One Developer Off the Hook, Another Will Attempt Affordable Housing Downtown

East Lansing’s City Council has decided to relieve developer DRW Convexity of its responsibilities where downtown affordable housing is concerned and to give PK Companies a try instead.

As part of their Park District project, Chicago-based developers DRW Convexity agreed to construct an affordable apartment building at a now-vacant lot known as “Parcel C” (333 Valley Court Drive, formerly 341-345 Evergreen Ave.). The promise to build affordable housing is how DRW Convexity got the right to build The Graduate Hotel and The Abbot apartments nearby.

According to a 2018 agreement with the city, DRW Convexity either had to construct “Building C” or give the land to the city for free as parkland. But earlier this year, DRW Convexity came to Council to ask that they be let out of their agreement and have the city enter into a new agreement with PK to construct the building.

The project has been a subject of discussion at the previous two City Council meetings. The matter was finally put to vote at the Tuesday (July 11) meeting, under two business agenda items.

The first, which will provide a payment in lieu of taxes (PILOT) for the affordable housing development, enables PK to plan to pay a sum much lower than normal property taxes for an apartment building.

The PILOT would, in the view of the Michigan State Housing Development Authority (MSHDA), create a more competitive and viable approach for this affordable housing project, according to Interim Director of Planning, Building & Development Tim Dempsey.

Mayor Pro Tem Jessy Gregg clarified that, if for some reason PK fails to break ground on this building, the PILOT approval will die with the project. If it fails, the city will have the right to buy the property for $1.5 million – the sum PK is paying DRW Convexity for the land.

With the Council’s approval of the second item, DRW Convexity was released from its obligation to build the project and all redevelopment duties were essentially passed onto PK Companies.

On Tuesday night, DRW Convexity’s local attorney David Pierson once again presented why he believes this is the right choice for the city.

“From our perspective, we think accepting the PK development is the best way to get affordable housing in downtown East Lansing,” Pierson told Council. “There’s a way to advance the city and PK I think, as you understand, is a group that can make that happen.”

Both items were approved by all five council members, but not without concerns being named.

“This is not a wonderful situation to be in,” Councilmember George Brookover said. “But, I think in the end, to me, it looks like the choice is this: We either get a piece of property that we pay nothing for because the project doesn’t go through at all and we inherit the property…under the original agreements with Mr. Pierson’s client [DRW Convexity] or we potentially pay $1.5 million in the future to reacquire this property if the new successor in interest, I’ll call them [PK Companies], can’t put together this project.”

Brookover ultimately voted yes on this item, stating he has come to the realization that, “I think I’m willing to pay $1.5 million to attempt, in hopes that we can get a reasonable low-income project in downtown East Lansing.”

Gregg agreed with Brookover, stating she did not like the “very zig-zagging path with many blockades” that was taken to reach this point.

“But, I do think that if we approve this tonight, we will be closer to reaching our goals,” Gregg said before the vote. “I think that PK has the ability to move forward with this, depending on if their financing can line up, and I feel optimistic that we will get an affordable housing project in our downtown.”

Brookover and Mayor Ron Bacon also presented concerns about parking congestion downtown. The present site plan for Building C calls for a six-story building including about 96 apartment units with only 34 parking spaces.

Brookover shared personal experiences of speaking with employees at the new Michigan State University Federal Credit Union building and The Graduate Hotel and the challenges they face with parking. He also said there’s not enough parking at the East Lansing Farmers Market at Valley Court Park, nearby.

“We have a parking issue and we’re gonna have to deal with it sooner or later,” Brookover said.

Bacon agreed with Brookover, stating parking has been an ongoing issue in the city’s downtown and needs to be dealt with.

“I think there’s something we’ve got to do here if we’re going to pull this off,” Bacon said, concerning Building C. “It could be our greatest win or we could really sink here. So, I’m hopeful that we can communicate across a couple more boards and make sure we’re not missing something here.”

Moving forward, the Council will receive quarterly project updates from Dempsey and PK employees, at the request of Councilmember Dana Watson.