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Sunday, 02 April 2017 15:58

Capital gains: Lansing-area developers focus on mixed-use projects to add vibrancy

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Developers from around the region have set their sights on the capital area with an influx of new mixed-use development projects. They include the Gillespie Group’s Outfield development attached to Cooley Law School Stadium. Developers from around the region have set their sights on the capital area with an influx of new mixed-use development projects. They include the Gillespie Group’s Outfield development attached to Cooley Law School Stadium. Courtesy Photo

As developers from around the Midwest descend on Michigan’s capital region, the Lansing area’s brownfield sites could soon become a lot less brown. 

That’s because a variety of commercial real estate stakeholders and economic developers — some with roots in the Lansing area and some without — see considerable demand for new, mixed-use development, particularly along the roughly 5-mile stretch of Michigan Avenue that connects the downtowns of Lansing and East Lansing. 

Case in point: A pair of proposals from two Chicago-area real estate investors near Michigan State University each aim to offer high-rise, mixed-use projects consisting of a variety of residential housing, hotel space, retail and parking.

“I think it really strives to encapsulate mixed-use and urban design principles,” said Mark Bell, CEO of Harbor Bay Real Estate Advisors LLC, a Northbrook, Ill.-based commercial real estate firm.

Harbor Bay has proposed the $132 million Center City development project in downtown East Lansing on the block of Grand River Avenue east of Abbot Road and on a city-owned surface parking lot along Albert Avenue to the north. 

The strip of existing retail real estate located along Grand River Avenue is owned by East Lansing’s Ballein family, who are partners in the development, Bell said. He added that plans call for market-rate housing and units for people age 55 and older. Additionally, the site hopes to attract a grocery user, additional retail, a large parking component and public streetscape improvements. 

“When those four variables are woven together, at the end of the day, you have a truly mixed-use development that will hopefully attract (a variety) of people and interests,” Bell said. 

Likewise, adjacent from Harbor Bay’s proposed project, Chicago-based real estate firm Convexity Properties’ long-discussed $148 million proposal at the northwest corner of Grand River and Abbot would develop additional residential units and a hotel. 

The pair of projects still require additional municipal approvals as well finalizing incentive packages. However, both could also qualify as “transformational” brownfield redevelopments under pending state legislation. If the legislation is passed, it would allow the developers to capture additional sales and use taxes generated on the site. 

Economic developers say both projects fit the goals for the city and what the area needs, according to Steve Willobee, chief operating officer for Lansing Economic Area Partnership (LEAP). 

“If you look at the major employers, they’re telling us they need urban product that will help (to) draw an urban workforce,” Willobee said. “If you think about the buying habits of millennials, (employers are) saying they need that product in order to get the workforce they need. That’s our interest in it.”

Harbor Bay, which has other large-scale, mixed-use projects in cities like Minneapolis in its portfolio, believes a town like East Lansing sets up well for the kind of development the company prefers doing, Bell said. 

“We’re attracted to campus towns because they have a lot of diversity and economic strengths,” Bell said. “We find East Lansing to be very consistent with what we see in other Big 10 towns.”

LISTENING TO USERS

The separate East Lansing proposals by the two Chicago development firms are among the largest private development projects the region has seen in some time. However, due west on Michigan Avenue heading toward Lansing’s downtown, other homegrown developers are finding a niche as well. 

Among them is Pat Gillespie, president of Lansing-based real estate development and property management firm Gillespie Group

The executive told MiBiz his company has invested around $45 million in recent years in the area around Cooley Law School Stadium, just east of the Grand River and downtown Lansing, in an area known as “The Stadium District.” 

“We’re seeing a steady appetite for people wanting to come downtown (but) I would not call it explosive,” Gillespie said. “I think it’s strong and I think there’s still quite a few people that would like to live downtown that don’t because there’s not a product type yet.” 

Finding the right types of housing product is something Gillespie said he takes very seriously, noting that every year or two, his company makes it a point to listen to existing tenants and tweak future projects based on their feedback, largely in terms of their square footage and amenities. 

Currently, Gillespie’s company offers a handful of unique apartment developments, including The Outfield, which features units fronting the Lansing Lugnuts minor league baseball stadium. 

Meanwhile, his brother, Scott Gillespie, is working separately on his own development projects via The Gillespie Company LLC

Gillespie Company’s projects include the $7 million, mixed-use Provident Place in the 2200 block of East Michigan Avenue, as MiBiz previously reported. 

“(People) are looking for some quirky, urban placemaking stuff where they can be entertained. We’re getting more tire kickers looking downtown for buildings that can be redone into dance clubs or entertainment venues or different types of restaurants,” Pat Gillespie said. “That activity has picked up in the Stadium District, which we’re kind of excited about because that drives more people after ballgames and in off-hours so it doesn’t become dark.”

Other West Michigan developers are also investing in properties in the capital region. 

In late March, Grand Rapids-based Vision Real Estate Investment Inc. said it acquired the 10-story One Michigan Avenue office building on Washington Square in downtown Lansing. Tenants in the facility include several law firms and financial services companies.

KEEPING THE LIGHTS ON

As a government town where many people leave after the workday, downtown Lansing has struggled at times to create vibrancy after business hours, whether in terms of reasons to stay or infrastructure, according to Gillespie and other stakeholders.  

“There is that government part of town and that clientele where 5 o’clock hits and they’re gone,” said Nate Scramlin, a senior community assistance team specialist focused on the Lansing area for the Michigan Economic Development Corp. “Dealing with that is a struggle for those businesses. The population just dies after that, (although) some of that is a misconception. There is population and people going to downtown. But to really build that would be to add residential units in the downtown.”

Scramlin believes myriad opportunities exist to build more residential units in and around Lansing’s center city, noting that vacant land and surface parking lots could prove suitable for new construction. 

He also said he continues to hear about potential new development projects in nearby Lansing neighborhoods like Reo Town and Old Town. 

Pat Gillespie told MiBiz that Gillespie Group has more development planned in the area, noting that he’s got at least three unspecified projects around the Stadium District that he hopes to unveil soon. 

The challenge for the developer: There’s some level of apprehension at the municipal level over the continued use of economic development incentives, namely tax incremental financing (TIF). Other sources contacted for this report did not share those concerns. 

Gillespie said TIF plays a key role in continuing the momentum in the capital city. 

“It’s almost like we’re in a cycle right now where interest rates are low and you can get things done,” he said. “If we miss the cycle and they start rising, then stuff dries up for a while. We just think you need to keep the pedal to the metal and create more so that the momentum doesn’t stop.” 

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Nick Manes

Staff writer

nmanes@mibiz.com

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