Wealthy Street Mega Thread

[sfloria]

 

Oh, And in nearby related news, the Wealthy St. Station is planning on a major expansion. The article was a few days ago (and I completely forgot where I read it) where they talked about expanding the interior for some seating, and putting in an outdoor seating area. I think they were going for a liquor license for beer sales too?

 

http://therapidian.org/placematters-wealthy-grill-staying-put-looking-expand

 

I'm excited that they are staying!  One of my favorite places in town for a sandwich.  Having a beer as well will be the icing on the cake!

[GRDadof3]

I'm starting to grow weary of this need to constantly give tax-exempt status to these projects. I get that during really lean times where this either makes or breaks these projects because banks aren't lending, but we have some major financial issues in GR and these guys simply cannot keep doing these projects and not paying any taxes for half a decade. I really like this project, but not this much.

 

A year? Maybe. But come on.

 

Oh, And in nearby related news, the Wealthy St. Station is planning on a major expansion. The article was a few days ago (and I completely forgot where I read it) where they talked about expanding the interior for some seating, and putting in an outdoor seating area. I think they were going for a liquor license for beer sales too?

 

I agree GRUrbanist. And it's not like you need incentives to fill apartments in the Grand Rapids area now. And there's no way the developer of this will pass along the property tax savings to the tenants. Ha. All of that exempted property tax would go to the schools in particular, GRPS, which could definitely use it.

[egrguy]

Why would you think a brewery is still going to land in the market? I figure if one hasn't yet, it'll probably end up as restaurant space.

The floor plan has space for two larger size restaurants (one potentially earmarked for a brewery). I hold hope for a brewery because I think the impact is much greater then a restaurant. The brewery attracts patrons that may not regularly visit the market and vice versa.

I'm biased towards beer, but I just feel it could be more beneficial to the market's long term success.

[fotoman311]

I agree GRUrbanist. And it's not like you need incentives to fill apartments in the Grand Rapids area now. And there's no way the developer of this will pass along the property tax savings to the tenants. Ha. All of that exempted property tax would go to the schools in particular, GRPS, which could definitely use it.

 

I was in a meeting where another developer was going to go for one of these and was looking for support from the neighborhood.  They claimed it was the only way they could get the cost/square foot down and still make money on the project.  It's really tough to tell who's just trying to eke out more profit and who actually needs it to make their cost structure feasible to get the project built.

 

My understanding is that the state changed their rules and started allowing only single parcels to apply for the NEZ status and the city also changed their rules to match the state.  Before I think 10 contiguous parcels were required.  So, we'll likely continue to see this on more projects.

[Jippy]

Development tax incentives should be tailored to achieve specific community priorities. Grand Rapids has evolved enough that infill should no longer be the priority in and of itself. Green building, superior design, mixed-income housing, historic preservation are some of the top of mind priorities that I would be comfortable providing limited term tax incentives for. 

[GRDadof3]

That's the other thing(s)

 

a) They could get an NEZ designation for up to 15 years. I was only using the area around Union Square as an example that it expires in 2019, but hypothetically on this project in Eastown it could be exempted through 2029 or 2030 (depending on when they start).

 

and b) They're not even seeking the NEZ to help the Eastown neighboring business owners, they're just seeking NEZ on this project alone. To me a "zone" denotes an area, not a single project. The NEZ around Union Square is huge and extends all the way up to Leonard Street.

 

My experience is, the larger developers have tax incentive attorneys/consultants they work with whose job it is to turn over every nook and cranny to figure out what tax incentives they qualify for. It's actually good business practice, but that should not compel the city to approve them.

 

The hearing appears to be March 25th at 7PM at City Hall, 9th Floor City Commission chambers.

[GRDadof3]

The floor plan has space for two larger size restaurants (one potentially earmarked for a brewery). I hold hope for a brewery because I think the impact is much greater then a restaurant. The brewery attracts patrons that may not regularly visit the market and vice versa.

I'm biased towards beer, but I just feel it could be more beneficial to the market's long term success.

 

I had heard they were going to break the brewery space up into two smaller spaces. Knowing the team working on filling the market, I would bet they've talked to every brewery within 100 miles.

[mpchicago]

It's a shame that New Holland and the Market could not come to a resolution on what I would guess was a lease disagreement.  What is the deal with New Holland?  I think they have had something like three false starts in Grand Rapids over the last 5 or so years. 

 

I too would have liked to see a brewery go into the market.  I do think it would have been a great anchor tenant for the place.

Edited March 12, 2014 by mpchicago

[elcelc]

Lack of parking (yes that P word) was an issue with one, if not more, of the breweries pursuing this space.  It's been close to full every time I've been down there since the indoor opened.  I can imagine the days when the outdoor is open will be pretty packed. 

[mpchicago]

Lack of parking (yes that P word) was an issue with one, if not more, of the breweries pursuing this space.  It's been close to full every time I've been down there since the indoor opened.  I can imagine the days when the outdoor is open will be pretty packed. 

 

That's surprising.  Isn't there a ton of on street parking south and east of the market, in addition to a nearby parking ramp?  I think NH was looking at a Division Ave location years ago; maybe "lack or parking" put brakes on that spot too?  Bottom line: If they think parking is an issue way down at the southern edge of downtown, they are never going to set up shop, unless it's in Ada, Rockford, or Grand Rapids Twp.

Edited March 12, 2014 by mpchicago

[arcturus]

Parking aside, how much would any craft brewer have to charge to cover the rent they're asking at the market?  I suspect the answer for most is 'too much', at least for getting frequent repeat business.  Also, could the brewer keep their hours longer than the rest of the market, requiring no doubt a dedicated entry?

[GRDadof3]

Parking aside, how much would any craft brewer have to charge to cover the rent they're asking at the market?  I suspect the answer for most is 'too much', at least for getting frequent repeat business.  Also, could the brewer keep their hours longer than the rest of the market, requiring no doubt a dedicated entry?

 

There is a separate exterior entry for that space onto Ionia, it could be done.

 

I probably know just enough to be dangerous, but I also think that the market was requiring some infrastructure/equipment additions/maintenance that is uncharacteristic of a commercial space lease, that turned people off. As in, and I quote someone who was looking at that space: "They want a brewer in there and they're not willing to support a brewer."

[egrguy]

There is a separate exterior entry for that space onto Ionia, it could be done.

 

I probably know just enough to be dangerous, but I also think that the market was requiring some infrastructure/equipment additions/maintenance that is uncharacteristic of a commercial space lease, that turned people off. As in, and I quote someone who was looking at that space: "They want a brewer in there and they're not willing to support a brewer."

I have to say this is surprising and disappointing. To me it appears the market has missed an opportunity to be a real tourist draw. I've been to all the restaurants there and they are good, but I'm not bringing an out of town guest specifically for any of them (maybe fish lads) but Shorts, New Holland, Bells, Jolly Pumpkin, Dark Horse,etc would have really driven the market into a different level.

I just lack the confidence that two other smaller restaurants will be able to accomplish this.

[elcelc]

re parking, the 7 or 8 times I've been there this winter, their lot was very full.  In summer, many of those spots go away when the outdoor vendors are operating.  I haven't experienced that yet myself but I imagine it's not good.  I don't know who owns the mud pit across Ionia or what the plans are for it, but that took in a lot of cars last summer.

 

I agree, the market combined with an excellent brewer/restaurant nearby would vastly expand visitors to that area.  Still waiting...

[x99]

It's a terrible idea.  I never could figure out the economics of building a new apartment building with rents where they are in Eastown, although they have been creeping up.  This nonsensical (and arguably offensive) proposal just amplifies the problem.  More units (built with, in effect, substantial taxpayer subsidies) leads to lower rents, making any further construction without more tax breaks even more difficult.  It is simply not a sustainable path to follow.  There is absolutely nothing about Eastown generally or this particular site that presents a compelling need for tax incentives to redevelop it.  Are the speculators that paid too much for these lots now having a case of buyer's remorse and looking for taxpayers to bail them out?  Sounds like it.

 

What I can see, perhaps, is a scenario where the project has an agreed upon tax value keyed off of the projected returns, rather than keying them off of construction costs, as would be the norm in a new construction project.  There would then be an agreement to reassess five years later based on actual realized returns.  Such an approach would properly recognize the actual market value of the units, which is as it ought to be.  The developers are effectively arguing that the value of their new construction project ought to be zero, which is nonsense.  If that is the case, it should not be built in the first place.

 

Here's a quick primer:  Let's say one building costs $1,000,000, and its value is the same.  Taxes would be around $25,000 a year.  Now let's say that after expenses, but before taxes, the project realizes an operating income of only $50,000 a year.  At a 6% return, but before taxes, the building would be "worth" about $834,000.00 (and would never be built).  Now, properly taxes are supposed to be about 2.5% of the value.  Applying that tax load factor to the anticipated return, the building becomes worth $590,000.00, and taxes are $14,750.  Not zero. 

 

The developer of course will gripe that it makes no sense to spend a million dollars to end up with something worth half that.  The rejoinder to that is fairly simple:  Then don't build it.

 

Simply granting a $0 value does (at least) two bad things for everyone else, other than the huge loss of revenue--worse now than the vacant lots!  First, it artificially lowers operating expenses, thereby reducing necessary rental rates.  The project developer doesn't care, since he pays no taxes anyway.  Every other landlord in the area, though, takes a bath.  They have to charge less too, and pay property taxes.  So what happens?  Their properties go DOWN in value.  Here's the real kicker:  Every homeowner in the area takes a bath, too, since their neighbors' properties, many of which are rentals, all went down in value too.  Ugly paradox, isn't it?  New construction lowers surrounding property values?  Huh?  But it most certainly does in an area littered with two and one family rentals.  The only way that doesn't hold true is if the new construction is somehow so desirable that it attracts more people to the area and increases the area rents.  But that leads to really crummy result #2.

 

The second bad side effect if the project actually increases area rents is that it allows the landlord an enormous profit potential at taxpayer expense.  Rents go higher than the projections, but the phony $0 assessment is locked in.  So the landlord sells with 10 years to go on the no tax bonanza.  On a million dollar cost property worth a million bucks after normal taxes, this is an extra $50,000 a year, courtesy of mom and pop next door.  Assuming the property can be sold with no tax increase, discounted at 6%, we just put another $370,000 in Mr. Developer's hand, gratis.

 

No matter which way you slice it, when an area doesn't have a need for investment dollars--which Eastown doesn't--deals like this tend to be losers for everyone but the developer.

 

EDIT:  I can picture one scenario where a temporary tax cut makes some sense.  Say the numbers all work out just fine with the taxes, but the building is built out of cheap junk and looks terrible, although it technically meets bare-minimum code.  The City and neighbors say, "Uh, that looks awful.  Go back to the drawing board, and while you're at it, you need to improve adjacent on-street parking, upgrade the street lamps, and add some curb bulb outs."  Developer goes back and says, "Facade improvements and all that garbage will cost me another $120,000 and I will get nothing for those improvements, so I am cancelling the project."  The City then agrees to finance the additional requirements it imposed through a temporary, partial property tax reduction.

 

That's the other thing(s)

 

a) They could get an NEZ designation for up to 15 years. I was only using the area around Union Square as an example that it expires in 2019, but hypothetically on this project in Eastown it could be exempted through 2029 or 2030 (depending on when they start).

 

and b) They're not even seeking the NEZ to help the Eastown neighboring business owners, they're just seeking NEZ on this project alone. To me a "zone" denotes an area, not a single project. The NEZ around Union Square is huge and extends all the way up to Leonard Street.

 

My experience is, the larger developers have tax incentive attorneys/consultants they work with whose job it is to turn over every nook and cranny to figure out what tax incentives they qualify for. It's actually good business practice, but that should not compel the city to approve them.

 

The hearing appears to be March 25th at 7PM at City Hall, 9th Floor City Commission chambers.

Edited March 13, 2014 by x99

[GRDadof3]

It's a terrible idea.  I never could figure out the economics of building a new apartment building with rents where they are in Eastown, although they have been creeping up.  This nonsensical (and arguably offensive) proposal just amplifies the problem.  More units (built with, in effect, substantial taxpayer subsidies) leads to lower rents, making any further construction without more tax breaks even more difficult.  It is simply not a sustainable path to follow.  There is absolutely nothing about Eastown generally or this particular site that presents a compelling need for tax incentives to redevelop it.  Are the speculators that paid too much for these lots now having a case of buyer's remorse and looking for taxpayers to bail them out?  Sounds like it.

 

What I can see, perhaps, is a scenario where the project has an agreed upon tax value keyed off of the projected returns, rather than keying them off of construction costs, as would be the norm in a new construction project.  There would then be an agreement to reassess five years later based on actual realized returns.  Such an approach would properly recognize the actual market value of the units, which is as it ought to be.  The developers are effectively arguing that the value of their new construction project ought to be zero, which is nonsense.  If that is the case, it should not be built in the first place.

 

Here's a quick primer:  Let's say one building costs $1,000,000, and its value is the same.  Taxes would be around $25,000 a year.  Now let's say that after expenses, but before taxes, the project realizes an operating income of only $50,000 a year.  At a 6% return, but before taxes, the building would be "worth" about $834,000.00 (and would never be built).  Now, properly taxes are supposed to be about 2.5% of the value.  Applying that tax load factor to the anticipated return, the building becomes worth $590,000.00, and taxes are $14,750.  Not zero. 

 

The developer of course will gripe that it makes no sense to spend a million dollars to end up with something worth half that.  The rejoinder to that is fairly simple:  Then don't build it.

 

Simply granting a $0 value does (at least) two bad things for everyone else, other than the huge loss of revenue--worse now than the vacant lots!  First, it artificially lowers operating expenses, thereby reducing necessary rental rates.  The project developer doesn't care, since he pays no taxes anyway.  Every other landlord in the area, though, takes a bath.  They have to charge less too, and pay property taxes.  So what happens?  Their properties go DOWN in value.  Here's the real kicker:  Every homeowner in the area takes a bath, too, since their neighbors' properties, many of which are rentals, all went down in value too.  Ugly paradox, isn't it?  New construction lowers surrounding property values?  Huh?  But it most certainly does in an area littered with two and one family rentals.  The only way that doesn't hold true is if the new construction is somehow so desirable that it attracts more people to the area and increases the area rents.  But that leads to really crummy result #2.

 

The second bad side effect if the project actually increases area rents is that it allows the landlord an enormous profit potential at taxpayer expense.  Rents go higher than the projections, but the phony $0 assessment is locked in.  So the landlord sells with 10 years to go on the no tax bonanza.  On a million dollar cost property worth a million bucks after normal taxes, this is an extra $50,000 a year, courtesy of mom and pop next door.  Assuming the property can be sold with no tax increase, discounted at 6%, we just put another $370,000 in Mr. Developer's hand, gratis.

 

No matter which way you slice it, when an area doesn't have a need for investment dollars--which Eastown doesn't--deals like this tend to be losers for everyone but the developer.

 

EDIT:  I can picture one scenario where a temporary tax cut makes some sense.  Say the numbers all work out just fine with the taxes, but the building is built out of cheap junk and looks terrible, although it technically meets bare-minimum code.  The City and neighbors say, "Uh, that looks awful.  Go back to the drawing board, and while you're at it, you need to improve adjacent on-street parking, upgrade the street lamps, and add some curb bulb outs."  Developer goes back and says, "Facade improvements and all that garbage will cost me another $120,000 and I will get nothing for those improvements, so I am cancelling the project."  The City then agrees to finance the additional requirements it imposed through a temporary, partial property tax reduction.

 

Exactly!

[walker]

So Regal's last line in his Breton Village post today threw me for a loop. 

 

 

. . . Lee & Birch moving to Wealthy/Eastern really threw me for a loop.  Did not expect that.

 

Was this covered somewhere else and I missed it?

 

http://leeandbirch.com/blogs/l-b-blog/13674505-the-big-move-putting-down-new-roots-on-wealthy

 

Nothing says historic and high fashion more than an old Marvel Gas Station aka Ron's Car Wash:

 

http://viget.org/757_Wealthy_Street_SE/_files/759wealthysec.jpg/_info/

 

Bad for downtown, good for midtown I suppose. 

 

EDIT: here's an article in GR Business Journal;

 

http://www.grbj.com/articles/79442-clothing-boutique-moves-out-of-downtown

Edited April 17, 2014 by walker

[Gorath]

The Trade Center @ 50 Lewis must be feeling really empty now.  But then I read on M-live that CWD is trying to get Chemical Bank to move into Lee & Birch's space.

 

Mlive: Downtown Grand Rapids boutique moving closer to customers

[GR_Urbanist]

So Regal's last line in his Breton Village post today threw me for a loop. 

 

 

Was this covered somewhere else and I missed it?

 

http://leeandbirch.com/blogs/l-b-blog/13674505-the-big-move-putting-down-new-roots-on-wealthy

 

Nothing says historic and high fashion more than an old Marvel Gas Station aka Ron's Car Wash:

 

http://viget.org/757_Wealthy_Street_SE/_files/759wealthysec.jpg/_info/

 

Bad for downtown, good for midtown I suppose. 

 

EDIT: here's an article in GR Business Journal;

 

http://www.grbj.com/articles/79442-clothing-boutique-moves-out-of-downtown

 

Either L&B is trying to go for an extremely "ironic" look, or they are desperate. That building is reeeealy in need of some major work to make it just not look trashy.

 

And they are setting a date of June 1st to open there too? I dont think their customer base will know what to make of this.

 

Also, wasn't this place supposed to be part of the renovation of the building next door?

[Gorath]

Also, wasn't this place supposed to be part of the renovation of the building next door?

 

It was.

 

Technically, the addition is on a different lot and could still happen. The spire though is on the car wash lot and could get axed.

Edited April 17, 2014 by Gorath

[RegalTDP]

According to the GRBJ article, they won't be doing much to the building:

 

 

The 1,200-square foot building is considered historic and much of the site will remain the same, with the exception of some renovations: painting, building a larger patio and installing a glass garage door.

 

 

I don't know man... Maybe it's just me, but this is an odd little building to be selling clothes.  I never would have pictured a clothing boutique here.  There's no street frontage at all.  I'm really interested to see how they work the outside space, but still... Weird.  And the grass lots on both sides don't sell the location either.

 

That being said, I do happen to like this store, and if it works, a high-end clothing boutique on Wealthy and Eastern is a pretty amazing thing.

 

But I do think this is a blow for downtown.  There aren't many actual destination retail stores, and when one of them leaves, that really sucks.

Edited April 18, 2014 by RegalTDP

[GRDadof3]

According to the GRBJ article, they won't be doing much to the building:

 

 

I don't know man... Maybe it's just me, but this is an odd little building to be selling clothes.  I never would have pictured a clothing boutique here.  There's no street frontage at all.  I'm really interested to see how they work the outside space, but still... Weird.  And the grass lots on both sides don't sell the location either.

 

That being said, I do happen to like this store, and if it works, a high-end clothing boutique on Wealthy and Eastern is a pretty amazing thing.

 

But I do think this is a blow for downtown.  There aren't many actual destination retail stores, and when one of them leaves, that really sucks.

 

I think if downtown GR decides to raise parking rates, particularly at meters and ramps, that should help bring more destination retail downtown. Or an hour and a half on a bus to buy a $30 shirt makes perfect sense.

[RegalTDP]

I think if downtown GR decides to raise parking rates, particularly at meters and ramps, that should help bring more destination retail downtown. Or an hour and a half on a bus to buy a $30 shirt makes perfect sense.

 

You know, it's not always immediately obvious when you're being sarcastic. 

[GRDadof3]

You know, it's not always immediately obvious when you're being sarcastic. 

 

Haha. I know. sorry.

[requiredinformation]

Either L&B is trying to go for an extremely "ironic" look, or they are desperate. That building is reeeealy in need of some major work to make it just not look trashy.

 

And they are setting a date of June 1st to open there too? I dont think their customer base will know what to make of this.

 

Also, wasn't this place supposed to be part of the renovation of the building next door?

 

733 Wealthy (the old Kregel building) and 759 Wealthy (Ron's) are both owned by Bob Dykstra under a land contract with Kregel (ask him about missed payments). The renovation of 733 Wealthy hasn't happened because Bob has burnt too many bridges with investors through overspending on unrelated projects, then trying to roll that debt into the next project. He also owes hundreds of thousands to various contractors and companies around West Michigan for work performed more than a year ago. He's been going around trying to get people to partner up with him or work for free with the promise of a spot on his "next big project" (hint: there isn't one). 

 

He currently has one tenant in the Harris Building, Local Epicurean, who as per their contract didn't have to pay rent for most of 2013 because the space wasn't up to promised standards. I spoke with one contractor who told me they'd had a lot of requests to use the upstairs for weddings, but Bob keeps turning them down. When he bought the old Scavenger Hunt / DAAC building next door he kicked out all of the paying tenants and those spaces have sat vacant for the past year. I believe his son lives upstairs at the moment. He co-owns the doughnut shop downstairs. 

 

Lee & Birch is owned by Bob's daughter. Now that they've announced moving into the old Ron's building, Bob gets to tell potential investors that he already has a signed tenant - one wonders if this tenant will pay rent. One also wonders how they're going to make the space suitable for retail. It's rough, and there aren't a lot of companies still willing to do work for him.