NEWS

Heritage Tower emails show financing, perception concerns

Dillon Davis
Battle Creek Enquirer
Heritage Tower

The Heritage Tower redevelopment project has grappled with public perception issues as its Grand Rapids developer has made repeated attempts to secure financing, according to emails obtained by the Enquirer.

"Thank you for considering to screen the debris from view of the general public," Downtown Development Director John Hart wrote in a Nov. 10 email to 616 Development's real estate director Mark Harmsen ahead of the International Festival of Lights. "It should ease the minds of the pedestrians passing by if they don’t have to see the deterioration and wonder if we are doing something about it.”

More than 300 pages of emails from 2015 obtained by the Enquirer through a Freedom of Information Act request show the firm and the city have had almost weekly communication for months to discuss financing and logistics of the project, first announced nearly three years ago.

The company estimates the project will cost $29.5 million, according to the emails. Meanwhile, it has worked to close an estimated $11.3 million value gap.

616 Development took over the property in 2013 with plans to revamp the tower into a mixed-use facility. Harmsen told the Enquirer in December the company anticipates launching construction on the downtown property in late spring or summer if the company can secure the funding and tax credits to finalize the plans.

Heritage Tower work may start by summer

In a Nov. 23 email to Assistant City Manager Ted Dearing, Harmsen said the project expects a "significantly larger loss" than most urban renewal projects. The cost, he said, to rebuild the building is higher than normal because of the "significant water and mold damage due to leaking roofs" – which tacks on about $3 million in additional costs, particularly in restorations to the building's dome and the mezzanine level of the building.

New elevators alone would cost more than $1 million, he said.

Harmsen said also driving up the cost are low commercial and residential rental rates in the downtown area. He estimates the rates are about half those in other West Michigan markets such as Grand Rapids or Kalamazoo.

"In Grand Rapids," he wrote, "the Heritage Tower building would appraise at the range of $24 million, leaving a loss/value gap of only $5.5 million, which would need to be filled by incentives."

616 has pursued alternative funding avenues through tax breaks and other government programs such as the Conservation Reserve Program and the Neighborhood Enterprise Zone Program. Harmsen said in December the company is exploring Michigan historic tax credits which could net the project as much as $4 million.

The company also secured from the city a $570,000 brownfield cleanup loan "to address hazardous substances at the property."

The scope of hazardous substances at the property first were detailed in March 2013 in a 334-page asbestos building report prepared by Grand Rapids-based Salmon Environmental LLC. After nearly a month of inspections, the company reported dozens of building materials identified to contain asbestos in concentrations greater than 1 percent, which requires the materials to be removed before construction can begin.

Salmon Environmental president Jeremiah Salmon, who signed the company's report, declined to comment, instead referring media requests to 616 Development.

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Along with the challenges of renovating an 85-year-old building, the city and 616 have dealt with an increasingly impatient public.

It's been nearly three years since 616 confirmed its plans to redevelop the Heritage Tower, described by public officials as the turning point in downtown development. It had been owned since 2008 by Florida-based Random Acquisitions LLC, whose plans to house office space for computer programmers and software developers never came to fruition, leaving the property vacant for about a decade.

At first, 616 aimed to begin construction in 2014 by revamping about 150,000 square feet of usable space into market-rate loft apartments, hotel rooms, underground parking spots for tenants and commercial space – with the possibility of a restaurant – on the lower floors.

The developer told the Enquirer in December it hopes to being construction as early as late spring.

Battle Creek resident Peter Kobs raised concerns about the tower last summer, when he emailed city commissioners and administrators about its open windows, trash and the potential for black mold and other toxins.

Despite it being against the company's policy to "debate the merits of our development projects" in the media or with those not associated with the project, Harmsen was asked by Dearing to address Kobs' criticisms, according to the emails.

Harmsen refuted some of them in an email to Dearing and later in a phone call to Kobs, saying the windows were open for a clean air passageway system and that there was no black mold in the tower.

Kobs, who works in the nearby Battle Creek Tower, told the Enquirer this week he's concerned about poor communication from 616 Development and the city, which leads to mistrust from members the surrounding community.

"They have delayed and delayed, asked for more and more money, broken promises about when work would begin, did poor remedial work to repair the building and does not respond to public inquiries," he said. "Does that build trust? Not in my book."

Also included within the emails:

  • In a Dec. 21 email, a W.K. Kellogg Foundation official indicated it was not interested in providing a grant, but was open to providing a guarantee to a senior lender.
  • In a Nov. 6 email to Harmsen, Hart acknowledged a request to remove the WWMT-TV Ch. 3 sign from the tower because of stability concerns. It since has been removed.
  • Legacy issues were discussed in an Aug. 14 email from Dearing to Harmsen and City Manager Rebecca Fleury. Dearing said the legacy issues have caused "considerable delay" to construction plans. Much of Harmsen's time, Dearing said, had been taken up by easement issues with Sprint, Consumers Energy claims and other issues related to previous ownership.

Contact Dillon Davis at 269-966-0698 or dwdavis@battlecreekenquirer.com. Follow him on Twitter: @DillonDavis