Ann Arbor's 601 Forest student high-rise property sale finalized
The land deal - reportedly worth at least $12 million, according to student housing industry experts - also signals that financing may be in place for the 14-story tower to be built on the edge of the University of Michigan’s central campus.
A rendering from 2009 of how 601 Forest would look at the southeast corner of South University and South Forest in Ann Arbor. Chicago-based Hartshorne Plunkard Architecture is now the architect for the project.
AnnArbor.com files
Also part of the transaction is Harrison Street Real Estate Capital LLC, a Chicago firm that provides equity capital for student housing developers, according to a report today on studenthousingnews.com.
Closing the transaction to take ownership of the property was one of the final steps in the deal before construction could take place.
The project will add up to 620 student beds in the luxury student-housing market. Based on estimated per-bed lease rates at $1,000 per month, the project could generate $7.4 million per year in rent while also changing the market for owners of smaller, older or more distant properties.
This project continues a recent trend of new construction with higher rental rates taking hold of the campus housing market.
"The U-M was very, very slow to get into the student housing market," said Edward Surovell, owner of Edward Surovell Realtors in Ann Arbor. "That left the university with a deficit that created (opportunity) inside the city for private solutions for campus housing.
"... The private sector has jumped at a great opportunity."
Meanwhile, city records show multiple permit requests were filed last week by general contractor Stevens Construction, based in Wisconsin.
They include:
• Barricade permit.
• Demolition permits for 607 609, 617 and 621 S. Forest.
• Grading and earthwork.
Permits filed in December include requests to halt water, sewer and natural gas service to the properties before demolition.
Meanwhile, a permit filed in July to build the foundation for the new building remains under review, according to the city.
Ron Hughes, principal of Hughes Acquisitions LLC, was part of the original development team for the project, which started in the planning process as University Village.
He continued the development after the project was downsized from its original 25 stories and the project was changed to 601 Forest LLC.
In October 2008, City Council approved the 14-story version of the project, which also is eligible for a brownfield reimbursement plan to cover costs of demolition and site preparation work through a tax recapture after the project is completed.
The estimated value of the project at the time was $85 million.
In 2010, Hughes sought administrative changes to the site plan to add 10 bedrooms - bringing the total to a range of 570-620 - and add parking spaces to total 146. Those changes also added two retail store fronts to the ground floor.
Hughes did not return a call seeking comment on the transaction. Harrison Street also could not be reached Saturday afternoon.
On Thursday, Harrison Street announced the joint venture purchase of a 607-bed student housing project in San Diego for $43.5 million.
In a report on that transaction, Harrison Street senior vice president Brian Thompson said, “We continue to be active in the student housing space on various fronts.”
Campus Acquisitions, on its website, says its model of pursuing student housing opportunities is based on projections that U.S. college enrollment will increase to 18.5 million by 2013.
Also new in the market: development of Zaragon Place 2 at William and Thompson Streets, a similar project to the original Zaragon Place on East University that opened in 2009.
On North Campus, The Courtyards also opened in 2009. That project was built by national student housing operator Kensington Realty Advisors. It's now valued at $47 million, according to city estimates.
In late 2010, the owners of Pizza House restaurant launched a marketing effort to find a developer to build student housing in an approved high-rise over the existing restaurant on Church Street.
Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by email. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.
Comments
LiberalNIMBY
Thu, Jan 13, 2011 : 10:31 a.m.
Not so psyched that council saw fit to take what was proposed to be an interesting looking building (with part of it taller, part of it shorter) and squish it down into nice, neat Eastern Bloc dimensions. Are you really happy with this design, neighbors? On the other hand, it is good that the rich kids get more opportunities to contribute a greater amount to Ann Arbor's tax base via their rent. Unless the size of the undergrad body keeps increasing, this project will have the effect of stabilizing the rents of the apartments that are neither pit nor palace. And it'll have first-class fire suppression, unless I'm missing something.
Emma B
Sun, Jan 9, 2011 : 11:30 p.m.
As a student, it's really frustrating to see all these luxury complexes going up. I'm already using loan money to pay my rent, which is half of what most these places charge. I get why there is no affordable student housing going up, but for once it would be nice to find a place to live that isn't a pit or a palace. Plus, like Jud suggested, I think the demand has already been met. I've heard through the grapevine from residents of some of the existing luxury complexes that they aren't even fully rented. Obviously I don't know anything for sure... but realistically there are only so many rich kids.
Al Blixt
Sun, Jan 9, 2011 : 12:19 p.m.
Paula, How big is the footprint of this development? I live in the neighborhood and there have been several stories I have heard over the past several years. I know it includes the Village Corner building and the Bagel Factory building. Does it include 1320 S. University apartments? How far south will it go down South Forest? At one time there was talk about extending to include Forest Court and the 10 or so houses there. I once lived on that street and would hate to see it obliterated. Any info along these lines would be helpful. Thanks.
blahblahblah
Sun, Jan 9, 2011 : 11:57 a.m.
Given the demographic trends mentioned, does anyone know if the number of "out of state" students is rising? Given the much higher out of state tuition rate, one can easily assume that this is a prime student segment being targeted by these pricey new digs. If state revenue funding to U of M continues to fall, wouldn't it be tempting to push up the out of state enrollment? (obviously to the detriment of in state applicants). Maybe there is some kind of cap in place? Given our state's budget woes, one can not 100% dismiss the "privatization" route for the U of M either. In which case these student high rises would hit the jackpot of even more rich out of state students.
Jud
Sun, Jan 9, 2011 : 9:57 a.m.
Interesting trend, I agree that it feels like a bubble in many respects. Seems like national real estate investment efforts tend to lag behind local responses to demand, then overbuild the actual demand. Wonder if we'll spend our golden years as Ann Arbor retirees in converted versions of these buildings? Curious, Paula, do we know the US college enrollment now that compares to the 18.5M projection for 2013? thanks.
a2citizen
Sun, Jan 9, 2011 : 9:39 a.m.
@Andy Jacobs: I agree with the student loan bubble but I don't think it will be as bad as the housing bubble. As I understand it a person cannot default on their student loan. They cannot get out of paying it through bankruptcy. The government will just garnish their wages until the loan is paid off. I've been trying to figure out the short but haven't come up with anything.
LANDS
Sun, Jan 9, 2011 : 9:30 a.m.
Yeah, $1,000/mo/bed. So a two bedroom will be $2,000/mo, will they have 3 & 4 bedroom apartments? I wonder if this will affect our house prices positively. I know there are upscale apartments currently getting $1,000/bed but they are trouble free nice quarters in comfortable neighborhoods. Go Blue, or should I say Green $?
a2citizen
Sun, Jan 9, 2011 : 9:28 a.m.
@Steve: Thanks for the answer. As to your second paragraph: I read the article. I was not commenting, I was asking a question.
Soothslayer
Sun, Jan 9, 2011 : 9:24 a.m.
These development projects will gain favor as long as the economics make sense. Students and parents are willing to go into massive debt and pay these fees on the promise of a better carreer tomorrow that will pay everything back. Sounds like Vegas to me! With the current economy and near crisis student loan debt this "student economy" one trick pony everyone is gambling on is perched too precarious. Remember the housing bubble burst? The forthcoming mass student loan default will make the housing burst look like childs play.
John Alan
Sun, Jan 9, 2011 : 9:18 a.m.
In an earlier article, it was mentioned that 411 Loft was sold under construction cost!!! I just wish good luck to the investors/developers here. These kind of housing is NOT what students want.... but if you can make money and run... go for it. Just be careful not to follow 411 Loft situation...
say it plain
Sun, Jan 9, 2011 : 4:20 a.m.
Good to see more housing for UM students, but man am I tired of seeing those $1000/bedroom scenes, workable only because of the ridiculous levels of college expenses we've come to accept as unavoidable. Tiresome that the development that 'works' around here lately seems to be reflective of the easy profit that comes from creating boxes projected up into the sky to warehouse college kids at such obscene rents because it's being paid for with loans or with mom and dad's 529 money.
Steve
Sun, Jan 9, 2011 : 12:42 a.m.
This is not a UM project. It targets UM students, but is not a UM property thus it will stay on tax roles. Do people who comment on these articles actually them first or just read a headline and go straight to la-la land?
a2citizen
Sat, Jan 8, 2011 : 11:49 p.m.
I'll plead ignorance but I would like someone to enlighten me: It seems like the U of M swallows up land that was previously occupied by private citizens who paid property taxes. When the city of Ann Arbor grants the necessary construction and occupancy permits do they consider how to recoup the lost tax revenue, if there is lost revenue?
ShadowManager
Sat, Jan 8, 2011 : 10:44 p.m.
Do all these new highrise apartments/dorms have the same architect? They all look the same.
nicole
Sat, Jan 8, 2011 : 9:23 p.m.
Great. All those students crammed into a big high rise. Just wait until one of them leaves a burner "on" on the stove and forgets about it, or drops a cigarette on the floor. These big high rises are not what campus life is about. The smaller apartment buildings and houses provide a much better experience.