Momentum dies on latest Ottawa power plant project

[RustTown]

This sucks. And everything was looking so good, too...Here's a midday update:

Momentum dies on latest Ottawa power plant project

Midday

By Jeremy W. Steele

Lansing State Journal

A plan to redevelop the riverfront Ottawa Power Station as state offices appears to have been scrapped.

Despite nearly a year of work, state and Lansing officials no longer are negotiating to put together a deal, a spokeswoman for the state Department of Labor & Economic Growth said.

Although city and state officials haven't said they've ruled out the plan, which would have placed the Department of Information Technology in the decommissioned power plant, the project appears to be relegated among other failed proposals for the site.

City officials, however, say they're still committed to finding a use for the building. Mayor Virg Bernero's office expects to form a committee to develop a long-term strategy for the river front in coming weeks.

"It is a marquee building for downtown, no question about it," said Bob Johnson, director of Lansing's Department of Planning and Neighborhood Development. "If we can do something to preserve it, we want to do that sooner rather than later."

City officials under former mayor Tony Benavides' administration had worked for nearly a year to put together a plan to seek out private developers for the project. Despite at times saying they were only weeks away from releasing a project for bids, a deal never materialized.

Voters in August gave the city permission to sell a portion of the power plant that abuts the river. Lansing's city charter requires voter OK any plan to sell city property within 25 feet of the river.

The plant is owned by the Lansing Board of Water & Light, which is controlled by the city. The board uses the lower level of the power plant for a steam plant and has operating cooling towers on the building's roof.

Read more about this story in Tuesday's State Journal.

[hood]

I didn't really fell like postind this, I want to see the building redeveloped, but I'm sort of glad that this proposal won't go through. I really don't think offices is the bes use for this building. The upper floors of the building would work great for residential and the lower floors (the fatter part) would work nice as an urban mini-mall, maybe a theater or two, some stores and some resturaunts.

[RustTown]

They'd really have to put in extra floors to mak any residential work in this building. Either that, or they would have to charge a ridiculous amount of money for large condominium units. Plus, office space would have only filled part of the space. They were only supposed to be an anchor tenant. I'm angry that I went out and voted last year to sell the land in front of the station beliving that I was helping jump start the redevelopment only to have this thing fizzle out. Who dropped the ball, here, Virg's people or Tony's people? Was this just a ploy for reelection? I must say that I'm just a little annoyed at this news. There is no way the city is going to be able to find a tenant as large as the state to anchor the building in this current economy, and there is no way to make this work without having a large office tenant, at least not for another decade when downtown Lansing actually becomes desirable. Hell, this building would be almost impossible to fill in a bigger city. This is easily one of the largest vacant building in the state outside of Detroit.

Lansing State Journal:

http://www.lsj.com/apps/pbcs.dll/article?A...80340/1001/news

[statedude3]

This feels almost like the Book-Cadillac deal in Detroit, where we should never hold our breath because chances are, it's not going to work out. I do agree that the mini-mall/theater thng is probably the best solution, but there is really absolutely no data to prove this would work in downtown Lansing right now. I dont blame developers for not chasing this idea.

The one thing the building has going for it, is that it's all in tact. It still looks beautiful from the exterior.

I had a very funny dream last night about how Lansing became a thriving metropolis. In the dream, the smokestack of this building had the new fox theater style sign on it that said LANSING. I found it amuzing, just thought I'd share.

[RustTown]

That sounds like a cool dream.

I was just thinking how similar this was to the B.C. In fact, I told myself yesterday that this is Lansing's Book-Cadillac, though in much better shape. But, like I said, what makes this harder (in many ways) to fill than the Book-Cadillac is that this building is nearly 200,000 square feet of space in such a small city and metropolitan area. This would be hard to fill in Grand Rapids or Metro Detroit, let alone Lansing. Couple that with how incredibly creative the reuse has to be, and you see why I'm so disappointed. The building is 10 stories, but is closer to 16 stories when you consider the floor heights. Unlike your average building with normal floorplates, each of these floors is different in height and size, meaning you just can't simply carve this up into easy residential space. You're talking a total reconstruction of the interior including adding floors or half floors, adding walls...

What makes this worse is that for every year we don't have this renovated, we have to keep applying for the grant to develop the riverfront in front of it. The grants are contigent on whether we can get the building up and running. The city has been planning for years to build a riverfront pavilion (like what is currently on the otherside of the river at the Lansing Center), but need the grants to do so, and the only way to get the grants is for the property to be renovated, I believe.

[hood]

I really think the city just needs to do what they are going to do to the riverfront there, that alone could make the difference. I don't see this building as being too compicated either. On the upper floors (skinny part of the building) there could be residential, I dont see doing this as being a huge problem, maybe you need to add a few half floors but it's really not that big of a deal. The lower floors are what make it difficult, having that much retail space would be hard to fill, so maybe some of that could be made office, but I definately think the upper floors should be residential. All around I see this as an easier project to take on than Knapps, which requires massive amounts of expensive historic restoration on the outside and needs quite a bit of work on the inside. The Ottawa station is a clean slate, there is a lot of flexibility. BTW I think the state offices would of taken up virtually all of this building, except maybe the first floor, making it an almost exclusively office building. I really don't know how they planned on fitting 1600 workers in there, I think Grand Tower only has around 1100.

[fisher191]

I know this is going to sound like blasphemy to so many....but. From everything that I have heard about the Ottawa station, and driving by it myself, I am wondering why there is not more consideration given to razing it. It sits on such an important piece of land, that having a building that is inwardly focused, which is most ideal for offices, has relatively limited parking. The city wants a comprehensive vision for riverfront redevelopment, and that building is the sore thumb someone would have to work around. The power plant and the two building north of the plant, but south of Shiawassee, are a mess. An amazing development could go in there that not only brings a great mix of residential and business, but could be developed to have a boardwalk on the river with shops and restaurants, while giving the whole area a little more uniform feel (or at least like it was meant to be that way). So many proposal keep failing on that property, that it makes me wonder if its demo shouldn't be considered more. More state offices, while helping the developer, are about the last thing that the area needs.

The Knapps building however, definetley should and will be saved, its very difficult to redevelop, but its location and unique architecture are superior to that of the power plant.

[hood]

I, personnaly like the Ottawa Power plant a lot more than the Knapps. The biggest things hindering the power plant is the Parking ramp and those stupid cooling towers. I also really don't want to see more offices on the river either, but I'm sure that both buildings north of the Ottawa plant will be razed and that land will probably be filled with two buildings. To me tearing down the ottawa is not an option, it is a very nice building, with very nice architecture especially on the upper levels. I still think the building has a lot more potential than what most give it credit for.

[RustTown]

Architecturally, the Ottawa Street Station is priceless. It's VERY rare to find industrial architecture that tall, that large, and that finely done. There is nothing that compare to it in Michigan or the Midwest for that matter. And they certainly don't build them like that anymore. The Knapps' is also just as architecturally significant as the station, but no more so than the station. Both are priceless pieces of architecture. And, I can almost assure you that if the station came down, anything new built there at this time wouldn't be anywhere near as tall, anyway near as large, and probably not anywhere near as attractive and unique. The city needs to redevelop the plant like they did Baltimore's on the waterfront. That is one cool and unique retail/entertainment development, and Lansing could do just the same, IMO.

BTW, good news! I was finally able to get in contact with the mayor's office by email (first time since Hollister). I was informed by them that they did not drop the ball on this one, rather the state IT department was the one that got cold feet. The mayor's office informed me that the city is working on new RFP for not just the Ottawa Street Station, but for the entire riverfront from Michigan to Shiawassee in there words "very soon." I hope they aren't just pulling my leg, because we've heard it all before.

[fisher191]

My bringing the 'razing' issue to the forum, is that the numbers for this project, if we accept that it may cost 50 million (LSJ op/ed figure), assuming even the rosiest scenario of someone like Warren Buffet or Donald Trump, with gobs of money slaps down 20% through cash or redevelopment incentives. Would then need a mortgage of 40 million, at a below market rate of 5% (looking closer to 7% in the current market), and for a term of 30 years (most commercial mortgages of this size and type are 20years, and sometimes 25), the monthly nut is 215k.

At a square footage of 150,000, that means that the minimum price would be 17.20 per square foot in rent, assuming ZERO for taxes, vacancy (for a project of this size 7%), management, advertising, common area utilities, maintenance, repair reserves. Your then pushing that break even number up so high, that the developer has zero profit in there yet. For all those assumptions at zero, I would put that break even rent at 25.00, and still no profit to the developer. To risk up to 10 million of your own money (or maybe less) you expect a very healthy return. I would venture to say that no investor would even look twice for less 15% cash on cash method ( 15% on their 10 million, for giggles assume 5 million, thats still 750k per year). These numbers all assume that the square footage is class A. Obviously you would put some residential on the upper floors, but they wouldn't sell or rent for a high enough amount to help this scenario out.

Even another way to view this one......50 million for 150k of space is 333.33 per square foot. There is simply nothing in Lansing, anywhere near that price.

I would suspect that is why there have been so many proposals, but once they start crunching the numbers, it just doesn't fly. On top of all that, why would someone with that deep of pockets, simply go to a hotter market where they could reap a better return.

I love the architecture of the building, but it seems to me that no matter how beautiful, it is going to simply sit there for a very,very long time, or you could demo it, to make room for more immediate progress. I'm not sure which is the correct answer, but I think razing it needs to be on that list of considerations.

The LSJ threw an op/ed piece over the weekend that threw out the idea of a casino, which although a lead balloon, is about the only industry that could flush through enough cash to make that happen. So unless Lansing residents start warming up to a casino, and the politicians too, that won't be happening anytime soon. If we want to see the building filled and need a fool to pay the money, we need the state to buy it, afterall smart investment is not anything they would known for, I just think that would be a horrible misuse of a building.

However, looking at the Knapps building, that is a feasible project. The numbers can work. What has kept that project from happening to this point is the current owner, and just the size of the investment necessary. That one will end up happening, it is just a matter of when.

[hood]

First, I think $50 million is a very high number, you could build and furnish this building from scratch for that much, I think $20-30 million would be MORE than enough. Also, the building is currently, I think, 180,000 sq ft, after floors are completed and half floors constructed (some floors are currently well over 20' tall) I would bet that this building will be somewhere between 250k and 300k sq ft.

As for a casino, I think if one was proposed the city residents would support it, although council may not. The only roadblack for a casino would be the state government.

BTW, I seen that your project has a public hearing tonight, good luck with the council regulars Let us know when your getting close to having renderings or knowing a start date, I'm still patiently waiting...

[fisher191]

Thanks Hood,

I'm just waiting for Pollard, and the Christmas Tree Princess to ask wether or not I will be asking for any incentives. Which of course I will be....but later.

I'm getting close to making an announcement on the building and renderings, found a couple new snag/'think how you get around that' items. Which I have narrowed down to two solutions, now just decide which I would rather go with. I'm about 97% of the way there, to announcement and releasing renderings.

So stay tuned!!!

[hood]

the Christmas Tree Princess

[RustTown]

Is he talking about Christine Timmons? lol Yeah, pay them no mind. lol

Matt, that is what I was afraid off. Without the state being the anchor tenant, there is no way this building is going to get off the ground in this current economy. The only way is, like the LSJ said, a casino would act as an anchor, and they bring is huge amounts of money.

But as hood said, I don't think this would be a problem for the residents, maybe only with the city council and some of the regulars. Heck, even Grand Rapids has considered casinos recently to help inject some life and money into their downtown. Personally, there are like Black Holes, like pits, in that they offer very little vibrancy to downtown since they are pretty much self-inclusive cities-with-a-city. What they do do is pad well a poor city's budget. They have done wonders for Detroit, in those terms. Without them, the city would have already went into bankruptcy and recievership which it may anyway.

[LanCity]

Matt, that is what I was afraid off. Without the state being the anchor tenant, there is no way this building is going to get off the ground in this current economy.

C'mon man don't you have any creativity? Why do we need to wait for a big fat state contract before having the faith in this city to move forward on a big development? Why should we put state workers on primo property in downtown lansing? People need to break out of this paradigm that the only way we can get anything done in this city is by waiting for the state to bail us out. Look how well thats worked on this and the triangle property.

I love the idea of putting this property out there as a redevelopment for somebody to privately develop and occupy, especially as a true mixed use development. I mean the access to the waterfront alone would make that an attractive piece and from the sounds of things the city and bwl are going to be willing to make it a bargain. Best case scenario we get some vibrant usage out of a building that is at the heart of downtown with 0 parking issues; worst case scenario, it stays the same as its been for the last 20 years.

[hood]

Best case scenario we get some vibrant usage out of a building that is at the heart of downtown with 0 parking issues; worst case scenario, it stays the same as its been for the last 20 years.

Good point. The worst that could happen is that this building stays vacant, right now it doesen't look too bad, it's still secured and maintained and is structuraly sound. Thats why I think the city needs to develop the riverfront on their own, regardless of whether or not they redevelop the building. That would make it so that other projects adjacent to the station aren't hindered due to the buildings status.

[RustTown]

The only thing keeping this building from coming down is that the BWL still uses the back and basement of it in a limited capacity. Let's just hope they stay at the site in this capacity, because if they don't, it will be much more easy for someone to make the arguement to bring it down.

Again, a building of this size would be hard to redevelop in even a much larger city, let alone in a metro area of 450,000 persons. I'm usually optimistic. Actually, I've often me accussed of being overly optimistic, but barring some large tenant making itself the anchor for this redevelopment, this will either sit empty, or someone will call for it to be torn down.

[LanCity]

The only thing keeping this building from coming down is that the BWL still uses the back and basement of it in a limited capacity. Let's just hope they stay at the site in this capacity, because if they don't, it will be much more easy for someone to make the arguement to bring it down.

Again, a building of this size would be hard to redevelop in even a much larger city, let alone in a metro area of 450,000 persons. I'm usually optimistic. Actually, I've often me accussed of being overly optimistic, but barring some large tenant making itself the anchor for this redevelopment, this will either sit empty, or someone will call for it to be torn down.

I look at REI in Denver and think of a possible use for the BWL building. They too took a big old building that was a power station i think and set up a cool white water kyaking course along with a huge outdoor sports store... would they be interested? Who knows, but it would probably be a regional retail attraction... though Colorado is significantly more out-doors active than michigan.

[RustTown]

The problem is not that there is a dearth or lack of good, creative ideas. The problem is making a building of this size work in a city so small. Denver is significantly larger than Lansing, as are most other cities that have turned old power plants of this size (or larger) into creative developments. I've always envisioned the station as a scaled-down version of Baltimore's Power Plant mixed-use development on the Harbor. But again, it's not that there aren't enough creative ideas, but the numbers just aren't adding up in terms of redevelopment and population.

I'm not saying that it can't be done, but it's going to take something very rare to get this station up and running: countless developers, countless tax breaks...and I'm not sure how many are willing to make such a huge sacrifice to make this work in Lansing. We'll soon find out when Bernero puts out a new RFP soon.

[LanCity]

The problem is not that there is a dearth or lack of good, creative ideas. The problem is making a building of this size work in a city so small. Denver is significantly larger than Lansing, as are most other cities that have turned old power plants of this size (or larger) into creative developments. I've always envisioned the station as a scaled-down version of Baltimore's Power Plant mixed-use development on the Harbor. But again, it's not that there aren't enough creative ideas, but the numbers just aren't adding up in terms of redevelopment and population.

I'm not saying that it can't be done, but it's going to take something very rare to get this station up and running: countless developers, countless tax breaks...and I'm not sure how many are willing to make such a huge sacrifice to make this work in Lansing. We'll soon find out when Bernero puts out a new RFP soon.

The one thing it has going for it is there are countless incentives that can be applied to the development from SBT Credits, Historic Tax Credits, New Market Tax Credits, OPRA, NEZ, as well as some other grants the city holds intended for the power station (http://www.michigan.gov/deq/0,1607,7-135-3307_3515_5989-9694--,00.html). Plus since its a city of lansing building they could essentially give it away if they really needed to. Pretty much everything the developers downtown have been doing has been with a considerable amount of risk so if the city can sweeten the pot enough I don't see why any other developer wouldn't be willing to roll the dice on the power station.

[hood]

It is also a brownfield, so there is even more money yet, and as you said if it sits there long enough the city can give it away for a $1.

[RustTown]

I'm glad you all are so optimistic; someone sure needs to be. BTW, the building is owned by the Board of Water and Light (a quasi-city agency like the LEPFA), and would have to be voted on and sold by them.

[hood]

I think the city ultimately has control over the BWL, the city were the ones who had to give final approval to sell the coal storage facility, the BWL simply has to authorize the city to sell it.

[RustTown]

That's what I meant. The BWL is the first step, and they have to authorize. IMO, that's probably the most important step. If it doesn't pass them, it doesn't go forward to the city.

[LanCity]

So what are some good other uses? I was looking at the building today and imagined some awesome multi-level penthouses on the top level of the building with walkout decks on the tiered part of the building with those awesome huge windows making up two walls... might not be the most private (or warm) but probably the most stunning views possible in this city.

Then maybe lower down a big arcadia like the metreum in san francisco (without the corporate fingerprints). I'd kill to have an art museum downtown, and a real museum with a real name (impression 5 seems so, unimpressive to me) or a big aquarium (where else is there an awesome aquarium in michigan?)

Another idea I had that i think i mentioned before was REI or Bass Pro Shops with maybe a cafe/restaurant on the water front...

I don't think the big spacious building is a detriment, but rather a benefit to the riverfront. Office space is nice, but we can put offices in the knapps building or just about anywhere else downtown... I think the best use for the river front is fun.

Look at all the people that come downtown for common ground, silver bells, baseball, etc. etc. I don't think people are resistant to coming into the city and spending money, they just don't have any good reasons after 5 p.m. to be there.