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Posted on Tue, Oct 4, 2011 : 10:26 p.m.

The Varsity high-rise development proposal wins approval from Ann Arbor Planning Commission

By Lizzy Alfs


An aerial view of the project known as The Varsity, shown in yellow, as viewed from the southeast on Washington Street in downtown Ann Arbor. Shown in the background is Sloan Plaza condominiums on Huron Street. To the left is 411 Lofts, and to the right is the First Baptist Church.

Image courtesy of developer

The Ann Arbor Planning Commission voted unanimously Tuesday night to approve The Varsity, a 13-story student high-rise development proposed for East Washington Street in downtown Ann Arbor.

The project will now go before the Ann Arbor City Council for final approval.

The developer, Potomac Holdings of Bethesda, Md., plans to build a 177,180-square-foot building containing 181 apartments with 415 bedrooms, located at 425 E. Washington St. next to Sterling 411 Lofts. An existing two-story office building would be demolished to make way for the development.

The project also calls for 70 underground parking spaces, a fitness center, a management office and 121 bicycle parking spaces.

The commissioners swiftly approved the proposal tonight, lingering only a few minutes to discuss the project following comments from the public.

Aside from "minor" concerns about the prospect of tenants creating more parking demand, commissioner Diane Giannola said, "I actually like the building."

On Sept. 20, the Planning Commission postponed a vote on the proposal due to a few outstanding issues with the project, including corrections to the grading, landscape plans, issues with a drive approach on Washington Street to access a service alley and issues related to the development’s solid waste plan.

Since the vote was postponed, some minor changes were made to the site plan. A walkway on the east side of the building was narrowed, some fencing and decorative features were removed and a few windows were consolidated or eliminated.

The project still drew criticism Tuesday night from some residents. They cited the appearance of the Huron Street facade, traffic concerns and parking.

Because the primary resident entrance to the building would be on the south side along Washington Street, some residents suggested that the Huron Street facade should be made more attractive.

Chris Crockett, president of the Old Fourth Ward Association, called the project “13 stories of yellow brick, unrelieved by any pattern, any alteration in the brick.”

“The Huron Street facade should be treated with importance,” she said. “This building is not noteworthy and the architect should be ashamed.”

Hugh Sonk, a representative of the neighboring Sloan Plaza condominiums, noted the “lack of architectural detail on the Huron face.” He said the Huron side of the building should be given as much attention as the Washington Street side.

Although the renderings of The Varsity show a brightly colored, yellow brick, architect Brad Moore pointed out that the images aren’t representative of the actual color of the building, which, he said, wouldn't be nearly as bright.

Donnie Gross of Potomac Holdings said the design for the building has been changed 20 to 30 times to accommodate concerns from residents and the neighboring First Baptist Church.

“We are very, very, very proud of this building. It’s something we as developers can be proud of, and you as citizens can be proud of,” he said.

Stacey Simpson, a pastor at the First Baptist Church, said that although she never wanted a high-rise next to the church, The Varsity developers have been "positive neighbors."

"I'm excited about the 400 students that are going to be living right next door," Simpson said.

Although plans for the site don’t include first-level retail space, Gross pointed out that the space can be converted into retail if there is a demand in the future.

“I’m not opposed to retail,” he said. “I’m opposed to retail that’s empty.”

He said he prefers plans for the first floor that will make it “lively,” such as a fitness center and computer lab.

“If the bottom of your building is dark, it looks drab,” he said. “People want to see life along East Washington Street.”

Lizzy Alfs is a business reporter for Reach her at 734-623-2584 or email her at Follow her on Twitter at


Stuart Brown

Fri, Oct 7, 2011 : 5:48 a.m.

Veracity, Assuming a $35 Million cost of construction, the break-even construction cost per bed is about $540/month or about $2.5 Million/year. At $540/month, the cash flow is negative for about 16 years, but after 30 years, the building is paid for and worth about $80 Million plus the rents are about 2.4 times the original amount. The break-even cost is reduced due to the 3% annual inflation I assumed in the rent charged. The negative cash flow adds up to about $6 million but the return on investment (ROI) is about 9%/year for 30 years. What is more interesting to me is to compare the cost of a private development to the costs the UofM incurs when it either builds new or rehabs student dorm housing. The 177K sq-ft @ $35 million costs about $200 sq-ft while North Quad cost about $485 sq-ft. In addition, The Varsity will cost about $84 K per bed to construct new while the U will spend about $100K per bed to REHAB East Quad and Alice Lloyd halls. It would be interesting to ask students who graduate from UofM who will live in the Varsity and also lived in either East Quad or Alice Lloyd which housing they preferred. I am appalled at the apparent wast of public money that could be put to better use than the way it is by the UofM. UofM is a public institution and should be operated in a way that maximizes the benefit to all of Michigan's residents, but it is not.


Fri, Oct 7, 2011 : 4:44 a.m.

blahblahblah wrote "The market and bank financing will determine what new construction is viable, not city council." SOOO right! People do not realize the market demand is only one piece of the development puzzle/equation. It really does not matter what market demand is if there is no one willing to lend $$ to build projects. The easy money made available to those wanting to buy homes fueled the housing bubble. These days the only multy family deals getting financing are those targeted to students because of the easy money made available to them via student loans & family wealth. In the mind of a student going to U of M paying $300 more per month for a luxury living experience over a student slum (converted house that the owner hasn't put a dime into in 30 years) is really nothing compared to the total cost of the 4 or 5 or 6 or more year "college experience"


Fri, Oct 7, 2011 : 4:31 a.m.

Veracity I agree that to a certain degree Blight is in the eye of the beholder (as to the new city hall I do not find it to be either exquisite or blightful) Since the Varsity site had been taken back from the previous developer of that site, Mr Concanon, for failure to perform on the bank note I'm sure that the new developers were offered a "good deal" from the bank in order to take it off their hands. So in this case the discounting (or at least some of it) probably happened up front rather than at the finish line. This should help keep the total development cost numbers down and may help the project considerably if indeed the supply outstrips the demand. From what the developers have said most of the units in the Varsity project will be units with two master suites (each bedroom having its own private bathroom) with the balance being mostly studios and one bedroom units and only a couple of 4 bedroom units on each floor. I think this makes it highly likely that it could be re-purposed as "other than student" focused rental housing or even converted to condos should the high-end student market collapse. Lets not forget that the Glen-Ann place project site plan approval was extended for something like another 5 years so that project (with a significant number of student units) could start construction any minute. And the there is the Pizza House project that is being marketed nationally (though that project would still need to jump through all the same hoops that the Varsity is going through). I expect that in the game of student housing musical chairs The Varsity won't be the project to find the limit of the demand for such units. And if it does then it will come out smelling more rose-like than its other high-rise competitors. I wonder what the next student high-rise developer will have to offer in the game of one-upsmanship. I don't think that multiple bathrooms for each bedroom makes much sense from a financial, practical or marketing standpoint


Thu, Oct 6, 2011 : 3:54 a.m.

hope it FAILS Miserably

John Q

Wed, Oct 5, 2011 : 9:05 p.m.

Where are all the bashers from the Heritage Row debate that were busy bashing the city's "anti-development" votes?


Wed, Oct 5, 2011 : 11:12 p.m.

The Planning Commission did approve Heritage Row, it was a minority on City Council that killed that project. City council has yet to vote on the Varsity as it was just approved by the Planning Commission. So this is not a done deal nothing to bash just yet.


Wed, Oct 5, 2011 : 2:50 p.m.

Bob Martel: I offer the following reference regarding desired reduction in class size at the University of Michigan: <a href="" rel='nofollow'></a>


Wed, Oct 5, 2011 : 2:02 p.m.

Can city council attract a business other than student housing speculators?? I mean seriously!! When was the last time they attracted ANY NEW business of substantial size to the city besides a student housing project??? There are so many vacant store fronts downtown now!! !!! if it wasn't for the University A2 would be a ghost town!


Wed, Oct 5, 2011 : 3:58 p.m.

The best long-term solution for the vacant store fronts will be increasing the housing density downtown. You certainly would not want new retail construction to occur thereby increasing the retail supply. The market and bank financing will determine what new construction is viable, not city council.


Wed, Oct 5, 2011 : 1:59 p.m.

Good decision by the city planners (20-30 revisions were enough). I agree, more housing supply is a good thing. In addition, construction workers go to work, the city ultimately receives more property tax revenue and the demand for the new Library Lot parking spaces should increase (if and when the 70 on-site spaces fill up).


Wed, Oct 5, 2011 : 1:33 p.m.

If it's that close to campus, then why does it need 121 bike parking spaces?!? Go all the way green and have these students walk! Oh! I get it. Include 121 bike parking spaces and approval is guaranteed! Let's just hope those racks aren't outside and becomes an eye score when frames are missing, front wheels, mangled frames like most other bike racks on campus.


Wed, Oct 5, 2011 : 5:42 p.m.

God forbid a tenant might want a place to lock her bike.

Bob Martel

Wed, Oct 5, 2011 : 1:02 p.m.

I am amazed that the developers found financing for this project in today's environment. Best of luck to them, they will surely need it. While I do not agree with all of Veracity's comments, I do believe he is correct in projecting that the original developer's will lose the project once it proves to be uneconomical and that the second owner (having purchased it at the &quot;right price&quot;) will make it successful. I was not aware that the University was planning on downsizing the student population. Does anyone have some references to this plan?

Bob Martel

Wed, Oct 5, 2011 : 1:04 p.m.

My apologies for the typo above, the second reference to &quot;developer's&quot; should of course be &quot;developers.&quot;


Wed, Oct 5, 2011 : 12:48 p.m.

Of course we don't need it. But just think, the back of the building will be a nice contribution to making Huron St. one of the ugliest corridors around. And someday, it may make a lovely 415-bed high-rise homeless shelter.


Wed, Oct 5, 2011 : 12:38 p.m.

A2_Jim: Your assessment has merit. The risk from over supply will effect all luxury student residences. Some may do better than others for the reasons that you cite. As I mentioned, the ultimate viability of the project will hinge on the resale cost for the new owners. The only reason that 411 Lofts and, the non-student apartment building, Ashley Terrace are well-occupied and profitable relates to the very low prices for which the buildings were purchased. The Varsity may not offer such an advantage for its new owners. In the previous two examples, the original financing organizations accepted large losses upon resale. The financier of The Varsity may find similarly losses unacceptable. In addition, The Varsity's design for student residency may not adapt well to interior changes if the building is purchased for an alternative use. This fact may reduce the number of interested purchasers should the building enter bankruptcy. As for what constitutes a blight in our city I guess ultimately is up to individual perception. I might consider the new Municipal building as a blight while you may consider it the most attractive building in Ann Arbor.


Wed, Oct 5, 2011 : 12:06 p.m.

Why do we need yet another student highrise on Washington? Don't we have enough along that corridor?


Tue, Oct 11, 2011 : 1:39 p.m.

I appreciate the snark, but A2_Wookie's original comment still implies the city is the one that came up with the idea of building this thing. My question is no more ridiculous than your post.

Wolf's Bane

Thu, Oct 6, 2011 : 12:26 p.m.

Thanks ChrisW. I thought it was self-evident, but clearly, I'm glad you are here to explain it to folks like Andy. Best.


Wed, Oct 5, 2011 : 5:57 p.m.

Andy, the city makes money by taxing the building. If it costs $30 million, the city's portion of the building's property taxes would be approximately $250,000 per year.


Wed, Oct 5, 2011 : 5:41 p.m.

I must have missed the part about how the city makes money off this development.

Wolf's Bane

Wed, Oct 5, 2011 : 12:23 p.m.

The economy is in the toilet and the city still needs to make money. Hence, another student high rise.


Wed, Oct 5, 2011 : 10:24 a.m.

I do not know why residents attend these meetings. We forget that city council and the mayor do not work for the citizens or tax payers, they certainly do not listen and only care about tall buildings, art and wasteful spending.


Wed, Oct 5, 2011 : 11:14 a.m.

The Mayor &amp; City Council are the board of directors of the corporation that is Ann Arbor (yes Ann Arbor is a corporate body) and they represent the interests of ALL the citizens/tax payers/stock holders/stake holders not just the vocal anti development groupies. They are bound by many laws and regulations and must act within those constraints irrespective of what uninformed NIMBYs may wish. Sometimes the vocal anti-development crowd "wins" (witness the defeat of the Heritage Row) and screws things up for the rest of us and sometimes the Council finds its back-bone, screws up its courage, and in spite of what the "don't ever change anything about the city" naysayers clamor for they approve projects that comply with the ordinances that have been approved with more than the required public impute. It is a reality about corporate dynamics that by being part of the corporate body we agree to subordinate our individual predilections to the greater corporate good even though that "greater good" may not be wholly aligned with what we think is the best for us individually. The great thing about this country is that you can always decide to remove yourself from the corporate entity if you don't like how the board is running it (move elsewhere) or work to change the corporate board (vote the bastards out of office) unlike most of the other places on the globe!


Wed, Oct 5, 2011 : 4:56 a.m.

Veracity, If, as you contend, the student high-rise housing market does get overbuilt ALL the competing developments will need to engage in price cutting not just The Varsity. The projects which are forced to do the greatest amount of discounting will be the ones with the less desirable units i.e. the ones with windowless bedrooms (Zaragon 1 &amp; 411), paper thin walls, lower bedroom to bathroom ratios, greater distance to campus, least on-site parking, fewest amenities, more roommates per apartment etc. The Varsity will probably fare best of all the student towers because this developer has provided more bathrooms, smaller number of bedrooms per apartment (most are 2 bedroom units not 4 or 6 bedroom units which are harder to lease), more amenities, is only half a block from campus, etc. Furthermore the projects that will suffer most from the discounting will be those with the most debt service, greatest leverage, and poorest management. I say let the market work to bring down the rents of each of the student towers to what the market will bear. More supply equals lower cost (basic econ 101). Let the investors of these student towers beware if they do not conduct adequate due diligence. None of these building will however be blighted, derelict, problem children even if your worst case scenario is realized. Look at the improvements ongoing @ 411 since its recent sale – a long needed urban market-deli is going in at the corner, the leasing office is moving down to street level , the Subway is open. All because the new owner can charge less rent and fill up the space (nd I'm told they are near 98% leased in the upper levels). I'm sure similar improvements will follow shortly at Ashley Terraces under its new ownership. The free market works!!


Wed, Oct 5, 2011 : 4:13 a.m.

The Varsity represents a major risk for its financier and for the city of Ann Arbor. Although the cost of construction has not been divulged one can calculate a plausible cost of about $35 million, and maybe more because of the included underground parking structure. With an interest rate of 5% and a 20 year sinking fund, The Varsity will have to generate $3.5 million in revenue annually just to meet financing costs. Therefore, each of the 415 bedrooms must be leased for at least $702. However, the leasing rate will have to be increased in order to cover other costs of operation including salaries of employees, utilities, insurance, maintenance, and taxes. Very likely the ultimate leasing rate will average $1000 per bedroom which is similar to charges obtained by Zaragon Place 1 and anticipated for Zaragon Place 2. With The Varsity joining Zaragon Place 1 and 2, 4 Eleven Lofts on East Washington and The Courtyards near Plymouth Road and North Campus, the high-end student leasing capacity may well exceed the demand. This situation will be complicated by the intention of the University of Michigan to decrease the size of incoming freshman classes in the future. The Varsity can be expected to be a business failure and to be sold in bankruptcy for a fraction of the original construction costs as has happened with 411 Lofts and with Ashley Terrace (not a student residence but similar high priced apartment building). The &quot;fire sale&quot; pricing for the sale of the latter two buildings allowed the new owners to drastically cut leasing rates so that full occupancy could be achieved while still generating profits. When The Varsity enters bankruptcy and is then resold for much less than its initial financing, the city will lose tax money when TIF is recalculated downwards to reflect the loss in value upon resale. The Varsity may never attract profitable occupancy and end up a blight downtown, like the residency building on 4th and Huron.