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Wednesday, August 20,2014

Rewind the rollout?

LEAP calls Red Cedar Hyatt announcement premature

by Mickey Hirten
Developers of the $200 million-plus Red Cedar Renaissance project are negotiating with Hyatt International for a fullservice hotel fronting Michigan Avenue.

But there are enough outstanding questions about financing for the development and the quality of the project that the Lansing Economic Area Partnership, which along with the city is negotiating the project, is calling the announcement premature.

“There continue to be important questions that the developer has yet to answer,” said Bob Trezise, president and CEO of LEAP. “Before we move forward there is a great deal of additional due diligence that needs to happen.”

Caught off guard by the Hyatt announcement, made Tuesday by developers Joel Ferguson and Frank Kass, officials noted that the property has yet to be sold. There are significant challenges to building on the former golf course site that could require moving as much as 300,000 cubic yards of earth. And there are issues with the cost of redesigning drains tied to the project.

Which is why negotiations are continuing.

“We have a responsibility to the public to make sure a deal is correct,” Trezise said. “Quality, not speed, is our priority.”

All parties had hoped to agree on a sale price for the property by April 30, and there is a significant difference between what LEAP and the city are seeking for the property, which was appraised at $10.8 million, and what the Ferguson side wants to pay.

The Red Cedar redevelopment project is seen by city officials as a game changer that will speed redevelopment on the east side of Lansing, spur employment and provide tax revenue. “We really do believe in this project,” Trezise said.

The project is a mixed-use development — housing, retail, offices and hospitality -- in a 36-acre park setting just south of Frandor and Michigan Avenue. The site, which includes the Red Cedar flood plain, will feature significant parkland.

Lansing has been seeking a large hotel for decades. The proposed 200- room Hyatt, with banquet facilities and restaurant, would be the first major hotel in Lansing since the 256-room Radisson was built in 1985. It also represents a significant advance for the Red Cedar project.

“It shows that we have momentum going. It means we have a great hotel with great restaurants. A place for meetings. It enhances the whole development,” said Ferguson. Besides the hotel, he and his partner want to include a large medical facility, retail, offices and restaurants along Michigan Avenue, with housing and retail toward the back of the property and student housing along the eastern boundary.

Hyatt is working on the Red Cedar project with Concord Hospitality Enterprises, Co., a North Carolina-based hotel management and development company. Concord owns and operates the Crossroads Marriott in Lansing. It is involved with three other properties in the Michigan: a Hyatt Place in Grand Rapids, a Courtyard Marriott in Detroit and a Baronette Renaissance in Novi. It has management agreements with Marriott, Hilton, Starwood, Hyatt, Choice and InterContinental Hotels and proclaims development of more than $1 billion of projects in virtually every hotel segment.

Hyatt confirmed its interest in the Red Cedar project in a July 29 letter to Mark Laport, Concord president and CEO.

“We believe that the location, proposed mixed-use amenity base, and exceptional connectivity to the Lansing, East Lansing and Michigan State University communities would make Red Cedar ideally suited for a full-service Hyatt Hotel,” David J. Tarr, Hyatt´s senior vice president for Real Estate and Development, wrote.

For Lansing, the ability to attract a hotel in its downtown district has been encumbered by an exclusivity agreement between the city and the hotels owners´ financial difficulties. The hotel´s first investors, Block 100 Limited Partnership, received a $4.3 million federal grant from the city in 1985. Repayments lagged and by 2005, principle on the loan had grown to $17 million. The Radisson´s owners were threatening to close the hotel unless the city provided financial relief. It did.

Adding to the politically charged atmosphere of the mayoral election between incumbent, Tony Benavides and challenger Virg Bernero, the Lansing City Council voted to forgive the outstanding debt and require the the investors to pay $500,000 for the next two years and sought optional payments of $100,000 a year through 2018.

The deal also included a provision that prevented the city from subsidizing another hotel in the downtown area by any more than 15 percent. The boundaries of downtown were considered vague at the time. And a Hyatt at the Red Cedar site would be consider well outside any downtown district.

The Red Cedar Hyatt would be the chain´s second property in the Lansing area.

CSM Lodging, a division of CSM Corp., based in Minnesota, is building an $18 million, 125-room Hyatt Place hotel at Eastwood Towne Center. It expected to open in spring 2015.

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