Keeler Building - 56 North Division

[Dj Augustine]

4 hours ago, organsnyder said:

You're describing an environment in which they have unlimited capital. They aren't looking at the value of their current investments in a vacuum—they're looking at the value compared to other possible uses of that capital. That's simply good business sense.

You're trying to spin this into a story that they're bearish on downtown's future. However, I think it's just the opposite: They see such a hot market that they're shedding stable, long-term investments, in favor of much more lucrative (albeit perhaps more risky) short-term gains.

Well said.

 

 

[arcturus]

Big pension $'s invest in income producing commercial real estate.  Always been that way.

[GRDadof3]

www.grbj.com/articles/84677-franklin-partners-doubles-down-on-city

 

“For Franklin to come here from Chicago and invest their capital in Grand Rapids is a real statement about the growth and optimism in our city, which the local business and philanthropic community has been nurturing now for more than 30 years,” Koster said. “It’s also nice to see these key assets now transition back to local hands to be operated by local groups with an interest in developing long-term relationships with their tenants and in keeping the profits here in Grand Rapids.”

Is that you x99?   j/k

 

[x99]

On 3/3/2016 at 0:08 PM, Dj Augustine said:

 Franklin Partners is a "value add" investor, and not a group looking for stabilized returns.  The sale of the buildings are much more about providing a return on their investment to their financial partners.. They take the risk to buy buildings that are not stabilized with cash flow.  When they sell it, it is to someone who is looking for the annual cash flow vs. taking on a risky project.  They made massive investments into both buildings and they did have debt on them both.

Oh, come on.  Even Franklin agrees with me (see GRBJ article linked above): "When we’re finished and the tenants are moved in, we evaluate whether we hold it long term or sell it" and also this: "the deals were too good to pass up."   They cashed out because someone offered them more than they felt they were worth over the long haul.  Plain and simple.  

Franklin saw the crazy amount of cash as outstripping the amortized value of the returns when all of the externalities were taken into account.  That's the fancy-pants version of "too good to pass up."  The big factors are not downtown going vacant but parking and long-term interest rates.  Interest rates are a broader macro issue, but parking is a much bigger externality as leases turn over.  A huge chunk of vacant office space in the city is currently untenantable by tenants without existing parking cards--including 99 Monroe as leases roll over.  Even if the situation resolves, in the near term the rent concessions hungry landlords will be forced to offer will get baked into 5-10 year leases with renewal options.  I think Franklin was acutely aware of the parking problem since they caused it, and felt now was the time to sell while the parking issue was still quietly percolating and not at full boil and scaring off investors.  

Personally, I think Franklin made a very wise calculation that a building with parking is going to worth a lot more money than one without which is why they signed an OPTION on the building  (a far cry from saying they "bought" it as many news reports have breathlessly repeated) .  All of this is why I have said from the outset that Keeler will come--if Franklin actually closes--with a major parking ramp announcement, and that the ramp space will be reserved to the building.  Wait and see... 

 

Edited March 7, 2016 by x99

[GRDadof3]

2 hours ago, x99 said:

Oh, come on.  Even Franklin agrees with me (see GRBJ article linked above): "When we’re finished and the tenants are moved in, we evaluate whether we hold it long term or sell it" and also this: "the deals were too good to pass up."   They cashed out because someone offered them more than they felt they were worth over the long haul.  Plain and simple.  

Franklin saw the crazy amount of cash as outstripping the amortized value of the returns when all of the externalities were taken into account.  That's the fancy-pants version of "too good to pass up."  The big factors are not downtown going vacant but parking and long-term interest rates.  Interest rates are a broader macro issue, but parking is a much bigger externality as leases turn over.  A huge chunk of vacant office space in the city is currently untenantable by tenants without existing parking cards--including 99 Monroe as leases roll over.  Even if the situation resolves, in the near term the rent concessions hungry landlords will be forced to offer will get baked into 5-10 year leases with renewal options.  I think Franklin was acutely aware of the parking problem since they caused it, and felt now was the time to sell while the parking issue was still quietly percolating and not at full boil and scaring off investors.  

Personally, I think Franklin made a very wise calculation that a building with parking is going to worth a lot more money than one without which is why they signed an OPTION on the building  (a far cry from saying they "bought" it as many news reports have breathlessly repeated) .  All of this is why I have said from the outset that Keeler will come--if Franklin actually closes--with a major parking ramp announcement, and that the ramp space will be reserved to the building.  Wait and see... 

 

Sounds like a great investment decision. Why didn't you do it x99?

[jas49503]

Or, they realized that there is more money in developing a property than renting a property, which, given my first hand knowledge of developers, is absolutely true.

 

unfortunately for me I am in the rental business, not the developing business.

[GRDadof3]

3 minutes ago, jas49503 said:

Or, they realized that there is more money in developing a property than renting a property, which, given my first hand knowledge of developers, is absolutely true.

 

unfortunately for me I am in the rental business, not the developing business.

You can lose a shit-ton of money developing too. There's this little thing called an unlimited personal guarantee that a lot of banks make developers sign where the bank can call you on the entire loan, plus legal fees. They can go after your home, all of your assets, your retirement accounts, your kids' college savings, everything.

That's why the rewards have to be so great for a development project, because the risk is tremendous.

[jas49503]

I meant to say, more potential money in development, when the market is right. (Like right now).  

Edited March 8, 2016 by jas49503

[GRDadof3]

3 hours ago, jas49503 said:

I meant to say, more potential money in development, when the market is right. (Like right now).  

Being in the rental business also seems like a good place to be right now too.

[GRDadof3]

This is a real bummer. Maybe one of the other bidders will come forward?

https://mibiz.com/news/real-estate/item/24051-franklin-partners-walks-away-from-keeler-building-deal-in-downtown-grand-rapids

[joeDowntown]

1 hour ago, GRDadof3 said:

This is a real bummer. Maybe one of the other bidders will come forward?

https://mibiz.com/news/real-estate/item/24051-franklin-partners-walks-away-from-keeler-building-deal-in-downtown-grand-rapids

That sucks, I liked the design. I wonder if Kendall will look at this building after giving up on the old Klingman's/Count building. And heck, Franklin was one of the bidders on the Klingman's/County building. Maybe they should just swap.

Azzar's death grip continues.

Joe

[GR_Urbanist]

What a disaster. First the building across the street fell through, now this.

 

I can only see someone combining these two buildings + the parking lots next door (turning them into ramps), into one massive project as the only thing that will make this work.

[GVSUChris]

38 minutes ago, GR_Urbanist said:

What a disaster. First the building across the street fell through, now this.

 

I can only see someone combining these two buildings + the parking lots next door (turning them into ramps), into one massive project as the only thing that will make this work.

And then you add in the disappointing turn of events with 12 Weston...why can those sections of Division never catch a break? 

[GRDadof3]

1 hour ago, GVSUChris said:

And then you add in the disappointing turn of events with 12 Weston...why can those sections of Division never catch a break? 

Lack of parking? *ducks*

 

[thebeerqueer]

The only positive to come out of this news " While the overall potential for future redevelopment of the Keeler Building remains unclear, Franklin Partners will now turn its focus to its proposed redevelopment of the Display Pack Inc. industrial building in the Grand Rapids Monroe North building. The current tenant is expected to be mostly out of the facility by the end of the year, and Shoemaker said he hopes to decide whether to turn the building into office or residential uses in the next 30 days." Progress on the Display Pack building should be announced soon. 

[x99]

Not really unexpected that a deal with Azzar fell apart, although at least one of the stated reasons boggles the mind:  Franklin wanted more time for due diligence and Azzar wasn't willing to give it.  Really?  Because there is a huge pool of buyers lined up?  It sounds to me like Azzar thought he had a winning hand, tried to play hardball when Franklin asked for time, and lost.  

 

[ctpgr34]

I think this had more to do with parking.  I heard that there was hope of a possible new ramp nearby, maybe that fell through?

[arcturus]

It begs to ask the question just how impotent is the city?  When a building is falling apart and fencing has to be erected to avoid public hazard just exactly what's it going to take to stop the building from festering further?  

[thebeerqueer]

1 minute ago, arcturus said:

It begs to ask the question just how impotent is the city?  When a building is falling apart and fencing has to be erected to avoid public hazard just exactly what's it going to take to stop the building from festering further?  

I couldn't agree more. Also, why is it acceptable in GR to just close a sidewalk on a busy DT street and not provide a covered/safe walkway. You see this with a lot of construction projects currently underway. So pedestrians are walking in the street and crossing not at crosswalks. Makes for a dangerous and un-walkable city. 

[getemngo]

1 hour ago, thebeerqueer said:

I couldn't agree more. Also, why is it acceptable in GR to just close a sidewalk on a busy DT street and not provide a covered/safe walkway. You see this with a lot of construction projects currently underway. So pedestrians are walking in the street and crossing not at crosswalks. Makes for a dangerous and un-walkable city. 

In the case of the Keeler Building, the problem is underneath the sidewalk, not above - so there's not much in the way of quick, temporary solutions.

[GRDadof3]

1 hour ago, thebeerqueer said:

I couldn't agree more. Also, why is it acceptable in GR to just close a sidewalk on a busy DT street and not provide a covered/safe walkway. You see this with a lot of construction projects currently underway. So pedestrians are walking in the street and crossing not at crosswalks. Makes for a dangerous and un-walkable city. 

The city has a lawsuit against the building owner, but what they should do is do at least the areaway and sidewalk work and slap a lien on the property, if that's an option. It's a public health hazard. 

[MJLO]

57 minutes ago, GRDadof3 said:

The city has a lawsuit against the building owner, but what they should do is do at least the areaway and sidewalk work and slap a lien on the property, if that's an option. It's a public health hazard. 

Would eminent domain apply here?  The hazard there has been growing,  It's been that way for a couple of years.  Doesn't greater public safety set a precedent against a notorious commercial slumlord? 

[wingbert]

17 minutes ago, MJLO said:

Would eminent domain apply here?  The hazard there has been growing,  It's been that way for a couple of years.  Doesn't greater public safety set a precedent against a notorious commercial slumlord? 

What was the mechanism that led to the demolition of the two leaning buildings on south division?  I forgot how that whole situation went down but didn't the city cite a danger to the public in that case?

 

[thebeerqueer]

2 hours ago, getemngo said:

In the case of the Keeler Building, the problem is underneath the sidewalk, not above - so there's not much in the way of quick, temporary solutions.

I was also thinking of 20 E Fulton, 234 Market and up until recently, the Westside gateway/New Holland/office/apartment building projects. Sidewalks closed, construction fencing/barricades to the street and no where for pedestrians to go. 

[GRDadof3]

1 hour ago, wingbert said:

What was the mechanism that led to the demolition of the two leaning buildings on south division?  I forgot how that whole situation went down but didn't the city cite a danger to the public in that case?

 

The city made the call but the owner actually paid to demolish the buildings and clear the land. In this case, they've fined and cited the owner (Azzar) but he doesn't care about paying any of it. There's just not enough pain there for him to loosen his death grip on his money. That's why I say do the work and put a lien on the property. That way he can't sell it until the lien is cleared.