I'm confused. DTN owns the Vista outright, right? Rent for what? And, yeah, the township is on the hook because they were the ones who developed and owned the land, but that's basically true for a lot of development in Michigan in inner-cities. Almost all of these developments (everything in Lansing included) are sweetheart deals. Again, the big difference here seems to be the size of the township and it's budget relative to the development; Lansing, for instance, could have pulled something off like this and negotiated less of a stake given its size. There is no way Lansing Township should have taken on something of this size alone.
I think the LSJ did a great job on this story, it's some the most in depth reporting I've seen from them.
@Jared The article says that the Vista pays a "base payment of $75,000 per year", to me 'base payment' would imply that there is some sort of variable payment in addition to that. Hyatt's land lease of 8% of gross sales may not be all that bad of a deal on face value, at least the basic idea of a lease being based on gross sales seems fair even if 8% isn't. It's also key to remember that these are not building leases, Hyatt and DTN financed their own respective buildings (It says in the article that the DDA gave Hyatt their land outright so I'm not even sure what that 8% payment is for.)
Overall, the decision to develop and finance The Heights seems like it was a horrible decision by the Township. They were/are not capable of playing developer on a project of this size and even if they were, a municipality really has no business developing what's a essentially a strip mall and large parking ramp with free parking. Then they chose to build on land they didn't own, signing a 99 year lease with unfavorable terms, they took out bonds and then more bonds. As they struggled to keep the project afloat they took measure after measure to seemingly harm the Township further. I'm reading these articles trying to wrap my head around everything and I really can't, it's difficult to even discern who really owns what.
Correct me if you see something wrong, but these seem to be the important points:
-Lansing Township took $22 million in bonds to fund The Heights initially.
-They signed a 99 year lease with Eyde for the land, starting at $1 million per year rising to $5 million per year (about $240 million over the life of the lease)
-The DDA sold $7.5 million in junk bonds to complete construction.
-The Township suffered $10.5 million in losses from the project from 2010-2015
-The DDA partnered with Eyde to take some ownership stake in the Heights in exchange for help making ground lease payments (which go to Eyde).
-The commercial space remains less than 30% occupied
-The Township is depending on being able to sell the development after 2020 yet both of the potential buyers they cite say they are not interested.
-Steve Hayward (former executive director of the DDA), one of the biggest proponents of the project, now works for Eyde.
My biggest question is whether these people are incompetent or crooked. I'd be angry if I were a Lansing Township resident.
It's almost certainly gross incompetency, because no one is really getting paid anything significant from this except the private owners and developers (and Steve Hayward if I'm reading the article correctly). The way I see it, Steve Hayward had a grand vision he wouldn't let die even when there were warning signs, and the township board simply relied on him for their information. No one on the board had the expertise or interest to oversee the DDA's work like it should have been. Everyone knows how critical I've been of Lansing Township and this is the perfect example of small-town/amateur the township is. They were trying to complete something this big with a two-person staff. That's insane. This was essentially one man's baby, and when the board checked in with him he told them "it's going to be fine" and they just took his word.
Hood, you did miss one thing. Steve Hayward is still very much the Executive Director of the DDA unless I totally missed that in the article, and he's still the township's long-time director of planning. And, from my understanding, on the private sector side of thing he's not working for Eyde but in partnership with the new company.
The solution I took away from this is that a lot of this could be solved by selling their stake when they can in four years. The two most likely potential buyers may not be interested now, and maybe they won't be in four years, but they'd be well served to begin right now shopping around their stake in this around the country.
@hood, you're right that's the base payment. It would have been nice if the LSJ included more about what that meant. I know there's more to the story, I was just trying to illustrate how the businesses made sure that their side didn't get screwed.
The DDA did have some business expertise. Granger and DTN members were on the board, but both resigned after the vote because they disagreed with the vote. DTN having a stake in the project may have been a small reason for resigning too, as it showed a strong conflict of interest. I'm surprised the DTN rep didn't abstain.
The articles say that Steve Hayward is a consultant to Eyde. So he's on the payroll from the township as well as getting paid by Eyde, but he says he will stay out of overlapping work due to conflict of interest. That's hard enough to believe because as humans it is very hard to be neutral like that, but also made much harder when one person represents 50% of the staff.
I don't think it 100% gross incompetency across the board. It may be 100% gross incompetency on the township government side, but the private businesses knew what they were doing and set it up to make sure that they would get paid no matter what. The private businesses (and Steve Hayward) sold the township government on these ideas and the DDA/Planning Commision/etc all took the bait.
What a mess it would seem to be. The idea was laudable, but it still seems like the results are much less than they could be. I think maybe it's time for developers to submit plans that are not subsidized by some kind of tax brake. Cities and towns already provide the roads water, sewer, police and fire protection for these developments, that seems like a pretty big subsidy right there. I know that is how they do it around here, but if a development can not make it without some kind of deal than maybe they should not be building it.
I really believe that Lansing Township at least the western areas was mainly formed as a racial division from the west side of Lansing, it also gave them power and money so they could be big fish in their own little pond and they do not want to give that up. Meanwhile the areas between Michigan and Kalamazoo look neglected and impoverished. Bad governance all around.
I don't know exactly what his role with the township currently is, I was going off this rather vague paragraph:
In August 2015, after serving as the township’s planning director and DDA’s executive director since 2003, Hayward “decided it would be best for all concerned if he left full-time employment with the township and worked as a consultant-independent contractor”
Lansing Township's website lists him as planning director, but I wouldn't depend on that to be updated if it had changed anyways. This article from the time that he became an independent consultant leaves his future with the township vague as well: Lansing Twp. DDA director to take consulting role
I was out that way and noticed the steel going up for one of the hotels out there behind Walmart. I still think it is a crazy place to build hotels, but there must be a market for them.
One thing I do like about the new apartment building in Eastwood is how it looks from 127 at night, it's the first thing you see after you pass the Ingham County line and the building is lit up very nicely. It is a dramatic entrance to the Lansing urban area after traveling through the countryside to the north. Then the road gets really bad, so you have to look quickly.
I was at NCG last night and afterwards went across the parking lot to Chapelure for a cup of tea. I was surprised to see how busy the coffee shop was (I counted about 15 people sitting there) on a Saturday night considering it's located in the far back of Eastwood, though I think the proximity to the apartments there helps a lot.
As much as I dislike how Eastwood has pulled businesses away from downtown East Lansing and Lansing, Eastwood can be a viable and successful business district if they continue to diversify their offerings. Building residential closer to the center of the complex will keep the area alive and viable.
I am really have been impressed that the place is even there and for the most part is successful. Another row of buildings between the movies and the apartments in the rear, would give a more urban feel and connect the areas. They could open up store fronts entrances and facades at the rear of the store buildings, to lessen the walled city feel and view.
I've always been disappointed to see the rear end of strip malls lining the main entrances to Eastwood. They may end up adding on to the back of these building to create storefront-lined streets, but I sorta doubt it. IMO The more likely scenario is that the strip mall portion of Eastwood will live out it's useful life over the next few decades at which point it will be surrounded by much denser development, making a total redevelopment likely.
If you've never checked out the Eastwood Master plan, it's worth a look. It's a little outdated now, but it still should give you a good idea of the scale of the Township's plans: [EDIT: link is dead, see two posts down]. I suspect that the Township will be (already has/is?) crafting an updated master plan at some point in the relatively near future.
Comments
@Jared The article says that the Vista pays a "base payment of $75,000 per year", to me 'base payment' would imply that there is some sort of variable payment in addition to that. Hyatt's land lease of 8% of gross sales may not be all that bad of a deal on face value, at least the basic idea of a lease being based on gross sales seems fair even if 8% isn't. It's also key to remember that these are not building leases, Hyatt and DTN financed their own respective buildings (It says in the article that the DDA gave Hyatt their land outright so I'm not even sure what that 8% payment is for.)
Overall, the decision to develop and finance The Heights seems like it was a horrible decision by the Township. They were/are not capable of playing developer on a project of this size and even if they were, a municipality really has no business developing what's a essentially a strip mall and large parking ramp with free parking. Then they chose to build on land they didn't own, signing a 99 year lease with unfavorable terms, they took out bonds and then more bonds. As they struggled to keep the project afloat they took measure after measure to seemingly harm the Township further. I'm reading these articles trying to wrap my head around everything and I really can't, it's difficult to even discern who really owns what.
Correct me if you see something wrong, but these seem to be the important points:
-Lansing Township took $22 million in bonds to fund The Heights initially.
-They signed a 99 year lease with Eyde for the land, starting at $1 million per year rising to $5 million per year (about $240 million over the life of the lease)
-The DDA sold $7.5 million in junk bonds to complete construction.
-The Township suffered $10.5 million in losses from the project from 2010-2015
-The DDA partnered with Eyde to take some ownership stake in the Heights in exchange for help making ground lease payments (which go to Eyde).
-The commercial space remains less than 30% occupied
-The Township is depending on being able to sell the development after 2020 yet both of the potential buyers they cite say they are not interested.
-Steve Hayward (former executive director of the DDA), one of the biggest proponents of the project, now works for Eyde.
My biggest question is whether these people are incompetent or crooked. I'd be angry if I were a Lansing Township resident.
Hood, you did miss one thing. Steve Hayward is still very much the Executive Director of the DDA unless I totally missed that in the article, and he's still the township's long-time director of planning. And, from my understanding, on the private sector side of thing he's not working for Eyde but in partnership with the new company.
The solution I took away from this is that a lot of this could be solved by selling their stake when they can in four years. The two most likely potential buyers may not be interested now, and maybe they won't be in four years, but they'd be well served to begin right now shopping around their stake in this around the country.
The DDA did have some business expertise. Granger and DTN members were on the board, but both resigned after the vote because they disagreed with the vote. DTN having a stake in the project may have been a small reason for resigning too, as it showed a strong conflict of interest. I'm surprised the DTN rep didn't abstain.
The articles say that Steve Hayward is a consultant to Eyde. So he's on the payroll from the township as well as getting paid by Eyde, but he says he will stay out of overlapping work due to conflict of interest. That's hard enough to believe because as humans it is very hard to be neutral like that, but also made much harder when one person represents 50% of the staff.
I don't think it 100% gross incompetency across the board. It may be 100% gross incompetency on the township government side, but the private businesses knew what they were doing and set it up to make sure that they would get paid no matter what. The private businesses (and Steve Hayward) sold the township government on these ideas and the DDA/Planning Commision/etc all took the bait.
I really believe that Lansing Township at least the western areas was mainly formed as a racial division from the west side of Lansing, it also gave them power and money so they could be big fish in their own little pond and they do not want to give that up. Meanwhile the areas between Michigan and Kalamazoo look neglected and impoverished. Bad governance all around.
Lansing Township's website lists him as planning director, but I wouldn't depend on that to be updated if it had changed anyways. This article from the time that he became an independent consultant leaves his future with the township vague as well: Lansing Twp. DDA director to take consulting role
One thing I do like about the new apartment building in Eastwood is how it looks from 127 at night, it's the first thing you see after you pass the Ingham County line and the building is lit up very nicely. It is a dramatic entrance to the Lansing urban area after traveling through the countryside to the north. Then the road gets really bad, so you have to look quickly.
As much as I dislike how Eastwood has pulled businesses away from downtown East Lansing and Lansing, Eastwood can be a viable and successful business district if they continue to diversify their offerings. Building residential closer to the center of the complex will keep the area alive and viable.
If you've never checked out the Eastwood Master plan, it's worth a look. It's a little outdated now, but it still should give you a good idea of the scale of the Township's plans: [EDIT: link is dead, see two posts down]. I suspect that the Township will be (already has/is?) crafting an updated master plan at some point in the relatively near future.