I’ve been remiss in posting project updates, but you can always see what’s been posted in the past using the search box at that shows up on most pages. You can click here and see what’s been posted.
This project has had some struggles getting off the ground. Despite having funds from READI and the City of Plymouth to invest, getting a construction loan and securing permanent financing proved a challenge. Construction costs remain high and getting to an acceptable debt service ratio was challenging. We spoke to nine financial institutes before settling on Interra Credit Union for this project. Even after making that decision, the commitment process was slow. All of the financial institutes seem skittish about committing to long term financing in the current market.
We have made our first draw request to READI on January 15th and currently are being told it may be another 30-45 days before we see funds released. We made our first draw request to the City of Plymouth on January 8th to start the process for approval with the Redevelopment Commission meeting on the 21st, but despite approval there, the bond fiduciary has not released funds to us. It is hard to complain about the injection of funds that make this project possible, but the delays mean we will incur additional interest expense to cover costs until the payments come in.
We broke ground on the project December 17th, 2024. Those gold shovels have traveled to a lot of sites over the years! Mayor Listenberger asked us to delay actual construction until after Christmas to keep the parking lot open for holiday shopping. We literally broke ground December 26th, with excavation starting that day.
Excavation is mostly complete for the building footprint. We have been fortunate that most of the debris we have uncovered has been relatively easy to remove. As always, there was some “fun” stuff, like an active waterline that ran back under the parking lot, through the excavation, from Water Street before it was capped. That made for a muddy day before being resolved. As of now, footings are in place for the townhomes and a large percentage of the basement walls are complete. We should see basement waterproofing start this week and backfill shortly after that. We’re working through the framing shop drawings to get the wall panels released.
We are still looking for completion in late Fall of ’25. We would love to accelerate that if we can!
We had a groundbreaking ceremony for Water Street Townhomes on Tuesday. It was great to see support from the Plymouth Community. Mayor Listenberger, Clerk Treasurer Lynn Gorski and Council Members Don Ecker, Linda Starr and Dave Morrow also turned out. Mike Miley was there representing the Plymouth Redevelopment Commission. Plymouth City Attorney Jeff Houin was there and Taryn MacFarlane from the South Bend Elkhart Regional Partnership (SBERP). This type of infill development for this area has been part of Plymouth’s last two Comprehensive Plans, so we were pleased to be able to help bring it to fruition.
Housing affordability has become more difficult with the duel challenges of record inflation and interest rate increases over the last 4 years. While there are signs of moderation, they will continue to be a challenge for the near future. Inflation moderates, but continues to accumulate and rarely reverses. The Fed has lowered interest rates, but the mortgage market has done little to reflect the decrease.
We were please to partner with the City of Plymouth and obtain a READI 1.0 grant for this project. Infill housing has also shown up in the two current Marshall County housing studies being completed, so this is a timely addition to the City. We did not get all we asked for from READI, but without their contribution and the matching dollars from the city, the project would not pencil out. Even with that, this is a market rate project, not an affordable housing project. Because of the current inflationary market, the banks look more at the income generated than the loan to value of a project, i.e. another reason the State and Municipal participation is important.
This project is part of a trend towards more walkability and brings some additional rental property to downtown Plymouth. Catty-corner to River Park Square, it will be conveniently located for local festivals. The Mayor’s initiative to improve the festival space on Garro Street between Michigan Road and Center Street as well as his initiative to create a downtown Entertainment District, positions Water Street Townhomes to be successful and Water Street Townhomes will provide residents to attend these events, as well as frequent the existing local businesses and restaurants in the area. This site once was home to the Gem Theater, a predecessor to The Rees, a Doctor’s office and various other business entities through the last 100 years. It will be included in the new downtown entertainment district. We hope to encourage others to revitalize the back half of Plymouth’s downtown main street. Putting this historic block back on the tax rolls is a positive change for the city.
Culver Sand Hill Farm also submitted a townhouse project for Culver, Spirit Townhomes, which was named in the READI 1.0 Strategic Investment Plan. Unfortunately, after the fact, Culver chose to partner with a different developer on the much larger project, The Dunes. (Discussed here.) C’est la vie! Sometimes you reap what you sow. These small pocket developments are ones that can make an impact without as much culture shock to the community. A trend of these small projects would ease a community into the idea of expansion and make it easier to integrate new residents into the community – something to consider throughout Marshall County communities.
We look forward to making a positive impact with Water Street Townhomes and hope it is a catalyst for more downtown Plymouth development. The Plymouth Administration and Common Council have been supportive and a great partner. There is a need for 1,300 new housing units in Marshall County. Often big developments are jarring to the community. Small, infill projects such as this can make a difference and be placed into the community with only ripples instead of waves. They can also take advantage of existing infrastructure, be placed walking distance from amenities, and generally become part of existing neighborhoods. I hope this is the first of many similar projects in Plymouth and Marshall County.
The Dunes received a major subdivision plat approval and site plan approval from the Culver Plan Commission on June 18th and from the Culver Town Council on June 26th. This was somewhat a foregone conclusion since Culver has been working with the developer for over a year on this project. It was interesting though that neither entity passed these approvals unanimously.
The preponderance of people in attendance at the meetings were against the project. Some in its entirety, but most in its scale. Some (falsely in my opinion) called the Town to task for not communicating enough and not listening to concerns. (If there is one thing that I would say Culver is above average in, it’s communication with its citizens…) There were also those that attempted to complain on both sides of the issues, saying it was too big, but might be left incomplete; it was being pushed to quickly, but the developer shouldn’t be give 8 years to complete it; it was not planned to be part of the community, but but it should be connected directly to State Road 17, to direct traffic out of community.
I remain generally in favor of the project. I am a little disappointed in the the follow through on requirements the town had placed on the project. The project presentation to the plan commission has been delayed twice because of engineering questions being unanswered. As presented, at the meeting, most of those were answered “in concept”, but details were still not complete. There were also pending questions regarding the projects connection to South Main Street that were not complete. And then there was the statement from the developer that the town would be receiving a lot of money from increased TIF capture on this project which could be directed towards some of the short falls in water and sewer needs. Many of these things affect adjacent property owners, including a wetlands and the town’s own well field, while the money being proposed for water and sewer improvements had previously been suggested for other TIF district needs not connected to this project. I would have liked to have seen all these things tied down before authorizing them to proceed.
I was pleased that many of the questions from the audience were addressed, but I have concerns with their substantiation. I do not in anyway want to speak ill of the developer and their honesty regarding the project, but the answers given were off-the-cuff, having little if any documentation or requirements of follow-through. Many of the questions were, frankly, not the business of anyone but project investors, but the reassurances carried no weight. While I trust that everything said was in good faith, there is nothing that keeps them from changing direction on them if economics of the project suggest better uses of funds. As suggested here before (second to last paragraph), their development agreement included none of the delineated requirements seen in past agreements.
That said, I think many of those protesting this development fail to understand that this project was not a surprise, but something that has been in the Town of Culver’s plans and one of their goals for over a decade. When the Culver Garden Court property was annexed around 2010, the surrounding property was annexed as well. It was rezoned as R-2 to promote housing in that area. When the last revisions to the Culver Zoning Ordinance were completed, R-2 was rewritten to allow higher density developments. The 2014 Comprehensive Plan suggested, due to citizen input, that more housing is needed. The Stellar Communities surveys of 2016 and 2017 indicated more housing is needed. The 2024 Comprehensive Plan still indicated the need for more housing, even with The Dunes under discussion. This was not a project that required a rezoning or multiple variances to make happen. It fits with the planned development of the town.
Do I think things might have been done better? Always. Until I’m appointed benevolent dictator, I will most likely always see alternatives that I would have pursued. (I still have questions about whether it follows the Culver Complete Streets Ordinance, whether there were drywells added, where they drain and who owned them, and whether the wetlands have been properly addressed, etc.) Do I think those in charge were (mostly) following the will of the majority of citizens? Yes.
Cost of doing business
August 12, 2024
Kevin Berger
Commentary, Plymouth, Politics
Affordable Housing, Community, government, housing, Multi-family, Politics, Trends, Volunteering, Workforce Housing
The Pointe has been all over the news and social media lately due to the City of Plymouth deeming the property unsafe to occupy. This has forced the charitable community to jump to action to help the residents of the 16 units there. On top of the general low income housing shortage in Marshall County, there is the issue that this property was renting at the very low rate of $400 per month. To the best of my knowledge, this is not a subsidized housing site.
As has been described to me, the facility is a former nursing home, so the “units” are small rooms with half baths, i.e. a sink and toilet. They are set up with common (shared) men’s and women’s showers and a community kitchen. There has been some deferred maintenance that includes roof leaks leading to other damage. Pictures from the Pilot News indicate that there is some mold/mildew, but the level and danger from that would have to be professionally assessed.
The landlord is taking it on the chin for this. Again, I know none of the background, reasons for deferred maintenance, etc. But I do think the $400/month is an unworkable business model. So if all the work that is projected to be needed there is done, there’s no way it supports itself at that rental rate. Here are some numbers to start the conversation:
So lets total that up as if someone were to buy this this and puts it back the way it should. That comes to $626,000. I think this is probably a cheap number, but it’s a starting point for this discussion.
First pass: 20% down = $125,200 The remaining $580,800 financed per the above at 5% = $45,996 in loan payments, against fully rented 16 units x $400/month x 12 months = $76,800. Seems like a decent return of $30,804, but remember, right now, plunking that $626,000 into a government bond funds would pay in excess of 5%, or a yearly return of $31,300 with no risk.
But lets do a second pass the way a developer would look at this:
Now we’re at a loss of $28,706 despite some of those numbers being generously on the low side. Not including the time value of money, i.e. the $125,200 down payment would earn $6,350/yr at 5%. So looking at the first three numbers in the above list, it would take a rent increase of $173/unit to get to break even. Most banks won’t finance a break even project and most developers want to make some money and have some cushion for unforeseen things. And nowhere in there was any maintenance reserve savings for when the roof needs replaced again or whatever unforeseen problem comes up.
Granted, this is an extremely simplified analysis. It doesn’t take into account the benefits of depreciation, since those are only a benefit when there is profit. Likewise it doesn’t take into account any taxes on the theoretical income. It also doesn’t take into account any escalators for inflation. There would be a large spreadsheet that a commercial developer would run this through to make their analysis.
Minimum Rent to make this begin to work would need to be $700/month, when existing tenants say they are struggling with the current $400/month. Reality is more like $800 – $900 to get to comparable rates in Plymouth that make economic sense to cover the myriad of additional things that will come up in the renovation and the probably greater management, vacancy and bad debt costs that are likely. The significant age of the building warrants a large maintenance reserve.
But lets take a step back and do really, really rough math (because I don’t know their expenses) on existing conditions assuming with the initial investment of $126,000. Assume 20% down leaves $100,800 financed. Using the 5% interest rate number in the previous scenario, that’s $665/month = $7,980 per year.
This would give us a profit of $14,944/yr. There may be other expenses I haven’t put a number to and conversely there are those that would suggest the maintenance line items should be zeroed out, since maintenance has been less than needed. In any case, this is not a gold mine as it exists today.
This is the real life example of what I’ve said for years… I would rather have a leaky roof over my head than no roof at all. Some of these residents have been living that situation, but the City has (rightly) cited safety concerns that removed their leaky roof.
the $626,000 number is a low number for the renovation, but it’s an impossible number to duplicate that building. $626,000/9,840sf = $64/sf. New construction on a facility such as this would be in excess of $200/sf. It is also questionable that a new facility such as this would meet current zoning standards, though a variance might make it possible. Then there is the issue of where to put it. Even if built on the same site, rezoning would be required along with the variance. That would prompt the same NIMBY protests that Garden Court ran into with the two sites they considered for their project. Theoretically, Garden Court’s GC Horizons project should have been less objectionable as fully functioning apartments.
Plymouth as a community has some hard decisions to make regarding housing. Complaints are rampant about facilities like The Pointe, but solutions are few. As seen with The Pointe, just shutting down the problem facility without a viable alternative creates a different crisis. As seen with Garden Court’s GC Horizons project, those that step up with a solution are often disparaged. Mayor Listenberger is making efforts, but is getting a lot of pushback. It’s tough when there’s a cry to “Do Something!“, but it’s accompanied by a chorus of “But Not That!“… no matter what “that” is…
Some things never change… That’s just part of the cost of doing business…
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