Documents show City Place property has new owner and active development plans
Seven houses along Fifth Avenue would be demolished to make way for the two apartment buildings and surface parking lot included in the plans for City Place. Neighbors still oppose the project.
Confidential documents obtained by AnnArbor.com show the development team is poised to move forward soon with demolishing seven houses along South Fifth Avenue near downtown Ann Arbor to make way for two new apartment buildings and a 36-space parking lot.
The property changed hands last week in a sale that leaves an out-of-town developer with control over the project as it moves forward.
AnnArbor.com obtained dozens of pages of documents this past week offering a glimpse into what's happening with City Place — an approved by-right project that city officials and many neighborhood residents don't want to see built.
The documents show the development team has worked aggressively in recent months to line up financing and take other steps necessary to start construction.
Among those documents is a May 25 letter of intent from Titanium Real Estate Advisors to Jeff Helminski, vice president of Rochester-based Campus Village Communities and one of the partners involved in City Place.
Developer Jeff Helminski appears to be taking the lead on the City Place project.
Ryan J. Stanton | AnnArbor.com
"The developer believes that in order to secure construction financing, the project will require 40 percent equity on a loan-to-cost basis, which equates to approximately $5.4 million in equity for the project," the letter states.
"Investor intends to contribute $4.6 million of capital and the developer and affiliated parties $800,000 of the $5.4 million total."
Campus Village currently owns, operates or has under construction more than 3,000 rental units in 11 different apartment communities.
Its portfolio includes apartments near several universities, including Michigan State, Wayne State, Kettering, Texas A&M, Saginaw Valley State, Ferris State, Siena Heights, Toledo and Wright State. Most were either purchased or built in the last 10 years.
The letter of intent from Titanium gave Helminski until June 10 to accept the financing terms and return an executed copy.
Titanium Real Estate Advisors is a division of Titanium Asset Management, a publicly traded investment manager headquartered in Chicago. Its clients represent a number of institutional investors, including public employee pension funds and college endowments.
Property changes hands
A newly formed company called City Place Ann Arbor LLC filed articles of organization with the state on Aug. 5. Ernest Schaefer of Campus Village is listed as the resident agent.
According to a financial document leaked to AnnArbor.com, Schaefer had a net worth of more than $17 million at the end of last year.
Helminski declined to comment on Friday about the investors behind City Place or what's happening with the project. But he confirmed that, as of Thursday, he and other partners involved with City Place Ann Arbor LLC had finalized the purchase of all seven houses expected to be demolished to make way for the 24-unit apartment complex.
In the past, Ann Arbor developer Alex de Parry was seen as the face of both City Place and Heritage Row, an alternate development proposal for the same location. But it appears now that Helminski and his team are taking the lead on pushing forward with City Place.
De Parry owned five of the houses and had an interest in the other two. But now after the sale, it appears he's no longer involved in the development.
City Place was begrudgingly approved by the City Council in September 2009, despite concerns about aesthetics and whether the project fits the character of the neighborhood. It legally conformed with city codes, so the council felt it had no choice but to approve it.
Heritage Row, a compromise proposed by de Parry in late 2009, promised to preserve the seven houses while building new apartments behind them. But four council members — Mike Anglin, Sabra Briere, Carsten Hohnke and Stephen Kunselman — blocked Heritage Row's approval last year, steering the developer back toward City Place.
Fearing City Place could move forward now, some council members said this past week they're hoping the developer is open to bringing back the Heritage Row proposal. Helminski and de Parry both declined to comment on that possibility.
If the developer were to bring Heritage Row back for reconsideration, one of the four council members who previously opposed it would need to change his or her vote for the project to win approval, and it appears Anglin and Hohnke might be willing.
Ann Arbor resident Tom Whitaker, who lives across from the City Place site and continues to oppose the project, referred comments to his attorney on Friday.
"We are exploring all possible legal options for our client to pursue," said attorney Susan Morrison, declining further comment.
Dollars and cents
One of the documents obtained by AnnArbor.com this past week is a 32-page construction finance offering prepared by Jones Lang LaSalle's real estate investment banking group in Chicago. The undated report includes confidential financial information about City Place, as well as a market overview that was used to sell the project to investors.
The report references a financial commitment from Titanium Real Estate Advisors and states that Campus Village also was seeking a construction loan of up to $11.5 million, representing 85 percent of the total development cost.
A look at a possible floor plan for City Place, which is mostly six-bedroom units with personal bathrooms for each bedroom.
According to the report, Campus Village executed a development and purchase agreement with the owners of the City Place property for about $3.7 million and have paid more than $1 million for pre-development activities. The report also said detailed construction drawings were being finalized and construction was expected to start by the end of September.
In addition to $3.7 million for the land, the project budget shows $7 million in hard costs, including $100,000 for building demolition and $5.3 million for building construction — for a total building cost of $82.40 per square foot.
The report describes City Place as a quality student housing option for the University of Michigan community. The market overview contained in the report states there's "significant opportunity for the development of new student housing units due to a very strong rental market that is historically underserved with quality housing options."
"City Place will be the most spacious new student housing project serving the Central Campus market and will provide the highest level of technology available, including the fastest Internet and greatest bandwidth capacity in Ann Arbor," the report states.
City Place is a 64,750-square-foot project with 23 six-bedroom units and one five-bedroom unit in two identical buildings. The 1.23-acre site is located along the east side of Fifth Avenue, south of William Street, in an area near downtown zoned R4C multiple family residential.
The monthly rent for a majority of the units is expected to be $900 to $960 per bed, with a handful of them priced at $1,100 and $800, according to the report.
The budget projects a stabilized annual cash flow of $1.1 million, equating to an 8.5 percent return on cost. Annual debt service of about $870,000 would be paid over 30 years.
Net rental income is expected to be about $1.5 million annually. Total operating expenses are expected to be slightly north of $500,000 a year, including $200,999 in taxes.
The report talks about the on-campus housing currently provided at U-M, calling it both "limited" and "outdated." Off-campus housing, the report adds, is "infamous for its low-quality offerings" that have "pushed into areas originally constructed as single family neighborhoods."
The site of the City Place project.
The report looks at comparable rents, identifying City Place as more affordable than other apartments in the campus area.
The average rent is expected to be $5.78 per bedroom square foot, compared to $9.24 at Zaragon Place, $7.21 at 411 Lofts, $6.17 at 922 Church and $6.54 at 930 Church.
The report references enrollment growth at the University of Michigan, claiming about 800 new students are being added to the rental market each year.
According to university records, undergraduate enrollment increased from 25,555 to 27,027 — about 5.8 percent — between 2007 and 2010. Meanwhile, total enrollment increased from 38,680 to 41,924, or about 8.4 percent, during that time.
However, university officials said recently they think they welcomed too many freshmen on campus last fall and so they made it a goal this year to reduce the incoming class. A university spokesman said on Friday this year's enrollment figures won't be released until October.
The new housing stock is growing, too: Two high-rises are under construction, and another is proposed on East Washington. Combined, the three projects will bring another 1,173 bedrooms into the student housing mix.
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 e-mail newsletters.
Comments
Tom Teague
Mon, Sep 19, 2011 : 1:08 p.m.
@Ryan - Kudos on a good piece of reporting, especially given that none of the primary sources would go on the record with you. It provides some interesting insight into the developers' thinking, financing, and expectations as well as some tantalizing glimpses at their views on the Ann Arbor market.
snapshot
Mon, Sep 19, 2011 : 5:11 a.m.
City council should make a public apology to the citizens of Ann Arbor for their selective and inconsistent enforcement of law, codes, and zoning ordinances.
Laura J
Mon, Sep 19, 2011 : 1:23 a.m.
I hope the city council is happy with themselves. They did not let the property owner develop his land with a decent and good plan. Now these houses are going to be demolished and we have no one but council to thank for it.
John Q
Mon, Sep 19, 2011 : 5:53 p.m.
No one forced them to invest in this property. If they wanted to build a project that didn't meet the zoning rules, they should have found a site that did or selected a site without out the potential problems that came with this one.
fjord
Mon, Sep 19, 2011 : 1:45 p.m.
John Q, you'd do the same thing if you were in the developer's shoes. They've spent how much on this debacle already? They have one project already approved, and nothing but stonewalling on the project that they said they'd rather build (and that the public, aside from some loudmouth neighbors, found least objectionable) -- in the end, this is nothing more than a sound business decision based on the costs they've already incurred and the obstacles that have been put in their way. City Council had its chance and they blew it. Believe me, I'm not one to defend developers, but this is one of those exceedingly rare cases where I'm on their side.
John Q
Mon, Sep 19, 2011 : 1:16 p.m.
It's the developers choice to go this route. Quit trying to deflect the blame. No one is forcing them to tear down anything.
snapshot
Mon, Sep 19, 2011 : 5:13 a.m.
That's not correct John Q. It is the responsibility of city council to maintain the integrity of the development process....they failed.
John Q
Mon, Sep 19, 2011 : 4:11 a.m.
We have the developers to thank for that. It's not the Council that's paying for the bulldozers.
DonBee
Sun, Sep 18, 2011 : 10:06 p.m.
I do not blame Mr. de Parry for walking away, and since the new developers have zero ties to the community, expect they will have zero interest in working with a hard to deal with city council. The bulldozers will arrive very, very shortly. Then the cement trucks and by next fall the students.
Lets Get Real
Tue, Sep 20, 2011 : 12:52 p.m.
Yes, more outsiders with no committment to the community - except to extract money from it. More beer parties on the street, more noise, more litter, more undesirable behavior perpetuated by these living situations. I wonder how quickly the condition of these buildings will decline with so many people crammed into small spaces? By the way - where are the kitchens? I see beds, and desks, and bathrooms, and a media room. Will these students have to have a meal plan at UM? Or, eat out every meal? Or will they have a house mother who will cook for them? This looks like a fraternaty to me. Let's Get Real - this is not an asset for the city. Neighborhoods are what make a city; destroying them is not progress. This is a very sad commentary on the future of Ann Arbor.
JMA2Y
Sun, Sep 18, 2011 : 9:18 p.m.
Six bedrooms per apartment @ $900-1000 per bed=$6000 per apt per month as stated-is this correct? 411 rents for about $800-$1000+ for the entire unit of 1-4 bedrooms, per their website-if I'm reading their website correctly? Isn't there a legal-be it state or city-limit to how many bodies can live in so many feet of space? Six beds per apartment seems like a very cramped place unless one apartment takes up one entire floor of a building.
The Picker
Mon, Sep 19, 2011 : 12:47 p.m.
225 Sq' / bedroom, City code
Mike D.
Mon, Sep 19, 2011 : 3:37 a.m.
411 Lofts cost $900 to $1200 per room, not per unit.
DonBee
Sun, Sep 18, 2011 : 10:04 p.m.
JMA2Y - 20 bedrooms in 7,748 square feet. This is in the range of 300 square feet per occupant, more than most SRO buildings being built today and way more than many of the dorms.
Mike D.
Sun, Sep 18, 2011 : 8:24 p.m.
It's amazing how a few people like Mr. Whitaker and commenter "beuwolf" think it's reasonable to stop all development in downtown Ann Arbor by making everything a historic district. This is a progressive city, and that means we preserve certain neighborhoods with historical significance and replace others with denser housing. Density allows more people to live in or near downtown so they drive less. Density makes public transportation options more viable. This is not rocket science; it's how people everywhere else in the world consume less energy per capita than Americans. The houses in question are dumps (yes, I have been in one). They aren't deemed historic. Council did the right thing by not ginning up a historic district just to save them. Council did not do the right thing when it rejected a much better proposal from the developer. So we get a crummy, giant box. The blood of tackiness is on the hands of Mike Anglin, Sabra Briere, Carsten Hohnke, and Stephen Kunselman.
timjbd
Wed, Sep 21, 2011 : 2:20 p.m.
From a developers point of view, they will build the absolute cheapest possible building that brings in the greatest amount of revenue. If it is minimally attractive enough that people are willing to live in it, they have done their job. The government is supposed to represent the rest of the citizenry who will not LIVE IN it, but will have to look at it and who might also own nearby property which will be affected by it. In this case, the government did not do its job but the developers did do theirs. The result will be the cheapest possible building. Period. If they cannot get anyone to live in it, the taxpayers will be on the hook for its upkeep eventually until someone else comes along to tear it down and start again. In my opinion, there should be architectural standards for the entirety of the city but there are not. Only building codes. Hence- there are hideous building all over Ann Arbor. Were it not for the old downtown area and the U of M, Ann Arbor would look like one big, ugly strip mall. From a developers point of view, avoiding (talented) architects is something you want to do at all costs. If there are no architectural standards to meet, go as close to a 4 sided box as you can.
Mike D.
Tue, Sep 20, 2011 : 8:21 p.m.
John Q, what is the other choice? The developers do nothing and lose their investment? Do you really think that's viable? I guess you must live in a communist country, but America is still a capitalist society.
John Q
Mon, Sep 19, 2011 : 1:18 p.m.
It's the developers who are choosing this route. You can blame Council because they didn't pick the plan you wanted. But no one forced the developers to tear down houses or build an ugly box. That's their choice.
Mike D.
Mon, Sep 19, 2011 : 12:53 p.m.
I'm complaining because the intransigence of a few on the council has forced density to manifest as an ugly box that will be a run-down slum within a decade. Stricter codes combined with a willingness of council to make smart compromises would allow more sustainable development. Instead, we get this. Life isn't black and white, and there are right and wrong ways to add density.
John Q
Mon, Sep 19, 2011 : 4:10 a.m.
Why are you complaining? You're getting your density.
say it plain
Sun, Sep 18, 2011 : 4:23 p.m.
We're going to have to get used to this in Ann Arbor. Unfortunately for us, given the current state of real estate development, one of the only types of projects still seen as profitable will rely on the college-costs bubble. So long as Americans are willing to ring up huge debts for dorm beds and tuitions and such, and so long as there are still loans available for this, projects oriented toward students will be 'sellable' to investors. Ann Arbor managed to escape too too much of the overdevelopment of the heady bubbly downtown condo scene, though we've had our share. Ann Arbor managed to escape too too much of the sprawling subs on the outskirts, though we've had our share. But I fear we will not escape this next round of bubbly development, student housing. In some ways we really have needed more of it, but we'll be seeing what happens when we get *lots* at once now I think!
Phil Dokas
Sun, Sep 18, 2011 : 4:12 p.m.
Here's Jeff Helminski's Twitter account: <a href="https://twitter.com/jhelmin" rel='nofollow'>https://twitter.com/jhelmin</a>. People should let him know what they think about these plans of his.
Dot
Sun, Sep 18, 2011 : 5:54 p.m.
can't see the tweet - can you share?
Alfie
Sun, Sep 18, 2011 : 5:23 p.m.
Good idea, lets harass a group of developers willing to invest in the City while one neighbor threatens to waste everyone's time on the very definition of a frivolous lawsuit. We didnt get what we wanted so lets just drag out, just for the sake of being sore 'losers' in this.
MB111
Sun, Sep 18, 2011 : 4:16 p.m.
He bought a legal siteplan. he will build it. Our feedback will be irrelevant. Blame the neighbors for forcing everyone's hands and creating a lose-lose scenario for the citizens.
guyfroma2mi
Sun, Sep 18, 2011 : 3:33 p.m.
This project proves that those that just say "no" to everything, rather than engaging in the conversation and coming to a reasonable compromise, end up with nothing except the right to whine and complain about how they've been wronged. Works exactly the same for anti-development liberals (I say this as someone that leans heavily to the Left politically) as it does for Tea-Party Republicans. They had a chance at a not unattractive, neighbor-friendly, preservation-friendly option that might not have been 100% of what they wanted (not that they were prepared to put any of their own money on the line) but at least it wouldn't have been a boring suburban solution like this that ignores the context and will lower their property values.
nixon41
Sun, Sep 18, 2011 : 3:12 p.m.
Whoop Tee Do
hut hut
Sun, Sep 18, 2011 : 3:02 p.m.
"Construction of new housing has been limited in recent years in part due to the high barrier to entry nature of the Ann Arbor city entitlement process and its both active and influential community groups who have long held anti-growth sentiments," the report adds It's just so hard to build here. LOL! I guess that's why we see so many hight rise apartments and condos going up. Even during a recession, developers want to build in Ann Arbor. Even when things turn sour and the roadblocks, many that are not the casue of the bureaucracy of neighborhood interest groups, (re: active community involved local residents) , they continue to want to invest and build. Nobody ever said that capitalism was without risk.
timjbd
Sun, Sep 18, 2011 : 3:02 p.m.
The photo of the floor plans shows 5 bedroom units. So maybe a mix of students, halfway house residents and federal/state funded homeless shelter space in each unit? That will be interesting to see what kind of calls the AAPD starts getting. Seems like there is plenty of rental space in/around Ann Arbor already. As far as the esthetics go, there are already many dozens of crappy apartment buildings all over town so a few more could hardly further offend the delicate sensibilities of residents.
The Picker
Sun, Sep 18, 2011 : 2:37 p.m.
This is not really a campus project, it is downtown, at least six blocks to the Diag. I would call this a rooming house due to the fact that these six bedrroom units will have individual leases for each bedroom. What will become of it when the student population realizes that living with 5 other individuals (some strangers to round out the six) is not all that great of a living arrangement. Remember it only takes one bad sub-let and their friends to upset the harmony in any group home. Again, what will become of these buildings when the students ignore them. I'll let you fill in that blank!
The Picker
Mon, Sep 19, 2011 : 12:39 p.m.
Dude! What? Your statement makes no sense!
snapshot
Mon, Sep 19, 2011 : 5:20 a.m.
Picker, you are way off base dude. These are students, many are not wealthy enough to experience the "values" you put forth in community living, or don't have a financial choice. They make do. I think it's safe to say you never served your country in the military, I had 168 roomates and we lived in the same bedroom called a barracks and that was like the hotel Hilton compared to other accommodations. 5 roomates with seperate sleeping quarters, that was officer country.
Dot
Sun, Sep 18, 2011 : 5:52 p.m.
pretty steep prices for a "rooming house"
AA
Sun, Sep 18, 2011 : 2:27 p.m.
"Heritage Row, a compromise proposed by de Parry in late 2009, promised to preserve the seven houses while building new apartments behind them. But four council members — Mike Anglin, Sabra Briere, Carsten Hohnke and Stephen Kunselman — blocked Heritage Row's approval last year, steering the developer back toward City Place. Fearing City Place could move forward now, some council members said this past week they're hoping the developer is open to bringing back the Heritage Row proposal. " I doubt it, I would not after all this grief.
Lets Get Real
Tue, Sep 20, 2011 : 1:05 p.m.
Mike Anglin - you're historic house could be next in line for demolishion - you live in the exact same kind of neighborhood this development is destroying.
xmo
Sun, Sep 18, 2011 : 1:54 p.m.
What again is suppose to be so bad about City Place? People are willing to RISK their "HARD EARNED" money to provide housing for students which will increase the tax rolls of Ann Arbor, provide more foot traffic for local businesses and put Union Construction people to work! You almost have to be Anti-Ann Arbor not to like the story?
hut hut
Mon, Sep 19, 2011 : 12:46 p.m.
Du Parry owned the property and allowed it to disintegrate. He did not spend his "HARD EARNED" money to maintain and improve the property. He sat back and collected the rents and didn't do anything to improve the property.
beuwolf
Sun, Sep 18, 2011 : 1:24 p.m.
Rather than wringing our hands about how horrible City Place will be, I ask that voters remember why 7 beautiful historic houses are being destroyed. The City Council did not vote for the historic district which would have saved these houses, notwithstanding that the local committee which studied the merits of the historic district overwhelmingly endorsed the historical district. The result is that an out of town developer is plundering our cityscape. Rapandulo, Derizinski, Teal, Taylor, Smith, among others, did not vote the historic district. Remember that during the primary and general elections. I have followed this matter closely. It is quite apparent that Tony Derezinski and Jean Carlberg at the City Planning Commission level, and Deresinski at the city council level, have endorsed an agenda of knocking down all of the historic houses to the south of downtown, all the way down to Madison. If that is what Ann Arbor wants, so be it. If you don't like it, don't vote for Rapandulo, Derizinski, Teal, Taylor, and Smith in the city council elections. We as Ann Arbor residents get the results which we deserve, and by virtue of those who elected those folks, City Place is what we got.
Dave Koziol
Mon, Sep 19, 2011 : 1:25 p.m.
I hope you are kidding when you call those 7 house "beautiful". I park behind them, and they are run down ugly old buildings.
Rob T
Sun, Sep 18, 2011 : 2:28 p.m.
After three years of living in Ann Arbor, I'm still not sure what makes Kerrytown and Germantown historic. Is it that they're full of student rentals? There are some lovely old houses, but nothing you wouldn't find in other Midwestern cities.
Hot Sam
Sun, Sep 18, 2011 : 12:51 p.m.
Have I read this right? 23 SIX bedroom units??? If that is the case, where does one start...
MB111
Sun, Sep 18, 2011 : 11:05 a.m.
Since the monstrosity known as City Place appears to be moving forward, citizens of Ann Arbor need to learn from the errors of Mr. Whitaker and his neighbors. 1) Change is inevitable, so don't fight every option - you will end up with the worst possible scenario just because it is permissible within the zoning code. 2) By having the neighbors fighting so vehemently, council caved to the best possible alternative, Heritage Row, in order to kow-tow to a small segment of the constituency. 3) Selective use of historic designation will not work to stop specific projects.