University of Michigan offers $1.725M to buy 2 student rentals on South Division in Ann Arbor
The University of Michigan has pending deals to buy the two student rentals at the northeast corner of South Division and East Jefferson, as long as the Board of Regents approves the moves on Thursday.
Paula Gardner | AnnArbor.com
Two adjacent student rentals on South Division — both next to the Institute for Social Research — will be bought by the Univeristy of Michigan in December, if officials approve the purchases on Thursday.
The properties are:
- 443 S. Division, listed in city assessor records as 405 E. Jefferson, which is a three-floor, 6,048-square-foot apartment building.
- 439 S. Division, a 3,210-square-foot converted house that once was home to playwright Arthur Miller when he attended U-M.
“It’s too soon to know what the university will do with the space,” U-M spokeswoman Kelly Cunningham said in an e-mail statement. “Because the houses are adjacent to the ISR building, it could serve for possible future development opportunities.”
The purchase price would be a combined $1.725 million, according to documents prepared for the Board of Regents, which has to approve the purchase. The deals — along with a third home sale to U-M — are on the agenda for Thursday’s meeting, which is taking place at 3 p.m. at U-M Flint.
The properties are on the northeast corner of South Division at East Jefferson, where the ISR in recent years built an addition that covered a former surface parking lot along East Jefferson.
The location also is one block southwest of the corner of Thompson and East William, where the Zaragon Place II high-rise is under construction — signaling more changes to the student housing market in the blocks closest to Central Campus.
Both owners of the South Division properties approached the university about the purchases, Cunningham wrote. Neither owner returned calls from AnnArbor.com seeking comment.
The building at 443 S. Division was purchased for $575,000 in 2000 by an entity related to its management company, Bartonbrook. It’s assessed at $466,800, and U-M would pay $805,575 for it.
The property at 439 S. Division is owned by an entity related to management company Jones Properties. While not in a city historic district, it earned a reputation as a former home of Arthur Miller.
Marketing for the property even touted, “Come live in the old digs of famous playwright Arthur Miller. ...” until that description was removed from local property listings this week.
It’s assessed at $178,100, and U-M would pay $919,425 for it.
Both properties are leased through August 2011, according to U-M.
If the deals with U-M take place, the houses will come off of the city tax rolls, said assessor David Petrak.
While the city doesn’t kept track of ongoing U-M property purchases, “there seems to be one or two a year …. It’s the reality when you live in a big college town,” Petrak said.
Tax revenue on the properties in 2009 totaled $23,978 for 443 S. Division and $7,205 for 439 S. Division.
Meanwhile, a third property purchase also is on this week’s regents agenda: 963 Wall St., near Broadway and Maiden Lane, where U-M has bought other homes over the past several years as they’ve become available. The location is near Kellogg Eye Center.
The house at 963 Wall is a 1,056-square-foot single-family home, and U-M would pay $350,000 for it. The city has it assessed at $71,100.
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
Laura J
Sun, Nov 21, 2010 : 11:04 a.m.
@Bobby John I would love to buy more rental property. I already have 9 houses, but for good locations, I would love to buy more at a 9 multiplier. Let me know what you have! 4 Eleven Lofts is pending and I can tell you this. It is at least an 8 multiplier. So what did the U of M overpay by, maybe a couple of hundred thousand. To them, that is chump change. They are an entity and will survive both you and I. To try and go up against that is like banging your head against a concrete wall. Good luck with that! P.S. No such word as irregardless. It's a common mistake.
BobbyJohn
Thu, Nov 18, 2010 : 6:04 p.m.
@Laura J If you feel that the price for the houses is so good, why don't you buy more student rental property. There is plenty available for a multiplier of 9. No private individual would have paid that amount for those houses in this real estate market. It doesn't matter what the houses were worth 6 years ago. In real estate it only matters what the house is worth today on the open market. Only our UM looks at it differently because they obviously really want that property, to be able to pay more than the private sector.
Rhe Buttle
Thu, Nov 18, 2010 : 12:20 p.m.
Want to raise the taxes for AA? Start charging UoM students hotel taxes - at a discount. Or, sidewalk use taxes. How about street crossing taxes, double when they jay-walk. One final idea - charge all football, hockey and basketball attendees $10 every time they show up, call it "Fresh Ann Arbor Air Tax, With Arrogance", a faaat-wa, if you will...
Lets Get Real
Thu, Nov 18, 2010 : 4:07 a.m.
Let's Get Real about UM and property. Although they do contibute to the quality of life here - sports, theater, art, and student buyers for products and services - they drive up the cost of living in Ann Arbor by continually removing properties from the tax roles and shifting the burden to resident property owners and small business owners. One of my peeves is that in some cases, where all of the space is not yet occupied in buildings they acquire, the University becomes landlord, realizing income for the space. Wouldn't we all like to be in the position of generating income, paying no tax, and receiving tax payer dollars from the state to subsidize the business model? The University doesn't lack for benefits from the city services: street maintenancce & repair, snow plowing, water and sewer, etc. The University contributes to many of our woes: Demands on police - how many responses are student related and are not handled by the UM private security force? What about traffic control? Theft? Peace disturbance? Demands on refuse collection & processing - how much excessive weekly garbage and seasonal large item services are student related? Demands on road maintenance & repair - do the snowplows stop at State and Packard and resume at State and Huron? Does the city resurface and repair East U, South U, North U? Demands on water and sewer service - do we think of the quantity of processing demanded by the hospital, educational campus, residential facilities, and event venues & arenas? Like all of life - relationships are built on give and take. I've lived here 35 years, and appreciated the things I can enjoy because the University if here. But, I've paid a fee for every one of those things - tickets to performances, games; fees to use recreational facilities, parking; charges for participation in presentations - yet I've watched the University ask for contributions of time from volunteers and donations from small businesses in product and service. For me, the take seems much more than the give when I view the University's fair share. The city limits are set. Within those boundaries, the University will continue to expand, acquiring more property, removing it from the tax roles, shifting costs to those who can afford to live here until no one can. Then, the next University President will have a new role - mayor - and will need to develop a whole new skill set in city management. In the mean time, many of us watch our monthly tax allocation rise above the amount of our monthly mortgage driving cost of living here above our means. Why should people be driven out of their homes to subsidize the land grab of a public institution that already receives our dollars? Let's get real, the playing field is not level.
Laura J
Wed, Nov 17, 2010 : 5:17 p.m.
It's obvious none of the people commenting on here have a clue about real estate prices in the income sector. As far as I can tell, one of the houses sold for less than a 9 multiplier, which is down from a high of over 11 in the early to mid 2000's. So U of M could have potentially paid 1,124,640, but instead, waited for a down market and is now getting a steal at $919,425. As we know, it is all about location and most of you just have sour grapes. I have income properties and would love to sell to U of M. Good for them!
BobbyJohn
Wed, Nov 17, 2010 : 12:36 p.m.
@jgold47 The city assessor uses comparables from the same neighborhood, where homes are all student rentals. The income stream is built into the comps because when houses sell, the rental income is part of the equation of what someone is willing to pay. Irregardless, No private investor would have been willing to pay these prices in this abysmal real estate market. Especially with all the new student housing that has been recently built and is continuing to be built. Only the deep and bottomless pockets of the taxpayer (read U of M) would pay that kind of money. Especially since they are only interested in the land and will not be renting out the houses after the current landlord ends his leases in September. Nobody can compete w/ U of M, but I bet the current landlord is laughing all the way to the bank.
jgold47
Wed, Nov 17, 2010 : 9:46 a.m.
lets try this again. Income producing properties are worth more than their 'value' as they generate income. So while the property may only be worth x, you have to value the income stream as well, so you wind up paying higher than what you would pay if the property was a single family residence. In a way, this skews what the property is worth from a taxation perspective, but commercial properties are already taxed at a higher rate. Want to see something fun, try proposing an excise tax on rent, like several other states do.
dextermom
Wed, Nov 17, 2010 : 8:57 a.m.
Add me to the list of folks who don't understand how/why the University should pay such huge amounts over the assessed value for properties they don't even know what they are going to use them for? I'm sure lots of folks would like to get in on those deals for their homes, not just rentals. Think of what you could do with all the extra money!
Elaine F. Owsley
Wed, Nov 17, 2010 : 8:33 a.m.
Why should the University pay multiple times the value of the property?
Forever27
Wed, Nov 17, 2010 : 8:33 a.m.
Considering the revenue and employment that the university brings to the city, I think that the people complaining about two rental properties being taken off of the tax roll should calm themselves.
LiberalNIMBY
Tue, Nov 16, 2010 : 7:53 p.m.
"Every time the U buys another property, my taxes go up." Well, since our property tax increases are limited while we own our homes, our taxes only go up a little each year. What actually happens is that our services go down, unless we have new construction (and corresponding new taxes) in the city to replace the declining property values. The taxes on people who want to buy a home in the city go up, because they bear the burden of "full" property taxes in this arrangement. I think this is a large concern, but I know that "new residents" are of limited concern to a large number of voters. "The U will now take care of these properties, relieving the burden from the city." That might be accurate if we could just shut down utilities and pools and shrink personnel each time a property goes off the tax rolls. Not something that politicians want to do because they're afraid of losing their jobs.
rusty shackelford
Tue, Nov 16, 2010 : 7:49 p.m.
You're wrong on one count, kenUM: the people complaining about Umich buying 2 parcels will ALWAYS find something to complain about.
kenUM
Tue, Nov 16, 2010 : 7:42 p.m.
@margie Please explain to me how U-M is DESTROYING THIS CITY! Ironically, all the ways you describe are what so many cities in this part of the Country would kill for. Move to Detroit or Toledo and enjoy what they offer; blight, unemployment and CRIME. Both cities are just dying slow painful deaths. This is also attributed to property taxes not being paid. While U-M is not perfect, they have in so many ways kept Ann Arbor alive and more importantly WORKING and vibrant! @scooter dog when big blue owns all of a2, then big blue will have to anti up to pay for all city services and no one will have anything to complain about!
b master b
Tue, Nov 16, 2010 : 6:39 p.m.
For everyone that wants to complain about UM - you guys are welcome to leave. Please do us all a favor and stop complaining. If you don't like it, move somewhere else. UM kept us alive during this recession and the complaining liberals helped us in no way
margie
Tue, Nov 16, 2010 : 6:25 p.m.
If this sale goes through then Ann Arbor will not only lose much needed tax funding but the residents lose also. This continual buying up of property by the UM, eliminates money for schools, parks, police, fire, sanitation services (remember when fall leaves were picked up), etc... When will the residents and the people we elect to protect the best interest of the city stop the buying up of property by this University. While I respect UM, the best interest of Ann Arbor is not being considered. I understand that they have a lot of money and clout, that someone may not want to turn down... but turning the city of Ann Arbor into parking lots, dorms, athletic fieds, office blgs., art studios, etc is DESTROYING THIS CITY. Studies have been made in the past looking at how universities destroy cities, raise taxes, cut services and most importantly force residents out because of the high expenses and lack of services. People have to choose, whether to coexist with a University that respects their right to have a viable community without buying massive properties with no tax revenue or FIGHT TO LIMIT THE GROWTH OF A UNIVERSITY DETERMINED TO turn the city of Ann Arbor and the residents who remain, into tenants with little power to resist any street closing request or unregulated noises they make. The beauty of this city is being destroyed by a entity with deep pockets, because they pay 0 taxes, yet demand services by the city. Their so-call security are the big dogs in this town because we won't have enough police to support. Our firefighters, will be limited because we will have lack of firefighters. We already lost leaf collection which now require some people to pay for this...next will be snowplowing. The only streets that will be plowed without addition cost to everyone else will the streets they own because no one has the power to say no to their deep pockets. This buying of division street will not be their last. Huge swatches of property is being bought by UM under the guise of education and that's this is really good for the city without any limits. How long will we stare at the elephant in the room and realize we are all complicit in the destruction of a viable Ann Arbor for everyone. Love the university, support the sports BUT please take a stand for the City of Ann Arbor. Just my humble opinion.
Mick52
Tue, Nov 16, 2010 : 6:09 p.m.
Thanks Dudley, I was just thinking that same thing, that Miller lived up on State near Kingsley. I guess a student can move from place to place every year, so maybe there are a few more plaques around town. When the U buys up property, don't look at it like less property taxes for the city, consider that the city is getting smaller and it will be cheaper to take care of it. The U will now take care of these properties, relieving the burden from the city.
charis
Tue, Nov 16, 2010 : 5:09 p.m.
Every time the U buys another piece of Ann Arbor, my taxes go up.
treetowncartel
Tue, Nov 16, 2010 : 4:17 p.m.
Actually, U of M chose to locate in Ann Arbor because it is the center of the universe, end of story.
Brian
Tue, Nov 16, 2010 : 4:01 p.m.
I think the purchase is fine except the price. Why are they paying 4 times the assesed value? I understand paying more to getthe owner to sell but 4 times seems outragous. Twice its values isn't enough? UM has deep pockets and property owners know it so they push up the price well beyond it's value. And UM has done a lot for Ann Arbor. What would Ann Arbor be like if UM was in Ann Arbor and moved to Manchester as was considered when it moved from Detroit. No one would know Ann Arbor or live here. The quality of life and services is far better than most of the nation and especially within the state and it is because of UM.
b master b
Tue, Nov 16, 2010 : 3:43 p.m.
Income properties are in no way valued based upon their assessed value. The only way to analyze how much UM is over paying for the properties is to look at the income and expenses on them
Dudley Barlow
Tue, Nov 16, 2010 : 3:42 p.m.
Arthur Miller may have lived at 439 S. Division, but that is not the Ann Arbor residence he discusses in "Timebends," his memoir. There he says he lived at 411 North State Street, and the book includes a photo of Miller in front of that house.
5c0++ H4d13y
Tue, Nov 16, 2010 : 3:39 p.m.
@cfsunlet Because the assessed value is not the market value?
cfsunlet
Tue, Nov 16, 2010 : 3:29 p.m.
So how does one sell UM a piece of property for 5 times its assessed value?
scooter dog
Tue, Nov 16, 2010 : 3:18 p.m.
When you don't pay any property taxes you can buy anything you choose. I'd love to return in another life and see what the city is doing money wise when big blue owns all of a2 and still pays ZERO property taxes. Our sons and daughters for generations to come will be taking it on the chin and in the pocket book for their style of gobbling up property. WOW When will the circus end