Affordable Apartment Project Shifted to Local Specialist Developer; Aims to House Lower-Income Families Downtown

When Chicago-based developers DRW/Convexity got the OK to build The Abbot Apartments and the Graduate Hotel along Grand River Avenue in East Lansing’s downtown, the deal was that they’d build a third structure: an apartment building with 99 apartments, including 74 apartments restricted to people whose earnings count as “low-to-moderate” compared to the area’s average.

The Abbot, which markets pricey rental apartments to MSU students, opened in 2020. The boutique, upscale Graduate Hotel opened in 2021.

But the third building – still known simply as “Building C” from the original agreements – has yet to materialize. The property where it is meant to be built, at the southwest corner of Valley Court Drive and Evergreen Avenue, remains a vacant lot with a construction fence surrounding it. (The address for it had been 341 Evergreen Ave., but it has recently been relabeled 333 Valley Court Drive.)

Now, Convexity has let the City of East Lansing know it plans to shift the development of Building C over to PK Companies LLC, based in Okemos. PK specializes in affordable housing projects. 

“One of the reasons that we’re dealing with PK is this is what they do,” David Pierson, attorney for Convexity, told City Council at their meeting this week (March 21). “What Convexity has discovered is affordable housing is not that easy.”

Because PK is going to be seeking federal and state government subsidies to help with the costs of constructing and running the building, and those government approvals take a long time, it’s going to take years more before this building comes to fruition.

City Council voted on Tuesday to extend the conditional rezoning required for Building C. 

The initial rezoning was done in 2018 and required construction to begin within five years, a deadline set to expire April 3, 2023. 

The extension passed this week 4-1, with the lone vote against cast by Councilmember Dana Watson. Watson said she was excited about the project but questioned whether developers are moving forward with enough urgency. 

“I was on Planning Commission when we talked about this build,” Watson said. “But it still hasn’t happened. So, I’m wondering if, with another extension, is it going to happen?”

Watson noted that The Abbot and the Graduate are up and running.

“I don’t see the passion for this part to happen,” she said. “And I want to see it happen, but I think it seems like there’s a lot of reasons for delaying this particular building.”

Mayor Ron Bacon said he understood Watson’s concerns, but expressed optimism PK will build the project along the original guidelines.

“A big part of this is on the front end and finding the right partners,” Bacon said. “The entire tenor is very different when you talk with the people who do this on a daily basis.”

The conditional rezoning extension as approved requires construction to start within two years and be completed within four.

Reached on Friday by phone, PK’s Vice President of Development Jacob Horner told ELi, “We’re very excited to be involved in this project.”

Horner said he was particularly excited about bringing affordable housing to downtown because low-income housing is often pushed to the outskirts of a city. The location of Building C also puts it right next to Valley Court Park, an amenity that may help attract families with young children. 

Horner confirmed the building will be constructed with units designed to attract families with children, as had been the plan under Convexity, too.

“We feel it’s good to have that economic diversity within a downtown,” Horner said. “The intention here is to create not just affordable housing but workforce housing, where folks who couldn’t afford a market-rate apartment, who may be hourly [wage earners], will have an opportunity to live downtown.” 

A law meant to diversify downtown housing is behind the requirement to construct Building C.

In 2016, East Lansing’s City Council passed a zoning law known as Ordinance 1384. It was an attempt to diversify the housing market downtown, to avoid a situation where every new housing project featured market-rate student rental housing.

The law required that 25 percent of housing units in new, big downtown developments be (a) for people with low or moderate income levels or (b) for people age 55 and up or (c) sold as owner-occupied condo apartments. 

This is the law under which a different development team – Harbor Bay Real Estate and Ballein Management – elected to build the senior housing at Newman Lofts. This allowed the developers to get permission to build The Landmark, the market-rate student-rental building above the Target store downtown.

Only two downtown projects have ever been subject to Ordinance 1384: the DRW/Convexity project that brought The Abbot and the Harbor Bay/Ballein project that brought The Landmark and Newman Lofts. 

With Ordinance 1384 in place when Council struck the deal with DRW/Convexity, the expectation was that Building C would be constructed shortly after the two other structures in the site plan. But now, Building C is going to take even longer. 

Pierson told Council this week that PK is applying through the Michigan State Housing Development Authority (MSHDA) for low-income housing tax credits, which are only available twice per year. Applications are due in April and October. 

“Based on what they’ve done previously, they [PK] expect it to be approved, but that still takes 12 to 18 months,” Pierson said. “The [new deadline for] commencement within 24 months gives them time to line up the financing and then start construction.”

City Attorney Tony Chubb clarified it is not possible for PK to apply prior to the April deadline because PK first needs to come to a new development agreement with the city. Chubb said the funding system is very competitive, so it may take multiple attempts to receive the tax credits, something Horner confirmed by phone Friday. 

“The timing would just be trying to put some cushion in here to ensure they do get a few bites at that apple,” Chubb told Council, explaining the rezoning extension. “But once it’s approved, it puts everything into a traditional construction speed.”

The City built enforcement mechanisms into the deal.

Chubb explained to Council the development agreement, not the rezoning extension approved at Tuesday’s meeting, is the main enforcement tool the city has. The plan is to rework that development agreement to recognize the sale of the lot to PK “for development of Building C in accordance with the approved site plan,” according to a letter to the city from Pierson.

The existing development agreement has a clear penalty built in for failure to construct Building C. That agreement says that, if the developer doesn’t complete Building C by Jan. 1, 2025, the developer will deed the property to the city “for use as a public open space, restricted to use of the property as public open space. Public open space means land dedicated or reserved for parks, recreational areas, and scenic areas.”

That deadline was pushed back due to various delays, including some caused by the pandemic. Still, the city could try to insist that the building be constructed quite soon or the developer hand over the property for use as a park. The lot could be used to extend public open space in the area. But City Council wants to see affordable housing built there. 

Council has tried other options. In April 2022, Council voted 3-2 to buy the property from Convexity for $1.56 million, possibly to support an Artspace project, which would have included affordable live-work rental apartments for artists. But that scheme required a tax capture plan the state declined to approve.

Now, Council will pursue the steps necessary to allow the transfer to PK and to support PK in its pursuit of MSHDA assistance.

PK will build according to the approved site plan, Horner confirmed by phone.

That approved site plan describes a six-story building with 99 apartments in total with internal parking on the first floor for 34 cars. 

Convexity’s plan was to include 74 income-restricted units and 25 market-rate units. Horner told ELi that PK’s understanding is, under Ordinance 1384, Building C must include at least 72 income-restricted apartments. But, he said, PK is going to try to make all 99 apartments income-restricted.

“We are working through a revised development agreement with the City,” Horner said, “so we expect to be in front of Council in the next few weeks to discuss that.”

ELi thanks our fiscal sponsors for making this reporting possible.