncompleted projects as well: The James in Madison, Wisconsin, which is scheduled to open in the fall of the 2017; and The Hub Ann Arbor, The Hub West Lafayette, and The Hub Flagstaff, all under construction and scheduled to be completed in 2018. (Core Spaces has also built similar projects in Tuscon, Tempe, and Madison that do not appear to be part of the deal with ACC.) Upon completion, ACC will increase its investment in these properties with an option to purchase outright. ACC also has exclusive purchasing rights to Core Spaces project in Seattle, which is also not ready for rental.
According to Business Wire, “Upon the initial funding of each property, American Campus Communities assumes sole operational control, while Core Spaces/DRW Real Estate Investments will retain certain limited decision making abilities including responsibility for the development and delivery of the in-process development properties.”
When we contacted Core Spaces regarding their plans for the East Lansing development once it is completed, they responded through attorney Pierson that “Core has not changed its plans or strategy for future developments, including East Lansing, which Core will develop, own, and manage in-house. The transaction with ACC recapitalized a portion (but not all) of their assets, meaning that Core sold some of their assets, changed their percentage ownership in some of their assets, and retained ownership in some outright.”
Pierson tells ELi that the purpose of the transaction with ACC was to free up capital for them to invest in projects “that Core will keep. That is why Core has built and maintains a strong in-house management staff, and intends to remain a vertically integrated real estate company, not simply act as a developer.”
Tonight’s Transportation Commission meeting begins at 6 p.m. (See the agenda here.) Planning Commission’s meeting starts at 7 p.m. on Wednesday, and that agenda is now posted and includes links to materials on the proposal. Members of the public can comment at both of these meetings.
After Planning Commission completes its review, it will make a recommendation to City Council, which has final decision-making authority on the project. The project does not call for any any tax increment financing (TIF), making it relatively unusual in that respect for a large East Lansing development in the downtown area.
The Transportation Commission meeting is scheduled for the same time and place as the surprise City Council meeting announced yesterday. Presumably, one meeting will be moved to the other courtroom.