A massive redevelopment project in East Lansing could be the latest to fall victim to the credit crunch.
However, while on the back burner for the time being, those pushing the project are confident the delay will be temporary.

Demolition for the City Center II project was to begin this spring, but some snags in securing funding from the federal government have stopped the trucks from rolling in on schedule. Scott Chappelle, president of the Strathmore Development Company, says both public and private funding of the $112 million project has already been secured but the economy forced a delay at the federal level. “The last component of the financing is a $28 million loan through HUD which is proceeding a little slower than planned given the disruption in the credit markets.”

Officials from the City of East Lansing have been sympathetic to the problems generated by the credit crunch granting time extensions to get the deal done. The third and latest delay gives Strathmore until July to finalize funding with the U.S. Department of Housing and Urban Development (HUD). East Lansing officials are keeping their collective fingers crossed as well that all goes as planned.

The mixed use facility, slated to be an anchor of the city’s downtown central business district, is promising to bring much needed business and jobs to the mid-Michigan area. An estimated 150 permanent jobs are expected to be created along with the generation of millions of dollars in tax revenue.

Part of the funding which has already been secured are tax incentives from the Michigan Economic Development Corporation for brownfield redevelopment. The idea is to give funding to help clean up contaminated sites to allow for redevelopment of land that would otherwise be left vacant or underutilized. Chappelle says one of the biggest challenges facing the project is a misconception about where brownfield money comes from. “There is a perception that the project will receive taxpayer funds but that is simply not true,” Chappelle emphasizes.

The MEDC invests in projects like the City Center II up front hoping for a big payoff in the future. “If the project is as successful as the original City Center development, this will be another good investment for the City of East Lansing and the state as a whole,” says Bridget Beckman, MEDC public information officer.

The original City Center, which opened in 2001 in the area of M.A.C. and Grand River avenues, is said to have brought in millions in business and investment by offering what the community was lacking. “It took a vacant building and transformed it into a successful business bringing condominium living to the downtown for the first time ever,” says Jim van Ravensway, director of the East Lansing department of planning and community development.

The City Center II, which will sit on some 20 acres of land near Michigan State University’s Student Union Building, will be encompassed by Grand River Avenue, Abbot Road, Evergreen Avenue and Albert Avenue. It is planned to include residential and retail development as well as office and public exhibition space. That space will likely be utilized in great part by Michigan State University for lectures and concerts. “The project will also include investments more like urban development,” van Ravensway says. “The five buildings will be like a little village sitting in the heart of East Lansing.” In addition, the City Center II will be the first development to also house a high-end hotel. The Hotel Indigo will have as many as 180 rooms with all the amenities of five-star hotels found in most major cities. The Hotel Indigo (www.hotelindigo.com) is marketed as a peaceful experience whose unique design brings together “math, art, and nature in perfect symmetry to give visitors a perfect sense of balance and well-being.” It’s owned by the successful InterContinental Hotels Company of Great Britain and provides a rewards program offering discounts on other hotel stays all over the world. The hotel will also include a 400-seat auditorium to be managed by MSU’s Wharton Center.

The City Center II will also house a well-known restaurant, although the name had not been released as of this writing. In addition to the various retail and office spaces available, the highlight of the 10-story, 250,000-square-foot project will be condominiums of varying design and price—all LEED certified as environmentally friendly.  The building even will sport a green roof.  A five-story parking structure is also part of the plan.  Developers have been asked to use green products when possible, but are not mandated to do so.
The City Center II, unlike its predecessor, has encountered delays almost from the beginning.  “It took longer for the properties to be acquired and also to firm up a design,” says Chappelle.  The financing delays are just the latest to plague the project.  But those at Strathmore are taking the problems in stride.  “It happens,” Chappelle says.  “Financing investment of real estate projects has become very difficult.  The number of projects getting off the ground has fallen off a cliff.” Chappelle says he’s confident the delay is just a bump in the road and that the location of the project makes it too good to pass up. “The location is unique given its proximity to the downtown, Michigan State, Sparrow, Cooley Law School and the Capitol. That type of area tends to be recession resistant and will provide support for the project despite the economy.”

City officials aren’t giving up hope either. Pointing to what van Ravensway calls the University Community Oasis. “The area is considered a very stable environment for development. We’ve attracted more than our share, and this one is just around the corner.”