As high rises sprout downtown, more than six acres on Broadway lie fallow.
by Julie Halpert
From the October, 2015 issue
Developer Peter Allen assembled the property in 2000. He sold it to East Lansing-based Strathmore Development Company, which after years of negotiations with the city, county, and state won approval to build a grandiose retail, condo, and office development called Broadway Village at Lower Town.
By 2008, a former Kroger supermarket and other buildings on the site had been demolished. But as the economy imploded, so did Broadway Village. Allen says banks pulled a $155 million construction loan, preventing the development from moving forward.
Strathmore's website boasted that Broadway Village "received one of the largest economic incentive packages from the State of Michigan in State history totaling over $75,000,000." Since the project didn't go forward, that money was never disbursed. But the State of Michigan Retirement Systems (SMRS) was hit hard: it invested $20 million in the project, all of which appears to have been spent.
Allen says that Scott Chappelle of Strathmore sold the state a 50 percent interest in the development in return for the promise of a 10 percent annual return on its investment--and that debt continues to accrue as the project lays dormant. (Chappelle didn't respond to requests for comment.)
Terry Stanton, a spokesman for the state treasury department, says that the property is now owned by a private partnership that includes SMRS. Stanton referred questions about it to Clint Hinds, senior vice president with Bentall Kennedy, the partnership's real estate advisor. "We are not presently able to publicly discuss in any specificity our objectives or plans for the site," Hinds says. "I can tell you that we are monitoring ongoing market conditions and will continue to evaluate future possibilities for the site."
"If the pension board is in it for $20 million, there are only so many people willing to pay that, so there is some barrier out there," says Matt Naud, the city's environmental coordinator. A buyer would also have to negotiate with the city to get it rezoned--it's currently a Planned Unit Development (PUD),
which means nothing can be built there except the financially untenable Broadway Village.
A final obstacle is environmental. Strathmore had promised to clean up contamination left behind by a dry cleaning facility. With an estimated price tag of $4 million, Naud says, it would have been the largest brownfield cleanup in the state. The state oversaw a pilot test by the developer to treat contaminated soil and groundwater on site, says Mitch Adelman, district coordinator for the remediation and redevelopment division of the Jackson district of the state Department of Environmental Quality. But Adelman says the cleanup halted when the project did.
Naud said the plume of contamination "is moving and getting into the river. How much is unknown." Laura Rubin, director of the Huron River Watershed Council, says there's no imminent danger, since the plume is well downriver from the city's drinking water intake at Barton Pond. But she stresses that there haven't been many studies conducted on the site.
City councilmember Sabra Briere, who lives nearby, was a vocal opponent of Broadway Village. She says the developers were unrealistic in the amount of public support they needed, including asking the city to finance a $40 million private parking structure. She'd prefer to eliminate PUDs and instead "clarify zoning so that the community gets the quality of development it wants."
Briere says some councilmembers are worried that the university could purchase the site before anyone else knows it's for sale. Others see the potential opportunity for transit-oriented development in that area.
Councilmember Kirk Westphal is one. "I would definitely welcome renewed discussion about this parcel. It's in an interesting position of being 'urban' but not downtown." One factor that could make a difference is the upcoming decision on where a new train station might be located (see p. 37).
"An upgraded station will bring more intensity to the area," he points out, "which could change the value and nature of what's possible on the Broadway site."
[Originally published in October, 2015.]
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