Living in a luxurious, high-rise condominium overlooking Lansing’s Grand River is enough of a draw for some investors, but add a tax-free environment and the offer seems almost too good to be true. But such a project is coming to the capital city and the lines are already forming for those looking to cash in.

The Capitol Club Tower, a multi-use facility, will be the first Michigan Renaissance Zone in Lansing and one of the most exclusive combination residential-and-retail facilities in the state. The designation of Renaissance Zone by the Michigan Economic Development Corporation (MEDC) and the Michigan Economic Growth Authority (MEGA) allows residents to live tax free for a period of time—that (amazingly) means no property, no city and no state income taxes. Those signing on will receive the perk for 15 years, but the tax breaks will phase out over the last three years of the agreement. While the greatest savings will be seen by those buying high-end properties, tax savings are said to range from nearly $800 to over $2,000 a month for even less expensive units. “The average buyer will save $100,000 during the abatement,” says Shawn Elliott, one of the developers and owner of Lansing’s Diamonds in the Rough Development Company.

Elliott says plans for the development include some condos with hot tubs and 600- to 800-square-foot balconies.  Paramount Level homes with a design-your-own-space floor plan are also available. And for those looking for real luxury, the Capitol Club Tower will include four two-story penthouse condominiums. “The price tag for them is flirting with a million bucks,” says Elliott. “But the more you spend, the more you save.” Up-and-comers can also cash in with the purchase of a loft. The units, costing about $120,000, are modern efficiency-type living spaces with a European design. Plans also include a high-end restaurant, a state-of-the-art workout facility, an indoor pool, a parking garage, and a doorman with 24-hour concierge and security services. The high rise, to be built on South Grand Avenue along the Grand River in Downtown Lansing, will also include what Elliott calls an urban market. “It’ll be a modern day general store with soups, eggs, milk and bread.”

The purchase of the three parcels of land for the project was completed in 2007 giving Elliott and his partners a leg up on the competition.  “We had the plans drawn up even before the area was designated a Renaissance Zone,” he says. “That gave us the edge in landing the deal. Most developers are just now working up their blueprints and we were ready to go.” Elliott was actually hoping for a designation in January of next year giving him more time to market the project but says timing isn’t everything. “We’re making do. The facility pretty much sells itself.”

The Capitol Club Tower is still in its infancy. The site is still being cleared and demolition of the 80-year-old City Club building has just begun. The original plan called for an 18-  to 20-story building but was later reduced to 16 floors. The economy, though, forced developers to head back to the drawing board yet again. “We’re now slated for 12 floors,” says Elliott. He says that was the minimum size promised the City of Lansing for the development and the smallest plan possible to make purchase of the property worthwhile. Elliott says the lost square footage has been replaced with a more elegant design. The client base has also shifted from an even split between young professionals and empty-nesters. “Now the target market is 70 percent toward the more sophisticated resident,” Elliott says.

While the housing market has seen a downturn of late with values dropping as much as 20 percent, Elliott says purchases of the Capitol Club condos are a good investment. The City of Lansing and the State of Michigan are banking on that as well. While losing full tax revenues for a good portion of the 15-year purchase agreement, in the 16th year, the properties, valued at between $20-30 million, will be fully back on the tax rolls. Elliott says the City of Lansing is reaping some benefits already. “Our purchase of a city parking garage—not on the tax rolls before—now is,” he says. “It’s just the beginning of money that will start coming in.”

Elliott has seven other buildings he has developed in a three-block area of Downtown Lansing, but the Capitol Club is a first for him. While utilizing brownfield redevelopment funds for previous construction, his newest endeavor is the first Renaissance Zone project. His other developments have been profitable, but Elliott says he did some extensive research before taking on the idea of a tax-free housing project. “They’ve stimulated growth and generated revenue successfully in similar areas, like Detroit and Grand Rapids. Lansing seemed like the next logical step.”

Elliott says if the initial interest is any indication, the Capitol Club Tower will be a tremendous success.  There is a waiting list for the properties and developers are in negotiations for two of the four penthouses. The project is slated to be completed sometime in 2010.

Author: Jo Anne Paul-Stanton
Photography: Terri Shaver