Traverse City Record-Eagle

August 25, 2013

Acme project begins to move as financing loosens

By BRIAN McGILLIVARY
bmcgillivary@record-eagle.com

---- — TRAVERSE CITY — A development project featuring a Meijer Inc. store in Acme Township is slowly moving forward, with developers planning to move earth before the snow flies.

The development project, now known as the Grand Traverse Town Center, appeared to go into hibernation after it obtained final zoning approval in March, 2012. Project officials confirmed that financing was one of the main hurdles.

Area finance and economic development officials not involved in the Grand Traverse Town Center said financing has been extremely tight for new commercial developments in northern Michigan and have just now begun to open up.

"Right now bankers are more willing to do construction projects than they were two or three years ago, but they still want to make sure it's not speculative," said Mark Eckhoff, a former bank president who now works for Three West, a commercial real estate consulting firm. "Now, if you have tenants, (the banks) are willing to listen."

That change has occurred in the last six months, Eckhoff said.

Laura Galbraith, vice president for the Traverse City Area Chamber of Commerce, said there are a lot of investors out there, but they are requiring less debt and more equity in projects.

"So it's creating a gap in financing," Galbraith said.

Back in the go-go days of the region's economic and population boom, all you needed was an idea to get funded, Eckhoff said. Now banks and other funding sources want to make sure a developer has committed commercial tenants with a strong financial record plus all the necessary permits and government approvals before agreeing to fund a project.

Developers for the Grand Traverse Town Center have a committed tenant.

Conceived in the go-go days, the development promised more than 1 million-square feet of retail and commercial development anchored by the 214,000-square-foot Meijer store plus 700,000 square feet of housing on more than 180 acres on M-72 and Lautner Road.

The project received conceptual approval from the township in 2004. The approval sparked a series of lawsuits and probes of Meijer for campaign finance violations in Acme Township elections that derailed the contentious project for about five years. Developers restarted the process at the end of 2009 in the midst of the Great Recession and the project crawled through the final zoning approvals at a snail's pace.

"It's the way it is with these large projects. It's a big site. It's complicated," said Terry Boyd of Gourdie-Fraser Inc., the consulting engineer for the project.

The project virtually disappeared after its final zoning approval until the developers reappeared at the end of July and asked to divide their land use permit into two phases so they could begin site work now. Work on widening M-72 and constructing a traffic roundabout at Lautner Road will come later.

Developer Steve Smith told township planners they needed to begin work to build the roads and utility infrastructure soon in order to meet their contract with Meijer. Smith said they have 12 months under the contract to have the site ready for store construction. It will then take Meijer about a year to erect and outfit its new store.

"This is the closest we've ever been, we are so close now," Boyd said. "It could all gel any day, any minute ideally."

Boyd confirmed that financing has been an issue similar to what any large commercial project has experienced. He did not provide any details.

Smith did not return calls seeking comment.

Eckhoff said the time lapse from zoning approval to project start doesn't surprise him. A lot of details have to be resolved before banks or other capital sources will agree to fund such a large project. The developers may also have needed to line up more than just Meijer as a future tenant to help justify the up front infrastructure costs.

Government agencies require the developers to have more than $17 million just to cover the public infrastructure costs such as utility extensions and road improvements.

Kevin Endres, a real estate specialist at Three West, said there is definitely a market for new mid-sized retail space that the Grand Traverse Town Center can fill.

"The opportunities in specific retail corridors are kind of light right now," Endres said. "There's definitely a market for new retail on the east side of Traverse City."