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Fulton and Sheldon


arcturus

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I have to believe that the numbers are inflated as well. I think developers do this to get bigger tax credits.

These are the new tax credits they will be seeking from the state.

To assist in development funding, we hope to secure property tax caps under the Michigan Obsolete Property Rehabilitation Act (OPRA) as well as grant funding under the new Michigan Community Revitalization Program (CRP).

My guess is that the DDA will also kick in money. The city also could give money to help fix the areaway under the sidewalk. I also would expect some value engineering to take place after the tax credits are secure such as the rooftop deck getting the axe.

Note: Could a moderator split the Kendall stuff from this thread as it has gone way off topic from Fulton & Sheldon

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Have they lost their marbles paying Azzar's ransom? As I said the last time this came up, a buyer could have bought most if not all of the Loraine building across Fulton for about the same, and that building is in great shape. Don't know if most of the floors are still for sale, though (at the time, I think it was running about $150k per floor with similar floorplates and architecture). The maths on this Kendall building venture just totally suck. Beyond suck. Beyond wildly wild bad awful terrible, somewhere out into the land of pure fantastical rotten horrible. $5 million for TWELVE apartments plus a rinky-dink 3000 square foot retail (IIRC the floor plates correctly) with no parking, and a 3000sqft office for themselves? What the @#$%^ are they thinking? That's, say, $200k for each apartment PLUS $2.5 million for TWO FLOORS. They must have some sort of magic economics I just can't understand. That, or they enjoy having the most expensive office in all of downtown GR.

UPDATE: Just read the article. Let's just fuel the cynic in me (and you) a bit more: Based on the stated rents, this place will GROSS $153k/yr off the apartments. And they are market rate, meaning taxpayer subsidies seem less likely to add some much-needed financial juice. At an 8% return, that makes them worth about $2 million tops, assuming that they operate with ZERO expenses. That means they need rents of... uh ... $240,000.00 per year with ZERO expenses on floors one and two. Assuming they can do that (which is impossible, of course), and given a 3000 square foot floor plate, they would need to rent for $40 A FOOT. Which. Is. Totally. Impossible. So who the heck is picking up the difference (not to mention paying property tax and other expenses, unless they somehow plan to do magic mystery sauce triple net residential leases with CAM charges). Is someone actually lending money on this deal? More realistic numbers: At $16 a foot, they're looking at around $100k per year on the first two floors. That assumes a true triple net with landlord paying ZERO expenses (property tax, heat, etc). With an insanely generous operating cost ratio on the residential (40% expenses), they're at $91k on the residential. They net out around $191k per year. That's about a 3.8 percent return, assuming life is perfect. On a very, very risky venture. Good luck with that. These guys need a new lawyer, a new broker, or a new manager, or some combination of the above. Unless, of course, they have some sort of really good, super crazy federal and state subsidy picking up most of the renovation cost, which of course would just tick me off, since that means my tax dollars in effect just fed Azzar's bottom-feeder bank account. And it would have to be one heck of a tax credit. /rant

I always get a kick out of your mythical pro forma's. It appears that you are the only one in the know that each of these developments is a money loser. Amazingly the same developers keep coming back for more, yet I never hear about their bankruptcies! I'm beginning to wonder if the developers and their financiers are wrong, or you!

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I always get a kick out of your mythical pro forma's. It appears that you are the only one in the know that each of these developments is a money loser. Amazingly the same developers keep coming back for more, yet I never hear about their bankruptcies! I'm beginning to wonder if the developers and their financiers are wrong, or you!

Mythical pro formas? Not exactly. Those are their rent income numbers quoted in the Press. Commercial and office rents are no mystery either. $16 a foot is generous for that location. Industry standard numbers on residential are 45-55% of rents being costs. I went with 40% to be generous. The reality is that without a mountain of tax incentives, or a massive cost reduction, or both, they don't make money. If Dave is right--which I suspect he is--they come out okay, albeit not great. They clearly didn't squeeze Azzar to make it profitable. He got his obscene price. Instead, the taxpayers will get squeezed, in effect rewarding Azzar. That. Sucks.

But alas ... we are indeed venturing far astray from the WMCAT building project. What is going on with that? The brick came down, but exterior progress seems to have come to a halt for awhile now. Are they planning on restoring the original facade eventually? Did I miss renderings?

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X-99-I cannot agree with you more about Azzar. When I was ED at Lighthouse Communities (now LINC) we got a long way down the road to making the drain field on Madison a REALLY cool park that would have transformed that area. At the last minute Azzar pulled a fast one on us, we fought him in court, lost and it cost us about $60K.

The problem is that when you deal with snakes like this that own the property, really do not care about selling it, and see litigation as sport (literally), and hold key pieves of property for ransom, sometimes you have to simply pay the ransom for the good of the community. I had to do the same thing with a slime ball named Ollie Olsen to get the development done on Wealthy and Diamond.

Sucks but that's the way it is. I cannot wait to see what this building is going to look like. My wife already told me she wants to move there.

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X-99-I cannot agree with you more about Azzar. When I was ED at Lighthouse Communities (now LINC) we got a long way down the road to making the drain field on Madison a REALLY cool park that would have transformed that area. At the last minute Azzar pulled a fast one on us, we fought him in court, lost and it cost us about $60K.

The problem is that when you deal with snakes like this that own the property, really do not care about selling it, and see litigation as sport (literally), and hold key pieves of property for ransom, sometimes you have to simply pay the ransom for the good of the community. I had to do the same thing with a slime ball named Ollie Olsen to get the development done on Wealthy and Diamond.

Sucks but that's the way it is. I cannot wait to see what this building is going to look like. My wife already told me she wants to move there.

Dave,

I read through some of that litigation history when you mentioned it a couple months ago. What an insane deal. I wasn't entirely surprised at the outcome given what the contractual provisions were, but you at least at a sound argument. Michigan has this thing, though, for absolutist literal interpretation of contracts (and often only so long as the little guy takes one in the shorts). Uptown Village looks great, and I hope its making some money. Maybe one day Beauty House will stop looking like it was designed by a guy who owns a string of Chinese takeout restaurants.

And while we were all diverted on other projects, a nice article popped up on the Acton Institute project at Fulton/Sheldon. http://www.mlive.com/business/west-michigan/index.ssf/2012/09/conservative_think_tanks_new_h.html

The renderings of the building look fantastic--better than the original. Nice!

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