Pizza House owners market development rights for 10-story tower above Ann Arbor restaurant

The Tice family is working with Peter Allen, a University of Michigan real estate instructor and with local development connections. He’s marketing the property as a development opportunity on a long-term land deal for someone who wants to expand new student housing options.

“It’s a great location,” Allen said. “The question is, how deep is that market?”

Zaragon Place high-rise on East University started the wave of new student housing in Ann Arbor. The location is in the same block as Pizza House, and serves as a model for how the Tice family’s tower could function.

Two blocks east, the 601 Forest mixed-use high-rise with 600 beds is in the early stages of development, with the tenants of the existing buildings on the site moving out and the city looking at demolition permit requests.

And across the Diag, the 4Eleven Lofts and North Quad - built by the University of Michigan - are redefining the housing options for students seeking new construction in a high-rise environment. Zaragon Place 2 also is in development.

Timing, said Dennis Tice, is critical for a new project.

“Now’s the time,” he said.

“You’ll only be able to fill so many (new projects) with students,” he said. “… At some point, the market’s only so deep.”

But it’s deep enough to absorb a high-rise on his property because so much of the legwork has been done, he said.

The building specs were done by Ann Arbor architect Brad Moore.

The construction of the new Pizza House restaurant 3 years ago included specs that fit the new building for a 10-story high-rise - and possibly higher.

And the city’s rezoning of the South University area to allow high-rises in select areas clears the way on the municipal approval front.

However, the Tice family isn’t willing to sell the property - for obvious reasons. The restaurant will stay put.

And they don’t want to do the development.

That’s where Allen comes in. He’s crafting a way for them to turn the property into condominiums, with the restaurant as one ownership entity and the development rights above the property a second ownership entity, which is being offered on long-term lease to a developer who could build and operate new student housing.

“The creation of condos to separate the first floor and above is not unique,” Allen said. “What is unique is that they’d be renting it and not selling it.”

Allen is open to offers that he’ll present to the Tices.

“We’ve had interest from two local residential developers,” he said, declining to name them.

Any eventual deal is likely to be based on a 50-year lease - maybe longer - with the price based on a percentage of the net operating income, Allen said.

Tice, who co-owns the restaurant and the property with his father, Bill, and brother, Matt, said their vision for redevelopment on the property started in 1998.

“It’s something we’ve been thinking about for a long time … as we acquired property and the restaurant business grew,” he said.

At the time, the zoning wouldn’t allow the change. But Tice, active in the South University Area Association, helped drive rezoning in the district through a proposal that took shape in 2004.

“As things moved along, we kind of realized that we might need a partner or partners for something like this,” Tice said.

While Tice believes the market warrants new construction over Pizza House, he recognizes that financing could be an issue.

But he also says the South University is sustaining itself as “the high-rent district for campus,” and that adds to the appeal.

Adding to the residential base will eventually help the retail mix in the area, he added. That was an original goal of the rezoning and one that many are still looking for.

“It has to evolve on its own,” Tice said. “But I know it’ll happen.”