Ann Arbor hiring broker as council considers selling city-owned property downtown
As the city of Ann Arbor looks to sell the old YMCA property downtown, the City Council is giving City Administrator Steve Powers an April 1 deadline to report back on efforts to hire a broker.
A majority of council members decided Monday night the surface parking lot known as the Y Lot at the corner of Fifth and William is no longer needed for public purposes.
Under a resolution sponsored by Mayor John Hieftje and Council Member Stephen Kunselman, D-3rd Ward, the council directed Powers to issue a request for proposals for brokerage services.
A majority of council members decided Monday night the surface parking lot now known as the Y Lot at the corner of Fifth and William, shown here in this photo from last summer, is no longer needed for public purposes.
Ryan J. Stanton | AnnArbor.com file photo
"It's not selling the property," he cautioned. "It's not doing anything of that nature at this point. But we need to make the first step."
Hieftje said he has agreed for quite some time with Kunselman's repeated suggestion to put the Y Lot up for sale, given that a $3.5 million balloon payment on the property is due in December.
The council voted against that idea when Kunselman brought it forward last August, preferring to let the Downtown Development Authority's Connecting William Street planning process — which included a study of the Y Lot — finish playing out first.
Now that the DDA's process has concluded, Hieftje said, it makes sense to move forward on putting the Y Lot up for sale, even though that's at odds with what the DDA recommends.
As the first project in the Connecting William Street plan, the DDA's plan recommends the city consider marketing — as a package deal — both the Y Lot at the corner of Fifth and William and the Library Lot above the city's underground parking garage off Fifth Avenue.
The DDA believes the sites — across Fifth Avenue from one another — provide enough space to accommodate large floor plate office, high-density residential, open space and lodging.
To solicit developer interest in the Y Lot and the Library Lot, the DDA proposed a two-phase process — first releasing a request for qualifications (RFQ), and then releasing a request for proposals (RFP) to select developers. Through that process, the DDA has argued the city could insist on performance requirements to ensure each site is developed to certain standards.
"I have a disagreement with part of the Connecting William Street process that talks about trying to do some sort of a super plan for the Library Lot site and the old YMCA," Hieftje said. "We do owe money on that site, which we've been refinancing, but the market appears to be strong right now, and it seems like a good opportunity for the council to move forward and sell that parcel."
Council Member Christopher Taylor, D-3rd Ward, was the lone voice of dissent on the Y Lot resolution Monday night.
"We asked the DDA to take a long hard look at this and I think they offered some intriguing ideas about coupling this with the Library Lot," he said.
John Hieftje
Taylor said the imminent balloon payment, in his mind, is not a threat because interest rates are low and the city can refinance without changing the status quo.
"It strikes me that we asked the DDA to take a good hard look at this and we should continue with that process," he said.
The city purchased the old YMCA property for $3.5 million in 2003 in hopes of ensuring the housing units on site would be preserved after the YMCA moved into its new facility on Washington Street. Had the city not purchased the building, city officials feared the YMCA could have sold it to someone else and the city would have permanently lost 100 units of affordable housing.
But the city found the building had been poorly maintained — the boiler was deteriorating and eventually died, the plumbing was poor, and the building lacked proper accessibility for the disabled.
Because of the deteriorating conditions, the city paid about $1.3 million to relocate remaining tenants to other housing units in 2008 and then tore down the building.
The original goal was to sell the property to a developer who would demolish the building, but that deal fell apart in 2007. The developer sued the city in federal court but lost.
The site has remained a surface parking lot ever since, and the city has continued to make interest-only payments on the property for the last decade.
"I guess there may still be some in the community who think we should continue to make interest-only payments on it," Kunselman said. "But I would just ask: Is that how you would manage your own finances?"
Hieftje acknowledged the city is enjoying a relatively low interest rate on the property. Meanwhile, the lot is roughly generating $250,000 a year in parking revenues.
After subtracting expenses, including nearly $100,000 in payments that go to the city, the lot generated a profit of about $80,000 for the DDA last year, records show.
"So it's paying the bills," said Council Member Jane Lumm, an Independent who represents the 2nd Ward. "But I don't think that's the point here. What we're trying to do, again, is just get some info on what the property might be worth."
The city's total interest through the maturity of the note is expected to be $727,692, while the DDA will have contributed $634,557. Of the $3.5 million principal payment due in December, $2.075 million is the city's responsibility and $1.425 million is the DDA's responsibility.
"As we approach that decision point, we should be certainly maximizing our options, gathering as much information as we can," Lumm said. "Selling the property in an as-is condition is certainly one of the options, not necessarily the one we'll ultimately choose."
AnnArbor.com filed a Freedom of Information Act request with the city and DDA for any appraisals of the properties studied as part of Connecting William Street. That turned up two old records.
A 68-page report by an Ann Arbor-based appraisal firm told the city in January 2009 the market value of the 0.82-acre Y Lot at 350 S. Fifth St. was nearly $4.7 million.
Separately, the city received an appraisal of the Library Lot in June 2006, before the underground garage at the site was constructed. At the time, the 1.55-acre site was home to a 190-space parking lot, and the appraiser found it had a market value of more than $6.4 million.
The developable footprint of both properties has been reduced somewhat since the construction of the underground garage and addition of a new mid-block street at the Library Lot, and the sale of a small strip of the Y Lot to the Ann Arbor Transportation Authority for its transit center expansion.
The council voted against the idea of selling the Y Lot when Stephen Kunselman brought it forward last August, preferring to let the Downtown Development Authority's Connecting William Street planning process — which included a study of the Y Lot — finish playing out first.
Ryan J. Stanton | AnnArbor.com file photo
"The market appears to be strong now and I think it's a good idea for us to explore this at this point and perhaps sell this property and have money left over for affordable housing if everything goes well," he said, referencing a resolution the council passed in October.
The resolution stipulates the net proceeds from the eventual sale of the Y Lot, whenever that might be, first will be used to repay the various funds that expended resources on the property, after which any excess proceeds will go to the city's affordable housing trust fund.
Council Member Sabra Briere, D-1st Ward, said she hopes the city will be "generous about exactly how we define those costs, because it would be really easy to attribute a lot of costs to this property and thus diminish the contribution that could be made for affordable housing."
Council Member Chuck Warpehoski, D-5th Ward, said he hopes the city will continue to look for ways to make sure whatever gets built on the Y Lot is "worthy of the city."
Hieftje said he doesn't think it would be possible for the city to stipulate the land, for example, couldn't be used to build another student high-rise. But he said there might be ways the city could express its preference for mixed-use development, including ground-floor retail, possibly office space, and if there's residential included, a mix of studios and one- and two-bedroom units.
Council Member Margie Teall, D-4th Ward, said she's concerned the city could lose control over how any future building looks if it sells the property to a private developer. She still voted with the majority, noting Monday's action doesn't commit the city to selling the property just yet.
"We're going to be dealing with public opinion and expectations of what this block could be in the end, however it comes back to us from the broker," Teall said. "So I think there will still be challenges."
Council Member Sally Hart Petersen, D-2nd Ward, suggested the city might be better off loosening its control over development of the Y Lot given its "radioactive" reputation among developers.
Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.
Comments
StraightTalk
Wed, Mar 6, 2013 : 2:49 p.m.
The DDA could work to sell and develop this lot at no cost to the city, but that wouldn't fit into Kunselman's vendetta.
Alan Haber
Wed, Mar 6, 2013 : 2:44 p.m.
$60,000 to get a market value assessment with no agreement actually to sell now, or before clear stipulations are made as to what design and zoning guidelines are actually discussed and specified, so a prospective buyer has full knowledge. wasted money! refinance now, suggested in a previous comment seems the best idea. unless some land swap with the huron street developers could be worked out, as some one above suggested. that could be the best idea yet, providing a qualified developer with whom to work out what the city would like, and whether they want to build it. i hope the fuller accounting and absent $$$ figures people have asked for can be provided in a followup article. how much does a broker cost? is the $60.000 figure that someone suggested accurate, if the city does not sell in some short term? the city council continues to refuse to have an actual discussion about the options and desires, for that property and the others too.
annarboral
Wed, Mar 6, 2013 : 1:54 p.m.
I agree that the city should sell their lands downtown and let the planning department do their jobs and let the developers pay for the planning & development. They still have their zoning rules and planning processes to ensure something "politically correct" gets built. That said, why is the first thing they say about this "to hire a broker"? The city has an abundance of highly paid administrators. Realtors work on a commission basis. So why is there a need to hire and pay anybody? Hmmm... could the mayor have a buddy needing a job?
Alfie
Wed, Mar 6, 2013 : 2:53 a.m.
I just love it.. so Council member Kunselmans name will be on both a resolution to SELL city land to a DEVELOPER and a moratorium on development in the downtown which would affect the parcel he wants to sell. Wow. Great marketing campaign.
Veracity
Wed, Mar 6, 2013 : 1:17 a.m.
REFINANCING IS BEST OPTION NOW Potential buyers of the parking lot across from the library should realize that the City wants to sell the property before the balloon loan payment is due in December. Therefore, the party interested in purchasing the property will offer less than what the City determines is fair value because the City has limited time during which to sell the property. The wiser approach is to refinance the property now while interest rates remain low. A thirty-year loan with a 4% interest rate will cost the city $200,519.40 annually. The yearly fees collected from the parking lot presently occupying the land is stated to be $250,000 which will service the loan while providing funds to cover part if not all of maintenance costs. Hopefully, the terms of the loan will allow full payment at any time without significant penalty. Once the loan is established the City will no longer be pressured to sell the property this year and can await proper time and circumstances. The City will have a better chance of receiving a more desirable sales price when it no longer is in a hurry to sell.
dancinginmysoul
Wed, Mar 6, 2013 : 12:36 a.m.
"They paved paradise, to put up a parking lot" Sorry. It had to be done.
RUKiddingMe
Wed, Mar 6, 2013 : 12:05 a.m.
Oh, and is anyone in charge of making sure the broker doesn't get some ridiculously outrageous fee/pay because it's the city? And that he/she is not paid while on retainer for 5 years while people figure out what they're going to do? Can we avoid a consulting company on this one? Like let potential buyers get their own consultants?
RUKiddingMe
Wed, Mar 6, 2013 : 12:03 a.m.
Ryan, I'm having trouble figuring out from the numbers provided whether we've lost money or made money on this lot at this point in time. 3.5 mil to buy, that great idea fell through, 1.3 mil to relocated people, ??? to demolish it, ??? to pave it and turn it into a parking lot, and ??? in interest-only payments for 10 years. Can you supply the ??? money parts, and let us know if the parking revenue is more or less than that? For everyone else, I do hope you saw the sequence of events here: 1) City buys property for 3.5 million because they want to make sure we keep affordable housing downtown 2) Apparently it was bought before anyone inspected it ($3.5 million seems like enough to evaluate first, no? NO??!!), so that was a big mistake. So they paid $1.3 million to relocate everyone, because that apparently became their responsibility when they bought it 3) Some amount of money to demolish, or maybe that was wrapped up in the 1.3 above 4) Turn it into a parking lot (how much money?) and hold onto it in a death grip, because SOMEHOW, this MUST turn out to be a smart thing to do 5) Make interest-only payments for TEN YEARS!!!!!! 6) Finally wise up and realize there's probably someone else out there better at real estate than everyone at city hall combined. It's like a mini-Water Street. The new train station's going to be a same-as-Water Street.
Arboriginal
Tue, Mar 5, 2013 : 11:05 p.m.
Does this have anything to do with the monorail?
Eep
Tue, Mar 5, 2013 : 10:45 p.m.
The grammar used in the council's resolution does not inspire confidence: "RESOLVED, That City Council authorizes the City Administrator to execute a contract for services with the firm who's [sic] response is deemed in the best interest of the City subject to approval of the contract as to form by the City Attorney; . . . ."
mady
Wed, Mar 6, 2013 : 2:34 p.m.
"Confusion, will be my epitaph"........Emerson, Lake and Palmer
Eep
Tue, Mar 5, 2013 : 10:19 p.m.
I'm shocked that no one has yet suggested a Cheesecake Factory be built on this site.
oyxclean
Tue, Mar 5, 2013 : 11:42 p.m.
They should build one there AND at Briarwood :P
Elaine F. Owsley
Tue, Mar 5, 2013 : 10:17 p.m.
I can see it now - they'll get a broker, who gets a buyer, who gets a builder, who gets an architect, who designs a building. Then the fuss begins. And the delays, and the tabling, and the "historical impact', and the parking impact, etc. etc. etc. We've been here before . Broker and buyer beware.
mady
Wed, Mar 6, 2013 : 2:33 p.m.
Elaine, absolutely right. Oy, what a mess!
brian123
Tue, Mar 5, 2013 : 9:30 p.m.
It's too bad that the City can't do some sort of land swap with the developers of 413 E. Huron. This would actually be a much more appropriate location for a residential structure of that scale (referring to the proposed 413 E. Huron structure), and would add much needed vitality to Williams street. Plus, with the transit center being adjacent, you could truly live without a car at this location (requiring less parking spaces onsite). Seems to hit two birds with one stone - - developers are happy (no lawsuit) and fourth ward residents are happy. Thoughts??
Veracity
Wed, Mar 6, 2013 : 12:56 a.m.
I am not sure that the students who would occupy the residence hall across from the library would provide the kind of vitality that would benefit townies. Those students who are dedicated to studying will do it elsewhere on campus as will those that are more interested in drinking and playing. The bars on South University and neighboring campus streets are more attractive to students than the pubs and restaurants along Main Street. Liberty Street, Washington Street and elsewhere downtown.
LXIX
Wed, Mar 6, 2013 : 12:18 a.m.
Interesting idea! Same price range. Size 0.75 acre Huron? v 0.82 acre Y Kinda walls off S. Main/William access from walkable library spaces. Promotes Main/Liberty activity. Promotes library - top of the cave entertainment energies. Promotes starter "student to young professional transition complex" Promotes urban "green" transit designs between two centers (gownie and townie). Thrills Sloan folk. The local hood. (You guys can use that lawsuit money saved to pay off the new note). Steals precious parking (twice). Blocks beautiful sunsets over top of the cave space. Still promotes overpopulation. The core cause of everything going wrong. And with a big and ugly precedent in play some other clown might try to stick in a hotel/convention center nearby.
Sam S Smith
Tue, Mar 5, 2013 : 9:30 p.m.
How much is the broker going to cost?
Sam S Smith
Wed, Mar 6, 2013 : 3 a.m.
Thank you Bobby John! I'd also like to know who it's going to be. God forbid it's someone who has connections to the mayor or anyone on city council.
BobbyJohn
Tue, Mar 5, 2013 : 11:23 p.m.
Typically, brokers get around 10% for a deal like this. We could specify less, like 1-2%. If the parking lot sells for $6 million, reasonable in today's climate based on $4.7 million in 2009, the bottom of the market, at 1%, broker still gets $60,000 for ~ a few hundred hours work.
David Cahill
Tue, Mar 5, 2013 : 9:26 p.m.
I hope the City continues to discount the unwise recommendations of the DDA on the Connecting William Street study.
LXIX
Tue, Mar 5, 2013 : 9:23 p.m.
The city Bought the Y in 2003 for $3.5M. Paid $1.3M to relocate tenets. Won in court at no stated cost. Demolished the building at no stated cost. Built a parking structure at no stated cost. Out of $727,692 total interest? City pays $93,135 and DDA pays $634,557 Or was that $1,362,249 total interest? City pays $727,692 and DDA pays $634,557 DDA earns $250k gross $80k net and pays city $100k for what ? the DDA interest contribution ? Rent ? Payola ? If balloon is paid $2.075 million is the city's responsibility. $1.425 million is the DDA's responsibility. So if the city sells then the DDA effectively keeps $1.425M. How nice for the DDA. Do not sell. That is public for public by public. Pay off the note with Train Station money or sell a lesser city property. Immediately disband the disfunky DDA. Use the DDA monies saved to help pay the note, build an open-air mall, and top of the cave entertainment space enveloping the library and Y and bus block. Maybe even that nice Federal property if they decide to sell that one day. Not that the Feds and/or Post Office there would ever do that. Right?
Ryan J. Stanton
Wed, Mar 6, 2013 : 1:42 a.m.
$727,692 and $634,557 are numbers to be added. Also, Kunselman estimated nearly three-quarters of a million dollars for the demolition work.
Vivienne Armentrout
Tue, Mar 5, 2013 : 9:10 p.m.
You allude glancingly to it, but the story would be enhanced by the details of the resolution passed earlier to dedicate a certain percentage of sales from this lot to the Affordable Housing Trust Fund. That fund predates the combination of the city Community Development department with the county, and those funds can only be used in Ann Arbor. There needs to be some clarification of what would be done with them.
Veracity
Wed, Mar 6, 2013 : 2:52 p.m.
Actually, Vivienne, any profit from the sale of the former Y property should be applied to repairing existing affordable housing operated by the Ann Arbor Public Housing Commission (AAPHC). In 2010, the AAPHC accepted the Schumaker report that identified more than $14 million in needed repairs with over $1 million in upgrades needed in the next year. The AAPHC has done little to improve the substandard living conditions because it, admittedly, does not have the funds. Some building may need to be torn down and replaced but otherwise I do not believe that any new funds should build additional housing until the health and safety concerns of present tenants are addressed.
Ryan J. Stanton
Tue, Mar 5, 2013 : 9:19 p.m.
Here's the story we had on the council resolution when it passed: http://www.annarbor.com/news/ann-arbor-to-use-proceeds-from-sale-of-former-ymca-property-toward-affordable-housing/
Vivienne Armentrout
Tue, Mar 5, 2013 : 9:07 p.m.
I think that the city could put some proscriptions into the title, similar to conservation easements that private property owners put onto their property so that it can't be developed in future (like the development rights in PDR agreements). Probably this would require a certain amount of care and statements like "no student housing" would not be legal. But I'm sure the city would not have to just turn over the property blindly.
JRW
Wed, Mar 6, 2013 : 2:53 p.m.
"Probably this would require a certain amount of care and statements like "no student housing" would not be legal." Why would a statement like this not be legal?
Steve Bean
Tue, Mar 5, 2013 : 9:06 p.m.
Considering the history, this might not turn out so bad if a sale is completed in the next year—the sooner the better—and unrealistic expectations are set aside.
GratefulReb
Tue, Mar 5, 2013 : 8:54 p.m.
Please don't sell to the U of M - The city needs more tax revenue. And please fix our roads.
ChrisW
Tue, Mar 5, 2013 : 9:29 p.m.
I wonder if it can be deeded to prevent UM from buying it without the city's permission?
1bit
Tue, Mar 5, 2013 : 7:56 p.m.
"Hieftje said he doesn't think it would be possible for the city to stipulate the land, for example, couldn't be used to build another student high-rise." Why can't stipulations be made as part of the agreement? On both sides. If the City thinks it knows what it wants or doesn't want there then they should tell any prospective purchaser. If I was buying from the City, I'd make very sure they knew what my plans were lest they try and pull the rug out at the last minute.
Goober
Wed, Mar 6, 2013 : 9:27 a.m.
10. a Republican convention hall 11. a Tea Party room 12. a Snyder monument purchased as art
DJBudSonic
Wed, Mar 6, 2013 : 5:06 a.m.
9. Hooters
Gorc
Wed, Mar 6, 2013 : 1:04 a.m.
8. Selling the lots to U of M, making them exempt from property taxes.
Bryan Ellinger
Wed, Mar 6, 2013 : 12:36 a.m.
4. Wind turbine 5. Landfill 6. Gun range 7. Mosque
1bit
Tue, Mar 5, 2013 : 9:15 p.m.
@Craig: Hilarious and sadly true. We should make a list of everything that would make somebody upset. Here, I'll start it: 1. Dog park 2. Student housing 3. Pizza establishment
Craig Lounsbury
Tue, Mar 5, 2013 : 8:09 p.m.
" If I was buying from the City, I'd make very sure they knew what my plans were lest they try and pull the rug out at the last minute." seriously even then I'd be nervous.....unless I was building a little green park.
Craig Lounsbury
Tue, Mar 5, 2013 : 7:22 p.m.
normally I would say this is a great idea. But given the 2 politicians pushing it I have to wonder what I'm missing?