Metropolitan Building

[ghettopalmetto]

It would be nice to just see the building renovated, but it is going to take a very creative person to get a deal done for renovating this building...

It would be nice if a condition assessment and feasibility study was conducted this time.

[casscorridor]

I don't want to cut anybody down here, but the problem with low income housing, is that the return would be substantially less. While it may look good on the surface, once you get into the numbers, it would become nearly impossible. While you would be able to get more money for renovations up front, the cost could not be justified long term, as those tax credits would still not cover enough of the renovation. With low income housing, you have to keep the costs low, and unless you can do that, there is little hope, and the profit margins would be razor thin just to start with and they will quickly be eaten away.

Historically speaking, 30 years has been a nice round number for cost recovery on these types of projects, but these days, developers want it in 20-25 [[or less), and to try for 35 would be a huge risk from this point of view even 10 years ago. When dealing with low income housing, the developer gets substantially less, as much as 70-80% in the long run in terms of rents, so much different that even huge tax credits couldn't compensate for the difference.

While up front this may seem like a viable alternative, with the lower rents received and the astronomical cost recevery period, a proposal of this sort would be a pipe dream to any developer.

It would be nice to just see the building renovated, but it is going to take a very creative person to get a deal done for renovating this building...

But the point of affordable housing is not to make a profit. Maybe that is what you are missing. That is why no "developer" will touch this unless given big time incentives. And if the city is going to give massive incentives to a developer, why don't they development themselves and use the money to subsidize low-income units. They could even split the building up so some of the units are affordable and some are market-rate.

In summary, the point of developing this building should not be to make a profit. The point should be that this is a one-of-a-kind historic building that can never be replaced if destroyed. All those features that were listed that make it hard to develop are what make it unique and worth saving. That is a massive and priceless gain, even if money was lost. Which is the reason why we need a non-capitalist development model.

[PQZ]

I don't want to cut anybody down here, but the problem with low income housing, is that the return would be substantially less. While it may look good on the surface, once you get into the numbers, it would become nearly impossible. While you would be able to get more money for renovations up front, the cost could not be justified long term, as those tax credits would still not cover enough of the renovation. With low income housing, you have to keep the costs low, and unless you can do that, there is little hope, and the profit margins would be razor thin just to start with and they will quickly be eaten away.

Historically speaking, 30 years has been a nice round number for cost recovery on these types of projects, but these days, developers want it in 20-25 [[or less), and to try for 35 would be a huge risk from this point of view even 10 years ago. When dealing with low income housing, the developer gets substantially less, as much as 70-80% in the long run in terms of rents, so much different that even huge tax credits couldn't compensate for the difference.

While up front this may seem like a viable alternative, with the lower rents received and the astronomical cost recevery period, a proposal of this sort would be a pipe dream to any developer.

Well, that isn't quite accurate. If the LIHTC doesn't help projects, it wouldn't be oversubscribed 4 - 6 times available credits every year.

While the LIHTC does not work in every case, the ability to create more units of smaller size and have a greater occupancy rate at the Metropolitan actually creates a steadier and higher income stream than market rate units of low demand and low revenue production. The LIHTC, combined with HOME dollars are the ONLY wat this project makes sense. Unless there is a magical market rebound and rents charged in the CBD double int he next year.

The idea was first floated and shown to come closest to working by the developer of the Kales Building - who happens to be very adept at LIHTCs and is one of the largest developers using LIHTC in Indianapolis. The numbers work. Condo conversion is a non-starter. Larson has been worrying that bone for nearly seven years with at least four different partners and can't get it anywhere close. There's the feasibility study right there.

[esp1986]

But the point of affordable housing is not to make a profit. Maybe that is what you are missing. That is why no "developer" will touch this unless given big time incentives. And if the city is going to give massive incentives to a developer, why don't they development themselves and use the money to subsidize low-income units. They could even split the building up so some of the units are affordable and some are market-rate.

In summary, the point of developing this building should not be to make a profit. The point should be that this is a one-of-a-kind historic building that can never be replaced if destroyed. All those features that were listed that make it hard to develop are what make it unique and worth saving. That is a massive and priceless gain, even if money was lost. Which is the reason why we need a non-capitalist development model.

We are talking about the City of Detroit, right? The city with an estimated $325 million budget deficit?? Where, exactly, do you think this money is coming from?? We have all seen how well the City has tackled low income housing projects in the past...

The problem with low cost housing is, everything needs to be done with the cheapest of materials and labor. The city, especially right now, can't possibly come up with the kind of money that this type of project will require. We can only assume from looking at the side of the building and the crumbling facade, that this would be a very labor intensive project. Taxpayers would riot if they saw millions recklessly poured into a low income housing project of this magnitude.

There is just no way to justify this type of project financially. We would all love to see this building rehabbed, but just look at the Brewsters... look how well that worked out. The city would end up supporting this building for years, and wouldn't even make a fraction of their investment.

It is one thing for the city to subsidize a project, either directly or indirectly ie through taxes, but for the city to outlay this much capital up front and then subsidize the rentals long term is insane.

[bailey]

...The problem with low cost housing is, everything needs to be done with the cheapest of materials and labor. The city, especially right now, can't possibly come up with the kind of money that this type of project will require. We can only assume from looking at the side of the building and the crumbling facade, that this would be a very labor intensive project. Taxpayers would riot if they saw millions recklessly poured into a low income housing project of this magnitude. ....

Is low income housing really going to be net positive? Not to be all 'f- the poors" but is the highest and best use of that particular property subsidized housing. Is that REALLY going to spur others to renovate?

[Gsgeorge]

The city should sell the building for a dollar to an eager developer.

With the plan for the David Stott Building, developers would only need to come up with $4mil of the $40mil price tag to bring the building up to code & put in condos & lofts. That's over 80% of the costs being covered by tax incentives & historic rehab grants.

The Metropolitan is not in nearly as good condition as the Stott, but it is a significantly smaller building.

If the city sells the building to a developer for $1, then developers would only have to raise $3-$5 mil to rehab the building; the other $20-$40 mil would come from tax incentives.

[Hermod]

In summary, the point of developing this building should not be to make a profit. The point should be that this is a one-of-a-kind historic building that can never be replaced if destroyed. All those features that were listed that make it hard to develop are what make it unique and worth saving. That is a massive and priceless gain, even if money was lost. Which is the reason why we need a non-capitalist development model.

As Margaret Thatcher once said, "The problem with socialism is that eventually you run out of other people's money."

Detroit is almost out of "other people's money".

[Hermod]

Is low income housing really going to be net positive? Not to be all 'f- the poors" but is the highest and best use of that particular property subsidized housing. Is that REALLY going to spur others to renovate?

I think that Detroit already tried to provide high rise, low income housing for the poor. Do the names Brewster and Jeffries ring a bell with anyone?

[esp1986]

Is low income housing really going to be net positive? Not to be all 'f- the poors" but is the highest and best use of that particular property subsidized housing. Is that REALLY going to spur others to renovate?

Ideally, a developer would renovate it into luxury condos, but without a market for that right now, it won't happen...

but who knows what would spur development... a couple of owners on or near Washington Blvd. made some improvements to their properties concurrent to the Book Cadillac rehab, but have not seen any interest, the Archdiociese Building kitty corner comes to mind... and none of the shops on the ground floor of the Book Cadillac garage have tenants either so who really knows, but I agree, in a downtown area, low income housing really isn't the best thing...

if the city is going to waste a ton of money on this building, they should just find a developer, and cover whatever gap they have on it.

[cman710]

Thanks for the informative posts, PQZ and Hermod. They help me appreciate the difficulties that will be encountered in rehabbing these buildings.

[ghettopalmetto]

Not to say there won't be challenges with such a renovation, but a condition assessment and feasibility study conducted by an architect/engineer team would be required in order to get a reasonable idea as to the expected scope of work. Until then, you're really just working with made-up costs that may or may not be realistic.

[esp1986]

The city should sell the building for a dollar to an eager developer.

With the plan for the David Stott Building, developers would only need to come up with $4mil of the $40mil price tag to bring the building up to code & put in condos & lofts. That's over 80% of the costs being covered by tax incentives & historic rehab grants.

The Metropolitan is not in nearly as good condition as the Stott, but it is a significantly smaller building.

If the city sells the building to a developer for $1, then developers would only have to raise $3-$5 mil to rehab the building; the other $20-$40 mil would come from tax incentives.

The problem with this, is that the developer who currently has rights to redevelop the building, has tried to put a few different projects together, and supposedly can't get it to work, and for that matter, what is going on over at the stott building??

[EastSider]

Talk about letting them eat the scraps off our plates...

Why would we expect poor people to put up with low ceilings and no windows? Don't they deserve fresh air?

The only memorable part of the Metropolitan is the facade. Take those useful pieces down and attach them to new construction that doesn't have all of the problems. Maybe even save the facade pieces of the Wurlitzer and build something l-shaped on those two parcels. Who knows. All I know is that Eric Larsen knows what he's doing, and he hasn't been able to bring life back to the Metropolitan.

And, ghetto, the condition of the Met is pretty well documented, because of the environmental cleanup from the radium. In this case, it's not necessarily that the building's poor condition making reuse difficult; even in pristine shape, the building presents hurdles to profitable repurposing and usefulness.

[mikeg19]

The problem with this, is that the developer who currently has rights to redevelop the building, has tried to put a few different projects together, and supposedly can't get it to work, and for that matter, what is going on over at the stott building??

I second that. I was under the impression the Stott was occupied [[not sure what percentage)

[ghettopalmetto]

And, ghetto, the condition of the Met is pretty well documented, because of the environmental cleanup from the radium. In this case, it's not necessarily that the building's poor condition making reuse difficult; even in pristine shape, the building presents hurdles to profitable repurposing and usefulness.

Last I checked, environmental remediation contractors don't document structural repairs, MEP work, and architectural treatments that would be required to renovate a building. You might as well hire a carpet shampooer to build an addition to the rear of your house.

I understand that most people reading this thread have never had involvement in a renovation project, so allow me to break the thought process into concise components:

1. Profitability is going to be the ultimate driver of a private-sector renovation.
2. Profitability hinges on both leasing rates and costs of renovation.
3. Costs of renovation depend on the scope of work.
4. The scope of work is determined by qualified professionals who work for the owner.
5. The professionals [[architect/engineering team) need access to the building to conduct the condition assessment and develop the scope of work required.

So, as you see, it's a bit difficult to comment on "profitability" until you've engaged in the prerequisite steps. Hence, my earlier comment about "made-up" numbers.

[ndavies]

Last I checked, environmental remediation contractors don't document structural repairs, MEP work, and architectural treatments that would be required to renovate a building. You might as well hire a carpet shampooer to build an addition to the rear of your house.

I understand that most people reading this thread have never had involvement in a renovation project, so allow me to break the thought process into concise components:

1. Profitability is going to be the ultimate driver of a private-sector renovation.
2. Profitability hinges on both leasing rates and costs of renovation.
3. Costs of renovation depend on the scope of work.
4. The scope of work is determined by qualified professionals who work for the owner.
5. The professionals [[architect/engineering team) need access to the building to conduct the condition assessment and develop the scope of work required.

So, as you see, it's a bit difficult to comment on "profitability" until you've engaged in the prerequisite steps. Hence, my earlier comment about "made-up" numbers.

So you think the the developers that have looked at the building aren't going to or haven't done this? Just because they haven't shared the numbers with you doesn't mean it hasn't been done. Why do you think no one can get this project off the ground? None of their financial projections work due to the extreme amount of costs associated with getting this building back on line.

[ghettopalmetto]

So you think the the developers that have looked at the building aren't going to or haven't done this? Just because they haven't shared the numbers with you doesn't mean it hasn't been done. Why do you think no one can get this project off the ground? None of their financial projections work due to the extreme amount of costs associated with getting this building back on line.

I didn't say that the owner did or did not yet have an A/E team look at the building. I honestly don't know. My point is that you can't just up-and-say, "Oh well, it's going to be too expensive, so why bother?" or "Oh, it looks like it's structurally unsound, so we better demolish it."

If due diligence is done by the owner, and he decides he can't make it work at this time, that's his prerogative. At least he made an informed decision. I wish we could say the same for George Jackson and the DEGC.

I think what I'm trying to express is that Detroit [[and this Forum) has become very comfortable with unqualified people taking superficial, cursory looks at buildings [[Hudsons, Lafayette, Madison-Lenox, Tiger Stadium, among many others), and then deciding that public money *must* be used to demolish them. Heck, even on this forum we have people running around declaring buildings "structurally unsound", even though they wouldn't know "structurally unsound" if it fell on their head. These are dangerous habits that can only be dispensed with rational thought processes.

[rsa.313]

while i agree with your overall point GP, that's not the case here. owner/city, developers, and/or anybody that has anything to do with this building has ever stated it's structural unsound. qualified people on the matter that have posted in this thread have merely listed the difficulties in renovated the building.

[bailey]

I didn't say that the owner did or did not yet have an A/E team look at the building. I honestly don't know. My point is that you can't just up-and-say, "Oh well, it's going to be too expensive, so why bother?" or "Oh, it looks like it's structurally unsound, so we better demolish it."

If due diligence is done by the owner, and he decides he can't make it work at this time, that's his prerogative. At least he made an informed decision.

I think what I'm trying to express is that Detroit [[and this Forum) has become very comfortable with unqualified people taking superficial, cursory looks at buildings [[Hudsons, Lafayette, Madison-Lenox, Tiger Stadium, among many others), and then deciding that public money *must* be used to demolish them. Heck, even on this forum we have people running around declaring buildings "structurally unsound", even though they wouldn't know "structurally unsound" if it fell on their head. These are dangerous habits that can only be dispensed with rational thought processes.

Ok.. assuming that the Metro is the fucking fort knox of structural soundness.... lets just say there is no derelict building MORE structurally sound in the 145 square miles of the city of detroit... it's still been empty for 30 years. It's going to need massive work to bring it into the 21st century... It's still a weirdly shaped building wedged in an odd lot... it's still a purpose built jewelry exchange/retail center in a city that can support coffee shops in its landmark park/CBD...it still has no parking accessibility in a region dependent upon cars.... and it's still in a city that leads a state --which in turn, leads the nation- in unemployment, out migration, empty office space, and foreclosures...Are you seriously saying there is a scenario that results in that building getting re-habbed...in Detroit...ever?

[esp1986]

Ok.. assuming that the Metro is the fucking fort knox or structural soundness.... lets just say there is no derelict building MORE structurally sound in the 145 square miles of the city of detroit... it's still been empty for 30 years. It's going to need massive work to bring it into the 21st century... It's still a weirdly shaped building wedged in an odd lot... it's still a purpose built jewelry exchange/retail center in a city that can support coffee shops in its landmark park/CBD...it still has no parking accessibility in a region dependent upon cars.... and it's still in a city that leads a state --which in turn, leads the nation- in unemployment, out migration, empty office space, and foreclosures...Are you seriously saying there is a scenario that results in that building getting re-habbed...in Detroit...ever?

Some good points here... most of the problems with this building are other than structural issues, if there are any, which we will not know too much about. Such as the HVAC and sprinkler system, and the low ceilings they would cause, to the crumbling facade, which would require extensive repair. Aside from any structural issues, there are still alot of barriers that would need to be dealt with in a renvation, and a number of them would pose pretty tall tasks.

[Gsgeorge]

Re: Parking, there IS an empty lot next to the building that could be turned into a parking garage, especially if the Wurlitzer was demolished to make way for it. And, the empty lot between Angelina's and Small Plates has been talked about as being turned into a garage for the Broderick renovation -- the Wurlizter could share space with that. I think the "lack of" parking is really the least of our concerns here....

Regarding the shape of the building and its ceiling heights, is there any possibility of every-other floor being removed to allow for taller ceilings and more spacious residences, possibly with two-story layouts that would have a balcony & bedroom above overlooking a common area below?

Finally, we are forgetting about the large retail space in the building's bottom two floors. If this was truly a mixed-use building, possibly with a restaurant or shop[[s) below, would it help in the case to renovate?

[esp1986]

Re: Parking, there IS an empty lot next to the building that could be turned into a parking garage, especially if the Wurlitzer was demolished to make way for it. And, the empty lot between Angelina's and Small Plates has been talked about as being turned into a garage for the Broderick renovation -- the Wurlizter could share space with that. I think the "lack of" parking is really the least of our concerns here....

Regarding the shape of the building and its ceiling heights, is there any possibility of every-other floor being removed to allow for taller ceilings and more spacious residences, possibly with two-story layouts that would have a balcony & bedroom above overlooking a common area below?

Finally, we are forgetting about the large retail space in the building's bottom two floors. If this was truly a mixed-use building, possibly with a restaurant or shop[[s) below, would it help in the case to renovate?

I will go ahead and comment on the retail aspect: No. There is no demand for any sort of retail downtown, and with the seemingly limited amount of residental units in the building, the demand likely wouldn't change.

[DetroitZack]

I second that. I was under the impression the Stott was occupied [[not sure what percentage)

http://detroityes.com/mb/showthread....stott+building
I know the owner of the Stott, it is about 30 percent occupied.

[Hermod]

Re: Parking, there IS an empty lot next to the building that could be turned into a parking garage, especially if the Wurlitzer was demolished to make way for it. And, the empty lot between Angelina's and Small Plates has been talked about as being turned into a garage for the Broderick renovation -- the Wurlizter could share space with that. I think the "lack of" parking is really the least of our concerns here....

Regarding the shape of the building and its ceiling heights, is there any possibility of every-other floor being removed to allow for taller ceilings and more spacious residences, possibly with two-story layouts that would have a balcony & bedroom above overlooking a common area below?

Finally, we are forgetting about the large retail space in the building's bottom two floors. If this was truly a mixed-use building, possibly with a restaurant or shop[[s) below, would it help in the case to renovate?

George, if you and 40 or so of your buddies would each pony up $250,000 to $300,000 up front for a condo in the Met building [[plus $1200 a month or so for maintenance), I am quite sure the building would be renovated

[PQZ]

The city should sell the building for a dollar to an eager developer.

With the plan for the David Stott Building, developers would only need to come up with $4mil of the $40mil price tag to bring the building up to code & put in condos & lofts. That's over 80% of the costs being covered by tax incentives & historic rehab grants.

The Metropolitan is not in nearly as good condition as the Stott, but it is a significantly smaller building.

If the city sells the building to a developer for $1, then developers would only have to raise $3-$5 mil to rehab the building; the other $20-$40 mil would come from tax incentives.

Good lord, I really hope that is sarcasm that I am somehow missing.

And to other's points above:

Low income housing tax credits are designed to ensure developers make a profit by providing low income housing. The whole point IS to make aprofit. Other wise they would have no incentive to provide it. The supply side models of governments just building low income housing have failed miserably. While not perfect and certainly in need of much greater funding, the LIHTC has been the most effective and efficient vehicle for low income housing provision we as a nation have created.

The lot next to the Wurlitzer would hold about 12 cars tops. The lot is part of the People Mover right of way and needs to remain free of encroachemtns, limiting the parking available.

In a perfect world, the Metro would have a "higher" and "better" use than low income housing, but frankly giving people decent affordable housing near employment centers seems to be a pretty noble cause. It's also a matter of reality that this would likely be the only way to save the building.

RE: Due Diligence - Larson and the DDA have sunk nearly a million dollars of due diligence, A/E, attempts at stabilization etc with literally dozens of financing scenarios created and analyzed. The owner [[the DDA) has been engaged in due diligence for quite some time and contrary to what some believe, is not making a flippant or lazy decision.

Do some googling on Eric Larson and Robert C. Larson the priciples of the firm that is attempting the renovation.