Wednesday, October 15, 2008

Brownfield use spurs values

David Levitt, a partner with Brad Rosely in Third Coast Development Partners, shared some brownfield advice Wednesday afternoon at the University of Michigan Urban Land Use Institute Real Estate Forum. Third Coast initiated MidTowne Village, a six-acre, medical mixed-use development just north of Michigan Street at the end east of the Medical Mile. Levitt said the brownfield tax credit was vital for the project to be able to go forward, like it is for many developments. But why it went forward was extremely distinctive.

Levitt said MidTowne was either the first or second project in the state to be approved for brownfield tax credits because Third Coast “took on blight.” These business tax credits are awarded to projects for one of three reasons; the site is polluted, the building is obsolete, or a property is blighted. “How do you prove blight? You can see it, but how do you prove it,” Levitt asked the audience before he explained how Third Coast did it.

Levitt said the firm gathered a lot of quantitative data about the low-income residential neighborhood that consisted of 50 older homes Third Coast wanted to build on and then compared those findings against averages in the city. Things like the rate of tax delinquency there versus the city-wide average and the number of code violations there were compared to the entire city, among other key statistics like mortgage foreclosures.

The resulting data proved blight existed, but there was another problem. Defining a neighborhood as blighted is a public process and Levitt said doing that can trigger liability issues for a city. So in the MidTowne case, the brownfield authority labeled the 50 properties as blighted and not the city commission. Between the business tax credits that come from the brownfield and the project’s tax-increment financing, Levitt said MidTowne is collecting $5.3 million in tax incentives over 12 years.

“We know blight when we see it, but you should get hard data to prove it,” he said. “Don’t do it alone. Get an expert. The whole point of this is to demonstrate need.”

The Women’s Health Center, Park Row Condominiums and 545 Michigan Street are the three buildings that currently make up the MidTowne Village. Third Coast sold the parcels to the developers. But Levitt said a fourth building is planned. They want that to be a hotel and Third Coast is thinking about being a partner in it. That project, however, has been put on hold until the financial markets get better.

“I can’t emphasize enough that brownfield is a very valuable tool in any economy,” said Levitt, “but especially in this economy.”

—David Czurak

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