Grand Rapids' Michigan Street corridor could be on the verge of another multimillion dollar round of development.
If a number of projects on the drawing board come together from existing developers in the corridor and new entrant 616 Development LLC, sources say the changes could unlock additional opportunities for a more diverse mix of residential and commercial uses, particularly in the section east of College Avenue.
With the purchase of two adjacent properties at 740 and 756 Michigan Street, 616 Development joins other firms such as Third Coast Development Partners LLC who've amassed key property holdings along the corridor.
616 Development plans a $16 million, four-story residential and mixed-use project at the site that includes 54 market-rate apartments, 9,700 square feet of ground-floor commercial space, 68 underground parking spaces and approximately 27 grade-level parking spaces.
The Grand Rapids Brownfield Redevelopment Authority today approved 616's Development plan to demolish the existing structures, which were deemed functionally obsolete. The work plan is expected to receive a reimbursement of approximately $3.3 million in eligible Brownfield activities over a period of 21 years.
616 Development anticipates work to start in late 2013 or the beginning of 2014 and be completed in 12 to 15 months, according to documents filed with the Brownfield Redevelopment Authority.
Under the entity Lofts on Michigan LLC, 616 Development founder and principal Derek Coppess purchased the properties for $550,000 from a business entity owned by Mark Sellers, a local restaurateur.
Sellers, who owns HopCat, Stella's Lounge, McFadden's and Grand Rapids Brewing Co., originally bought the properties in 2009 in the hopes of developing another restaurant, but his other projects prevented him from moving on it.
"I had been sitting on (the property) for a few years and never had the time to put into a project there," Sellers told MiBiz. "It was hard making that sale. It was the first piece of property I've ever bought then sold. I usually buy and hold."
Having worked together on the Grand Rapids Brewing Co. project, Coppess approached Sellers in January about buying the Michigan Street property. The two briefly discussed working together on a project in which 616 Development would build a facility and manage residential units above a retail space operated by Sellers. In the end, Sellers said he opted to just sell the property, even though the momentum of property development on Michigan Street is enticing.
"I'm not really in the real estate business, I'm in the restaurant business," Sellers said. "I wasn't going to do anything there so I thought, 'Why hold on to it anymore?'"
The Michigan Street corridor just east of the Medical Mile has its share of challenges for developers, but the city of Grand Rapids has prioritized encouraging continued investment in that area, said Suzanne Schulz, director of the planning department for the city of Grand Rapids.
"This area is a very exciting spot," Schulz said. "If several projects being talked about now land, it will be transformative and will transform how people see the corridor today."
Developers say they are already seeing the corridor in a new light and would argue they have been finding opportunities there for some time.
"We've been over there developing and acquiring properties for over 10 years now," said Brad Rosely, principal with Third Coast Development. "We've literally spent hundreds of millions of dollars in the area, and there are those like Spectrum (Health) doing the same thing, but for different reasons."
In addition to a solid employment base, the adjacent residential communities make the area even more viable for future commercial development, Rosely said.
Although nearly 25 percent of residents near the corridor live at or below the poverty level according to U.S. Census data and the city clerk's office, the people in the neighborhood can help keep the corridor active at all hours, which translates into business for the restaurants and retail stores in the area, Rosely said.
"If we can continue to acquire a few more properties and redevelop a few more things down the corridor, maybe we could get a grocery store and things that frankly the neighborhood would love to have, but just aren't viable now," Rosely said.
The zoning ordinances in place for the corridor outline a vision for a high-density, mixed-use neighborhood with plenty of ancillary services, said Schulz.
"There has been a lot of lost services over the years in the corridor," she said, referring to the migration of shops and amenities out of the neighborhood. "It's a unique area that eventually turned into a hodge-podge of auto-oriented development."
Local leaders don't anticipate institutional development from organizations such as Spectrum Health or Van Andel Institute to move further east down the corridor. Instead, there is more interest in multi-family residential and retail investments, Schulz said, adding that the city wants to encourage more transit-oriented development to help spur those types of uses.
Ultimately, city officials would like to see a better balance of transportation options, increased walkability and diversified neighborhoods, she said.
"Retail and residential is what the area needs," Third Coast's Rosely said. "There is plenty of office right now, and I don't really see a big need for it. That could change in next five to 10 years, but the higher the (residential) density, the better it is for everyone."
Because the corridor became more car-oriented over time, many properties have inherent development challenges, meaning new redevelopment projects for residential and pedestrian uses will require the re-engineering of decades of infrastructure, sources said.
As the corridor became more auto-oriented over the years, the street widened and the corridor lost green space and sidewalks, which made the area less friendly for pedestrian traffic, Schulz said.
"When we see redevelopment, we often think of how do we use this as an opportunity to improve those aspects," she said. "What's happening now offers an entirely different opportunity in how to design the corridor."
While Schulz is optimistic about the growth of the corridor, she did note that any progress down Michigan Street is "an evolution that will take a number of years."
A good portion of the projects there currently would have a harder time starting now than they did 10 years ago because of the increased demand for space and rising property values, Rosely said. A 4,000-square-foot standalone cell phone store with 25 parking spaces isn't really economically feasible in the corridor anymore, he added. The property values are climbing again and developers need to maximize the usable space to make a project provide the needed cash flow.
"It's always a situation where an area gets in high demand and it gets harder and harder to justify prices you're willing to pay for what I'd call raw land," he said. "For a developer, there is a major investment in adjusting the land as you need it."
Rosely's firm is currently preparing subcontractor bid packages for a 149-room hotel development, a process Pioneer Construction is managing. The hotel would be adjacent to Third Coast's Mid Towne Village project at 545 Michigan Street NE. The total project cost is roughly $30 million.
Third Coast is also wrapping up the redevelopment of the former Miller-Zeilstra Lumber site into a mixed-use retail/residential space at 833 Michigan Street. Snap Fitness, Grand Butchers and Flat Landers Barstillery have signed up as new tenants for the site.
"We have two other properties we are working on redeveloping on Michigan Street, too," Rosely said. "These projects are also mixed-use retail and residential."
Rosely declined to share further details on the projects, but said given recent announcements in the corridor, he's confident his firm's investments will pay off.
For instance, Grand Valley State University on Nov. 1 purchased 11 acres of property for $18.9 million just up the street for the future expansion of its health science programs, although no new facilities are planned at this time. The university said it hoped to add at least 1,000 new students to the various health science programs and hire an additional 20 to 30 faculty and staff over the course of the expansion.
In 2011, Rockford Construction Co. proposed a new health science facility that would accommodate future GVSU's expansion nearby the corridor on the north side of I-196 at the corner of Lafayette Avenue NE and Hastings Street NE. GVSU's Board of Trustees approved the purchase of the 1.6-acre site from Rockford for $3.25 million in November 2011, but the project that was expected to break ground in 2012 has not yet materialized.
Other institutional holdings on the corridor include a handful of partially undeveloped properties that Michigan State University owns on the corner of Sinclair Avenue and Michigan Street, according to government records.
"We've always been excited about (the Michigan Street corridor)," Rosely said. "We've been working in the area for quite some time ... and will be for quite some time in the future."