Village Green CEO: 'I'm committed to doing Ann Arbor City Apartments'
Ann Arbor officials announced this week they're forging ahead with plans to interview developers who responded to the city's request for proposals for the downtown "Library Lot."
It's an interesting contrast to the status of the city's RFP to develop the site of the former parking structure at First and Washington.
That process, finalized in late 2008, resulted in Village Green Co., based in Farmington Hills, winning a development agreement with the city and Downtown Development Authority to build a 156-apartment, 11-story (eight above grade) building that includes a four-level, 244-space parking deck.
Jonathan Holtzman, CEO of Village Green, told me this week he's still committed to the project.
The reasons haven't changed: He cited his company's relationship with the city and neighborhood groups, which collaborated on the final design; the character of the city, including downtown; and its strong employment base, including the University of Michigan, biomedical companies and engineering companies.
Ann Arbor, he said, needs rental housing.
"It doesn't have a downtown apartment community that's a green building, that will utilize mass transit," Holtzman said. "The fundamentals ... continue to be very positive."
Yet the project has been on hold since it obtained formal approved in December 2008. Village Green obtained extensions on its $3 million purchase of the property in 2009, and it awaits financing.
The reason, Holtzman said, is the national lending market is stalled by fear.
"The majority of the banks are still concerned that they’ll have more failed loans," he said.
And Village Green - despite its 90-year history, its 38,000-apartment management portfolio, and its development record (which even includes a project started- after the company secured financing - last fall in Minnesota) - still can't get financing to build apartments in downtown Ann Arbor, which may be one of the best rental markets in the state.
That's not to say the rental market isn't softening here and nationally. But the long-term prospect for the apartment sector is stronger than many commercial real estate sectors, Holtzman said.
Population growth, stricter lending criteria for home-buying and the lack of development of new houses and condos should keep apartments solid in coming years, he said.
But since 2008, Village Green hasn't been able to land financing for a project that, a few years ago, looked like a homerun.
That shows the depth of the national lending crisis, Holtzman said.
And that's the climate his company is working in to keep the project alive.
"We have been and continue to be quite active, talking to a number of lenders (and) ... equity investors," Holtzman said. He expects to be able to eventually find a solution.
One irony, he said, is some aspects of the economic climate have improved since the project was proposed. They include interest rates and material costs, both of which are lower.
Still, he added: "This is the most difficult environment I've seen in 32 years (in this business). But I'm committed to doing Ann Arbor City Apartments."
Holtzman's experience in the real estate industry is keeping him connected to the apartment project. His success in development comes from the conservative approach that banks say they'll once again value once the economic crisis passes.
A few blocks to the east, the city's other active public-private project with parking is in its early RFP stages. Six prospective developers will be interviewed next week to discuss their plans for development atop the 677-space underground parking deck next to the Ann Arbor District Library on South Fifth Avenue.
It's already shaping up to be a long and expensive process - for both the city and participants.
While some citizens may be lining up behind their favorites among the 6 proposals, the viability of any of them remains in question. Prospective developers will be providing specifics in the pending interviews with the city.
But in the meantime, the city already has an excellent indicator of when the Ann Arbor market is ready for a good development project to move dirt.
It's the corner of First and Washington.