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Demolition for City Center II project stalled

September 6, 2010

Demolition for a multimillion dollar development in East Lansing is now projected to begin at the end of this year or beginning of the next, following a finance meeting between city officials and the developer.

City Center II, a $116.4 million mixed-use project slated for development on the corner of Abbot Road and Grand River and Evergreen avenues, has been plagued by delays in financial planning for the last two years.

In summer 2009, city officials said demolition was projected to begin in spring of this year. Earlier this summer, officials said a demolition date would be decided after the August finance meeting with the developer and city officials.

The project, proposed by Strathmore Development Co., is on hold while a financing plan is worked out, said Scott Chappelle, president of the company.

“We believe we have all the pieces of financing and we’re working on moving the project forward,” he said.

The project cannot progress until Chappelle submits a finance plan and legal descriptions of the properties contained within that plan, East Lansing Mayor Vic Loomis said.

Chappelle has not provided a time line for the completion of the documents, Loomis said.

“Those are the two documents that the developer owes us under the agreement,” he said. “Until he is forthcoming with those documents, there is really nothing that the council can do.”

Chappelle could not be reached for further comment on the status of these documents.

New project underwriting standards set by the Federal Housing Administration and a high demand for U.S. Department of Housing and Urban Development, or HUD, funding have presented delays in preparing the financing plan of the project, said Tim Dempsey, East Lansing’s planning and community development director.

“In the current economic climate, the HUD source of funding is one of the primary opportunities for developers right now,” he said. “As a result, there is a high level of demand for the program (and) processing for these loan reviews is taking longer.”

The project will begin demolition later than originally planned because of the reappraisal and submittal of updated information regarding the property, Dempsey said.

“The timing on this is taking longer than we had hoped, but that’s the nature of the real estate market,” he said.
“Lenders are being very cautious.”

The developer and East Lansing officials have done as much as they can to keep the project moving, Councilmember Kevin Beard said.

“We have progressed on our end of this deal,” he said. “The Downtown Development Authority has purchased property on Evergreen Avenue where the ramps are located. We are trying to be as responsible as we can be with the property we have acquired through this process.”

City officials have requested frequent updates from the developer about the financing of the project, but the current loan market makes finding funding difficult, Beard said.

“It is just very tough to find a lender to put money up for something of this scale,” he said. “We have seen this all over the country. It’s not unique to us by any means.”

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