Ann Arbor officials are seeking proposals
to build on the 1.2-acre city-owned property known as the “library lot” on South Fifth Avenue, where work on a $59 million underground parking garage will begin in October.Â
The vision, according to city plans, will be a dense project that adds vitality to the blocks between Main Street and the University of Michigan campus.Â
But the reality, say local developers, could be another failed attempt to lure private development to public property near downtown.
With the library lot RFP, insiders say that developers who in the past may have responded with a legitimate proposal - at a cost of $20,000 or more - will stay on the sidelines.
The economy is a driver of that, since finding a marketable use for the property will be challenging.
But so is the track record of city RFPs.
Â “(Many developers) view the risk as being a substantial waste of time and resources because you can never get to the end,” said Rob Aldrich, president of MAVDevelopment in Ann Arbor.
“From my perspective, the city has a lousy track record with these (requests for proposal)s. Name a successful one in the last 10 years.”Â
Examples of “Requests for Proposals” -or RFPs - to develop city properties over recent years include:Â
â€¢ 415 W. Washington, where three developers submitted proposals to develop 2.2 acres in 2008, but a decision has been postponed.Â
â€¢ First/Washington - An RFP was issued in 2000 and Joseph Freed & Associates were chosen as developers, but the deal collapsed in 2002.
Â â€¢ First/Washington
- A second RFP was issued in December 2005, with Village Green
chosen as the developer. Negotiations concluded, but financing issues have postponed construction, according to city officials.Â
â€¢ The former YMCA site
: an RFP was issued in December 2004, and the city reached an agreement with HDC LLC to build William Street Station, which was to include affordable housing and a new bus station at 350 S. Fifth. The city halted the project
in 2007 after two years of negotiations.Â
In addition, the city and Downtown Development Authority spent years working on a “three-site plan” to develop other downtown property, including the former Kline’s lot and property at First and William. That hasn’t resulted in development opportunities, and the latter site was proposed to remain “open space.
“I want someone to show me one RFP that was successful,” said downtown developer Ed Shaffran, echoing Aldrich’s concerns.Â
City officials say the lack of actual building following an RFP process doesn’t point to failure of the city.
As an example, they cite the Village Green apartment project, called Ann Arbor City Apartments.Â
The company and city officials have negotiated the complexities involved with the site, including the public parking components - financed by the DDA - and the rental housing, a portion of which will be dedicated for low-income residents.
Â “That’s an approved project that’s simply awaiting financing,” said City Manager Roger Fraser. That means the delay is stemming from the private aspect of the development, not a delay on the public side, he emphasized.
Â The financing evolves from the real estate downturn and credit market implosion, Fraser said, and that’s a national issue - not particular to Ann Arbor and its development potential.
Â “We expect that it will be built,” Fraser said. “It just needs to get past the financing bubble.”
Â But many developers - some who would only speak privately - say that the city may not be in the best position to weigh the feasibility of projects, and that can add time delays.
Â The RFPs have kept some control in the city’s hands, and that control can add elements to a project that push a good idea for the city into an unbuildable plan that won’t be profitable for the private investment.Â
When deciding how to develop a city site, Ann Arbor officials typically hold public meetings to get input on the proposals and that input may or may not reflect market realities.Â
“You can’t do a deal when you’re trying to please all sides,” Aldrich said. “That, frankly, is the problem.”Â
Another concern is the open-ended aspects of the RFP, which leave many details for negotiation late in the process.Â
“If we’re going to put up an RFP, let’s put down exactly what the city will do,” Shaffran said. “Say: We’ll give you A, B and C - with no negotiations behind the scenes.”Â
The site itself also raises concerns for a developer seeking to invest in a downtown project.
David Kwan, who has participated in several previous RFP rounds, noted that the mid-block location of the 1.2 acres next to the library limits the visibility and potential for any project that ends up on the property.Â
Swapping the Ann Arbor District Library’s property for the former YMCA property would yield a larger parcel with corner frontage, Kwan said. “That would increase the value tremendously,” he added.Â
Kwan joins Fraser in noting that it’s better for the city to choose a developer at the same time the parking deck is built. But he questions the need for forging ahead with that parking today, particularly in light of the difficulty the city likely faces in attracting a viable project to sit on top of it.
Â “In this market, nobody’s excited about developing anything right now,” Kwan said.Â
However, Fraser said the city has been approached by several potential developers, in addition to the one group that spoke publicly about its plans to submit a proposal calling for a hotel and conference center.Â
“We realize the economy is still difficult, but we’ve also been approached by a number of folks that have been interested in developing something for that top side,” Fraser said.
Â Whether those developers submit plans - and attend the mandatory pre-proposal meeting on Sept. 25 - remains to be seen.
Â “I think we’ll certainly be challenged to find many bidders for this property because of the economy, but we have nothing to lose,” said City Councilmember Leigh Greden, D-3rd Ward. “The worst case scenario is we’re unhappy with the quality or quantity of bids, so the city starts over.”
Â Fraser said he expects at least three to four developers to participate, drawn by the relative stability of the Ann Arbor economy and the strength of downtown.
Â “I do think this is a prime piece of property,” Fraser said.
Paula Gardner is business director for Ann Arbor.com, where she covers real estate and development. Contact her at (734) 623-2586 or by email.