DDA Votes to Stay With the Royal Vlahakis Team

Friday, May 3, 2019, 9:04 am
By: 
Chris Root

Above: Paul Vlahakis presents yesterday at the DDA.

At a special meeting yesterday to decide whether to extend an agreement with local developer Paul Vlahakis and his partner Royal Apartments or to issue a Request for Proposals to allow other developers to submit proposals, the Downtown Development Authority (DDA) voted 8 to 1 to keep giving an exclusive opportunity to the same developer – at least for now.

Positive comments about the latest ideas for the project from a representative of The Peoples Church at the start of the meeting appeared to help the developers’ case.

The one “no” vote came from the DDA’s chair, Peter Dewan, who will now sign the Amendment on behalf of the DDA. Those voting in favor were City Manager George Lahanas, Mayor Mark Meadows, Greg Ballein, Lynsey Clayton, Luke Hackney, Michael Krueger, Jill Rhode, and Eric Sudol.

The project under discussion is proposed for construction along Evergreen Avenue at the west end of downtown, just north of The Peoples Church.

There is no active site plan for the project, as the developers have kept changing what they propose to build, partly in response to some officials’ dissatisfaction with earlier plans and partly in response to market realities.

At yesterday’s meeting, the DDA approved an Amendment to the Purchase and Sale Agreement with the Royal Vlahakis developers that extends the time this group has to submit a revised site plan and Brownfield Tax Increment Financing (TIF) plan and to negotiate a Development Agreement with the DDA and the City.

What the new amendment does

In brief, the Royal Vlahakis developers now have until May 25 to enter into a Development Agreement with the DDA and the City. A Development Agreement sets numerous conditions for a project that involves both private and public properties.

The original deadline for the three parties to enter into a Development Agreement was April 1, and the DDA had given the developer 30 more days to “cure” the “default.” The developers submitted a 73-page draft Development Agreement on April 24, but it is far from complete or from being agreed to by all the parties.

Further, three 30-day extensions are available after May 25 to complete this agreement, provided that the DDA determines, at the end of each period, that sufficient progress is being made. For each 30-day extension, the developers must pay a nonrefundable sum of $15,000 to the DDA.

The new amendment also gives additional time for the developer to “inspect” the property, a multi-faceted process that has been underway since the first agreement was signed in December 2018.

Four 30-day extensions are now available to the developers for the “inspection” provisions. Each extension requires paying a nonrefundable $21,000 “Inspection Extension Fee.”

There has been no explanation as to why the inspection can fairly readily be extended for longer than the Development Agreement.

The amendment also gives new deadlines for submitting a revised site plan and special use permit – by June 21 – and a revised Brownfield TIF plan – by July 24. There is no explanation of why the deadlines for the site plan and TIF plan come after the Development Agreement, which normally comes later and pulls together all the pieces of a development deal.

A site plan was first submitted by the original deadline of December 17, and a TIF plan was submitted by the original deadline of January 15. But both have gone through multiple versions already and have now been repeatedly withdrawn. So new plans are now expected in June and July.

The new plans include only the DDA-owned properties on Evergreen Avenue, and the proposal for that area is being called “Park Place West.” The proposal no longer includes Vlahakis’ Dublin Square property, where a building called “Park Place East” was originally proposed.

How did the DDA decide to grant the extension?

A positive tone was set about the extension for Royal Vlahakis at the beginning of the Public Comment period, when the interim senior pastor of People’s Church, Rev. Case van Kempen, came to the podium.

“What a difference a week makes,” he said.

The developers had met with a group at the church the day before. The church likes this most recent proposal, van Kempen said.

“We like the sensitivity to our memorial garden. We like the parking.” He added, ”We appreciate very much that the developer has listened to the concerns of the church.”

Van Kempen also delivered a letter from the church’s attorney George Brookover, and read from its last paragraph: “With these understandings the Church has no objection to the proposal on your Agenda to extend the Purchase and Sale Agreement to May 25, 2019.”

Brookover’s letter lists 12 “commitments” that he said the developer made, the first seven of which all concern parking.

A new agreement between the developers and the church holds that the developer will pay to build a “Wall Expansion” around The Peoples Church Memorial Garden. The developers submitted pictures of this wall the day before the meeting, including this:

Brookover continued, “With these commitments, the Church feels the developer has made great strides towards a project possibly acceptable to the Church. Consequently, I have been authorized to indicate to you that the Church may be able to conditionally support this project subject to certain components memorialized in writing and legally enforceable.”

These items were not added to the new agreement passed by the DDA.

What the developers say they have learned

Although the item on the agenda was considering the Purchase and Sale Amendment, considerable time was given to hearing again from the developers’ representatives, Kelly Kenefick from Royal Properties and local developer Paul Vlahakis, about what they have learned about the project in recent months.

Kenefick returned to East Lansing from Illinois for a second week to lead the presentation of the reasons for the many changes to their plans. Among the changes were the elimination of the multi-plex movie theater (that they discovered didn’t work financially), eliminating for-sale condominiums (because banks demand presale of a high percentage of such units, particularly when they are mixed with rental apartments), the elimination of the Hagan properties that reduced the footprint of the Evergreen building after Matt Hagan refused to sell, and the decision to drop automated parking (which was not explained).

Kenefick (above) said this learning experience put them ahead of where other developers would be if the DDA opened up the process by releasing a Request for Qualifications and Proposals (RFQP), which would invite other developers to submit their qualifications and ideas for the public properties.

The fact that the site plan has changed several times – now featuring a first-floor mix of markets and restaurants instead of the multi-plex theater – is evidence of the team’s adaptability and its ability to listen to what people want, Kenefick said.

For-sale condos are now out of the plan, but low- and moderate-income housing will be incorporated instead, she says, to comply with the City’s zoning requirement for large downtown projects that at least 25% of residential units in mixed-use buildings be for diverse housing. The developers say they are communicating with MSHDA about this component of the project.

Kenefick also said repeatedly that they would be able to fix issues that were still outstanding.

For example, she asked people who were concerned about the height of this building not to oppose the project because of its current 14-story plan. “If you are going to vote today based on building height, please don’t do that. That can be adjusted,” Kenefick said.

She said they could shave off a couple of stories, although she couldn’t promise that a 10-story design would be economically feasible.

Kenefick also said that possible concerns about underground parking could be addressed. One concern is that underground parking is extremely expensive, and the developers are proposing that the City own part of the underground parking. Another concern is that the underground parking is proposed where a major sewer line runs just underground.

Faced with concerns, Kenefick said that above-grade parking could work instead of underground parking. Reviewing the letter from Peoples Church’s lawyer suggests that certain changes to parking could affect the church’s support for the project.

Kenefick also stressed that they are experienced developers. Royal Properties’ website shows completed projects in Illinois, Florida, Texas, Arizona, and Tennessee, most of which are student housing.

How DDA members voted

Lynsey Clayton said she did not want the City to get the reputation for operating in ways that would cause developers to lose money. She wanted to give these developers more time.

Greg Ballein, whose company is partnering with Harbor Bay Real Estate on the City Center project, said big projects take a lot of time and a lot of change, and this team should be given the time they need. He urged that the developer submit plans as soon as possible for the Dublin Square site, too, so that the period of construction downtown would not be extended more than necessary.

Jill Rhode said that the developers have been responsive to the DDA, bringing back things that have been asked for in a timely manner.

Peter Dewan, the chair of the DDA, was the only “no” vote on the Purchase and Sale Amendment. While he did not explain his vote, his questions during the meeting indicated various concerns.

Dewan asked about why various elements of previous plans had been changed. He pointed out that there had been five site plans thus far, and wondered how could the DDA know that the plan they had now would not change again soon.

Dewan pointed out that the developer already had spent a lot of time and investment in the project – as had City staff. One concern is that the developers might go further down the line, make more nonrefundable payments, and then meet rejection by Council. (The project as currently described requires approval from at least four members of Council.)

Dewan asked whether the current developers would have a problem with the DDA releasing an RFP, given that the developers have stressed that they would be well ahead of any other developers who might be interested.

Kenefick responded that the DDA choosing to issue an RFP now would result in a loss of trust with the Royal Vlahakis team, and they and their partners would reduce the intensity of their work on developing the project.

Major issues that are outstanding

Even though the DDA voted by a wide margin to continue with Royal Vlahakis under the terms of the new Amendment, several significant issues were raised during the meeting that were not resolved.

One surprise conveyed at the meeting, which some people in City government learned about only the day before, was that the latest version of the proposal has the City owning, maintaining, and operating (1) part of the underground parking (the portion under the current public parking Lot 8), and (2) a promised “covered pavilion … for use as a farmer’s market, public market and/or public festival area …”

City ownership of these elements is not included in the legal Amendment that the DDA adopted; it has been communicated verbally by the developer.

While the developers promise to pay for the construction cost of the pavilion, Lahanas pointed out at the previous week’s meeting that markets are a nice amenity, but they are an expense, not a money-maker.

The pavilion could be built on Evergreen Avenue or at another location agreeable to both the DDA and the developers. The Amendment said the pavilion would be constructed “in substantial compliance with the renderings presented to the Seller on May 2, 2019,” but no renderings were identified that would be used for this purpose.

City Planning Director Tim Dempsey said that underground parking is about twice as expensive to build as above-ground parking, and it is also considerably more expensive to operate and maintain.

Dewan pointed out that previous plans at this site had included some underground parking in the hill East of Evergreen Avenue, but the plan currently before the DDA includes two levels of underground parking below Lot 8, where there is potential flooding.

Lahanas (above) raised the issue of the sewer. The plan (on pages 4 and 5) shows underground parking crossing below Evergreen Avenue, where the City has long planned to install large, elliptical sewer pipes to replace smaller lines running there now. Lahanas said he had not yet been able to get comments from the Engineering Department, but he asked whether both of these elements are possible.

Vlahakis responded that the issue will require some attention by engineers.

Another issue that continues to be controversial in the City is how much more height and density is beneficial in the west end of town where four tall buildings are currently under construction. We have reported in the last several months about differing views on expanding the number of tall buildings in the DDA, Planning Commission, and City Council.

These different perspectives will come into play as the Royal Vlahakis’ revised deal now moves forward.

 

See our complete reporting on the Royal Vlahakis team's attempts to strike a deal in East Lansing.

 

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