Downtown conference center proposal may make sense for Ann Arbor, consultant says

• Click here for AnnArbor.com's analysis of the consultant's report.

DDA board member John Splitt said the consultant met with both Valiant Partners and Acquest Realty Advisors of Bloomfield Hills to review their competing development proposals for the city-owned Library Lot on South Fifth Avenue, just north of William Street.

The city, in cooperation with the DDA, has been looking for a private developer to build atop an underground parking structure now under way at the site.

Splitt said the Roxbury Group has concluded a need exists for a downtown conference center, and the Valiant proposal is the better of the two proposals being considered.

Today's announcement marks the first major news in the Library Lot proposal review process in more than 10 months — since Valiant and Acquest were chosen as finalists.

"Finally, after all this time, we have something," DDA Chairwoman Joan Lowenstein said today.

A year ago, Valiant and Acquest both proposed building a hotel on the Library Lot site and asked the city to make a financial commitment to fund a conference center that would drive the success of the hotel.

The two projects were selected for further review in January from a pool of six proposals. After months of delays by the city, city officials agreed to hire a consultant using grant money from the DDA to determine whether the projects make sense economically.

Valiant drafted a vision for a project called Ann Arbor Town Plaza Hotel and Conference Center. It proposed a 150-room hotel, 32,000-square-foot conference center, 12 two-bedroom condos, restaurants and retail shops — all on the Library Lot. It has since scaled back the size of the conference center to 26,000 square feet and has reduced the number of condos to six.

Acquest proposed a potentially 190-room hotel with meeting spaces, restaurants and retail aspects. Acquest asked the city to partner on the project by building a 40,000-square-foot conference center on the former Y site across the street from the Library Lot.

Splitt said the consultant found Valiant's proposal was "much clearer" and "much more capable of moving forward."

"They felt that a conference center had greater community benefit than a hotel standing alone," Splitt said of the preference for the Valiant proposal. "They felt that the conference center was essentially a game changer, which brought much benefit to downtown."

The actual report states the Valiant proposal is "clearly preferable from a financial perspective" and that "Valiant appears to have presented a mixed-use proposal that is inherently more capable of reinforcing its own uses to achieve greater viability, and remains flexible enough to adjust to market conditions."

Michael Bailkin, a representative of Valiant Partners, said earlier this year his firm's project would cost $54 million — $40 million for the hotel and retail aspects, $5 million for the condos and $9 million for the conference center, which the city would help fund.

Valiant originally asked the city to issue $8 million worth of tax-exempt bonds to be paid back over 20 years from hotel proceeds. At the end, the city would own the conference center debt-free, Bailkin said during a public interview in January.

However, Splitt said today that Valiant has revised its proposal and has removed the request for the city to hold a bond, eliminating the risk to the city of a publicly guaranteed debt.

DDA board member Newcombe Clark, a commercial real estate professional, said it's good the bond has been eliminated, but it appears Valiant is banking on revenue from the commercial aspects of its project, and rent prices right now are about half what is needed to justify new construction of office space. That doesn't seem to add up, he said.

Splitt said it's uncertain when the Library Lot advisory committee, which has been reviewing the proposals, will meet again to move the process forward.

Lowenstein said the proposal eventually will come before the DDA's Partnerships Committee. City Council approval is required before Valiant could move forward.

Members of the development team for Valiant Partners have been in close talks with Ann Arbor community leaders dating back nearly three years.