Royal Vlahakis Throws a Hail Mary Pass

Thursday, April 25, 2019, 5:22 pm
By: 
Alice Dreger

Above: The rendering of the new proposal. Only not really?

Trying to save their exclusive purchase agreement with East Lansing’s Downtown Development Authority, just yesterday developers Royal Apartments and Vlahakis Development sent in a completely new site plan and a draft development agreement.

Royal Vlahakis did not want the DDA to vote at its meeting today to end their exclusive deal or to invite other developers to consider what they might propose to do with the DDA’s properties on Evergreen Avenue.

And for now, Royal Vlahakis got their wish.

The DDA put the decision off again until at least next Thursday at noon, when the DDA will hold a special meeting to decide whether to radically rework the purchase agreement with this developer – keeping it exclusive – or to open the properties up to other potential developers with a Request for Qualifications and Proposals (RFQP).

The new site plan submitted just yesterday is a radical departure from what we’ve seen. It includes only the DDA’s publicly-owned land on Evergreen Avenue, not the developers’ own land on Abbot Road. The proposal from Royal Vlahakis no longer includes Matt Hagan’s property just north of the DDA’s land, as Hagan refused to sell to Vlahakis for yet more student-focused apartments.

This image shows in yellow what is gone and what is still included:

Gone now, too, are plans for movie theaters. Gone is the automated parking. Gone is the 20,000-square-feet of office space. Gone are the owner-occupied condos.

All of these things had sweetened the pot for the DDA.

At the meeting today, DDA member Jill Rhode said, “It’s just an apartment complex now… All the special stuff is out” now.

Indeed, the plan submitted yesterday for the public land just north of Peoples Church calls now for a rental apartment building that maxes out the footprint of the site, rising to 140 feet, with no stepping down toward the park and residential neighborhood.

It includes 66 four-bedroom apartments, although the existing zoning code allows no units larger than three-bedrooms in this part of the city.

Here’s the new proposal rendered looking east from Abbot Road. Peoples Church is on the left, and Dublin Square is the grey block on the right.

Faced with this radical change in plans, DDA Chair Peter Dewan said they confronted two choices: either decide to continue in discussions with this developer or issue an RFP.

Members of the public came forward to speak at public comment to say the DDA should make the second choice.

“Getting qualified developers is very important,” said Ralph Monsma, a former City Council member.

He suggested these are not qualified developers. Monsma and other public commenters noted that the developers had failed to make progress in the review and approval process.

Royal Vlahakis has still made no traffic report public, and they still have no active Brownfield tax increment financing plan, having now submitted and rapidly withdrawn two.

City Council recently voted against a zoning ordinance needed to make the originally-proposed project work.

And the developers have admitted they cannot secure financing for what they proposed – something other local developers predicted to ELi from the start.

Citizens commenting also noted that the developers have failed to win public support for the project. Rev. Betsy Aho of the Peoples Church, immediately south of the project area, told the DDA today that the community’s “trust is being shaken” by the developer and DDA.

Below: Betsy Aho and Calvin Kerr of Peoples Church listen to attorney Brent Titus speak.

Aho said she was “urging” the DDA to “pause and step back” and realize “how this particular developer’s actions are interpreted by all the people you serve.” She urged the DDA to move to the RFQP, as did the other public speakers.

But then, taking the floor, the developers announced the new site plan was much more exciting than people in the room realized.

All those apartments include, they say, some moderate-income housing that will address the City’s requirement for diversified housing in big downtown developments. The developers say they are talking to MSHDA (the Michigan State Housing Development Authority) about that.

There was more.

The developers handed out images based on the Grand Rapids Public Market, and showed a video from that market, saying this was what they would add to the site plan. The message was clear: East Lansing could have what Grand Rapids has.

Where did the new site plan show that public market? Well, it doesn’t. The developers explained they just haven’t had time to put it in. But give them time, they said, and it would be drawn in on the first floor, where a floor of parking is shown in the new plans.

Who will pay for the cost of carrying this new public market, the City Manager asked? He noted that farmers’ markets are a “nice amenity to have” but are money-losers.

No answer came for that.

Below: City Manager George Lahanas (right) and DDA Chair Peter Dewan (left).

The process has been challenging with “a lot of moving parts,” the developers representatives told the DDA, with tough deadlines imposed by the contract they signed with the DDA back in December.

They apologized repeatedly for missing an appointment with Peoples Church yesterday, saying they had to meet with the City instead on the proposed new legal agreements.

Kelly Kenefick of Royal Apartments explained that they’ve spent $400,000 so far on this deal “if you include our time.”

Kenefick (above) said they had had “key learnings,” particularly that the timeline they agreed to in the Purchase & Sale Agreement was difficult and that there wasn’t financing for the office space, condos, or movie theater in the first iteration of their plans.

Without funding, she explained, a project can’t happen.

Kenefick did not say whether the new site plan – with or without the public market – can find financing. She did say the market would be managed by “just one vendor,” but said nothing about who that vendor would be.

Kenefick and attorney Brent Titus, representing Royal Vlahakis, suggested the developers were willing to pay $15,000 per month going forward to extend the deal. In fact, the developers handed in a $15,000 check yesterday, indicating the way they read the Purchase & Sale Agreement, that gave them the extension automatically.

City Attorney Tom Yeadon, who also serves as attorney to the DDA, indicated multiple times that he and Titus read the signed Purchase & Sale Agreement differently. He urged the DDA not to take the money offered yesterday lest it weaken their bargaining position, particularly if they might decide to pull out.

Below, from left: Brent Titus, Tom Yeadon, Erik Altmann, and Ralph Monsma.

On Yeadon’s advice, the DDA agreed to meet on May 2 in order to vote on and sign an addendum to the Purchase and Sale Agreement with Royal Vlahakis.

With an addendum that could eliminate text that is no longer accurate because of the significant changes to the proposal, Yeadon said the DDA would be in a better legal position to decide to either continue with this developer or to determine that the developer had not met the terms of the agreement and, therefore, move on to issue an RFP to open the opportunity to other developers.

The next decision – whether to continue with Royal Vlahakis or issue an RFP – could be made at the May 2 meeting or at a following meeting.

At today’s meeting, Titus said that his clients were willing to change the agreement so that the DDA could be assured of getting to keep $15,000 per month even if the deal never comes to fruition. (Right now these payments can be applied to a final purchase price.)

But Yeadon said he had only just been handed a proposed addendum to the signed deal, and he needed reasonable time to consider what made sense for the DDA and City.

“My point is we want to move forward in good faith,” Titus said. He told the DDA that “no one [else] is going to be as far along as we are” in the proposal process, so, he reasoned, the DDA would lose less time sticking with his clients. He said “we want your cooperation.”

Below: another rendering of the new plan, apparently showing the view from behind Peoples Church, without the market component included.

DDA Member Lynsey Clayton said that she was concerned with the changing of the project parameters. She noted that even as the DRW Convexity project morphed, The Graduate Hotel remained a constant positive, and that even as the Center City project morphed, the Target store remained an anchor.

Still, she found the public market concept very exciting.

DDA member Greg Ballein, whose company is developing Center City, said he thought these developers had made “tremendous progress” even with the changes.

By contrast, speaking to ELi after the meeting, Mayor Mark Meadows described the developers as “not even at square one now.” He noted the market idea shown today wasn’t even in the site plan turned in yesterday.

But, he said, it made sense to give them more time. He noted that the DRW Convexity deal on the Park District had to go through three iterations before construction started.

Meadows said he wants to see real progress by next week – a revision of the Purchase and Sale Agreement that reflects the radically different site plan.

Meadows did not say he wanted to see proof that it was financially viable, but he did say he wanted the DDA to have at least a few hours to look at the materials before they vote whether to stick with these developers longer or send out the RFQP.

“It was never our intent to delay this process,” Paul Vlahakis told the DDA before meeting ended. He said his team had no problem writing the public market and moderate-income housing plans into the new deal.

When the public will see that deal, and whether it will be in time to weigh in, is unclear at this point. The draft Development Agreement submitted yesterday by Royal Vlahakis has not yet been made public, nor has the proposed addendum to the Purchase and Sale Agreement.

 

Access ELi's complete reporting on the Royal Vlahakis deal.

Note: This article was amended to correct the last name of Kelly Kenefick.

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