TRAVERSE CITY -- A new developer is in control of a proposed makeover of downtown's Whiting Hotel building, a project that will have to make do with about $2 million less in taxpayer support than expected.
Traverse City real estate developer Gene LaFave recently took over the $8 million historical renovation of the Front Street building from Bob Sutherland, founder and president of Cherry Republic.
The project is intended to restore the 1893 building's exterior to its original look, make it energy efficient and create affordable and low-income apartment housing for downtown workers.
The project originally was supposed to attract over $4.3 million in public financing, but "the money is just evaporating by the day," LaFave said.
Grand Traverse County's land bank authority can contribute $800,000, not $1.6 million, as originally was estimated. The project isn't eligible for $450,000 in state historical tax credits because state officials don't recognize the downtown as a historical area.
LaFave said $400,000 in federal affordable housing assistance was pulled, and several other sources were trimmed.
"It could be an exciting project for the town, but it is a marginal project for the developer," LaFave said. "The numbers are not real good. If (Sutherland) had not gotten involved in this and I hadn't spent a lot of time on it consulting for him, I wouldn't even be involved with it."
Sutherland said the project grew too big and complicated, and demanded more time than he could devote to it. He also was uncomfortable with potential negatives associated with doing real estate development.
"There is a different feel of Cherry Republic as a retailer trying to capture the essence of northern Michigan, as opposed to Cherry Republic as developer, and it wasn't fitting us," Sutherland said.
Sutherland said he'll remain a ground floor tenant if the building is renovated, or he'll look for a new home if it's not.
Some city and county officials criticized the amount of public funding in the private project, as well as the use of the land bank authority. The county land bank will borrow $800,000 to help purchase the property for $2.65 million from a company run by local real estate investor Mike Anton.
The land bank will repay the loan by capturing state school taxes paid on the renovated Whiting's increased value.
"It's a perversion of what the land bank is supposed to be," said Ross Richardson, a Grand Traverse County commissioner. "The land bank is supposed to be a way to deal with tax-reverted or abandoned properties, and this is neither tax-reverted nor abandoned. I don't see any public benefit."
The original plan called for Cherry Republic to occupy the main floor and basement, but LaFave will use the basement for more housing. He said the project will now have about 32 apartments, 11 designated for low-income and the rest affordable for downtown workers.
"I've never taken government money and I hesitated to do this, but if you want to buy-down the rents, that's the only way you can do this," LaFave said. "This is really a great opportunity for this building, which is a significant part of downtown."
Jean Derenzy, director of the land bank, continues to seek final state approval for the remaining funding components. She said it will be two to three months before it will come back to the Traverse City Commission for final approval.
"Hopefully, this is a project than can unite, not divide, because if it divides us, we won't do it," LaFave said. "Delay will be its death."
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