Village Green to ask for extension on purchase of city-owned land for downtown apartments
Original agreements from 2008 called for the company to pay $3.1 million for the property, an amount raised to $3.3 million after it was granted its first extension to the purchase agreement.
Now the deadline to finalize that purchase is June 30.
City officials are talking to Village Green about options, said Tom Crawford, the city’s finance director. The Farmington Hills-based developer needs to officially request the extension on purchasing the land from the city, and to supply the city with information on the project’s status.
That’s expected to happen sometime this week, and the proposal is likely to come before City Council at its June 21 meeting, Crawford said.
The agreement calls for the company to build a 156-apartment, 11-story (8 above grade) building with a four-level, 244-space parking deck. The parking component would be financed with a $9 million bond issued by the Downtown Development Authority.
The property is at the corner of First and Washington, where the city demolished a parking deck and solicited bids from developers to pursue the public-private partnership.
Jonathan Holtzman, CEO of Village Green, told AnnArbor.com in January that he’s committed to seeing the project through.
Financing has stalled many development projects across the U.S. since 2008, yet Holtzman said he remains committed to the project.
“The fundamentals continue to be very positive,” he said about building rental housing downtown.
The problem, Holtzman said, has been financing concerns that have been an issue across all commercial real estate sectors in the United States.
By 2009, financing for multifamily development disappeared, according to national real estate sources. Rental rates declined along with occupancy rates in many markets, and investors who’d built or bought at the top of the market - 2004-2007 - faced declining operating fundamentals that prompted many lenders to foreclose. It’s a situation that’s still playing out across the U.S. and locally.
However, according to the trade publication Multifamily Executive, some apartment developers in the U.S. project a return to development by late this year and into 2011.
Village Green indicates there may be possibilities of getting financing.
Holtzman said in a statement, “The principal reasons for the delay are the problems in the financial market, which have recently improved.”
Whether that will be true in Michigan remains to be seen.
Village Green, which manages 38,000 apartments and is developing its City Apartments concept in other markets, still seems positioned to be a financial litmus test for obtaining development financing in Ann Arbor.
Here’s why: The concept for the apartments is proven in other markets, the city is underwriting many of the land improvements - like removing the former parking deck - and the DDA financing of the parking component removes that cost from the project.
Meanwhile, the request to council will take 8 votes to pass, Crawford said. And the request will require Village Green to detail its projected timeline for the project, giving city officials insight into just how close the company may be to closing this sale.