Center City Developers Threaten Legal Action If They Don’t Get Their Way; Also Now Spooking Elderly Tenants

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Gary Caldwell for ELi

Newman Lofts, built on public land as part of the Center City District project, above the new parking garage.

Attempting again to get the 55-plus age restriction on the Newman Lofts apartments removed, the developers of the Center City District project held a virtual press conference yesterday.

But that wasn’t all they did.

Representatives of Harbor Bay Real Estate also sent a 6-page letter to Mayor Aaron Stephens, threatening legal action against the City of East Lansing. They used various means to attack ELi’s investigative reporting on the project. And they emailed a message to Newman Loft tenants, making clear Harbor Bay wants to get rid of the age restriction and let anyone, including students, rent there.

Wrote the tenant who shared that letter with us, “What 55+ would now want to move into Newman Lofts given that they have twice now gone to the city seeking to remove the age restriction? This is a major deterrent. If I knew then what I know now, I would not have moved here. This is not an accident. This is part of their strategy. Scare off potential renters to bolster your position.”

The virtual press conference started with a 27-minute pre-recorded video entitled “Downtown East Lansing Business Leaders Provide Business Development Update Regarding COVID-19.”

In it, Mark Bell and Steve Willobee of Harbor Bay looked to make the case that the Covid-19 pandemic, the City’s response, and MSU cancelling in-person classes in tandem with the age restrictions make it a near impossibility to rent the 66 currently-vacant units since the 92-unit building opened early last October.

Developer Mark Bell of Harbor Bay Real Estate participating in a recent virtual meeting of the Brownfield Redevelopment Authority.

They also argued that removing the age restriction and having these units rented will provide significant stimulus to the downtown economy. (When mentioning “local businesses” that are struggling, the team spoke only of the businesses that are their tenants – Barrio Tacos, Foster’s Coffee, and Jolly Pumpkin – plus Blue Owl Coffee across the street.) Harbor Bay’s representatives also said that having the units rented out would draw more income tax for the City.

The threatening legal letter sent yesterday to Mayor Aaron Stephens from Foley and Lardner, a Detroit-based law firm, said that if “the City Council will not engage in good faith efforts to resolve this impasse by removing the age-based housing restriction by September 30, 2020, [Harbor Bay] will resort to appropriate legal action.”

“We honor our commitments,” Bell said during the prepared video – the same video designed to get out of a commitment Harbor Bay made in writing in 2017. 

The 55-plus age restriction stems from East Lansing’s Ordinance 1384, passed by City Council and requiring that large downtown housing developments dedicate at least 25-percent of housing units to something other than student-attracting rentals. The law allows for senior housing or owner-occupied condos or affordable (income-restricted) housing.

In the case of the Center City District deal, the developers chose the 55-plus option to meet that requirement. The age restriction for Newman Lofts is also written into the $125 million public-private Master Development Agreement.

Gary Caldwell for ELi

The entrance to Newman Lofts on Albert Ave.

Now the developers are arguing that potential older tenants haven’t wanted to move in because of the Covid-19 pandemic – and specifically the Harper’s outbreak, which they blame on the City’s actions. Bell said 45% of revenue is being spent on efforts to rent the vacant units while the “lost revenue is profound.” 

Their attorney’s letter informed the Mayor that, “if relief is not given,” the developer “will have no choice but to pursue its legal rights in protesting the real estate taxes assigned to Newman Lofts (Newman Lofts is currently fully assigned as if it were 95% occupied), thus resulting in a significant revenue shortfall to the City of East Lansing.”

But, in fact, under a Tax Increment Financing deal, 100% of eligible property taxes from Newman Lofts is going to reimburse the developers’ team for the project. In other words, if the tax assessment on Newman Lofts is decreased, it’s not going to hurt the City. It will hurt the developers’ team, because of the structure of the deal to which Harbor Bay agreed.

In Thursday’s email to Newman Lofts tenants, sent to ELi by a tenant who wishes to remain anonymous, Harbor Bay’s Brian Bell wrote, “As you may recall, in April 2020, we sent correspondence to the City requesting that we begin a conversation focusing on developing a viable financial and health solution for Newman Lofts, should this become a prolonged health crisis. Unfortunately, those inquiries weren’t given any serious consideration, and we were publicly criticized by Councilmembers.” 

Meanwhile, yesterday Mark Bell called the age restriction “reckless,” and said it was “reckless” for the City to not try to solve the problem.

But the City was not the group’s only target of ire. Harbor Bay spent much of the pre-recorded video explaining an “ethics” complaint against East Lansing Info and specifically its Publisher, Alice Dreger. They’ve taken umbrage with Dreger’s investigative reporting into the financing of this redevelopment project, claiming she is a “dangerous” activist due to her comments made in public meetings during “public comment” periods.

Harbor Bay sent a written complaint to ELi’s Board of Directors as well as to our trade organizations, LION Publishers and the Institute and Nonprofit News. ELi to date has received no notice from Harbor Bay, Bell, Willobee. or any others involved of factual information in need of correction, but Dreger says that, as always, any requests for factual corrections will be taken seriously.

Reached for comment on the matter, Council member Lisa Babcock said Thursday evening, “I’ve seen the letters and I’ve heard the complaints from Harbor Bay. It looks like they’re having a terrible, horrible, no good, very bad day.”

Raymond Holt for ELi

Council member Lisa Babcock

Babcock said a meeting will likely be scheduled in September to discuss the matter in public — she said that any and all negotiations are going to be fully public — and she said that she is not worried about any legal threats. Babcock, an attorney, said that the struggles to rent are due to Harbor Bay’s own choices and a pandemic that they have tried to lay entirely at the feet of City Hall.

In spite of knowing it was going to be marketed to seniors, Harbor Bay did not construct Newman Lofts to be disability-friendly, Babcock said, which is a major detractor for people in the 55-plus age range. She also noted that the high rents have not been changed in response to lack of interest.

Babcock, who is 53 years old, also said she wouldn’t want to lose a large portion of her personal equity by moving to a rental apartment. A condominium approach, Babcock said, could be more appealing to the 55-plus demographic. 

Babcock does not think that having the vacant units suddenly rented will be the economic cure for the ailing East Lansing, as suggested by Bell and Willobee. And she does not think what Harbor Bay did on Thursday does anything useful to resolve the “impasse.”

“Looking at the past few months we know it’s going to take many efforts to bring the economy back to what we’d like.” Babcock said. “More residents, yes, would be a positive step. But sending a letter of hollow demands and casting blame upon everyone but themselves is not a productive step.”

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