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Sunday, 01 May 2016 11:54

Downtown Grand Rapids theater project requires developers to think bigger

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Loeks Theatres Inc. partnered with 616 Lofts LLC on a $140 million mixed-use project in downtown Grand Rapids. Loeks Theatres Inc. partnered with 616 Lofts LLC on a $140 million mixed-use project in downtown Grand Rapids. Courtesy Photo

GRAND RAPIDS — Realizing that a movie theater would not work as a standalone project in downtown Grand Rapids, J.D. Loeks knew that he needed to broaden the scope of his long-planned development. 

As a result, the president of Loeks Theatres Inc., the Grand Rapids-based operator of Celebration! Cinema, partnered with 616 Lofts LLC to propose a multi-phase, $140 million mixed-use project on two surface parking lots south of Van Andel Arena. 

The first phase would include a nine-screen Studio C! movie theater, retail space, 187 apartment units, a 900-space parking deck and a public plaza. A potential second phase would add a 10-story residential tower atop an additional six-story parking deck, according to the developers.

“I recognized that the scale of a project that would make sense on that big of a piece of property would be something bigger than our company alone would want to take on,” Loeks said of the decision to partner with the residential development firm after four years of exploring a standalone theater project. 

While the project still requires several approvals before work can start on the proposed site, Loeks and the principals at 616 Lofts say they remain confident of the project’s viability and the opportunity it represents for downtown’s Arena South district. 

As the scope of the project grew, so too did the complexity, leading to involvement from a number of private, public and public-private entities. The developers must acquire the two parking lots from the Grand Rapids Downtown Development Authority (DDA). The proposed $28.5 million attached parking deck would be sold back to the city upon completion. 

Moreover, the proposed public plaza would be owned by the DDA but managed by the developers. 

The project — potentially one of the largest private investments in the history of downtown Grand Rapids — has already received support from a variety of local governing agencies. But the partners will face their most significant challenge in the upcoming months when they plan to ask for gap financing assistance from the Michigan Economic Development Corp. (MEDC). 

In an April board meeting of the DDA, Kris Larson, president and CEO of Downtown Grand Rapids Inc., said the MEDC is aware of the project and looking at options to support the development in its budget for fiscal year 2016 or 2017. 

However, the MEDC has said it could cool its funding of projects in downtown Grand Rapids, which already has experienced a surge of development activity in recent years, according to a previous MiBiz report. The agency said it believes other areas of the state could benefit more from its limited funds to support development projects. 

When asked whether it would provide incentives for the Loeks/616 Lofts project, executives at the MEDC said it’s too early to discuss any specifics for the agency’s involvement.  

“We’re excited to see projects like this taking place in our urban areas, and we’re always looking for ways to support projects that are revitalizing our downtowns,” Kathleen Czarnecki, vice president of collaborative community development at the MEDC, said in a statement to MiBiz.

ADDING DENSITY

To make the Loeks/616 Lofts development viable, the project needed to include more than just a movie theater, necessitating the addition of retail and housing components, Loeks said. 

“All along, this has been a project that’s about a passion for community development,” Loeks said. “We know we can make a lot more money in the suburbs. This is our hometown. It’s where we live and where we work and something we’re interested in investing in.”

Loeks talked with a number of unnamed developers before entering into a partnership with 616 Lofts, whom he selected because of the firm’s experience and connections in the downtown development community. 

In recent years, 616 Lofts has been one of the most active residential developers in the Grand Rapids area, but the proposed theater marks by far its costliest project to date. 

“The unique component of this development is the magnetism of it: People attract more people, and people enjoy being where the activity is,” said Jeff Olsen, director of development at 616 Lofts. “When you add the activity of (Van Andel) Arena plus the proposed theater, that just creates a really vibrant network. So with people coming down for destination activities and restaurants, the living component follows at hand.”

The developer’s assessment of the demand for increased downtown residential options aligns with findings from a January 2015 Grand Rapids-focused housing study.

The study conducted by Clinton, N.J.-based Zimmerman/Volk Associates Inc. found that downtown Grand Rapids and its near neighborhoods could support between 5,705 and 7,615 new housing units in the next five years, with a mixture of market-rate and affordable units.

The developers say they’ll be watching absorption rates over the summer, as several hundred residential units — including 616 Lofts’ building at Michigan Street and Eastern Avenue — near completion or have already come on the market.

“Obviously, the market is a little more competitive than five or six years ago when we started, but we’re very confident in the product we bring to market,” Olsen said. “The good thing is that this isn’t our first major project. It may be the biggest. We’ve had some wonderful lessons learned from our previous work to date. We have every reason to believe that this will be the most successful development we’ve brought to market.” 

RETURNING DOWNTOWN

Loeks told MiBiz his company has long pursued the idea of bringing a movie theater back to downtown Grand Rapids, which he views as part of the legacy for his family’s business. However, a former project — the Loeks-owned Studio 28 in Wyoming — worked against the company as it sought to develop a downtown theater. 

The reason: Movie studios dislike having too many theaters close together in any given market, Loeks said. 

“Studio 28 locked up the downtown theater market,” he said.

However, the closing of the “horribly inefficient building” in 2008 opened up new opportunities for the company to pursue new business in downtown Grand Rapids. In 2012, Loeks announced his intention to explore the opening of a downtown Celebration! Cinema on surface parking lots south of the Van Andel Arena in downtown Grand Rapids. 

The entrepreneur obtained a three-year option on the property from the DDA, which owns the parking lots. Loeks also received multiple extensions on the purchase option as he addressed issues of financing and parking for the project. 

Despite the length of the process and the support of many downtown business leaders for the Loeks/616 Lofts project, the proposed development has raised some hackles among community leaders. 

Speaking during an April meeting, DDA board member and Grand Rapids Community Foundation President Diana Sieger expressed concern with how city officials dealt with neighborhood stakeholders as the developers worked on the proposal.

Particularly, Sieger said that city officials failed to include area businesses and organizations in the dialogue. The Community Foundation’s headquarters is located across the street from the proposed mixed-use site. 

“What I didn’t appreciate this whole time, I would say, is having the business concerns in the area really discounted,” Sieger said. “The city of Grand Rapids was not terribly transparent, and I often heard, ‘We can’t tell you what’s happening because of development.’ We get that. We’re not stupid.

“My concern is that it took a heck of a long time for any level of transparency to occur. In the future, I would say that as development occurs … pay attention not just to the noise of people but to the retention and attraction of businesses in downtown.”  

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Nick Manes

Staff writer

nmanes@mibiz.com

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