DDA Ends Exclusive Agreement with Royal Vlahakis for Sale of Downtown Properties

Thursday, August 22, 2019, 4:58 pm
By: 
Chris Root

Above: Paul Vlahakis (standing) at today’s meeting with DDA members Jeff Kusler (from left), George Lahanas, and Eric Sudol. (Photos by Raymond Holt)

East Lansing’s Downtown Development Authority voted 7-4 Thursday to end the exclusive deal it entered into last December for the sale and redevelopment of DDA-owned properties on Evergreen Avenue. At its meeting next month, the DDA is expected to refine and to vote to send out a Request for Proposals (RFP) seeking ideas from any developers who are interested in redeveloping these properties.

A team of the principals from Royal Properties and Vlahakis Development came to the DDA’s meeting today seeking an extension of the exclusive right to purchase and redevelop the properties but left disappointed. Paul Vlahakis told ELi after the meeting that his team will need to meet to figure out their next steps and their view of the DDA's vote.

The original Purchase and Sale Agreement for the “Park Place” project set tight deadlines for submitting a site plan (December 17, 2018), Brownfield Tax Increment Financing (TIF) plan (January 15, 2019), and a signed Development Agreement (April 1, 2019). While that agreement contained a complicated set of possible extensions, the ambitious timetable was specified because the developer was being given the advantage of having the exclusive opportunity to propose a project here during that time.

If the DDA had agreed to the second amendment requested by the developer, the Royal Vlahakis developers would have had a total of more than a year of exclusive access to develop a project on this property. That's because the new agreement’s multiple extensions could have allowed until January 2020 to obtain the necessary approvals and a completed Development Agreement.

The seven DDA members who voted not to renew the Purchase and Sale Agreement were Peter Dewan (Chair), Jim Croom (Vice Chair), Luke Hackney, Mike Krueger, Jeff Kusler, George Lahanas (City Manager), and Erik Altmann (Mayor Pro Tem, sitting in for Mayor Mark Meadows, who is out of town).

Those voting in favor of renewing the agreement were Greg Ballein, Lynsey Clayton, Jill Rhode, and Eric Sudol.

The case for extending the exclusive agreement

The developers’ attorney, Brent Titus of Foster Swift, presented the developers’ rationale for extending the agreement. He said the developers had done everything they could to respond to each body in City government (including the DDA and the Planning Commission) as well as to City staff.

Below: Brent Titus at last month's meeting.

Titus also said that the City was partly responsible for delays, citing a letter from the City Engineer dated in early July that he said was not forwarded to the developers for more than a month.

Titus offered a contract renewal that stated that a fee of $21,000 for each of five potential 30-day extensions should be applied to the ultimate purchase price rather than being added to the City’s revenue as had occurred under the existing agreement.

In making his clients' case, Titus pointed out that Mayor Meadows had suggested that, if the DDA issued an RFP, it might not expect to obtain from another developer the full amount of $5.6 million that the DDA owes on the Evergreen Avenue properties. The Purchase and Sale Agreement that Royal Properties and Vlahakis Development had signed set the purchase price at $5.6 million.

DDA members’ rationales for their votes on whether to extend the agreement

Why did the DDA vote 7 to 4 against further extension, after voting 8 to 1 in favor of the last of the extension in the existing agreement just one month ago?

Several DDA members, including Altmann, Croom, and Hackney, said they had been willing to vote in favor of each of the extensions in that prior agreement, but they did not see justification for signing a new amendment, which would begin a new set of extensions.

Below: Peter Dewan at today's meeting.

DDA Chair Dewan, who voted against extensions on the last rounds, said the DDA had been looking for something transformational on this property, and that the initial proposal — which included movie theaters, condominiums, office space, and automated parking — seemed to fit that bill. But none of those elements are in the conceptual plan that exists today.

City Manager Lahanas also said that the original proposal had a lot more appeal. He said that he would not necessarily have agreed to an exclusive agreement eight months ago for a project proposal that looks as it does today.

Altmann said, “We are eight months into this and I do not see a project coming together. I see a collection of ideas that still seem to be changing.”

Altmann noted that he had been asking for five weeks for any evidence from third parties about their commitment to participate in the project or their assessment that various components were financially viable. He said that the developers had not provided a letter from either their consultant on the first-floor “urban market” or a potential operator of that market indicating that this plan was viewed by them as financially viable.

The DDA has previously discussed the fact that a number of urban markets in other Michigan cities are failing or they have significant outside funding that is not available in East Lansing.

Below: Jill Rhode at today's meeting.

Explaining her vote to extend the agreement again, Rhode expressed concern that the DDA will not be able to recoup its investment in the Evergreen Avenue properties, which DDA members now acknowledge were purchased for more than their market value for a failed development deal years ago. Rhode did not want to lose the Royal Vlahakis commitment to pay $5.6 million for the properties, as that would wipe out the debt on them.

What happens next

DDA Chair Dewan said after the meeting that the latest version of the Request for Proposals for the Evergreen Avenue properties will be reviewed by the DDA’s Executive and Finance and Project and Infrastructure Committees on September 19 and will come to the full DDA on September 26 for a vote.

Royal Properties and Vlahakis Development can stay in the game by responding to the RFP if they choose to do so.

See ELi’s comprehensive reporting on the Royal Vlahakis “Park Place” deal.

 

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