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Old Posted Jun 21, 2009, 2:51 PM
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City Center II could advance by fall
By Kate Jacobson
The State News
Published: June 15, 2009

Tonight’s East Lansing City Council agenda includes one item that is familiar to the council and the residents of East Lansing: a request from the City Center II developer for a fourth 90-day extension to finish securing funds for the project.

The $116.4-million project, which has been in the works for almost 10 years, is scheduled to begin in the fall, city officials said.

Because of a bleak economy, Strathmore Development Company, the developer, has experienced difficulties obtaining funds to finance the project. To the dismay of some residents, the plan is moving forward, as city officials hope the final pieces of the project fall into place.

City Center II is supposed to modernize the vacated Citizens Bank building and the 5.5 acres that sit at the corner of Abbot Road and Grand River Avenue.

Originally planned to be a counterpart to City Center I — located on the corner of M.A.C and Grand River avenues — the project has transformed into a multibuilding, mixed-use facility, complete with a preforming arts theater, parking garage and space for residential and retail space, among others. Construction of the parking garage, which is the first part of the project to be built, is slated for spring 2010.

“It took seven years to get the land all together, but this is not unusual for downtown developments like this,” said Jim van Ravensway, director of East Lansing’s Department of Planning and Community Development.

Finding finances

The $112-million funding the developer needs for the project should be completed in the next 90 days, Strathmore President Scott Chappelle said.

The financing comes from cash equity from the buildings’ existing owners, traditional bank financing, mezzanine financing, tax-increment financing and Michigan business tax credits. The rest of the almost $5 million in financing will come from the city.

Chappelle said he has received commitments for the $112 million. However, a portion of the commitments are in the form of equity participation, a relatively expensive option to finance real estate projects. He’s currently trying to obtain cheaper funding options for $54 million of the money he needs.

Strathmore is pursuing $28 million in financing backed by either a loan from the U.S. Department of Housing and Urban Development or lender Freddie Mac, Chappelle said. He is looking to garner another $26 million in financing with New Markets Tax Credit Program, part of the U.S. Department of Treasury, and traditional bank financing.

Because of the frozen credit markets, Chappelle has had some difficulties securing those funds.

Problematic projects

Two of Strathmore’s other developments have resulted in somewhat messy results.

A project in Bear Creek, Mich., resulted in a legal dispute with the township about the approval process for the development.

“Bear Creek Township acted improperly by not approving our project despite complying with the local ordinance,” Chappelle said in an e-mail. “The project was finally approved by the Michigan Court of Appeals and we are still trying to resolve the issue of damages.”

Bear Creek Towship Supervisor Dennis Keiser could not be reached for comment.

An Ann Arbor project also brought controversy to the company when the city claimed that Strathmore filed documents late, causing a check to bounce and a divide between the developer and the city. The project currently is stalled.

Connie Pulcipher, senior city planner for Ann Arbor, declined to comment. Chappelle said there are no financing options for the project, but the company still plans to pursue it.

East Lansing officials said they are not worried about the company’s track record.

“We have examined all litigation that they’re party to,” City Manager Ted Staton said. “We certainly don’t see anything that would disqualify them for candidacy.”

Construction concerns

The project will bring a big building into a neighborhood where it might not fit, said Ann Nichols, a resident living near the project and a member of the city’s Community Relations Coalition.

After working with the city on the project, Nichols said the voices of the residents were heard, even if their initial wants weren’t addressed by project changes.

“I, and most of my neighbors, I think, have pretty much resigned ourselves to the fact that we fought the good fight,” she said.

“People aren’t thrilled about it, but we have decided that it’s going to happen and we need to be positive about it.”

Phil Bellfy, a resident in the project area and associate professor of writing, rhetoric and American culture, is opposed to the development. When the project was proposed, Bellfy did not like Strathmore’s design and started a petition against the development. It was later submitted to the city.

“They’re changing the character of this community, and it’s bad,” he said.


The city instituted a flexible plan for construction and didn’t hammer down any specific dates. Staton and van Ravensway said they are confident demolition will begin in the fall.

“It’s very feasible to have our project under way by then,” van Ravensway said. “But there are so many things that have to be completed before we’re finally able to get to that point.”

The city and Strathmore have acquired almost all the properties required to build City Center II.

Purchases for the two remaining properties are on track to be completed by the end of the month, Staton said.

He said once the demolition occurs, there is a 30- to 36-month window before construction of the two larger multi-use buildings will be completed, Staton said.

“If you believe in a business cycle, there are 30 to 36 months (before) we could be staring at a whole different economy,” Staton said.

Published on Monday, June 15, 2009
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