Book Building and Tower renovation

**dcmorrison12** · November-05-09, 03:41 PM

sorry, couldn't find the thread for this!

Below is a quote from this week's Model D Media article. In the original thread, people were wondering about the rental rates and what not.

"Dobek says that Key spent three years researching potential developments and the Detroit housing market. For tenants, they are targeting the 80,000 downtown employees by offering rentals at a rate less than the suburbs -- along with the chance to potentially ditch a car payment. "There is a lack of affordable housing [[in Detroit)," she says. "There is an excess of low-income and high-end."

**artds** · November-05-09, 04:52 PM

Detroit has a better chance of electing a white mayor than this project has of actually getting off the ground.

Get back to me in 2015 and I'll be shocked if you tell me Book Tower is no longer standing vacant.

crawford · November-05-09, 04:58 PM

Model D is hardly a reliable news source.

And the Book Tower has a more likely chance of being demolished than renovated in today's economic climate.

**rjlj** · November-05-09, 05:10 PM

wrong and wrong

**buildingsofdetroit** · November-05-09, 06:14 PM

The discussion:

http://detroityes.com/mb/showthread.php?t=3223

**dcmorrison12** · January-20-10, 09:21 AM

Here are some passages from the article in todays newspaper.

"Detroit City Councilman Kenneth Cockrel Jr. and the Green Initiative Task Force played a major role in helping Key Investment Group, according to both sides. And the potential deal still is going forward, said Rick Bowers, an aide to Cockrel."

"All of this is happening because this is green; otherwise, we would not have gotten the financing," Dobek said.

" Construction will begin this summer, with completion in three years. The first units are to be available in mid-2011"

"Key Investment spent three years researching potential developments and the Detroit housing market, Dobek said."

http://detnews.com/article/20100120/...ng-coming-soon

**davewindsor** · January-20-10, 09:42 AM

Originally Posted by dcmorrison12

Here are some passages from the article in todays newspaper.

" Construction will begin this summer, with completion in three years. The first units are to be available in mid-2011"

http://detnews.com/article/20100120/...ng-coming-soon

I think John Ferchill's quote in this article says it all about the likelihood of this project ever getting off the ground:

"John Ferchill, the Cleveland developer behind the $200 million renovation of the Westin Book Cadillac just down the street from the Book Building and Tower, isn't convinced the project is for real. 'I think the deal is kaput,' said Ferchill, who said Tuesday he was approached several weeks ago by someone -- he wouldn't say who -- asking if he might be interested in 'taking on the project.'"

Think about it. Ferchill's quote has me thiinking, why hasn't work started on it already if it's for real? Why are the utilities off? Why wait until the summer before doing any work? Do you know what the monthly interest rate is on the $10+ million they bought the building for? I think they only bought it to try to flip it to Ferchill for a big profit and now Ferchill is making them sweat. They should just put some retrofits in it and try to rerent it as office space so they don't lose their shirts.

**esp1986** · January-20-10, 10:42 AM

Well, I will at least say that it is positive just to hear more about this project. About Mid-December, when nothing was heard for quite a while, I had all but written this project off, and a couple weeks ago, didn't think I would hear of it again... I am not going to hold my breath, for obvious reasons, but I don't plan on being overly hopeful about it until I see a construction fence on Washington Boulevard. But it is good to hear more, nonetheless, a step in the right direction.

**Detroit500** · January-20-10, 11:58 AM

How does "affordable housing" help the revitalization effort started by building a luxury hotel next door? Once again, it seems like this city has no real concerted effort to try urban planning --- even if this project comes to fruition. Why would I buy a luxury condo with a ridiculous markup, when I could live right next door for less than half the price?

Let's not forget the old adage... location! location! location! I completely agree with Dave, I think these guys are trying to flip it to Ferchill

**DetroiterOnTheWestCoast** · January-20-10, 12:54 PM

Let's not get our panties all in a twist.

Just wait 2-3 weeks and see if any more information is really forthcoming, as they claim. Sure would be nice to see this project take place. The fact that they stress that it is the "green" factor that is making it possible is interesting.

Wonder what the other buildings could be?

**esp1986** · January-20-10, 01:10 PM

Originally Posted by Detroit500

How does "affordable housing" help the revitalization effort started by building a luxury hotel next door? Once again, it seems like this city has no real concerted effort to try urban planning --- even if this project comes to fruition. Why would I buy a luxury condo with a ridiculous markup, when I could live right next door for less than half the price?

Let's not forget the old adage... location! location! location! I completely agree with Dave, I think these guys are trying to flip it to Ferchill

Well... starting at $800 a month is hardly "affordable." Right next door at Washington Square, the apartments start for the same amount, maybe less... they said they want to compete with the suburbs pricewise, when in the suburbs you can rent a one bedroom for $550-$600 easy, with a nice two bedroom for $750-$800... so this is hardly setting out to do what they want. However, this will in no way be as nice as the residences at the Book-Cadillac. They are far nicer, the very few actually being rented now. The Book Tower and Building won't be cheaply built, but it certainly won't be as nice as the Book Cadillac.

As for their other buildings, here is a list of large viable downtown structures in need of renovations:

David Whitney Building
David Stott Building
The Leland
Cadillac Tower
Free Press Building

Feel free to add to this list... it did not sound like they were building anew so it will likely be vacant structures... Seeing as the Cadillac Tower was recently in foreclosure, I would not be suprised if this was one of them, but who knows... The Leland is owned by Michael Higgins, and seeing the ride he took the state land bank on for the Farwell [[which should have sold for $1 million or less given it's condition), The Leland would not be cheap... there are also two buildings [[I do not know the names) at the corner of Adams and Park, across from the Kales Building, that could be targets... one is probably 8-10 stories, the other is probably 12-14.

There are also a few other structures, whose viability may be questioned by some:

Metropolitan Building
Wurlitzer Building

Rumors have swirled about the condition and fate of these two buildings, and there are probably others too.

**rb336** · January-20-10, 02:26 PM

I haven't found a thing on Key Investment -- it's one of those far-too-common names -- and I am curious just how legit the company is

**esp1986** · January-20-10, 02:35 PM

Originally Posted by rb336

I haven't found a thing on Key Investment -- it's one of those far-too-common names -- and I am curious just how legit the company is

From the State of Michigan website, shows they were formed just over a month before they announced their plans initially on Oct. 29:

Searched for: KEY INVESTMENT GROUP, INC.
ID Num: 02612N
Entity Name: KEY INVESTMENT GROUP, INC.
Type of Entity: Domestic Profit Corporation Resident Agent: ROSEMARIE DOBEK
Registered Office Address: 19459 SOUTH HIGHLITE CLINTON TWP MI 48035 Mailing Address: MI
Formed Under Act Number[[s): 284-1972
Incorporation/Qualification Date: 9-17-2009
Jurisdiction of Origin: MICHIGAN
Number of Shares: 60,000
Year of Most Recent Annual Report:
Year of Most Recent Annual Report With Officers & Directors:
Status: ACTIVE Date: Present

**Gistok** · January-20-10, 02:50 PM

2 comments....

"Why would I buy a luxury condo with a ridiculous markup, when I could live right next door for less than half the price?"

Last time I checked a map the Book Tower/Building are nearly 2 blocks away from the Book-Cadillac.... hardly what I would call "next door"....

"They should just put some retrofits in it and try to rerent it as office space so they don't lose their shirts."

... and rent it to whom?? They lost all their tenents to other buildings downtown... and the downtown occupancy rate is at 70%. In this economy who's going to move into the Class C space of the Book Tower/Building with that much available office space left downtown?? ... certainly not the former tenants who left because the electricity was shut off!

**esp1986** · January-20-10, 10:05 PM

As skeptical as we all are of this project, I am too, but if what they are saying is true, I have a hard time believing they would spend 3 years planning this if they were not serious about it... just a revelation I had, but once again, time will tell.

**davewindsor** · January-21-10, 06:32 AM

Originally Posted by esp1986

As skeptical as we all are of this project, I am too, but if what they are saying is true, I have a hard time believing they would spend 3 years planning this if they were not serious about it... just a revelation I had, but once again, time will tell.

This is what gets to me. If they spent three years planning a renovation before buying this building, why would they want to wait almost a year after buying it before starting the work? Especially since they're gonna be paying $100,000+ a month in mortgage payments.plus property taxes, which is what? Another $50,000 a month? Three years is a lot of time for planning and getting the money in place. If a developer pays that kind of money for a building, they're normally going to send in the work crews right away for it to get done so it can get rented. An even smarter developer would rent half the building out and do the renovations on the other half so at least there's some kind of income coming in. What these guys are doing doesn't make any sense if they really are developers and not land speculators. Even a very unconventional developer like Ferchill said it was a wash.

I'm sorry, but there's just no way I can see how anyone can get optimistic about this when I hear of urban explorers claiming they're still getting in there and there's no work being done on it. In fact, I'm kinda of pissed because Ferchill did make an offer on it and was the most likely guy to make something happen with it and would probably have work crews in there by now, but then these guys swooped in and now they're just sitting on it like the speculators of other vacant downtown buildings.

**esp1986** · January-21-10, 08:30 AM

Originally Posted by davewindsor

This is what gets to me. If they spent three years planning a renovation before buying this building, why would they want to wait almost a year after buying it before starting the work? Especially since they're gonna be paying $100,000+ a month in mortgage payments.plus property taxes, which is what? Another $50,000 a month? Three years is a lot of time for planning and getting the money in place. If a developer pays that kind of money for a building, they're normally going to send in the work crews right away for it to get done so it can get rented. An even smarter developer would rent half the building out and do the renovations on the other half so at least there's some kind of income coming in. What these guys are doing doesn't make any sense if they really are developers and not land speculators. Even a very unconventional developer like Ferchill said it was a wash.

I'm sorry, but there's just no way I can see how anyone can get optimistic about this when I hear of urban explorers claiming they're still getting in there and there's no work being done on it. In fact, I'm kinda of pissed because Ferchill did make an offer on it and was the most likely guy to make something happen with it and would probably have work crews in there by now, but then these guys swooped in and now they're just sitting on it like the speculators of other vacant downtown buildings.

Well, there is not much they can do to the exterior in the winter, so once it warms up, it will take a month or two to have inspections and get plans finalized and possibly do some cleanup work prior to construction... and I don't know where you are getting a year from... if they bought the building in December, then it would be only six months, and we do not know for sure if they actually own it yet.

**davewindsor** · January-21-10, 08:54 AM

Originally Posted by esp1986

Well, there is not much they can do to the exterior in the winter, so once it warms up, it will take a month or two to have inspections and get plans finalized and possibly do some cleanup work prior to construction... and I don't know where you are getting a year from... if they bought the building in December, then it would be only six months, and we do not know for sure if they actually own it yet.

The wikopedia article had said: In October 2009, Key Investment Group of Clinton Township, Michigan announced plans to for a renovation that would transform the building into 260 environmentally sustainable apartments and retail. The investors also revealed that they were looking to purchase the building from AKNO Enterprises of Vancouver in a matter of weeks after the announcement.[2] http://en.wikipedia.org/wiki/Book_Tower#cite_note-1

Did they buy it in early November? Why would they announce it if it wasn't close to closing date? 8, 7, or 6 months is still way too long before even getting a cleaning crew in there. How did they know they can get 260 apartments and retail in there if the plans weren't finalized? There had to be some kind of analysis done on the building prior to the announcement to know they could get 260 apartments in there. At $10+ million, I'm sure they would have had the inspections conditional prior them firming up the offer. What sort of inspections are we talking about here that would take longer than a couple days? Who's gonna spend $10+ million on a vacant building unless they know all this stuff beforehand? It's not like buying a building for a few hundred thousand in back taxes or even a buck. Their story just doesn't add up.

**esp1986** · January-21-10, 09:46 AM

Originally Posted by davewindsor

The wikopedia article had said: In October 2009, Key Investment Group of Clinton Township, Michigan announced plans to for a renovation that would transform the building into 260 environmentally sustainable apartments and retail. The investors also revealed that they were looking to purchase the building from AKNO Enterprises of Vancouver in a matter of weeks after the announcement.[2] http://en.wikipedia.org/wiki/Book_Tower#cite_note-1

Did they buy it in early November? Why would they announce it if it wasn't close to closing date? 8, 7, or 6 months is still way too long before even getting a cleaning crew in there. How did they know they can get 260 apartments and retail in there if the plans weren't finalized? There had to be some kind of analysis done on the building prior to the announcement to know they could get 260 apartments in there. At $10+ million, I'm sure they would have had the inspections conditional prior them firming up the offer. What sort of inspections are we talking about here that would take longer than a couple days? Who's gonna spend $10+ million on a vacant building unless they know all this stuff beforehand? It's not like buying a building for a few hundred thousand in back taxes or even a buck. Their story just doesn't add up.

Well, they said they were going to close on the building, but I can find no public record of the sale, and as I can tell, it is still owned by AKNO of Vancouver... the plans for the building are public record, they can get access to those to use for planning. However, before construction begins, they will likely need to have an engineer do a structural assessment, inside and out, to determine the exact extent of renovations needed.

When the Book-Cadillac Renovation was announced by Kimberly-Clark, they thought all was a go, until engineers were in the building and found more damage than originally thought. This is when they backed out.

Now the chance of this same case happening is very slim, considering the relative condition of the Tower and Building compared with the Hotel, but they likely have not had engineers go through and thoroughly inspect the building. Once that is done, they will probably have to get final quotes from all of their subcontractors before construction can begin. We are reportedly seeing this with the Broderick Tower right now, even though they have been "planning" that renovation for 5+ years.

So give it till the end of March or so when it is safe and snowless on top of the building, then give them the same 90 days that J.C. Beal has said it will take to start construction [[time to get subcontract quotes), and we are in June. The timeline makes perfect sense to me... they were not going to start the project in the winter, but what I am skeptical about is the whole plan in general, and until we hear more, I will continue to wonder.

**French777** · January-21-10, 06:18 AM

http://www.washingtonsquaredetroit.com/index.php

DetroitDad · January-21-10, 11:44 PM

Finally! Wouldn't this be great if it happened?

Advertised price is not good criteria to compare properties.

Moving up from one of the Central Business District's [[CBD) low income properties, into a mid priced property has proven problematic. Some of the above posters are pointing out advertised prices, and using them as criteria for comparison. The problem with comparing properties based on price is that you are not looking at what's included, such as utilities, ammenities, deposits, mandatory fees, and parking. Beyond that, two bedrooms are hard to find in Downtown Detroit, and when you do find one, they tend to be askewed by the colleges, in that they charge a base rate for a two bedroom with one person, and then they also charge extra for each additional tenant. The charging on a per person bases makes sense for college buddies but is ludicrous for couples and families.

Beyond hidden fees, lack of competition is one thing that has made us somewhat leery of renting at Washington Square [[under the former management and Trolley Plaza name) and Claridge House. Low income buildings and indeed the middle-upper income buildings seem to really care about keeping your business, while the mid-priced buildings really seemed to take renters for granted.

**cmubryan** · January-22-10, 12:31 AM

Here's our site: http://www.villagegreen.com/detroit/washington-square/

**3WC** · January-22-10, 09:09 PM

Folks, let's assume that those people paid $10 million for the real estate. They say they're raising $360 million to do 4 buildings; let's say $150 million [[way low) is for the Book deal. There's supposed to be 260 apartments.

Let's say they financed the whole shebang, conventionally, to get the deal done. Let's say they amortized the loan over 30 years, 360 months, at 6.5% per annum [[low in this market for that kind of deal). That's $1,011308.33 per month for the debt service. Or, $3,889.65 per month per apartment.

Now, they say they're going to have 3 floors of office [[a big loser) and retail. And, presumable they want the taxpayers to pay a big chunk of the debt service by using tax credits [[good luck), and less out the office/retail, so cut the per apartment debt service in half, and the debt service per apartment is $1,945.00 per month.

Add to that insurance, CAM, utilities etc [[usually at least 45% of the monthly rent, and what do you have? Let's just say the total debt service and operating costs total $2500/month. How much do you all think they should add on for their profit. Then you'll get the true monthly rent nut they have to make at 100% occupancy. [[If an apartment complex is 100% leased, the rents are too low.) Lenders will impute at least a 5% vacancy rate or higher regardless of the quality of the project.

Hey, cmubryan, why don't you see if Jonathan would go for this deal.

This is all very conservative based on the public info.

Dream on folks.

**bsu** · January-23-10, 01:28 AM

I thought the Book Building was completely closed up and shut down. But there seems to be some action in the building when we drove past tonight. Here are two pictures I took of the main entrance. There was a large chandelier on and what appeared to be temporary construction lights strung through parts of the 2nd floor. The top floors were lit up also.

**esp1986** · January-23-10, 09:14 AM

Originally Posted by bsu

I thought the Book Building was completely closed up and shut down. But there seems to be some action in the building when we drove past tonight. Here are two pictures I took of the main entrance. There was a large chandelier on and what appeared to be temporary construction lights strung through parts of the 2nd floor. The top floors were lit up also.

those lights have been on for weeks...

and someone mentioned the cost of renovation... at over $150 million... wrong! that building will cost closer to $100 million... Ferchill proposed an $87 million rehab, and add in the energy efficiency premiums and we are right around $100... plus, factor in a few federal tax credits for being "green" and it brings it down immensely.